Use these links to rapidly review the document
TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS
As filed with the Securities and Exchange Commission on September 24, 2009.
Registration No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PROSPECT ACQUISITION CORP.
(Exact Name of Each Registrant as Specified in Its Charter)
Delaware | 6770 | 26-0508760 | ||
(State or Other Jurisdiction
of Incorporation or Organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
9130 Galleria Court, Suite 318
Naples, Florida 34109
(239) 254-4481
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
David A. Minella
Chairman and Chief Executive Officer
9130 Galleria Court, Suite 318
Naples, Florida 34109
(239) 254-4481
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the merger contemplated by the agreement and plan of merger included as Annex A to the proxy statement/prospectus forming part of this registration statement have been satisfied or waived.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: o
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated Filer ý |
Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
CALCULATION OF REGISTRATION FEE
|
||||||||
Title of Each Class of Security
Being Registered |
Amount Being
Registered |
Proposed Maximum
Offering Price Per Share |
Proposed Maximum
Aggregate Offering Price |
Amount of
Registration Fee |
||||
---|---|---|---|---|---|---|---|---|
Shares of Common Stock par value $0.0001 per share |
26,000,000(1) | $9.87(2) | $256,620,000.00 | $14,319.40(3) | ||||
Total Fee Due |
$14,319.40 | |||||||
|
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the SEC, acting pursuant to said Section 8(a), may determine.
The information in this proxy statement/prospectus is not complete and may be changed. Prospect Acquisition Corp. may not issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO AMENDMENT AND COMPLETION,
DATED
, 2009
PROXY STATEMENT FOR SPECIAL MEETING OF
STOCKHOLDERS AND WARRANTHOLDERS OF
PROSPECT ACQUISITION CORP. AND
PROSPECTUS FOR UP TO 26,000,000 SHARES
OF COMMON STOCK
Dear Stockholders and Warrantholders of Prospect Acquisition Corp.:
You are cordially invited to attend the special meeting of stockholders of Prospect Acquisition Corp. ("Prospect") and the special meeting of Prospect warrantholders scheduled to be held on , 2009 at 8:30 a.m., Eastern Standard time, at 9130 Galleria Court, Suite 318, Naples, FL 34109.
Prospect is pleased to report that its board of directors and the board of directors and stockholders of Kennedy-Wilson, Inc. ("Kennedy-Wilson") have approved an Agreement and Plan of Merger (the "Merger Agreement"). The Merger Agreement provides for a merger of KW Merger Sub Corp., Prospect's wholly-owned subsidiary formed for the purpose of consummating the merger ("Merger Sub"), with and into Kennedy-Wilson, with Kennedy-Wilson continuing as the surviving corporation and becoming a direct wholly-owned subsidiary of Prospect (the "Merger"). The proposal to approve the Merger Agreement and certain other proposals discussed in this proxy statement/prospectus will be presented at the special meeting of Prospect stockholders.
If the Merger is completed, Kennedy-Wilson's stockholders of record (the "Kennedy-Wilson Holders"), will receive an aggregate of 26 million shares of Prospect common stock (each share of Kennedy-Wilson common stock shall automatically convert into the right to receive 3.8031 shares of Prospect common stock and each share of Kennedy-Wilson preferred stock shall automatically convert into the right to receive 105.6412 shares of Prospect common stock) (the "Initial Shares"), minus any shares of Prospect common stock that would otherwise have been issuable to the Kennedy-Wilson Holders of dissenting shares (the "Dissenting Shares"), plus shares issued in lieu of fractional shares. Based on the closing market price of $9.79 per share on September 8, 2009, the last trading day of Prospect common stock prior to the announcement of the Merger Agreement, the Initial Shares had an aggregate value of $254.5 million. Based on the closing market price of Prospect common stock of $ per share on , 2009 (the record date), the Initial Shares had an aggregate value of $ .
Prospect stockholders will be asked to (i) approve the Merger and the Merger Agreement, dated as of September 8, 2009, by and among Prospect, Merger Sub and Kennedy-Wilson, which, among other things, provides for the merger of Merger Sub with and into Kennedy-Wilson, with Kennedy-Wilson continuing as the surviving corporation and becoming a direct wholly-owned subsidiary of Prospect (the "Merger Proposal"); (ii) approve an amendment and restatement of Prospect's amended and restated certificate of incorporation to change Prospect's corporate name to "Kennedy-Wilson Holdings, Inc.," increase the number of authorized shares of Prospect capital stock from 73,000,000 to 81,000,000, provide for Prospect's perpetual existence, delete and replace Article Sixth and make certain other changes in tense and numbers that Prospect's board of directors believes are immaterial (the "Charter Amendment Proposal"); (iii) approve the Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan (the "2009 Plan"), which is an equity-based incentive plan for directors, officers, employees and certain consultants, pursuant to which Prospect will reserve up to 4,000,000 shares of Prospect common stock for issuance under the 2009 Plan (the "Equity Participation Plan Proposal");
(iv) elect seven directors to serve on Prospect's board of directors (the "Director Election Proposal"); and (v) approve the adjournment of the special meeting of Prospect stockholders to a later date or dates if necessary to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting of Prospect stockholders, Prospect is not authorized to consummate the merger (the "Stockholder Adjournment Proposal").
Prospect warrantholders will be asked to approve an amendment (the "Warrant Amendment") to the warrant agreement that governs all of the warrants of Prospect, each of which is exercisable for one share of common stock of Prospect in order to (1) allow each Prospect warrantholder to elect to receive upon the closing of the Merger, for each outstanding Prospect warrant that was issued in Prospect's initial public offering (the "Public Warrants"), either (i) $0.55 in cash (the "Cash Amount") or (ii) an amended and restated Public Warrant with a new exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013, subject to adjustment and proration as described in this proxy statement/prospectus and (2) amend and restate the terms of the warrants purchased by each of Flat Ridge Investments LLC, an entity affiliated with David A. Minella, Prospect's Chairman and Chief Executive Officer, LLM Structured Equity Fund L.P. and LLM Investors L.P., entities associated with Patrick J. Landers, a director and President of Prospect, and CMS Platinum Fund, L.P. (formerly Capital Management Systems Inc.), an entity affiliated with William Landman, one of Prospect's directors, in connection with Prospect's initial public offering (the "Sponsors Warrants"), to provide for an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013 (items (1) and (2), collectively, the "Warrant Amendment Proposal"). If the Merger is consummated, any warrantholder who votes against the approval of the Warrant Amendment Proposal or who makes no election will receive the Cash Amount in exchange for each of its Public Warrants. Warrantholders will also be asked to approve an adjournment of the special meeting of Prospect warrantholders to a later date or dates, if necessary, to permit further solicitation and vote of proxies in favor of the Warrant Amendment Proposal (the "Warrantholder Adjournment Proposal"). See the sections entitled " The Warrant Amendment Proposal " and " The Warrantholder Adjournment Proposal " for additional information.
Each of these proposals is more fully described in the accompanying proxy statement/prospectus.
Prospect's board of directors recommends (i) that Prospect stockholders vote "FOR" approval of the Merger Proposal, "FOR" approval of the Charter Amendment Proposal, "FOR" approval of the Equity Participation Plan Proposal, "FOR" approval of the Director Election Proposal, and "FOR" approval of the Stockholder Adjournment Proposal and (ii) that Prospect warrantholders vote "FOR" approval of the Warrant Amendment Proposal and "FOR" approval of the Warrantholder Adjournment Proposal.
Prospect's units, common stock and Public Warrants are currently quoted on NYSE AMEX LLC (formerly known as the American Stock Exchange) under the symbols "PAX.U", "PAX", and PAX.WS", respectively. Prospect intends to apply for re-listing on NYSE AMEX LLC upon the consummation of the Merger. If Prospect's securities are re-listed on NYSE AMEX LLC, the symbols may change to symbols that are reasonably representative of the post-Merger company's corporate name.
Prospect is providing this proxy statement/prospectus and accompanying proxy card to its stockholders and warrantholders in connection with the solicitation of proxies to be voted at the special meeting of Prospect stockholders and the special meeting of Prospect warrantholders and at any adjournments or postponements of the meetings. This proxy statement/prospectus also constitutes a prospectus of Prospect for the securities of Prospect to be issued to stockholders of Kennedy-Wilson pursuant to the Merger Agreement.
This proxy statement/prospectus provides you with detailed information about the Merger and other matters to be considered by the Prospect stockholders and warrantholders. Prospect encourages you to carefully read the entire document and the documents incorporated by reference. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER " RISK FACTORS " BEGINNING ON PAGE 45.
Prospect Stockholders and WarrantholdersYour vote is very important. Whether or not you expect to attend the special meeting of Prospect stockholders and/or the special meeting of Prospect warrantholders, the details of which are described on the following pages, please complete, date, sign and promptly return the accompanying proxy in the enclosed envelope.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated , 2009, and is first being mailed to Prospect stockholders and Prospect warrantholders on or about , 2009.
This proxy statement/prospectus incorporates important business and financial information about Prospect and Kennedy-Wilson that is not included in or delivered with this document. This information is available without charge to security holders upon written or oral request. To make this request, or if you would like additional copies of this proxy statement/prospectus or have questions about the Merger, you should contact James J. Cahill, Secretary, Prospect Acquisition Corp., 9130 Galleria Court, Suite 318, Naples, FL 34109, Telephone (239) 254-4481.
TO OBTAIN TIMELY DELIVERY OF REQUESTED MATERIALS, STOCKHOLDERS AND WARRANTHOLDERS MUST REQUEST THE INFORMATION NO LATER THAN FIVE BUSINESS DAYS BEFORE THE DATE THEY SUBMIT THEIR PROXIES OR ATTEND THE SPECIAL MEETING OF PROSPECT STOCKHOLDERS OR THE SPECIAL MEETING OF PROSPECT WARRANTHOLDERS. THE LATEST DATE TO REQUEST THE INFORMATION TO BE RECEIVED TIMELY IS , 2009.
All references in this proxy statement to "dollars" or "$" are to U.S. dollars, unless otherwise noted. Except as otherwise indicated, all financial statements and financial data contained in this proxy statement have been prepared in accordance with generally accepted accounting principles in the United States of America. Unless the context requires otherwise, references to "you" are references to Prospect stockholders and Prospect warrantholders, as applicable, and references to "we", "us" and "our" are to Prospect.
PROSPECT ACQUISITION CORP.
9130 GALLERIA COURT, SUITE 318
NAPLES, FLORIDA 34109
NOTICE OF SPECIAL MEETING OF WARRANTHOLDERS
OF PROSPECT ACQUISITION CORP.
TO BE HELD ON
, 2009.
To the Warrantholders of Prospect Acquisition Corp.:
NOTICE IS HEREBY GIVEN that the special meeting of warrantholders of Prospect Acquisition Corp., a Delaware corporation ("Prospect"), will be held at 8:30 a.m., Eastern Standard time, on , 2009, at 9130 Galleria Court, Suite 318, Naples, FL 34109. You are cordially invited to attend the meeting, which will be held for the following purposes:
These items of business are described in the enclosed proxy statement/prospectus, which you are encouraged to read in its entirety before voting. Only holders of record of Prospect warrants at the close of business on , 2009 are entitled to notice of the special meeting of Prospect warrantholders and to vote and have their votes counted at the special meeting of Prospect warrantholders and any adjournments or postponements thereof.
Prospect's board of directors has determined that the Warrant Amendment Proposal and the Warrantholder Adjournment Proposal are fair to and in the best interests of Prospect and its warrantholders and unanimously recommends that you vote or give instruction to vote "FOR" the Warrant Amendment Proposal and "FOR" the Warrantholder Adjournment Proposal.
All Prospect warrantholders are cordially invited to attend the special meeting of Prospect warrantholders in person. Your vote is very important. To ensure your representation at the special meeting of Prospect warrantholders, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. If you are a warrantholder of record of Prospect warrants, you may also cast your vote in person at the special meeting of Prospect warrantholders. If your warrants are held in an account at a brokerage firm or bank, you must instruct your broker, bank or nominee on how to vote your warrants or, if you wish to attend the special meeting of Prospect warrantholders and vote in person, obtain a proxy from your broker, bank or nominee. If you do not vote or do not instruct your broker, bank or nominee how to vote, it will have the same effect as voting "AGAINST" the Warrant Amendment Proposal, but will have no effect on the Warrantholder Adjournment Proposal.
A complete list of Prospect warrantholders of record entitled to vote at the special meeting of Prospect warrantholders will be available for ten days before the special meeting of Prospect warrantholders at 9130 Galleria Court, Suite 300, Naples, Florida 34109 for inspection by warrantholders during ordinary business hours for any purpose germane to the special meeting of Prospect warrantholders.
Your vote is important to us regardless of the number of warrants you own. Whether or not you plan to attend the special meeting of Prospect warrantholders, please read the enclosed proxy statement/prospectus carefully, and sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If your warrants are held in "street name" or are in a margin or similar account, you should contact your broker, bank or nominee to ensure that votes related to the warrants you beneficially own are properly counted.
Thank you for your participation. We look forward to your continued support.
By Order of the Board of Directors | ||
|
|
David A. Minella Chairman and Chief Executive Officer |
IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR WARRANTS WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS.
PROSPECT ACQUISITION CORP.
9130 GALLERIA COURT, SUITE 318
NAPLES, FLORIDA 34109
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OF PROSPECT ACQUISITION CORP.
TO BE HELD ON
, 2009.
To the Stockholders of Prospect Acquisition Corp.:
NOTICE IS HEREBY GIVEN that the special meeting of stockholders of Prospect Acquisition Corp., a Delaware corporation ("Prospect"), will be held immediately following the special meeting of Prospect warrantholders scheduled for 8:30 a.m. Eastern time, on , 2009 at 9130 Galleria Court, Suite 318, Naples, FL 34109. You are cordially invited to attend the meeting, which will be held for the following purposes:
These items of business are described in the enclosed proxy statement/prospectus, which we encourage you to read in its entirety before voting. Only holders of record of Prospect common stock at the close of business on , 2009 are entitled to notice of the special meeting of Prospect stockholders and to vote and have their votes counted at the special meeting of Prospect stockholders and any adjournments or postponements of the special meeting of Prospect stockholders.
Prospect's board of directors has determined that the Merger Proposal and the other proposals are fair to and in the best interests of Prospect and its stockholders and unanimously recommends that you vote or give instruction to vote "FOR" the approval of all of the proposals and all of the persons nominated by Prospect's management for election as directors.
