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Real Estate Company Operating Expenses Greenstreet Real Estate Partners will operate all of the real estate investment functions on behalf of KLC PropCo as detailed in the management agreement. See “Related Party Transactions.” 12.5. Debt Summary The table below shows KLC PropCo’s outstanding capitalization as of December 31, 2005. KLC PropCo Debt Capitalization ($ in millions) 12/31/05 Cash $ 24.5 CMBS Debt $699.4 Junior Mezzanine Debt' 150.0 Total KLC PropCo Debt $849.4 Net Debt” $824.9 ' Represents face value; book value is approximately $147.3 million. ? Represents total debt less cash. 12.6. Terms of the CMBS Debt KLC PropCo has $699.4 million of CMBS debt which was arranged in connection with the separation from KLC OpCo. KLC PropCo is required to pay interest in cash on a monthly basis at a rate of 5.62% and must meet scheduled amortization requirements on a monthly basis and maturing December 1, 2015. The CMBS debt consists of a $649.5 million mortgage loan and a $50.0 million senior mezzanine loan secured by 713 childhood education centers. The CMBS debt is nonrecourse KLC OpCo. Each of the centers securing the mortgage loan is leased to KLC OpCo pursuant to a master lease. KLC PropCo has entered into asset management agreements with Greenstreet Real Estate Partners (formerly Greenstreet Realty Partners, L.P.) pursuant to which Greenstreet Real Estate Partners provides asset management and consulting services for these centers to KLC PropCo. KLC PropCo has the right under certain circumstances to release, substitute, sell and/or reinvest in properties securing the mortgage loan. Prepayment of the CMBS debt is prohibited through January 1, 2007, after which prepayment is permitted’ in whole or in part, subject to a prepayment premium equal to the greater of 1% or an amount obtained based on a discount to treasury securities. After June 1, 2015, the CMBS debt may be prepaid in whole without premium or penalty. The CMBS debt contains provisions that require KLC PropCo to reserve with the lender of the CMBS debt 50% of excess cash flow generated from the CMBS centers if EBITDA (as adjusted) for KLC OpCo falls below certain levels and 100% if EBITDA (as adjusted) for KLC OpCo falls below certain other levels. 12.7. Terms of the Junior Mezzanine Debt The Junior Mezzanine debt has a face value of $150 million (and was purchased for approximately $147.0 million, reflecting a 2% discount to face value), substantially all of which was provided by the 104 HOUSE_OVERSIGHT_024537