KUE Partnership Agreement outlines $20M annual overhead payments and tax allocation of contributed appreciated property

Certain Partners contributed appreciated property to KUE in exchange for their interests in KUE. Under the Limited Partnership Agreement, and in accordance with Section 704(c) of the Code and the Treasury regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to KUE must be allocated for tax purposes among the Partners in a manner that takes into account the variation between the adjusted basis of such property to KUE and its fair market value at the time the property was contributed to KUE. As a result of this requirement, it is possible the Partners who contributed appreciated property to KUE will be allocated more income and gains, and therefore be entitled to receive larger tax distributions under the Limited Partnership Agreement, than Partners who acquired their interests in KUE pursuant to this offering. 14.12. Fixed Overhead Payment KUE, and/or one or more of its subsidiaries will pay $20 million annually ta KULG in quarterly installments beginning July 1, 2006 pursuant fo the Fixed Overhead Payment Agreement as an agreed upon payment to provide for the reimbursement of expenses and other costs incurred by KULG on behalf of KUE and its subsidiaries (including, but not limited to, salaries and bonuses of KULG employees providing services to KUE and its subsidiaries, fees and expenses relating te financing transactions and acquisitions, professional fees and other administrative expenses). To the extent that the U.S. $2,500,000 fee payable pursuant to an existing management services agreement with Knowledge Learning Corporation is paid to any person or entity other than a subsidiary of KUE, the amount payable to KULG by KUE will be reduced by the amount of such payment to such other person or entity. The $20 million annual fee will terminate upon the Initial Listing or the sale of KUE to a person or entity that is not a KUE LLC Entity. 14.13. liquidity Period KUE will operate for a period of seven years from the date of the first closing of this offering. If there has not been an Initial Listing by the end of seven years from the date of the first closing of this offering, the Board of Directors of the General Partner will determine whether to pursue a sale of KUE or an Initial Listing (or a dual track process); provided, however, in the event that not less than 75% of the value of KUE at that time is represented by shares of securities listed on one or more recognized international securities exchanges and such shares have been or will be distributed as soon as reasonably practicable thereafter to the Investors and the Investors have received distributions of cash and/or such securities valued at amounts equal fo or in excess of their original capital contributions, then there will be two extensions of one year's duration each (as determined by the Board of Directors of the General Partner) in order for KUE to complete either an Initial Listing or to have the remaining value of KUE represented by shares of securities listed on a recognized international securities exchange and to distribute such shares to the Investors. If the Board determines to pursue a sale of KUE (or an Initial Listing or a dual track process), then the Principals must determine at such time whether they intend to participate as a potential bidder in the sale process. If the Principals elect not to participate as a potential bidder in a sale process, then they will not be allowed to subsequently elect to participate as a potential bidder unless the sale process does not result in a buyer at a price the Independent Committee deems to be "fair." If the sale process results in a transaction that the Independent Committee deems to be "fair", the Principals will be required to sell their entire stake in KUE (Common LP Units and Profits Participation LP Units on an "as converted" basis) on the same terms as the Investors. If the Principals elect to participate as a potential bidder in a sale process, then the sale process will be managed by the Independent Committee and the Principals will be precluded from participating in Board deliberations regarding the sale process. In addition, the Principals will be required to sell their entire stake in KUE on the same terms as the Investors to the winning bidder in the event the Principals do not submit the most attractive bid. 123 HOUSE_OVERSIGHT_024556