All Prospect stockholders are cordially invited to attend the special meeting of Prospect stockholders in person. To ensure your representation at the special meeting of Prospect stockholders, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. If you are a holder of record of Prospect common stock, you may also cast your vote in person at the special meeting of Prospect stockholders. If your shares are held in an account at a brokerage firm or bank, you must instruct your broker, bank or nominee on how to vote your shares or, if you wish to attend the special meeting of Prospect stockholders and vote in person, obtain a proxy from your broker or bank. If you do not vote or do not instruct your broker, bank or nominee how to vote, it will have the same effect as voting "AGAINST" the Charter Amendment Proposal, but will have no effect on the Merger Proposal, the Equity Participation Plan Proposal, the Director Election Proposal, and the Stockholder Adjournment Proposal.
A complete list of Prospect stockholders of record entitled to vote at the special meeting of Prospect stockholders will be available for ten days before the special meeting of Prospect stockholders at 9130 Galleria Court, Suite 300, Naples, Florida 34109 for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting of Prospect stockholders.
Your vote is important regardless of the number of shares you own. Whether you plan to attend the special meeting of Prospect stockholders or not, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If your shares are held in "street name" or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted.
Thank you for your participation. We look forward to your continued support.
|
By Order of the Board of Directors | |
|
David A. Minella
|
IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS AND YOU WILL NOT BE ELIGIBLE TO HAVE YOUR SHARES CONVERTED INTO A PRO RATA PORTION OF THE TRUST ACCOUNT IN WHICH A SUBSTANTIAL PORTION OF THE NET PROCEEDS OF PROSPECT'S INITIAL PUBLIC OFFERING ARE HELD. IN ORDER TO PROPERLY EXERCISE YOUR CONVERSION RIGHTS, YOU MUST (I) AFFIRMATIVELY VOTE AGAINST THE MERGER PROPOSAL BY PROXY OR IN PERSON AT THE SPECIAL MEETING OF PROSPECT'S STOCKHOLDERS, (II) PRESENT WRITTEN INSTRUCTIONS TO PROSPECT'S TRANSFER AGENT NO LATER THAN ONE BUSINESS DAY PRIOR TO THE VOTE ON THE MERGER PROPOSAL STATING THAT YOU WISH TO CONVERT YOUR SHARES INTO CASH AND THAT YOU WILL CONTINUE TO HOLD YOUR SHARES THROUGH THE CLOSING DATE OF THE MERGER, (III) CONTINUE TO HOLD YOUR SHARES THROUGH THE CLOSING DATE OF THE MERGER AND (IV) TENDER YOUR SHARES TO PROSPECT'S TRANSFER AGENT WITHIN THE
PERIOD SPECIFIED IN A NOTICE YOU WILL RECEIVE FROM OR ON BEHALF OF PROSPECT, WHICH PERIOD WILL NOT BE LESS THAN 20 DAYS. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR STOCK CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY'S DWAC (DEPOSIT/WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE MERGER IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE CONVERTED INTO CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK, BROKER OR NOMINEE TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR CONVERSION RIGHTS. SEE "SPECIAL MEETING OF PROSPECT WARRANTHOLDERS AND SPECIAL MEETING OF PROSPECT STOCKHOLDERSCONVERSION RIGHTS" FOR MORE SPECIFIC INSTRUCTIONS.
i
ii
SUMMARY OF THE MATERIAL TERMS OF THE MERGER
This summary highlights selected information from this proxy statement/prospectus and does not contain all of the information that is important to you. To better understand the Merger, you should read this entire document carefully, including "Risk Factors," the Merger Agreement attached as Annex A, and all annexes and exhibits attached to this proxy statement/prospectus. The Merger Agreement is the legal document that governs the Merger and the other transactions that will be undertaken in connection with the Merger. It is also described in detail elsewhere in this proxy statement/prospectus.
1
closing market price of $9.79 per share on September 8, 2009, the last trading day of Prospect common stock prior to the announcement of the Merger Agreement, the Initial Shares had an aggregate value of $254.5 million. Based on the closing market price Prospect common stock of $ per share on , 2009 (the record date), the Initial Shares had an aggregate value of $ . If a fractional share is required to be issued to a Kennedy-Wilson Holder, Prospect will round up to the nearest whole share in lieu of issuing fractional shares. Upon completion of the Merger, assuming that none of the shares that Prospect issued during its initial public offering (the "Public Shares") are converted into cash, the Kennedy-Wilson Holders will own approximately 44.2% of the shares of Prospect common stock outstanding immediately after the closing of the Merger, the current Prospect stockholders will own approximately 48.8% and the other new Prospect stockholders (including recipients of awards under the 2009 Plan, defined below) will own approximately 7.0% of Prospect's outstanding common stock. If 29.99% of the holders of Public Shares elect to convert their shares into cash, such percentages would be 50.7%, 41.3% and 8.0%, respectively. See the section entitled " Summary of the Proxy Statement/ProspectusThe Merger and The Merger Proposal " for additional information.
2
LLM Structured Equity Fund L.P. and LLM Investors L.P., entities associated with Patrick J. Landers, a director and President of Prospect, and CMS Platinum Fund, L.P. (formerly Capital Management Systems Inc.), an entity affiliated with William Landman, one of Prospect's directors, in connection with Prospect's initial public offering (the "Sponsors Warrants"), to provide for an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013 (items (1) and (2), collectively, the "Warrant Amendment Proposal"). The warrantholders are also being asked to approve an adjournment of the special meeting of Prospect warrantholders to a later date or dates, if necessary to permit further solicitation and vote of proxies in favor of the Warrant Amendment Proposal (the "Warrantholder Adjournment Proposal"). Based on the closing market price of $0.28 per Public Warrant on September 8, 2009, the last trading day prior to the announcement of the Merger Agreement, the Public Warrants had an aggregate value of $7,000,000. Based on the closing market price of $ per Public Warrant on , 2009 (the record date), the Public Warrants had an aggregate value of $ .
3
an affirmative vote against the Merger will prevent you from exercising your conversion rights. Your vote on any proposal other than the Merger Proposal will have no impact on your right to seek conversion. For more information about exercising your conversion rights, see the section entitled " Questions and Answers for Prospect Stockholders and Warrantholders about the ProposalsHow do I exercise my conversion rights? " If 30% or more of the outstanding Public Shares are converted (7,500,000 shares), Prospect may not consummate the Merger. If, however, no more than 30% of the outstanding Public Shares (minus one share) are converted (7,499,999), Prospect may still consummate the Merger and such payments to holders who exercise their conversion rights would total approximately $ million based on a conversion price of $ per share.
4
QUESTIONS AND ANSWERS
FOR PROSPECT STOCKHOLDERS AND WARRANTHOLDERS ABOUT THE PROPOSALS
Why am I receiving this proxy statement/prospectus?
Prospect and Kennedy-Wilson have agreed to a business combination under the terms of the Merger Agreement that are described in this proxy statement/prospectus in the sections entitled " The Merger Proposal " and " The Merger Agreement ." This agreement is referred to as the Merger Agreement. A copy of the Merger Agreement which is incorporated by reference is attached to this proxy statement/prospectus as Annex A, which Prospect encourages you to read.
Prospect warrantholders are being asked to consider and vote upon a proposal, which we refer to as the Warrant Amendment Proposal, to approve the Warrant Amendment to the Warrant Agreement that governs all Prospect warrants, each of which is exercisable for one share of Prospect common stock, to (1) allow each Prospect warrantholder to elect to receive upon the closing of the Merger, for each outstanding Public Warrant, either (i) the Cash Amount of $0.55, or (ii) an amended and restated Public Warrant with an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013, subject to adjustment and proration as described in this proxy statement/prospectus and (2) amend and restate the terms of the Sponsors Warrants to provide for an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013. If the Merger is consummated, any warrantholder who votes against the approval of the Warrant Amendment Proposal or who makes no election will receive the Cash Amount in exchange for each of its Public Warrants. The exchange of the Public Warrants for cash is referred to herein as the "Cash Exchange" and the exchange of the Public Warrants for the amended and restated Public Warrants and the amendment of the Sponsors Warrants, is referred to herein as the "Warrant Exchange." The form of Warrant Amendment is attached to this proxy statement/prospectus as Annex B and the form of Amended and Restated Warrant Agreement, which will be in effect upon consummation of the Merger, is attached to this proxy statement/prospectus as Annex C and both are incorporated into this proxy statement/prospectus by reference. Prospect warrantholders are also being asked to consider and vote on the Warrantholder Adjournment Proposal to adjourn the special meeting of Prospect warrantholders to a later date or dates to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting of Prospect warrantholders, Prospect is not authorized to amend the Warrant Agreement.
Prospect stockholders are being asked to consider and vote upon a proposal to approve the Merger and the Merger Agreement, which, among other things, provides for the merger of Merger Sub with and into Kennedy-Wilson, with Kennedy-Wilson continuing as the surviving corporation and becoming a direct wholly-owned subsidiary of Prospect. You are also being requested to vote to approve: (i) the amendment and restatement of Prospect's amended and restated certificate of incorporation to (a) change Prospect's corporate name to "Kennedy-Wilson Holdings, Inc.," (b) increase the number of authorized shares of Prospect capital stock from 73,000,000 to 81,000,000, (c) provide for Prospect's perpetual existence, (d) delete and replace Article Sixth of Prospect's current amended and restated certificate of incorporation and (e) make certain other changes in tense and numbers that Prospect's board of directors believes are immaterial; (ii) the 2009 Plan; (iii) the election of seven directors; and (iv) the Stockholder Adjournment Proposal. With respect to the Charter Amendment Proposal, Article Sixth and its preamble relate to the operation of Prospect as a blank check company prior to the consummation of a business combination and will not be applicable after consummation of the Merger. Clause A of Article Sixth requires that the business combination be submitted to Prospect's stockholders for approval under the Delaware General Corporation Law ("DGCL") and be approved by the vote of a majority of the Public Shares present at the special meeting of Prospect stockholders in person or by proxy and eligible to vote thereon, provided that the business combination shall not be consummated if the holders of 30% or more of the Public Shares exercise their conversion rights. Clause B of Article Sixth provides that the proceeds of Prospect's IPO
5
and the sale of the Sponsors Warrants are to be deposited in the Trust Account. Clause C of Article Sixth specifies the procedures for exercising conversion rights. Clause D of Article Sixth provides that Prospect shall take action to liquidate if it does not consummate an initial business combination prior to the "Termination Date" (November 14, 2009). Clause E of Article Sixth provides that holders of Public Shares are entitled to receive distributions from Prospect's Trust Account only if a business combination is not consummated by the "Termination Date" or by demanding conversion in accordance with Clause C. Clause F of Article Sixth provides that Prospect must consummate the "Business Combination," as defined in the preamble of Article Sixth, before Prospect can consummate any other type of business combination. Clause G of Article Sixth provides that Prospect shall not, and no employee of Prospect shall, disburse any funds from the Trust Account other than set forth in such clause. Clause H of Article Sixth provides the procedure by which Prospect's Audit Committee must approve all payments to Prospect's initial stockholders, sponsors, officers, directors and their or Prospect's affiliates. Clause I of Article Sixth provides the procedure by which the Audit Committee is required to review and monitor compliance with the requirements of the agreements entered into by Prospect in connection with its IPO. Clause J of Article Sixth prohibits Prospect's board of directors from issuing any securities (other than those issued in the IPO) that would participate in the proceeds of the Trust Account or vote as a class with the common stock on a business combination prior to the consummation of the initial business combination. Clause K of Article Sixth permits Prospect to have a classified board of directors prior to the business combination. See the section entitled " The Charter Amendment Proposal " for additional information.
The approval of the Warrant Amendment Proposal by Prospect warrantholders and the approval of the Merger Proposal and the Charter Amendment Proposal by Prospect stockholders are conditions to the consummation of the Merger. If the Warrant Amendment Proposal is not approved, the stockholder proposals, other than the Stockholder Adjournment Proposal, will not be presented to the Prospect stockholders. If the Merger Proposal is not approved, the other proposals will not be presented to the stockholders for a vote. If the Charter Amendment Proposal is not approved, the other proposals will not be presented to the stockholders for a vote and the Merger will not be consummated. Prospect's second amended and restated certificate of incorporation, as it will appear if the Charter Amendment Proposal is approved, is attached to this proxy statement/prospectus as Annex D and you are encouraged to read it in its entirety. The 2009 Plan is attached to this proxy statement/prospectus as Annex E and you are encouraged to read it in its entirety. In addition to the foregoing proposals, the stockholders will also be asked to consider and vote upon the election of seven directors of Prospect, which proposal, along with the Equity Participation Plan Proposal, will not be presented for a vote if either the Merger Proposal or the Charter Amendment Proposal is not approved. The stockholders will also be asked to consider and vote upon a proposal to adjourn the special meeting of Prospect stockholders to a later date or dates to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting of Prospect stockholders, Prospect would not have been authorized to consummate the Merger. The warrantholders will also be asked to consider and vote upon a proposal to adjourn the special meeting of Prospect warrantholders to a later date or dates to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting of Prospect warrantholders, Prospect would not have been authorized to amend the Warrant Agreement. This proxy statement/prospectus contains important information about the proposed Merger and the other matters to be acted upon at the special meetings of Prospect stockholders and Prospect warrantholders. You should read it carefully.
Your vote is important. Prospect encourages you to vote as soon as possible after carefully reviewing this proxy statement/prospectus.
6
Why is Prospect proposing the Merger?
Prospect was organized to effect an acquisition, capital stock exchange, asset acquisition or other similar business combination with an operating business.
