15. MANAGEMENT INCENTIVE PLANS AND EMPLOYMENT AGREEMENTS
Certain key terms of the following incentive plans and employment agreements of the Company, which are subject to and qualified in their entirety by reference to any underlying documentation as applicable, are outlined below. Copies of such documentation have been provided or are available upon request and the summaries below are quajified in their entirety by reference to such documentation.
15.4. Long Term Incentive Plan and Agreements of Knowledge Learning Corporation
Effective as of December 6, 2005, KLC put in place a long term incentive plan ("LTIP") for officers, employees or consultants, providing for incentive compensation payments based upon the achievement of certain performance criteria determined by KLC’s Compensation Committee. Under the terms of the long term incentive award agreements entered into with eligible recipients pursuant to the LTIP, if the recipient is terminated by KLC without cause after the first year of any 3-year performance cycle, the first of which begins in 2006, or upon death, permanent disability or retirement after the first 6 months of any performance cycle, the recipient is eligible to receive a pro rata portion of any incentive award earned. The recipient is also eligible to receive a pro rata portion of any incentive award earned in the event of a sale of KLC or a termination of the LTIP.
15.2. Profits Interest Grants
KUE expects to grant profits interests in KUE to its (or its subsidiary’s) present and future officers, directors, employees and consultants, aggregating up to 2% of KUE's aggregate profits, subject to increases approved by the Independent Committee. Such grants would be dilutive to the holders of Units.
15.3. Stock Appreciation Rights Plan of Knowledge Schools, inc.
KSI established a stock appreciation rights (“SAR") plan for directors, officers, employees or consultants of KS! and its subsidiaries on April 25, 2004, pursuant to which a maximum number of 18,410 phantom shares (which may be converted to options) may be granted and an equivalent of 4,353.860 phantom shares are issued and outstanding. SARs may be granted under the plan until April 24, 2014 and shall vest and become exercisable as set forth in the holder's SAR agreement. These phantom shares will provide the holders with the appreciation in value of the equivalent of 1.6% of KSI's equity (after payment of $7.8 million to KLC’s departing chief executive officer in settlement of his SARs, and based on 273,904.89884 shares as of April 28, 2006). Beginning in 2006, incentive compensation at the KLC level to management will be made through the LTIP described above, while directors of KSI may continue to be granted SAR.
15.4. Stock Option Grants by Knowledge Schools, Inc. Les Biller and Stephen Goldsmith have been granted options to purchase an aggregate of 3,412.6 shares of common stock of KSI. Les Biller is on the Advisory Board of KUE and a director of KSI. Stephen
Goldsmith is the Senior Vice President of Strategic Planning & Worldwide Government Programs for KUE and a director of KSI. KSI may issue similar options from time to time.
15.5. Employment Agreements
With one exception, the Company's executives do not have long-term employment agreements. KLC entered into an employment agreement with Elanna Yalow as of August 1, 2004 with an employment term
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