On November 20, 2007, Prospect issued and sold 25,000,000 units in its IPO. Each of Prospect's units consists of one share of Prospect's common stock and one warrant. Each warrant sold in the IPO entitles the holder to purchase one share of common stock at an exercise price of $7.50. Prospect's units began publicly trading on November 15, 2007. Prospect's Public Warrants and common stock have traded separately since December 3, 2007. The public offering price of each unit was $10.00, and the IPO raised gross proceeds of $250,000,000. Of the gross proceeds: (i) Prospect deposited $241,750,000 into a Trust Account at JP Morgan Chase Bank, NA, maintained by Continental Stock Transfer & Trust Company, as trustee, which included $10,000,000 of contingent underwriting discount (the underwriters have agreed to forgo $4,000,000 of deferred underwriting compensation otherwise payable to them in connection with, and in accordance with the terms of, the underwriting agreement for the IPO); (ii) the underwriters received $7,500,000 as underwriting discount (excluding the contingent underwriting discount); and (iii) Prospect retained $700,000 for offering expenses, plus $50,000 for working capital. In addition, Prospect deposited into the Trust Account $5,250,000 that it received from the private placement of 5,250,000 Sponsors Warrants to Flat Ridge Investments LLC, an entity affiliated with David A. Minella, Prospect's Chairman and Chief Executive Officer, LLM Structured Equity Fund L.P. and LLM Investors L.P., entities affiliated with Patrick J. Landers, Prospect's President and a director, and CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), a corporation affiliated with William Landman, one of Prospect's directors. The $247,000,000 held in the Trust Account will not be released until the earlier of (i) the completion of the initial business combination or (ii) Prospect's liquidation. Therefore, unless and until the initial business combination is consummated, the proceeds held in the Trust Account will not be available to Prospect, other than amounts required to pay taxes on any interest income earned on the Trust Account balance and up to $2,750,000 of interest income earned on the Trust Account balance, net of income taxes payable on such amount, which can be released to fund working capital requirements. As of , 2009 (the record date), approximately $ was held in deposit in the Trust Account, including $10,000,000 of deferred underwriting compensation (the underwriters have agreed to forgo $4,000,000 of deferred underwriting compensation otherwise payable to them in connection with, and in accordance with, the terms of the underwriting agreement for the IPO). Prospect intends to use the funds released from the Trust Account (i) to pay Prospect stockholders who exercise conversion rights, (ii) to pay Prospect warrantholders in connection with the Cash Exchange, (iii) to pay expenses related to the business combination, (iv) to pay the deferred underwriting compensation, and (v) to pay investment banker's fees and to use the remaining funds released from the Trust Account for working capital and general corporate purposes.
Founded in 1977, Kennedy-Wilson is a diversified, international real estate company that provides investment and real estate services. Kennedy-Wilson has grown from an auction business in one office into a vertically-integrated operating company with over 300 professionals in 21 offices throughout the U.S. and Japan. Kennedy-Wilson is an industry leader, currently owning real estate (through its closed-end funds and joint ventures) representing $2.9 billion in aggregate value and managing over 40 million square feet of residential, multifamily and commercial real estate, including 10,000 apartment units, throughout the U.S. and Japan.
Based on its due diligence investigations of Kennedy-Wilson and the industry in which it operates, including the financial and other information provided by Kennedy-Wilson, Prospect believes that Kennedy-Wilson's management has the experience to successfully lead Kennedy-Wilson's business and that Kennedy-Wilson has in place the infrastructure for strong business operations and to achieve strong organic growth. As a result, Prospect also believes that a business combination with Kennedy-Wilson will provide Prospect stockholders with an opportunity to participate in a company with
7
significant growth potential. See the section entitled " The Merger ProposalProspect's Board of Directors' Reasons for the Approval of the Merger " for additional information. In accordance with Prospect's amended and restated certificate of incorporation, if Prospect is unable to complete the business combination with Kennedy-Wilson by November 14, 2009, its corporate existence will terminate and it will be required to liquidate.
Are the proposals conditioned on one another?
Yes. If the Warrant Amendment Proposal is not approved at the special meeting of Prospect warrantholders, none of the other warrantholder proposal or the stockholder proposals will be presented for a vote and if the Merger Proposal is not approved at the special meeting of Prospect stockholders, the other stockholder proposals will not be presented for a vote.
What vote is required to approve the proposals presented at the special meeting of Prospect warrantholders?
Approval of the Warrant Amendment Proposal requires the affirmative vote of a majority in interest of the shares of Prospect common stock issuable upon exercise of the Prospect warrants affected by the Warrant Amendment and entitled to vote thereon as of the record date.
Approval of the Warrantholder Adjournment Proposal requires the affirmative vote of a majority in interest of the shares of Prospect common stock issuable upon exercise of the outstanding Prospect warrants represented in person or by proxy and entitled to vote thereon as of the record date.
Abstentions will have the same effect as a vote "AGAINST" the Warrant Amendment Proposal and the Warrantholder Adjournment Proposal. A broker non-vote will have the same effect as a vote "AGAINST" the Warrant Amendment Proposal. Broker non-votes will have no effect on the Warrantholder Adjournment Proposal.
What vote is required to approve the proposals presented at the special meeting of Prospect stockholders?
Directors are elected by a plurality of all of the votes cast in person or by proxy and entitled to vote thereon as of the record date.
Approval of the Charter Amendment Proposal requires the affirmative vote of a majority of the issued and outstanding shares of Prospect common stock entitled to vote thereon as of the record date.
Approval of the Merger Proposal requires the affirmative vote of a majority of the issued and outstanding Public Shares represented in person or by proxy and entitled to vote thereon as of the record date. In addition, if holders of 30% or more of the Public Shares vote against the Merger Proposal and properly exercise their conversion rights, Prospect will not be permitted to consummate the Merger. See the section entitled " Special Meeting of Prospect Warrantholders and Special Meeting of Prospect StockholdersConversion Rights " for additional information.
Approval of the Equity Participation Plan Proposal requires the affirmative vote of a majority of the issued and outstanding shares of Prospect common stock represented in person or by proxy and entitled to vote thereon as of the record date.
Approval of the Stockholder Adjournment Proposal requires the affirmative vote of a majority of the shares of Prospect common stock represented in person or by proxy and entitled to vote thereon.
Abstentions will have the same effect as a vote "AGAINST" the Charter Amendment Proposal, the Merger Proposal, the Equity Participation Plan Proposal and the Stockholder Adjournment Proposal, but will have no effect on the Director Election Proposal. A broker non-vote will have the same effect as a vote "AGAINST" the Charter Amendment Proposal. Broker non-votes, while considered present for the purposes of establishing a quorum, will have no effect on the Merger
8
Proposal, the Equity Participation Plan Proposal, the Director Election Proposal, and the Stockholder Adjournment Proposal.
How will Prospect's directors and officers vote?
In connection with the IPO, Prospect and the underwriters in the IPO entered into agreements with each of the Prospect founders (including its officers and directors) pursuant to which each Prospect founder agreed to (i) vote his or its founders shares on the Merger Proposal in accordance with the majority of the votes cast by the holders of Public Shares and (ii) waive any right to receive a liquidation distribution with respect to the founders shares in the event Prospect fails to consummate the initial business combination.
This voting arrangement does not apply to any proposal other than the Merger Proposal, although the Prospect founders (including its officers and directors) have also indicated that they intend to vote their shares and warrants in favor of all other proposals. Approval of the Merger Proposal requires the affirmative vote of a majority of the issued and outstanding Public Shares represented in person or by proxy and entitled to vote thereon, and approval of the Charter Amendment Proposal requires the affirmative vote of a majority of the outstanding shares of Prospect common stock entitled to vote thereon as of the record date. As of the record date of the special meeting of Prospect stockholders, 6,250,000 founder shares, or 20% of the issued and outstanding shares of Prospect common stock, would be voted in accordance with the majority of the votes cast by Prospect stockholders with respect to the Merger Proposal. If the founders or Prospect's officers and directors purchase Public Shares from existing Prospect public stockholders that are likely to vote against the Merger Proposal or that are likely to elect to exercise their conversion rights, the probability that the vote to approve the Merger Proposal will succeed would increase.
What will happen in the Merger?
At the closing of the Merger, Kennedy-Wilson Holders, will receive an aggregate of 26 million shares of Prospect common stock (each share of Kennedy-Wilson common stock shall automatically convert into the right to receive 3.8031 shares of Prospect common stock and each share of Kennedy-Wilson preferred stock shall automatically convert into the right to receive 105.6412 shares of Prospect common stock), minus any Dissenting Shares. Upon completion of the Merger, assuming that none of the Public Shares are converted into cash, the Kennedy-Wilson Holders will own approximately 44.2% of the shares of Prospect common stock outstanding immediately after the closing of the Merger, the current Prospect stockholders will own approximately 48.8% and the other new Prospect stockholders (including recipients of awards under the 2009 Plan) will own approximately 7.0% of Prospect's outstanding common stock. If 29.99% of the holders of Public Shares elect to convert their shares into cash, such percentages would be 50.7%, 41.3% and 8.0%, respectively. The holders of Prospect Public Warrants will receive either (i) $0.55 in cash or (ii) an amended and restated warrant (the "Amended and Restated Public Warrants"), for each Public Warrant they own immediately prior to the Merger. Each of the Amended and Restated Public Warrants and will have an exercise price of $12.50 per share, will be redeemable by the Company at $0.01 subject to a $19.50 redemption trigger price per share and will expire on November 14, 2013. The holders of Sponsors Warrants will have their terms amended and restated to provide for an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013. However, the Sponsor Warrants will not be redeemable so long as they are held by the founders or their permitted transferees. See the sections entitled " The Merger Proposal ," " The Merger Agreement ," " The Warrant Amendment Proposal " and " Description of Prospect Securities " for additional information.
9
Do I have conversion rights?
If you are a holder of Public Shares, you have the right to vote against the Merger Proposal and request that Prospect convert your shares into a pro rata portion of the Trust Account in which a substantial portion of the net proceeds of the IPO are held.
How do I exercise my conversion rights?
If you are a holder of Public Shares and wish to exercise your conversion rights, you must (i) affirmatively vote against the Merger Proposal by proxy or in person at the special meeting of Prospect stockholders, (ii) present written instructions to Prospect's transfer agent no later than one business day prior to the vote on the Merger Proposal stating that you wish to convert your shares into cash and that you will continue to hold your shares through the closing date of the Merger, (iii) continue to hold your shares through the closing date of the Merger, and (iv) tender your shares to Prospect's transfer agent within the period specified in a notice you will receive from or on behalf of Prospect, which period will be not be less than 20 days. You may tender your shares by either delivering your stock certificate to the transfer agent or by delivering your shares electronically using the Depository Trust Company's DWAC (Deposit/Withdrawal At Custodian) System. If the Merger is not completed, then these shares will not be converted into cash.
Any action that does not include an affirmative vote against the Merger will prevent you from exercising your conversion rights. Your vote on any proposal other than the Merger Proposal will have no impact on your right to seek conversion.
You may exercise your conversion rights either by checking the box on the proxy card or by submitting your request in writing to Prospect's secretary at the address listed at the end of this section. If you (i) initially vote for the Merger Proposal but then wish to vote against it and exercise your conversion rights or (ii) initially vote against the Merger Proposal and wish to exercise your conversion rights but do not check the box on the proxy card providing for the exercise of your conversion rights or do not send a written request to Prospect to exercise your conversion rights or (iii) initially vote against the Merger, but later wish to vote for it, you may request that Prospect send you another proxy card on which you may indicate your intended vote. You may make such request by contacting Prospect at the phone number or address listed at the end of this section.
Any corrected or changed proxy card or written demand of conversion rights must be received by Prospect's secretary no later than one business day prior to the special meeting of Prospect stockholders.
If, notwithstanding your negative vote, the Merger is completed, then, if you have also properly exercised your conversion rights, you will be entitled to receive a pro rata portion of the Trust Account, including any interest earned thereon, calculated as of two business days prior to the date of the consummation of the Merger. As of , 2009 (the record date), there was approximately $ in the Trust Account, or approximately $ per Public Share. If you exercise your conversion rights, then you will be exchanging your shares of Prospect common stock for cash and will no longer own these shares.
Exercise of your conversion rights does not result in either the exercise or loss of any Prospect warrants that you may hold. Your warrants will continue to be outstanding following a conversion of your common stock and will become exercisable upon consummation of the Merger. A registration statement must be in effect to allow you to exercise any warrants you may hold or to allow Prospect to call the warrants for redemption if the redemption conditions are satisfied. If the Merger is not consummated and Prospect does not consummate an acquisition by November 14, 2009, the warrants will not become exercisable and will be worthless.
10
Do I have appraisal rights if I object to the proposed acquisition?
No. Prospect stockholders do not have appraisal rights in connection with the Merger under the DGCL.
Do Kennedy-Wilson Holders have appraisal rights if they object to the proposed acquisition?
Yes. Kennedy-Wilson Holders have appraisal rights under the DGCL. Any shares held by a Kennedy-Wilson stockholder who has not voted in favor of the Merger and who has demanded appraisal for such shares in accordance with the DGCL will not be converted into a right to receive the Merger consideration, unless such Kennedy-Wilson Holder fails to perfect, withdraws or otherwise loses such Kennedy-Wilson Holder's right to appraisal under the DGCL. If, after the consummation of the Merger, such Kennedy-Wilson Holder fails to perfect, withdraws or otherwise loses such Kennedy-Wilson Holder's right to appraisal, each such share will be treated as if it had been converted as of the consummation of the Merger into a right to receive the Merger consideration.
Kennedy-Wilson's holders of common stock may also have appraisal rights under Chapter 13 of the California General Corporation Law (the "CGCL"). Any stockholder who does not vote in favor of the Merger and remains a holder of Kennedy-Wilson common stock at the effective time of the Merger may, by complying with the procedures set forth in Chapter 13 of the CGCL and sending Kennedy-Wilson a written demand for appraisal, be entitled to seek appraisal of the fair value of their shares as determined by the proper California superior court. These dissenters' rights are contingent upon consummation of the Merger.
Prospect is not required to effect the Merger in the event that either (i) holders of more than 10% of the outstanding shares of Kennedy-Wilson common stock or (ii) holders of more than 10% of the outstanding shares of Kennedy-Wilson preferred stock exercise their appraisal rights. Prospect shall not waive this condition if the number of outstanding shares of Kennedy-Wilson common stock or preferred stock for which holders exercise appraisal rights is such that, pursuant to the transactions contemplated by the Merger Agreement, Prospect will not be acquiring "control" of Kennedy-Wilson as defined in Section 368(c) of the Internal Revenue Code of 1986, as amended (the "Code"), solely in exchange for Prospect common stock. See the section entitled " Appraisal Rights " for additional information.
What happens to the funds deposited in the Trust Account after consummation of the Merger?
Upon consummation of the Merger, the funds in the Trust Account will be released to Prospect and used by Prospect to pay stockholders who properly exercise their conversion rights, to pay warrantholders in connection with the Cash Exchange, for expenses it incurred in pursuing its business combination, and for working capital and general corporate purposes. Such expenses include $6,000,000 that will be paid to the underwriters of Prospect's IPO for deferred underwriting compensation (the underwriters have agreed to forgo $4,000,000 of deferred underwriting compensation otherwise payable to them in connection with, and in accordance with the terms of, the underwriting agreement for the IPO), plus $3,000,000 in cash to Citigroup Global Markets Inc. ("Citigroup") for acting as Prospect's financial advisor in connection with the Merger, plus the reimbursement of reasonable out-of-pocket expenses not to exceed $30,000, and $85,000, plus the reimbursement of reasonable out-of-pocket expenses not to exceed $5,000, that will be paid to Houlihan Smith & Company, Inc. ("Houlihan Smith") for the fairness opinion it issued in connection with the Merger. De Guardiola Advisors, Inc. ("De Guardiola") also will receive a fee of $1,500,000, plus the reimbursement of reasonable out-of-pocket expenses, as well as 375,000 shares of Prospect common stock (to be held by its parent company, De Guardiola Holdings, Inc.) for acting as Prospect's financial advisor in connection with the Merger.
11
What happens to Prospect units, common stock and Public Warrants after consummation of the Merger?
Prospect's units, common stock and Public Warrants will continue to trade on the NYSE AMEX LLC (formerly known as the American Stock Exchange) ("AMEX"), upon consummation of the Merger. In addition, the Public Warrants will become exercisable upon consummation of the Merger in accordance with their terms as amended by the Warrant Amendment.
What happens if the Merger is not consummated?
Prospect must liquidate if it does not consummate the Merger by November 14, 2009. In any liquidation of Prospect, the funds deposited in the Trust Account, plus any interest earned thereon, less claims requiring payment from the Trust Account by creditors who have not waived their rights against the Trust Account, if any, will be distributed pro rata to the holders of Public Shares. Holders of Prospect common stock issued prior to the IPO, including all of Prospect's officers and directors, have waived any right to any liquidation distribution with respect to these shares. David A. Minella, Prospect's Chairman and Chief Executive Officer and each of LLM Structured Equity Fund L.P. and LLM Investors L.P., entities affiliated with Patrick J. Landers, a director and President of Prospect, have agreed, pursuant to an agreement with Prospect and Citigroup, the representative of the underwriters of the IPO, that if Prospect liquidates prior to the consummation of a business combination, they will be jointly liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by Prospect for services rendered or contracted for or products sold to Prospect, other than with respect to amounts claimed by any third-party who executed a waiver (even if such waiver is subsequently found to be invalid and unenforceable). Prospect cannot assure you that Mr. Minella, LLM Structured Equity Fund L.P. and LLM Investors L.P. would be able to satisfy those obligations. Pursuant to the underwriting agreement between Prospect and Citigroup, Prospect agreed not to commence its due diligence investigation of any operating business which it sought to acquire or obtain the services of any vendor without using its best efforts to obtain an agreement pursuant to which such party would waive any claims against the Trust Account. As of the date of this proxy statement/prospectus, Prospect has received waiver agreements from each of its vendors other than its independent registered accounting firm and Kennedy-Wilson with respect to certain provisions in the Merger Agreement. There is currently an outstanding balance to Prospect's independent registered accounting firm of approximately $112,000 and Prospect intends to pay such fees in full in accordance with its past practices. Further, under the Merger Agreement, Kennedy-Wilson agreed to waive all rights, title and claims to the Trust Account, except for $10,000,000, in case of breach by Prospect of its no-shop/non-solicit provision. See the section entitled " Information Related to ProspectLiquidation If No Business Combination " for additional information.
When do you expect the Merger to be completed?
Assuming that all regulatory approvals have been obtained, it is currently anticipated that the Merger will be completed on , one day after the special meeting of Prospect stockholders and the special meeting of warrantholders both to be held on , 2009. For a description of the conditions to the completion of the Merger, see the section entitled " The Merger AgreementConditions to Closing of the Merger " for additional information.
Because the prospectus for the IPO did not disclose that Prospect may seek to amend the Warrant Agreement and exchange a portion of the Prospect Public Warrants for cash, what are my legal rights?
You should be aware that because the registration statement for the IPO (the "IPO Prospectus"), did not disclose that Prospect may seek to amend the terms of the Warrant Agreement and exchange a portion of outstanding Public Warrants for cash proceeds released from the Trust Account, each holder of Public Shares at the time of the Merger who purchased such shares in the IPO may have securities law claims against Prospect for rescission (under which a successful claimant has the right to receive
12
the total amount paid for his or her securities pursuant to an allegedly deficient prospectus, plus interest and less any income earned on the securities, in exchange for surrender of the securities) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of a security). Such claims may entitle such stockholders asserting them to up to $10.00 per share, based on the initial offering price of the Prospect units issued in the IPO, each comprised of one share of Prospect common stock and a Prospect warrant exercisable for an additional share of Prospect common stock, less any amount received from the sale of the original Public Warrants purchased with such Prospect units, plus interest from the date of the IPO (which, in the case of holders of Public Shares, may be more than the pro rata share of the Trust Account to which they are entitled if they exercise their conversion rights or if Prospect liquidates). See the sections entitled " The Merger ProposalRescission Rights " for more information.
What do I need to do now?
Prospect urges you to read carefully and consider the information contained in this proxy statement/prospectus, including the " Risk Factors " and annexes, and to consider how the Merger will affect you as a stockholder of Prospect or how the Warrant Amendment will affect you as a warrantholder of Prospect, as the case may be. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card, or if you hold your shares or warrants through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.
What is a "proxy?"
A proxy is your legal designation giving another person permission to vote the shares or warrants you own. The person you designate is called your "proxy," and the document that designates someone as your proxy is called a "proxy" or "proxy card." A proxy card is included with this proxy statement/prospectus. When you sign the proxy card, you designate James J. Cahill and David A. Minella as your proxies at the special meeting of Prospect stockholders and special meeting of Prospect warrantholders.
Who is paying for this proxy statement/prospectus and the solicitation of my proxy, and how are proxies solicited?
Prospect will pay the cost of soliciting proxies for both the special meeting of Prospect stockholders and special meeting of Prospect warrantholders. Proxies may be solicited on behalf of Prospect by directors, officers or employees of Prospect in person or by mail, telephone, or facsimile or other means of communication. In addition, brokerage firms, banks and other custodians, nominees and fiduciaries will send copies of these proxy materials to the beneficial owners of the stock held by them. Prospect will reimburse these institutions for the reasonable costs they incur to do so. Though Prospect does not plan to do so now, it may later decide to retain a professional proxy solicitation service. The cost of that service would be paid by Prospect.
How do I vote?
If you are a holder of record of Prospect common stock or Prospect warrants on , 2009 (the record date for the special meeting of stockholders and the special meeting of Prospect warrantholders), you may vote in person at the special meeting of Prospect stockholders or at the special meeting of Prospect warrantholders, as the case may be, or by submitting a proxy. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope. If you hold your shares or warrants in "street name," which means your shares or warrants are held of record by a broker, bank or nominee, you should contact your broker, bank or nominee to ensure that votes related to the shares or warrants you beneficially own are properly counted. In this regard, you must provide the record holder of your shares or warrants with instructions on how to vote your shares or, if you wish to attend the special
13
meeting of Prospect stockholders or the special meeting of Prospect warrantholders and vote in person, obtain a proxy from your broker, bank or nominee. You may also be represented by another person at these meetings by executing a proper proxy designating that person. If you hold your shares or warrants through a bank, broker or nominee, you must obtain a legal proxy from your broker, bank or nominee and present it to the inspector of elections with your ballot to be able to vote in person at the special meeting of Prospect stockholders or special meeting of Prospect warrantholders.
What is a "holder of record?"
If your shares are registered in your name with Prospect's transfer agent, Continental Stock Transfer & Trust Company, then you are considered the holder of record for those shares. If your warrants are registered in your name with Prospect's warrant agent, Continental Stock Transfer & Trust Company, then you are considered the holder of record for those warrants. Prospect sends proxy materials directly to all holders of record.
If my shares or warrants are held in "street name," will my broker, bank or nominee automatically vote my shares or warrants for me?
No. Except with respect to the election of directors, your broker, bank or nominee cannot vote your shares or warrants unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee.
What will happen if I abstain from voting or fail to vote at the special meeting of Prospect warrantholders or special meeting of prospect stockholders?
Prospect will count a properly executed proxy marked "ABSTAIN" with respect to a particular proposal as present for purposes of determining whether a quorum is present at the special meeting of Prospect stockholders. For purposes of approval, an abstention or failure to vote on the Merger Proposal will have the same effect as a vote "AGAINST" the proposal, but will preclude you from having your shares converted into cash. In order to exercise your conversion rights, you must cast a vote against the Merger, make an election on the proxy card to convert such shares of common stock and follow the instructions under " Special Meeting of Prospect Warrantholders and Special Meeting of Prospect StockholdersConversion Rights " on page 74.
An abstention from the Warrant Amendment Proposal, the Warrantholder Adjournment Proposal, the Charter Amendment Proposal, the Merger Proposal, the Equity Participation Plan Proposal and the Stockholder Adjournment Proposal will have the same effect as a vote "AGAINST" these proposals, but will have no effect on the Director Election Proposal.
If I am not going to attend the special meeting of Prospect warrantholders or the special meeting of Prospect stockholders in person, should I return my proxy card instead?
Yes. Whether or not you plan to attend the special meeting of Prospect warrantholders or the special meeting of Prospect stockholders, after carefully reading and considering the information contained in this proxy statement/prospectus, please complete and sign your proxy card. Then return the proxy card in the pre-addressed postage-paid envelope provided herewith as soon as possible, so your shares or warrants, as the case may be, may be represented at the special meeting of Prospect warrantholders or the special meeting of Prospect stockholders.
May I change my vote after I have mailed my signed proxy card?
Yes. Send a later-dated, signed proxy card to Prospect's secretary at the address set forth below so that it is received by Prospect's secretary prior to the special meeting of Prospect stockholders or the special meeting of Prospect warrantholders or attend the special meetings in person and vote. You also may revoke your proxy by sending a notice of revocation to Prospect's secretary, which must be
14
received by Prospect's secretary at least one day prior to the special meeting of Prospect stockholders and the special meeting of Prospect warrantholders.
Who will count the votes?
A representative of Prospect will tabulate votes cast by proxy and be appointed to act as the inspector of elections and tabulate votes cast in person at both the special meeting of Prospect warrantholders and the special meeting of Prospect stockholders.
What should I do with my stock certificates?
Prospect stockholders who do not elect to have their shares converted into the pro rata share of the Trust Account should not submit their stock certificates now or after the Merger, because their shares will not be converted or exchanged in the Merger. Prospect stockholders who vote against the Merger and exercise their conversion rights must deliver their stock to Prospect's transfer agent (either physically or electronically) as instructed by Prospect and set forth in this proxy statement/prospectus on page 74.
What should I do if I receive more than one set of voting materials?
You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares or warrants in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares or warrants. If you are a holder of record and your shares or warrants are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your Prospect shares or warrants.
Who can help answer my questions?
If you have questions about the Merger or if you need additional copies of the proxy statement/prospectus or the enclosed proxy card, please contact:
James
J. Cahill
Prospect Acquisition Corp.
9130 Galleria Court, Suite 318
Naples, Florida 34109
Tel: (239) 254-4481
To obtain timely delivery, Prospect stockholders and Prospect warrantholders must request the materials no later than , 2009.
You may also obtain additional information about Prospect from documents filed with the U.S. Securities and Exchange Commission ("SEC") by following the instructions in the section entitled " Where You Can Find More Information ." If you intend to vote against the Merger and seek conversion of your shares, you will need to deliver your stock (either physically or electronically) to Prospect's transfer agent at the address below after the special meeting of Prospect stockholders and after receiving delivery instructions from or on behalf of Prospect. If you have questions regarding the certification of your position or delivery of your stock, please contact:
Mark
Zimkind
Continental Stock Transfer & Trust Company
17 Battery Place
New York, New York 10004
(212) 845-3287
15
Prospect and Kennedy-Wilson believe that some of the information in this proxy statement/prospectus constitutes forward-looking statements within the definition of the Private Securities Litigation Reform Act of 1995. However, because Prospect is a "blank check" company, the safe-harbor provisions of that act do not apply to statements made in this proxy statement/prospectus. You can identify these statements by forward-looking words such as "may,""expect," "anticipate," "contemplate," "believe," "estimate," "intend," "seek" and "continue" or similar words. You should read statements that contain these words carefully because they:
Prospect and Kennedy-Wilson believe it is important to communicate their expectations to their stockholders. However, there may be events in the future that they are not able to predict accurately or over which they have no control. The risk factors and cautionary language discussed in this proxy statement/prospectus provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by Prospect or by Kennedy-Wilson in such forward-looking statements, including among other things:
16
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement/prospectus.
All forward-looking statements included herein attributable to any of Prospect, Kennedy-Wilson or any person acting on either party's behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, Prospect and Kennedy-Wilson undertake no obligations to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.
Before you grant your proxy or instruct how your vote should be cast or vote on the Merger Proposal or any of the other proposals, you should be aware that the occurrence of the events described in the " Risk Factors " section and elsewhere in this proxy statement/prospectus may adversely affect Prospect and/or Kennedy-Wilson.
17
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this proxy statement/prospectus and does not contain all of the information that is important to you. To better understand the Merger, you should read this entire document carefully, including "Risk Factors," the Merger Agreement attached as Annex A, and all annexes and exhibits attached to this proxy statement/prospectus. The Merger Agreement is the legal document that governs the Merger and the other transactions that will be undertaken in connection with the Merger. It is also described in detail elsewhere in this proxy statement/prospectus.
This proxy statement/prospectus is:
The Parties
Prospect
Prospect is a blank check company formed on July 9, 2007 as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business.
The funds deposited in the Trust Account, with the interest earned thereon, will be released to Prospect upon consummation of the Merger, and used to pay any amounts payable to Prospect stockholders who vote against the Merger and exercise their conversion rights, to pay warrantholders in connection with the Cash Exchange, and to pay expenses incurred in connection with the business combination, including deferred underwriting compensation of $6,000,000 (the underwriters have agreed to forgo $4,000,000 of deferred underwriting compensation otherwise payable to them in connection with, and in accordance with, the terms of the underwriting agreement for the IPO), a $3,000,000 cash fee, plus the reimbursement of reasonable out-of-pocket expenses not to exceed $30,000, to Citigroup for acting as Prospect's financial advisor in connection with the Merger, a cash fee to De Guardiola of $1,500,000, plus the reimbursement of reasonable out-of-pocket expenses, as well as 375,000 shares of Prospect common stock (to be held by its parent company, De Guardiola Holdings, Inc.) for acting as Prospect's financial advisor in connection with the Merger, and $85,000 that will be paid to Houlihan Smith, plus the reimbursement of reasonable out-of-pocket expenses not to exceed $5,000, for the fairness opinion issued in connection with the Merger. Remaining proceeds will be used for working capital and general corporate purposes.
If Prospect does not complete the Merger by November 14, 2009, its corporate existence will terminate and it will liquidate and promptly distribute to its public stockholders the amount in the Trust Account plus any remaining non-Trust Account funds after payment of its liabilities.
The Prospect common stock, Public Warrants to purchase common stock and units are quoted on AMEX under the symbols "PAX" for the common stock, "PAX.W," for the Public Warrants and "PAX.U" for the units. Prospect intends to apply for re-listing on AMEX upon the consummation of the Merger. If Prospect's securities are re-listed on AMEX, the symbols may change to symbols that are reasonably representative of the post-Merger company's corporate name.
The mailing address of Prospect's principal executive office is 9130 Galleria Court, Suite 318, Naples, FL 34109. Its telephone number is (239) 254-4481 and its website is http://www.prospectac.com . After the consummation of the Merger, the post-Merger company's principal executive office will be located at 9701 Wilshire Blvd., Suite 700, Beverly Hills, CA 90210 and its telephone number will be (310) 887-6400.
18
Merger Sub
Merger Sub, a corporation organized under the laws of the State of Delaware on September 2, 2009, is a wholly-owned subsidiary of Prospect. Merger Sub was formed by Prospect to consummate the Merger. In the Merger, Merger Sub will merge with and into Kennedy-Wilson with Kennedy-Wilson continuing as the surviving corporation and becoming a direct wholly-owned subsidiary of Prospect. Merger Sub will cease to exist upon the consummation of the Merger.
The mailing address of Merger Sub's principal executive office is 9130 Galleria Court, Suite 318, Naples, Florida 34109.
Kennedy-Wilson
Founded in 1977, Kennedy-Wilson is a diversified, international real estate company that provides investment and real estate services. Kennedy-Wilson has grown from an auction business in one office into a vertically-integrated operating company with over 300 professionals in 21 offices throughout the U.S. and Japan. Kennedy-Wilson is an industry leader, currently owning real estate (through its closed-end funds and joint ventures) representing $2.9 billion in aggregate value and managing over 40 million square feet of residential, multifamily and commercial real estate, including 10,000 apartment units, throughout the U.S. and Japan.
In June 2009, a joint venture of which Kennedy-Wilson's Residential Condominium Group has a 51.6% ownership interest, acquired 149 unsold units in a Los Angeles condominium property. As of September 21, 2009, the joint venture sold and closed escrow on 76 units generating a net gain on sale after expenses of $9.5 million. As of the same date, an additional 36 units are under contract. Although no assurances can be provided, Kennedy-Wilson anticipates that all or substantially all of the remaining units will be sold.
In August 2009, a joint venture in which Kennedy-Wilson's Japanese Multi-family Group has a 35% interest, reduced the balance outstanding of a portfolio loan in the amount of $16 million with a payoff of the loan for $10 million, generating a net benefit to Kennedy-Wilson of $2.1 million.
Kennedy-Wilson's principal executive offices are located at 9601 Wilshire Blvd., Suite 220, Beverly Hills, CA 90210 and its telephone number is (310) 887-6400. Kennedy-Wilson will be moving its executive officers sometime between October 15, 2009 and November 15, 2009 to 9701 Wilshire Blvd., Suite 700, Beverly Hills, CA 90210. Kennedy-Wilson's website is http://www.KennedyWilson.com . The information contained in, or that can be accessed through, its website is not part of this proxy statement/prospectus and should not be relied upon in determining whether to vote in favor of the proposals.
The Warrant Amendment Proposal
Prospect proposes the Warrant Amendment to the Warrant Agreement governing all of Prospect's Warrants to allow (1) each Prospect warrantholder to elect to receive for each Public Warrant, either (i) the Cash Amount of $0.55, or (ii) an Amended and Restated Public Warrant with an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013, subject to adjustment and proration as described in this proxy statement/prospectus and (2) amend and restate the Sponsors Warrants to provide for an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013 (the "Amended and Restated Sponsors Warrants"). If the Merger is consummated, any warrantholder who votes against the approval of the Warrant Amendment Proposal or who makes no election will receive the Cash Amount in exchange for its Public Warrants. We refer to the elections by holders of Public Warrants to receive the Cash Amount or the Amended and Restated Public Warrants as the "Warrant Election." We also refer to the exchange of the Public Warrants for the Cash Amount as the Cash Exchange and the exchange of the Public Warrants for the Amended and Restated Public Warrants as the Warrant Exchange.
19
The form of Warrant Amendment is attached to this proxy statement/prospectus as Annex B and the form of Amended and Restated Warrant Agreement, which will be in effect upon consummation of the Merger, is attached to this proxy statement/prospectus as Annex C and both are incorporated into this proxy statement/prospectus by reference. You are encouraged to read the Warrant Amendment in its entirety. See the section entitled " The Warrant Amendment Proposal " for additional information.
If the Warrant Amendment Proposal is not approved at the special meeting of Prospect warrantholders, the Merger Proposal will not be presented to Prospect stockholders for a vote. If the Merger is not consummated and Prospect does not consummate any other business combination by November 14, 2009, Prospect will be required to liquidate and the Prospect warrants will expire and become worthless.
The Warrantholder Adjournment Proposal
If, based on the tabulated vote, there are not sufficient votes at the time of the special meeting of Prospect warrantholders to approve the Warrant Amendment Proposal, the Warrantholder Adjournment Proposal allows Prospect's board of directors to adjourn the special meeting of Prospect warrantholders to a later date or dates, if necessary, to permit further solicitation and vote of proxies to approve the Warrant Amendment Proposal. See the section entitled " The Warrantholder Adjournment Proposal " for additional information.
The Merger and the Merger Proposal
The Merger Agreement provides for a business combination transaction by means of the Merger of Merger Sub with and into Kennedy-Wilson, with Kennedy-Wilson continuing as the surviving corporation and becoming a direct wholly-owned subsidiary of Prospect. At the closing, the Kennedy-Wilson Holders will receive an aggregate of 26 million shares of Prospect common stock (each share of Kennedy-Wilson common stock shall automatically convert in to the right to receive 3.8031 shares of Prospect common stock and each share of Kennedy-Wilson preferred stock shall automatically convert into the right to receive 105.6412 shares of Prospect common stock) minus any Dissenting Shares. Based on the closing market price of $9.79 per share on September 8, 2009, the last trading day of Prospect common stock prior to the announcement of the Merger Agreement, the Initial Shares had an aggregate value of $254.5 million. Based on the closing market price of Prospect common stock of $ per share on (the record date), the Initial Shares had an aggregate value of $ . If a fractional share is required to be issued to a Kennedy-Wilson Holder, Prospect will round up to the nearest whole share in lieu of issuing fractional shares. Each outstanding Public Warrant will be converted into either (i) $0.55 in cash, or the Cash Amount, or (ii) the right to receive one Amended and Restated Public Warrant, subject to adjustment and proration as described in this proxy statement/prospectus. Based on the closing market price of $0.28 per Public Warrant on September 8, 2009, the last trading day prior to the announcement of the Merger Agreement, the Public Warrants had an aggregate value of $7,000,000. Based on the closing market price of $ per Public Warrant on , 2009, the Public Warrants had an aggregate value of $ .
Prospect and Kennedy-Wilson plan to complete the Merger promptly after the special meetings of Prospect stockholders and warrantholders, so long as, among other things:
20
After consideration of the factors identified and discussed in the section entitled " The Merger ProposalProspect's Board of Directors' Reasons for the Approval of the Merger, " Prospect's board of directors concluded that the Merger met all of the requirements disclosed in Prospect's Registration Statement on Form S-1 (Reg. No. 333-145110), that became effective on November 14, 2007, including that Kennedy-Wilson has a fair market value of at least 80% of the balance of Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount).
Upon completion of the Merger, assuming that none of the holders of Public Shares elects to convert such shares into cash, the Kennedy-Wilson Holders will own approximately 44.2% of the shares of Prospect common stock outstanding immediately after the closing of the Merger, the current Prospect stockholders will own approximately 48.8% and the other new Prospect stockholders (including recipients of awards under the 2009 Plan) will own approximately 7.0% of Prospect's outstanding common stock. If 29.99% of the holders of Public Shares elect to convert their shares into cash, such percentages would be 50.7%, 41.3% and 8%, respectively. The following table illustrates the relative ownership of Prospect shares:
|
Post Merger Ownership Percentage | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Kennedy-Wilson
Holders Ownership |
Current Prospect
Stockholders Ownership |
Other New Prospect
Stockholders(1) Ownership |
|||||||
No Public Shares Elect Cash Conversion |
44.2 | % | 48.8 | % | 7.0 | % | ||||
29.99% of Public Shares Elect Cash Conversion |
50.7 | % | 41.3 | % | 8.0 | % |
If the Merger Proposal is not approved by Prospect's stockholders at the special meeting of Prospect stockholders, none of the stockholder proposals (other than the Stockholder Adjournment Proposal, as discussed below) will be presented at the special meeting of Prospect stockholders.
Fairness Opinion
Prospect engaged Houlihan Smith to render an opinion that the consideration to be paid by Prospect in connection with the Merger with Kennedy-Wilson on the terms and conditions set forth in the Merger Agreement is fair to Prospect stockholders from a financial point of view and that the fair market value of Kennedy-Wilson is at least 80% of the balance of Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount). Houlihan Smith is an investment banking firm that regularly is engaged in the evaluation of businesses and their securities in connection with acquisitions, corporate restructurings, private placements and for other purposes. Prospect's board of directors decided to use the services of Houlihan Smith because it is a
21
recognized investment banking firm that has substantial experience in similar matters. The engagement letter provides that Prospect will pay Houlihan Smith a fee of $85,000 and will reimburse Houlihan Smith for its reasonable out-of-pocket expenses, which will not exceed $5,000. Prospect also agreed to indemnify Houlihan Smith in the event Houlihan Smith were to incur certain losses as a result of its engagement by Prospect. No material relationship exists or has existed in the past between Houlihan Smith and Prospect or Kennedy-Wilson.
Houlihan Smith delivered a presentation in conjunction with its written opinion to the board of directors of Prospect on September 5, 2009, which stated that, as of September 5, 2009, and based upon and subject to the assumptions made, matters considered, and limitations on its review as set forth in the fairness opinion, (i) the Merger consideration to be paid by Prospect for Kennedy-Wilson in conjunction with the Merger is fair from a financial point of view to the stockholders of Prospect, and (ii) the fair market value of Kennedy-Wilson is at least equal to 80% of the balance in Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount).
The amount of the Merger consideration was determined pursuant to negotiations between Prospect and Kennedy-Wilson and not pursuant to recommendations of Houlihan Smith. The full text of the written opinion of Houlihan Smith is attached as Annex F and is incorporated by reference into this proxy statement/prospectus. You are urged to read the Houlihan Smith opinion carefully and in its entirety for a description of the assumptions made, matters considered, procedures followed and limitations on the review undertaken by Houlihan Smith in rendering its opinion. The summary of the Houlihan Smith opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion. See the section entitled " The Merger ProposalFairness Opinion " for additional information.
The Charter Amendment Proposal
If the Charter Amendment Proposal is not approved by Prospect's stockholders at the special meeting of Prospect stockholders, the Merger will not be consummated. If the Merger is not consummated and Prospect does not consummate any other business combination by November 14, 2009, Prospect will be required to liquidate. The amendment and restatement of Prospect's amended and restated certificate of incorporation addressed by the Charter Amendment Proposal would, upon consummation of the Merger, (i) change Prospect's corporate name to "Kennedy-Wilson Holdings, Inc.," (ii) increase the number of authorized shares of Prospect capital stock from 73,000,000 to 81,000,000, (iii) provide for Prospect's perpetual existence, (iv) delete and replace Article Sixth of Prospect's current amended and restated certificate of incorporation and renumber accordingly, and (v) make certain other changes in tense and numbers that Prospect's board of directors believes are immaterial. Prospect's second amended and restated certificate of incorporation, as it is proposed to be amended and restated, is attached as Annex D to this proxy statement/prospectus. Prospect encourages you to read it in its entirety. See the section entitled " The Charter Amendment Proposal " for additional information.
The Equity Participation Plan Proposal
If the Equity Participation Plan Proposal is approved, 4,000,000 shares of Prospect common stock would be reserved for issuance to executive officers (including executive officers who are also directors), employees, directors and consultants in accordance with the terms of the 2009 Plan. The purpose of the 2009 Plan is to provide Prospect's directors, executive officers and other employees as well as consultants who, by their position, ability and diligence are able to make important contributions to Prospect's growth and profitability, with an incentive to assist Prospect in achieving its long-term corporate objectives, to attract and retain executive officers and other employees of outstanding competence and to provide such persons with an opportunity to acquire an equity interest
22
in Prospect. The 2009 Plan is attached as Annex E to this proxy statement/prospectus. Prospect encourages you to read the 2009 Plan in its entirety. See the section entitled " The Equity Participation Plan Proposal " for additional information.
The Director Election Proposal
At the special meeting of Prospect stockholders, stockholders will be asked to vote to elect seven directors to Prospect's board of directors effective immediately following and contingent upon closing of the Merger, of whom two will serve until the annual meeting of Prospect stockholders to be held in 2010, two will serve until the annual meeting of Prospect stockholders to be held in 2011 and three will serve until the annual meeting of Prospect stockholders to be held in 2012 and, in each case, until their successors are elected and qualified.
Following the consummation of the Merger, if management's nominees are elected, the directors of Prospect will be classified as follows:
Following the consummation of the Merger, the executive officers of Prospect will be William J. McMorrow, Chief Executive Officer and Freeman A. Lyle, Executive Vice President and Chief Financial Officer. In addition, following consummation of the Merger, Barry S. Schlesinger, Co-CEO of KW Commercial Investment Group, Mary Ricks, Co-CEO of KW Commercial Investment Group, James A. Rosten, President of Kennedy-Wilson Properties, Donald J. Herrema, CEO of KW Capital Markets, and Robert E. Hart, President of KW Multi-Family Management Group, will continue to be employed with the combined company. Each of such persons is currently an executive officer of Kennedy-Wilson. See the section entitled "Executive CompensationKennedy-Wilson Executive Compensation" for additional information.
If either the Merger Proposal or the Charter Amendment Proposal is not approved by Prospect's stockholders at the special meeting of Prospect stockholders, the Director Election Proposal and the Equity Participation Plan Proposal (but not the Stockholder Adjournment Proposal, as discussed below) will not be presented to the special meeting of stockholders for a vote and Prospect's current directors and executive officers will continue in office.
The Stockholder Adjournment Proposal
If, based on the tabulated vote, there are not sufficient votes at the time of the special meeting of Prospect stockholders to authorize Prospect to consummate the Merger (because either the Merger Proposal or the Charter Amendment Proposal is not approved or if holders of 30% or more of the Public Shares vote against the Merger Proposal and elect to convert their Public Shares into cash), Prospect's board of directors may submit a proposal to adjourn the special meeting of Prospect stockholders to a later date or dates, if necessary, to permit further solicitation of proxies. See the section entitled " The Stockholder Adjournment Proposal " for additional information.
Vote of Prospect's Founders
As of , 2009, the record date for the special meeting of Prospect stockholders, Michael Castine, a Prospect director, in his personal capacity, Daniel Gressel, a Prospect director, in his personal capacity, Michael Downey, a Prospect director, in his personal capacity, James Merchant, a Prospect director, in his personal capacity, James J. Cahill, Prospect's Secretary and Chief Financial Officer, in his personal capacity, Flat Ridge Investments LLC, an entity affiliated with David A.
23
Minella, Prospect's Chairman and Chief Executive Officer, LLM Structured Equity Fund L.P. and LLM Investors L.P., entities affiliated with Patrick J. Landers, a director and President of Prospect, CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), a corporation affiliated with William Landman, one of Prospect's directors, and SJC Capital LLC, an entity affiliated with William Cvengros, a Prospect director, who are collectively referred to herein as the Prospect "founders," beneficially owned and were entitled to vote 6,250,000 shares which were issued to them prior to the IPO, referred to herein as the "founders shares." The founders shares issued to the Prospect founders constituted approximately 20% of the outstanding shares of Prospect common stock immediately after the IPO.
In connection with the IPO, Prospect and Citigroup entered into agreements with each of the Prospect founders (including its officers and directors) pursuant to which each Prospect founder agreed to (i) vote his or its founders shares on the Merger Proposal in accordance with the majority of the votes cast by the holders of Public Shares and (ii) waive any right to receive a liquidation distribution with respect to the founders shares in the event Prospect fails to consummate the initial business combination. The Prospect founders (including its officers and directors) have also indicated that they intend to vote their founders shares in favor of all other proposals being presented at the special meeting of Prospect stockholders. The founders shares have no liquidation rights and will be worthless if no business combination is effected by Prospect. The Prospect founders have also indicated that they intend to vote their Sponsors Warrants in favor of all the proposals being presented at the special meeting of Prospect warrantholders. The warrants will be worthless if no business combination is effected by Prospect. In connection with the IPO, the Prospect founders entered into agreements with Citigroup restricting the sale of their founders shares until one year after the date of the completion of the initial business combination or earlier if, subsequent to the initial business combination, (i) the closing price of Prospect's common stock equals or exceeds $14.50 per share for any 20 trading days within any 30 trading day period or (ii) Prospect consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of Prospect's stockholders having the right to exchange their shares of common stock for cash, securities or other property; provided, however, that transfers can be made to permitted transferees who agree in writing to be bound by the same restrictions, agree to vote in the same manner as a majority of the public stockholders who vote at the special or annual meeting called for the purpose of approving Prospect's initial business combination and waive any rights to participate in any liquidating distribution if Prospect fails to consummate its initial business combination. For so long as the founders shares are subject to such transfer restrictions they will be held in an escrow account maintained by Continental Stock Transfer & Trust Company.
As of the record date, the percentage of outstanding shares of Prospect common stock held by directors, executive officers and their affiliates was 20%. Of these shares, 6,250,000 (20% of the outstanding shares of common stock) are founders shares which must be voted in accordance with the majority of the votes case by the holders of Public Shares. Immediately prior to and subject to consummation of the Merger, 2,575,000 founder shares will be cancelled and forfeited. As a result of this forfeiture, at the consummation of the Merger, the founders will own 3,675,000 shares of Prospect common stock. As of the record date, the percentage of outstanding warrants held by directors, executive officers and affiliates was 18% of which 200,000 Public Warrants are held by a founder and 5,250,000 are Sponsors Warrants held by the sponsors, which are expected to be voted in favor of the Warrant Amendment Proposal and Warrant Adjournment Proposal.
Date, Time and Place of the Special Meeting of Prospect Warrantholders and the Special Meeting of Prospect Stockholders
The special meeting of Prospect warrantholders and the special meeting of Prospect stockholders will be held at 8:30 a.m., Eastern time, on , 2009 at 9130 Galleria Court, Suite 318, Naples, FL 34109, or such other date, time and place to which such meetings may be adjourned or postponed to consider and vote upon the proposals. A proposal to adjourn the special meeting of Prospect stockholders to a later date or dates may be presented if, based upon the tabulated vote at
24
the time of the special meeting of Prospect stockholders, Prospect is not authorized to consummate the Merger. A proposal to adjourn the special meeting of Prospect warrantholders to a later date or dates may be presented if, based upon the tabulated vote at the time of the special meeting of Prospect warrantholders, Prospect is not authorized to approve the Warrant Amendment Proposal.
Voting Power; Record Date
You are entitled to vote or direct votes to be cast at the special meeting of Prospect stockholders or special meeting of Prospect warrantholders, as the case may be, if you owned shares of Prospect common stock or Prospect warrants at the close of business on , 2009, which is the record date for the special meeting of Prospect stockholders and the special meeting of Prospect warrantholders. You will have one vote for each share of Prospect common stock you owned and one vote for each share of common stock issuable upon exercise of your Prospect warrants (with respect to the special meeting of Prospect warrantholders) at the close of business on the record date. If your shares or warrants are held in "street name" or are in a margin or similar account, you should contact your broker, bank or nominee to ensure that votes related to the shares or warrants you beneficially own are properly counted. On the record date, there were 31,250,000 shares of Prospect common stock outstanding, of which 25,000,000 are Public Shares and 6,250,000 are shares held by the Prospect founders that were acquired prior to the IPO. On the record date, there were 30,250,000 Prospect warrants outstanding, of which 25,000,000 are Public Warrants (of which 200,000 are held by a Prospect founder) and 5,250,000 are Sponsors Warrants held by the sponsors. Immediately prior to and subject to consummation of the Merger, 2,575,000 founder shares will be cancelled and forfeited. As a result of this forfeiture, at the consummation of the Merger, the founders will own 3,675,000 shares of Prospect common stock.
Quorum and Required Vote for Warrantholder Proposals
A quorum of Prospect warrantholders is necessary to hold a valid meeting. A quorum will be present at the special meeting of Prospect warrantholders if a majority of the shares underlying the warrants entitled to vote at the meeting are represented in person or by proxy. Abstentions and broker non-votes will count as present for purposes of establishing a quorum.
Approval of the Warrant Amendment Proposal requires the affirmative vote of a majority in interest of the shares of Prospect common stock issuable upon exercise of the Prospect warrants affected by the Warrant Amendment and entitled to vote thereon as of the record date.
Approval of the Warrantholder Adjournment Proposal requires the affirmative vote of a majority in interest of the shares of Prospect common stock issuable upon exercise of the Prospect warrants represented in person or by proxy at the special meeting of Prospect warrantholders and entitled to vote thereon as of the record date.
Abstentions will have the same effect as a vote "AGAINST" the Warrant Amendment Proposal and the Warrantholder Adjournment Proposal. Broker non-votes will have the same effect as a vote "AGAINST" the Warrant Amendment Proposal and will have no effect on the Warrantholder Adjournment Proposal.
The Merger is conditioned upon approval of the Warrant Amendment Proposal. The stockholder proposals will not be presented at the special meeting of Prospect stockholders unless the Warrant Amendment Proposal is approved.
Quorum and Required Vote for Stockholder Proposals
A quorum of Prospect stockholders is necessary to hold a valid meeting. A quorum will be present at the special meeting of Prospect stockholders if a majority of the outstanding shares entitled to vote at the meeting are represented in person or by proxy. Abstentions and broker non-votes will count as
25
present for purposes of establishing a quorum. As of the record date, the Prospect founders hold 6,250,000 founders shares, which represents approximately 20% of the outstanding shares of Prospect common stock. The founders shares will be voted on the Merger Proposal in accordance with the majority of the votes cast by the holders of Public Shares and in favor of all of the other proposals and for the election as directors of management's nominees.
Abstentions, while considered present for the purposes of establishing a quorum, will have the same effect as a vote "AGAINST" the Merger Proposal, the Charter Amendment Proposal, the Equity Participation Plan Proposal, and the Stockholder Adjournment Proposal, if the latter is presented. Broker non-votes, while considered present for the purposes of establishing a quorum, will have the same effect as a vote "AGAINST" the Charter Amendment Proposal, but will have no effect on the Merger Proposal, the Equity Participation Plan Proposal, the Director Election Proposal and the Stockholder Adjournment Proposal, if the latter is presented. Please note that you cannot seek conversion of your shares unless you affirmatively vote against the Merger Proposal.
The Merger is conditioned upon approval of the Merger Proposal and the Charter Amendment Proposal, but not upon the approval of the Equity Participation Plan Proposal or the Director Election Proposal. The Equity Participation Plan Proposal and the Director Election Proposals will not be presented for a vote at the special meeting of Prospect stockholders unless both the Merger Proposal and the Charter Amendment Proposal are approved.
Conversion Rights
Pursuant to Prospect's amended and restated certificate of incorporation, a holder of Public Shares may, if the holder affirmatively votes against the Merger, demand that Prospect convert its shares into cash if the Merger is consummated. See the section entitled "Special Meeting of Warrantholders and
26
Special Meeting of Prospect StockholdersConversion Rights" for the procedures to be followed if you wish to convert your shares into cash. If properly demanded, Prospect will convert each Public Share into a pro rata portion of the Trust Account, calculated as of two business days prior to the anticipated consummation of the Merger. As of , 2009 (the record date), this would amount to approximately $ per share. If you exercise your conversion rights, then you will be exchanging your shares of Prospect common stock for cash and will no longer own the shares. You will be entitled to receive cash for these shares only if you (i) affirmatively vote against the Merger Proposal by proxy or in person at the special meeting of Prospect stockholders, (ii) present written instructions to Prospect's transfer agent no later than one business day prior to the vote on the Merger Proposal stating that you wish to convert your shares into cash and that you will continue to hold your shares through the closing date of the Merger, (iii) continue to hold your shares through the closing date of the Merger, and (iv) tender your shares to Prospect's transfer agent within the period specified in a notice you will receive from or on behalf of Prospect, which period will be not less than 20 days. You may tender your shares by either delivering your stock certificate to the transfer agent or by delivering your shares electronically using the Depository Trust Company's DWAC (Deposit/Withdrawal At Custodian) System. If the Merger is not completed, these shares will not be converted into cash.
If Prospect is unable to complete the Merger by November 14, 2009, its corporate existence will terminate and, upon its resulting liquidation, the holders of shares issued in the IPO will receive an amount equal to the amount of funds in the Trust Account at the time of the liquidation distribution divided by the number of Public Shares. Although both the per share liquidation price and the per share conversion price are equal to the amount of funds in the Trust Account divided by the number of Public Shares, the amount a holder of Public Shares would receive at liquidation may be more or less than the amount such a holder would have received had it sought conversion of its shares in connection with the Merger because (i) there may be greater earned interest in the Trust Account at the time of a liquidation distribution since it may occur at a later date than a conversion and (ii) Prospect may incur expenses that it would otherwise would not incur if Prospect consummates the Merger, including, potentially, claims requiring payment from the Trust Account by creditors who have not waived their rights against the Trust Account. David A. Minella, Prospect's Chairman and Chief Executive Officer, LLM Structured Equity Fund L.P. and LLM Investors L.P., entities affiliated with Patrick J. Landers, a director and Prospect's President, have agreed, pursuant to an agreement with Prospect and Citigroup, the representative of the underwriters in the IPO, that if Prospect liquidates prior to the consummation of a business combination, they will be jointly liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by Prospect for services rendered or contracted for or products sold to Prospect, other than with respect to amounts claimed by any third-party who executed a waiver (even if such waiver is subsequently found to be invalid and unenforceable). Pursuant to the underwriting agreement between Prospect and Citigroup, Prospect agreed not to commence its due diligence investigation of any operating business which it sought to acquire or obtain the services of any vendor without using its best efforts to obtain an agreement pursuant to which such party would waive any claims against the Trust Account. As of the date of this proxy statement/prospectus, Prospect has received waiver agreements from each of its vendors other than its independent registered accounting firm and Kennedy-Wilson with respect to certain provisions of the Merger Agreement. There is currently an outstanding balance to Prospect's independent registered accounting firm of approximately $112,000 and Prospect intends to pay such fees in full in accordance with its past practices. Further, under the Merger Agreement, Kennedy-Wilson agreed to waive all rights, title and claims to the Trust Account, except for $10,000,000, in case of breach by Prospect of its no-shop/non-solicit provision. See the section entitled "Information Related to ProspectLiquidation if No Business Combination" for additional information.
The Merger will not be consummated if the holders of 30% or more of the Public Shares (7,500,000 shares or more) properly demand conversion of their shares into cash.
27
Appraisal Rights
Prospect stockholders do not have appraisal rights in connection with the Merger under the DGCL.
Kennedy-Wilson Holders who do not vote in favor of adopting the Merger, and who otherwise comply with the applicable provisions of Section 262 of the DGCL ("Section 262") will be entitled to exercise appraisal rights under Section 262. Any shares held by a Kennedy-Wilson Holder who has not voted in favor of the Merger and who has demanded appraisal for such shares in accordance with the DGCL will not be converted into a right to receive the Merger consideration, unless such Kennedy-Wilson Holder fails to perfect, withdraws or otherwise loses such Kennedy-Wilson Holder's right to appraisal under the DGCL. If, after the consummation of the Merger, such Kennedy-Wilson Holder fails to perfect, withdraws or otherwise loses such Kennedy-Wilson Holder's right to appraisal, each such share will be treated as if it had been converted as of the consummation of the Merger into a right to receive the Merger consideration. Under the Merger Agreement, if more than 10% of the outstanding shares of Kennedy-Wilson common stock or 10% of the outstanding shares of Kennedy-Wilson preferred stock exercise appraisal rights, Prospect is not required to effect the Merger. Prospect shall not waive this condition if the number of outstanding shares of Kennedy-Wilson common stock or preferred stock for which holders exercise appraisal rights is such that, pursuant to the transactions contemplated by the Merger Agreement, Prospect will not be acquiring "control" of Kennedy-Wilson as defined in Section 368(c) of the Code solely in exchange for Prospect common stock.
Kennedy-Wilson's holders of common stock may also have appraisal rights under Chapter 13 of the CGCL. Any stockholder who does not vote in favor of the Merger and remains a holder of Kennedy-Wilson common stock at the effective time of the Merger may, by complying with the procedures set forth in Chapter 13 of the CGCL and sending Kennedy-Wilson a written demand for appraisal before the vote is taken by Kennedy-Wilson stockholders on the Merger Agreement, be entitled to seek appraisal of the fair value of their shares as determined by the proper California superior court. These dissenter's rights are contingent upon consummation of the Merger.
See the section entitled "Appraisal Rights" for additional information.
Rescission Rights
A Prospect securityholder at the time of the closing of the Merger that purchased Prospect units in the IPO (an "IPO Purchaser"), may have securities law claims against Prospect for rescission or damages on the basis, for example, that the IPO Prospectus, did not disclose that Prospect may seek to amend the terms of the Warrant Agreement and exchange a portion of its outstanding Public Warrants for cash proceeds released from the Trust Account. Rescission would give a successful IPO Purchaser claimant the right to receive the total amount paid for his or her securities pursuant to an allegedly deficient prospectus, plus interest and less any income earned on the securities, in exchange for surrender of the securities. An IPO Purchaser who has properly exercised its conversion rights or dissenter's rights will not be eligible for rescission in connection with any securities law claims it may have against Prospect in connection with Prospect units purchased in the IPO. In addition, an IPO Purchaser who purchased Prospect units in the IPO but who has separated its Prospect units into the component common stock and warrants and no longer owns the common stock or warrants included in such Prospect units may not be entitled to rescission in connection with any such securities law claims.
A successful IPO Purchaser claimant for damages under federal or state law could be awarded an amount to compensate for the decrease in value of his or her securities caused by the alleged violation (including, possibly, punitive damages), together with interest, while retaining such securities. Such claims may entitle IPO Purchasers asserting them to up to $10.00 per Prospect unit, based on the initial offering price of the Prospect units sold in the IPO, or $10.00 per share less any amount received from the sale or fair market value of the original Public Warrants purchased as part of the Prospect units,
28
plus interest from the date of the IPO. In the case of IPO Purchasers, this amount may be more than the cash to which they are entitled upon exercise of their conversion rights or dissenters' rights or upon liquidation of Prospect.
In general, a person who contends that he or she purchased a security pursuant to a prospectus that contains a material misstatement or omission must make a claim for rescission within the applicable statute of limitations period, which, for claims made under Section 12 of the Securities Act of 1933, as amended (the "Securities Act") and some state statutes, is one year from the time the claimant discovered or reasonably should have discovered the facts giving rise to the claim, but not more than three years from the occurrence of the event giving rise to the claim. Claims under the anti-fraud provisions of the federal securities laws must generally be brought within two years of discovery, but not more than five years after occurrence. Rescission and damages claims would not necessarily be finally adjudicated by the time the Merger is completed, and such claims would not be extinguished by consummation of that transaction. See the section entitled " The Merger ProposalRescission Rights " for additional information about rescission rights.
Proxies
Proxies may be solicited by mail, telephone or in person. If you grant a proxy, you may still vote your shares or warrants in person if you revoke your proxy before the special meeting of Prospect stockholders or special meeting of Prospect warrantholders. You may also change your vote by submitting a later-dated proxy as described in the section entitled " Special Meeting of Prospect Warrantholders and Prospect StockholdersRevoking Your Proxy. "
Comparison of Rights of Stockholders of Prospect and Kennedy-Wilson
Prospect and Kennedy-Wilson are incorporated under the laws of the State of Delaware. Upon consummation of the Merger, Kennedy-Wilson stockholders will become stockholders of Prospect. Prospect's amended and restated certificate of incorporation that will be in effect at the closing of the Merger differs from Kennedy-Wilson's amended and restated certificate of incorporation. For a more complete description of the differences between the rights of the stockholders of Prospect and the rights of stockholders of Kennedy-Wilson, please refer to the section entitled " Comparison of Rights of Prospect and Kennedy-Wilson Holders. "
Interests of Kennedy-Wilson's Directors and Executive Officers in the Merger
When you consider the recommendation to vote in favor of approval of the Merger Proposal, you should be aware that certain members of the Kennedy-Wilson board and certain executive officers of Kennedy-Wilson have agreements or arrangements that provide them with interests in the Merger.
If the Merger is consummated, William J. McMorrow and Mary Ricks will be potentially entitled to receive certain cash bonus payments of up to $11.7 million and $4.0 million, respectively. The cash bonus payments will be payable as follows: (i) Mr. McMorrow and Ms. Ricks will be entitled to receive $4.85 million and $2.0 million, respectively, on October 15, 2009, provided, however, that such payments will be repaid to Kennedy-Wilson in the event the Merger is not consummated by November 15, 2009 or the executive is not employed by Kennedy-Wilson on the effective date of the Merger (these employment requirements will not apply, however, in the case of a termination of employment due to death or disability); (ii) Mr. McMorrow and Ms. Ricks will receive "performance unit awards" under the 2009 Plan which will entitle them to receive $2.425 million and $1.0 million, respectively, on April 1, 2010, provided that the Performance Target is met as of March 31, 2010 (in the event that the Performance Target is not met as of March 31, 2010, the bonus otherwise due April 1, 2010 shall, nevertheless, be paid on July 1, 2010, October 1, 2010, or January 1, 2011, respectively, if the Performance Target is satisfied as of the earliest of June 30, 2010, September 30,
29
2010, or December 31, 2010, respectively), and the executive remains employed through the date on which the Performance Target is satisfied; and (iii) Mr. McMorrow and Ms. Ricks will receive additional "performance unit awards" under the 2009 Plan which will entitle them to receive cash payments in the amounts of $4.425 and $1.0 million, respectively, on January 1, 2011, provided that the Performance Target is met as of December 31, 2010 and he or she, as applicable, remains employed by the post-Merger company through January 1, 2011. Notwithstanding the foregoing, in the event that the Merger is consummated and the employment of Mr. McMorrow or Ms. Ricks is terminated by the post-Merger company without cause or he or she, as applicable, resigns from his or her, as applicable, employment with the post-Merger company for good reason, the payments referred to in clauses (ii) and (iii) above will still be payable on the applicable payment dates if the Performance Target is met. The "Performance Target" is met as of a particular date if Kennedy-Wilson's assets under management plus the cost of properties subject to property management contracts are at least $3.0 billion as of such date. The Performance Target was established by an independent committee of Prospect and is subject to the approval of the compensation committee of the post-Merger company following the consummation of the Merger.
On April 10, 2006, William J. McMorrow borrowed $3,543,127 from Kennedy-Wilson evidenced by a Promissory Note bearing simple interest at a rate of 7.5% per annum and scheduled to mature on April 9, 2011 (the "McMorrow Note"). Mr. McMorrow's employment agreement has been amended to provide that the McMorrow Note will be forgiven if the Merger is consummated.
If the Merger is consummated, certain of Kennedy-Wilson's executive officers will continue to be employed with the post-Merger company, including William J. McMorrow, Freeman A. Lyle, Barry S. Schlesigner, Mary Ricks, James A. Rosten, Robert E. Hart and Donald J. Herrema. In addition, it is proposed that six members of the board of directors of Kennedy-Wilson will be elected to serve as directors of the post-Merger company. To reward and incentivize Kennedy-Wilson's key employees and management after the Merger, up to 4,000,000 shares of Prospect common stock will be reserved for issuance under the 2009 Plan. If the Merger is consummated, certain Kennedy-Wilson officers, directors and key employees will be issued an aggregate of 3,740,000 restricted shares of Prospect common stock under the 2009 Plan upon the closing of the Merger as set forth in the table below:
Name of Group
|
Dollar ($) |
Number of Shares
of Restricted Stock |
|||||
---|---|---|---|---|---|---|---|
William McMorrow, Chief Executive Officer |
$ | | 900,000 | ||||
Freeman Lyle, Chief Financial Officer |
$ | | 50,000 | ||||
Mary Ricks, Co-CEO of KW Commercial Investment Group |
$ | | 900,000 | ||||
Barry Schlesinger, Co-CEO of KW Commercial Investment Group |
$ | | 125,000 | ||||
Robert Hart, President of KW Multi-Family Management Group |
$ | | 125,000 | ||||
James Rosten, President of Kennedy-Wilson Properties |
$ | | 125,000 | ||||
All executive officers, as a group |
$ | | 3,495,000 | ||||
All directors who are not executive officers, as a group |
$ | | 25,000 | ||||
All employees, including all current officers who are not executive officers, as a group |
$ | | 220,000 |
In the event that the recipient of the restricted shares remains employed by (or continues to perform services as a director for) the post-Merger company through the relevant vesting date, 1 / 5 of the restricted shares will vest on each of the first five anniversaries of the date of issuance, provided that the Performance Target is met as of the September 30 immediately preceding the applicable anniversary date (in the case of the installments vesting on the fourth and fifth anniversary dates, the Performance Target must be met as of the September 30 immediately preceding the third anniversary date). The Performance Target was established by an independent committee of Prospect and is subject to the approval of the compensation committee of the post-Merger company following the consummation of the Merger. Notwithstanding the foregoing, in the event the employment with the
30
post-Merger company of an employee who has been granted restricted shares is terminated without cause or if the employee resigns from his employment with the combined company for good reason, the restricted shares will continue to vest on the applicable anniversary dates (subject to the satisfaction of the Performance Target), subject to certain limitations. In addition, in the event of a "Change of Control" as defined in the 2009 Plan (see "The Equity Participation Plan Proposal"Change of Control") , any unvested restricted shares of Prospect common stock that have not previously been forfeited will become vested, subject to certain limitations. See section "The Equity Participation Plan ProposalAwards to Particular Officers, Directors and Employees" for additional information.
In connection with the Merger, Mr. McMorrow and Ms. Ricks have entered into amendments to their employment agreements which provide for, among other things, (i) the removal of certain benefits in the event of a change in control; (ii) the addition of certain severance benefits if the executive resigns on account of a change in location or a material reduction in duties; (iii) the grant to each executive of 900,000 shares of restricted stock of Prospect pursuant to the 2009 Plan and upon the terms and conditions set forth above; (iv) the cash bonus payments set forth above and (v) in the case of Mr. McMorrow, the McMorrow Note forgiveness described above. Mr. Herrema has also entered into an amendment to his employment agreement which provides for the extension of his employment term from December 31, 2010 to January 31, 2014 as well as clauses (ii)(iii) above. In addition, each of the employment agreements for Messrs. McMorrow and Herrema and Ms. Ricks have been amended to include language intended (i) to provide for a reduction in the amount of payments or benefits payable or provided to them under their respective employment agreements or otherwise to ensure that no payment or benefit is subject to the excise tax imposed by Section 4999 of the Code (certain golden parachute payments) which reduction may, in certain circumstances, result in the repayment of certain previously paid amounts (plus earnings) to the post-Merger company and (ii) to achieve compliance with Section 409A of the Code.
Interests of Prospect's Directors and Officers in the Merger
When you consider the recommendation of Prospect's board of directors in favor of approval of the Merger Proposal, you should keep in mind that Prospect's executive officers and members of Prospect's board have interests in the Merger that are different from, or in addition to, your interests as a stockholder or warrantholder. These interests include, among other things:
31
held by any of the sponsors or their permitted transferees, (ii) they are non-transferable, other than to permitted transferees, until the date that is 30 days after the date on which Prospect consummates its initial business combination, (iii) for so long as the Sponsors Warrants are subject to the transfer restrictions described in clause (ii), the Sponsors Warrants are not exercisable, and (iv) the Sponsors Warrants are exercisable on a cashless basis at the holder's option so long as the warrants are held by the sponsors or their affiliates. Prospect has agreed to register the shares underlying the Sponsors Warrants at any time after Prospect has consummated its initial business combination, but the purchasers of the Sponsors Warrants have agreed that the Sponsors Warrants will not be sold or, subject to certain limited exceptions, transferred by them and they may not exercise the Sponsors Warrants until 30 days after Prospect has completed a business combination. Accordingly, the Sponsors Warrants have been placed in escrow and will not be released until 30 days after the completion of a business combination. The Sponsors Warrants are not publicly traded and, as amended by the Warrant Amendment, will have an exercise price of $12.50 per warrant, a redemption trigger price of $19.50 and an expiration date of November 14, 2013. All of the Sponsors Warrants will become worthless if the Merger is not consummated by November 14, 2009 (as will the remainder of the Public Warrants).
In addition, at any time prior to the special meeting of Prospect stockholders and special meeting of Prospect warrantholders, during a period when they are not then aware of any material nonpublic information regarding Prospect or its securities, the Prospect founders, Kennedy-Wilson and Kennedy-Wilson Holders and/or their respective affiliates may purchase shares or Public Warrants from institutional and other investors, or execute agreements to purchase such shares of common stock or Public Warrants from them in the future, or they may enter into transactions with such persons and others to provide them with incentives to acquire shares of Prospect common stock or Public Warrants
32
or vote their shares or Public Warrants in favor of the Merger Proposal and the Warrant Amendment Proposal, as applicable. The purpose of such Public Warrant purchases and other transactions would be to increase the likelihood that holders of a majority of shares underlying the warrants is present and voting at the special meeting of Prospect warrantholders. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements that the holders of a majority of the Public Shares present in person or by proxy and eligible to vote at the special meeting of Prospect stockholders vote in favor of the Merger Proposal, and that holders of fewer than 30% of the Public Shares vote against the Merger Proposal and demand conversion of their Public Shares into cash where it appears that such requirements would otherwise not be met.
While the exact nature of any incentives that would be provided by the Prospect founders, Kennedy-Wilson and Kennedy-Wilson Holders and/or their respective affiliates has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares or Public Warrants, including the granting of put options and the transfer to such investors or holders of shares or Public Warrants owned by the Prospect founders for nominal value. Prospect will not enter into any such arrangement, either prior to or after the consummation of the Merger, and no funds in its Trust Account will be used to make such purchases or to fund other such arrangements. Entering into any such arrangements may have a depressive effect on Prospect's stock and Public Warrants.
If such transactions are effected, the consequence could be to cause the Merger Proposal or the Warrant Amendment Proposal to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares of common stock or Public Warrants by the persons described above would allow them to exert more influence over the approval of the Merger Proposal or the Warrant Amendment Proposal and other proposals and would likely increase the chances that such proposals would be approved. Moreover, any such purchases may make it less likely that the holders of 30% or more of the Public Shares will vote against the Merger Proposal and exercise their conversion shares.
As of the date of this proxy statement/prospectus, there have been no such discussions with respect to any such transaction and no agreements to such effect have been entered into with any such investor or holder. Prospect will file a Current Report on Form 8-K to disclose any arrangements entered into or significant purchases made by any of the aforementioned persons that would affect the vote on the Merger Proposal, the Warrant Amendment Proposal, the Charter Amendment Proposal, or the conversion threshold.
Recommendations to Prospect Warrantholders
Prospect's board of directors believes that each of the Warrant Amendment Proposal and the Warrantholder Adjournment Proposal to be presented at the special meeting of Prospect warrantholders are fair to and in the best interest of Prospect's warrantholders and unanimously recommends that its warrantholders vote "FOR" each of the proposals.
Recommendation to Prospect Stockholders
Prospect's board of directors believes that each of the Merger Proposal, the Charter Amendment Proposal, the Equity Participation Plan Proposal, the Director Election Proposal and the Stockholder Adjournment Proposal to be presented at the special meeting of Prospect stockholders are fair to and in the best interest of Prospect's stockholders and unanimously recommends that its stockholders vote "FOR" each of the proposals.
33
Conditions to Closing of the Merger
General Conditions
Consummation of the Merger by Prospect and Kennedy-Wilson is conditioned upon, among other things:
Either party may waive one or more conditions to the consummation of the Merger. However, to the extent a material condition is waived by one of the parties, which waiver would render any prior disclosure materially misleading, Prospect intends to resolicit the approval of its stockholders of the Merger.
Kennedy-Wilson's Conditions to Closing
The obligations of Kennedy-Wilson to consummate the transactions contemplated by the Merger Agreement also are conditioned upon the following, among other things:
34
Prospect's Conditions to Closing
The obligations of Prospect to consummate the transactions contemplated by the Merger Agreement also are conditioned upon the following, among other things:
35
Termination
The Merger Agreement may be terminated prior to closing:
36
Effect of Termination
Except as otherwise provided in the Merger Agreement, in the event of proper termination of the Merger Agreement by either Prospect or Kennedy-Wilson, the Merger Agreement will have no further force and effect, without any liability or obligation on the part of Prospect or Kennedy-Wilson and each party will destroy all documents, work papers and materials of the other party relating to the transactions contemplated; provided, however, that those provisions which survive the termination of the Merger Agreement, including that Kennedy-Wilson will not seek recourse against the Trust Account except for a claim for damages if Prospect breaches its no shop/non-solicit provision, shall not be void and that such termination will not terminate the rights or remedies of any party against another party that has violated or breached the Merger Agreement prior to such termination.
If the Merger Agreement is terminated by either party should Kennedy-Wilson fail to receive its common stockholder approval, Kennedy-Wilson shall be obligated to pay Prospect $10,000,000. If such amount is not paid within 30 days after termination of the Merger Agreement, interest will begin to accrue on this amount.
Fees and Expenses
All fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such expenses, except that the parties will each pay one-half of fees related to filings under the HSR Act.
Certain United States Federal Income Tax Consequences
For United States federal income tax purposes:
37
Public Warrants nor a United States Holder of Sponsor Warrants should recognize any gain or loss on the Warrant Exchange.
Furthermore, the Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of Code.
If the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code, no gain or loss will be recognized by United States Holders of Kennedy-Wilson common stock or preferred stock who receive solely shares of Prospect common stock in exchange for shares of Kennedy-Wilson stock pursuant to the Merger. However, a United States Holder of Kennedy-Wilson common stock or preferred stock who exercises its appraisal rights and who receives cash in exchange for its shares of Kennedy-Wilson common stock or preferred stock generally will recognize capital gain or loss if such shares were held as a capital asset at the time of the exchange. Such gain or loss is generally measured by the difference between the amount of cash received and the tax basis of that stockholder's shares of Kennedy-Wilson common stock or preferred stock transferred.
For a further description of these material United States federal income tax consequences of the Merger, please see the information set forth in " The Merger ProposalMaterial United States Federal Income Tax Consequences " for additional information.
Anticipated Accounting Treatment
The acquisition will be accounted for as a "reverse merger" and recapitalization since immediately following the completion of the transaction, the stockholders of Kennedy-Wilson immediately prior to the business combination will have effective control of Prospect through its approximately 44.2% stockholder interest in the combined entity, assuming no share conversions (50.7% in the event of maximum share conversion), which includes its largest principal stockholder owning approximately 24.8% of the Kennedy-Wilson stockholder interest in the combined company. In addition, through Kennedy-Wilson's 44.2% stockholder interest, Kennedy-Wilson will maintain effective control of the combined entity through control of a substantial portion of the board of directors by maintaining six of the seven board seats for an expected term ranging from one to of three years. Additionally, all of Kennedy-Wilson's senior executive positions will continue on as management of the post-Merger company after consummation of the Merger. For accounting purposes, Kennedy-Wilson will be deemed to be the accounting acquirer in the Merger and, consequently, the Merger will be treated as a recapitalization of Kennedy-Wilson. Accordingly, Kennedy-Wilson's assets, liabilities and results of operations will become the historical financial statements of the registrant, and Prospect's assets, liabilities and results of operations will become consolidated with Kennedy-Wilson effective as of the acquisition date. No step-up in basis or intangible assets or goodwill will be recorded in this transaction. All direct costs of the Merger will be charged to operations in the period that such costs are incurred.
Regulatory Matters
Prospect and Kennedy-Wilson do not expect that the Merger will be subject to any state or federal regulatory requirements other than (i) filings under applicable securities laws and the effectiveness of the registration statement of which this proxy statement/prospectus is a part, (ii) expiration or early termination of any applicable waiting periods under the HSR Act, and (iii) the filing of certain merger documents with the Secretary of State of the State of Delaware. Prospect and Kennedy-Wilson intend to comply with all such requirements.
Risk Factors
In evaluating the Merger Proposal, the Charter Amendment Proposal, the Equity Participation Plan Proposal, the Director Election Proposal and the Stockholder Adjournment Proposal, stockholders
38
should carefully read this proxy statement/prospectus and especially consider the factors discussed in the section entitled " Risk Factors. "
In evaluating the Warrant Amendment Proposal and the Warrant Adjournment Proposal, warrantholders should carefully read this proxy statement/prospectus and especially consider the factors discussed in the section entitled " Risk Factors. "
Selected Historical Financial Information
To assist you in your analysis of the financial aspects of the Merger, please see the financial information set forth in the section "Selected Historical Financial Information" on page 129.
39
SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The selected unaudited pro forma condensed consolidated financial statements are presented on a pro forma basis for Kennedy-Wilson after giving effect to the reverse merger with Prospect.
Anticipated Accounting Treatment
The acquisition will be accounted for as a "reverse merger" and recapitalization since immediately following the completion of the transaction, the stockholders of Kennedy-Wilson immediately prior to the business combination will have effective control of Prospect through its approximately 44.2% stockholder interest in the combined entity, assuming no share conversions (50.7% in the event of maximum share conversion), which includes its largest principal stockholder owning approximately 24.8% of the Kennedy-Wilson stockholder interest in the combined company. In addition, through Kennedy-Wilson's 44.2% stockholder interest, Kennedy-Wilson will maintain effective control of the combined entity through control of a substantial portion of the board of directors by maintaining six of the seven board seats for an expected term ranging from one to of three years. Additionally, all of Kennedy-Wilson's senior executive positions will continue on as management of the post-Merger company after consummation of the Merger. For accounting purposes, Kennedy-Wilson will be deemed to be the accounting acquirer in the Merger and, consequently, the Merger will be treated as a recapitalization of Kennedy-Wilson. Accordingly, Kennedy-Wilson's assets, liabilities and results of operations will become the historical financial statements of the registrant, and Prospect's assets, liabilities and results of operations will become consolidated with Kennedy-Wilson effective as of the acquisition date. No step-up in basis or intangible assets or goodwill will be recorded in this transaction. All direct costs of the Merger will be charged to operations in the period that such costs are incurred.
Selected Unaudited Pro Forma Condensed Consolidated Financial Information
The following unaudited pro forma condensed consolidated financial information has been prepared assuming that the Merger had occurred (i) at the beginning of the pro forma statements of operations for the year ended December 31, 2008 and for the six months ended June 30, 2009, and (ii) at June 30, 2009 for the pro forma balance sheet.
Pursuant to Prospect's amended and restated certificate of incorporation, Prospect will not proceed with a transaction if stockholders owning 30% or more of the Public Shares vote against the transaction and exercise their conversion rights. Accordingly, Prospect may effect a transaction if stockholders owning up to one share less than 30% of the Public Shares exercise their conversion rights. If this occurred, Prospect would be required to convert for cash up to one share less than 30% of the 25,000,000 shares of common stock included in the units sold in the IPO, or 7,499,999 shares of common stock.
Furthermore, as a condition of the proposed transaction, each holder of the 25,000,000 Public Warrants must elect either to be redeemed for the Cash Amount of $0.55 per Public Warrant at closing, or to exchange its Public Warrants for Amended and Restated Public Warrants, with each such Amended and Restated Public Warrant entitling the holder thereof to purchase one share of Prospect common stock at an exercise price of $12.50 per share, with a redemption trigger price of $19.50 per share, and an expiration date of November 14, 2013. No more than 50% of the outstanding Public Warrants may exchanged for Amended and Restated Public Warrants. Accordingly, Prospect will be required to redeem a minimum of 12,500,000 Public Warrants and a maximum of 25,000,000 Public Warrants for an aggregate Cash Amount at closing ranging from $6,875,000 to $13,750,000, respectively.
40
Accordingly, the unaudited pro forma condensed consolidated financial information presents two possible scenarios for the approval of the Merger by the stockholders of Prospect, as follows:
The unaudited pro forma condensed consolidated financial information is provided for illustrative purposes only. The historical financial information in the unaudited pro forma condensed consolidated balance sheet has been adjusted to give effect to pro forma events that are directly attributable to the Merger and are factually supportable. The historical financial information in the unaudited pro forma condensed consolidated statements of operations has been adjusted to give effect to pro forma events that are directly attributable to the Merger, are factually supportable, and are expected to have a continuing impact on the consolidated results. Actual results could differ from the pro forma information presented herein.
The unaudited pro forma condensed consolidated balance sheet data reflects the acquisition of Kennedy-Wilson, as discussed in greater detail in the section entitled " Summary of the Material Terms of the Merger ." The historical balance sheet of Prospect at June 30, 2009 used in the preparation of the unaudited pro forma condensed consolidated financial information has been derived from the unaudited balance sheet of Prospect at June 30, 2009. For more detailed financial information, see the section entitled " Unaudited Pro Forma Condensed Consolidated Financial Information ."
The selected unaudited pro forma condensed balance sheet as of June 30, 2009 is based on the unaudited historical consolidated balance sheets as of June 30, 2009 for Prospect and Kennedy-Wilson and gives effect to the Merger. The selected unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2008 has been derived from audited consolidated financial statements for the year ended December 31, 2008. The selected unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2009 has been derived from the selected unaudited consolidated financial statements of Prospect and Kennedy-Wilson for the six months ended June 30, 2009. The selected unaudited pro forma condensed statements of operations give effect to the Merger as if it occurred on the first day of the period presented.
The following selected unaudited pro forma combined financial information has been derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes thereto included elsewhere in this proxy statement/prospectus, each of Prospect's and Kennedy-Wilson's historical consolidated financial statements and related notes, each of Prospect's and Kennedy-Wilson's " Management's Discussion and Analysis of Financial Condition and Results of Operations " section and other financial information contained in this proxy statement/prospectus. The selected unaudited pro forma information presented herein is not intended to represent or be indicative of the financial position or results of operations that would have actually occurred had the Merger occurred on the dates indicated and should not be taken as representative of the future consolidated financial position or results operations.
41
KENNEDY-WILSON HOLDINGS, INC.
Pro Forma Summary Unaudited Financial Information
(In thousands of U.S. Dollars, except per share amounts)
|
Years Ended December 31, |
Six Months Ended
June 30, |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2007 | 2008 | 2009 | |||||||||||||||||
|
Pro Forma
Consolidated Companies (with No Stock Conversion and Minimum Warrant Repurchase) |
Pro Forma
Consolidated Companies (with Maximum Stock Conversion and Maximum Warrant Repurchase) |
Pro Forma
Consolidated Companies (with No Stock Conversion and Minimum Warrant Repurchase) |
Pro Forma
Consolidated Companies (with Maximum Stock Conversion and Maximum Warrant Repurchase) |
Pro Forma
Consolidated Companies (with No Stock Conversion and Minimum Warrant Repurchase) |
Pro Forma
Consolidated Companies (with Maximum Stock Conversion and Maximum Warrant Repurchase) |
||||||||||||||
Revenue |
$ | 34,065 | $ | 34,065 | $ | 32,528 | $ | 32,528 | $ | 19,352 | $ | 19,352 | ||||||||
Net income (loss) attributable to common stockholders |
$ | 5,747 | $ | 5,747 | $ | (3,583 | ) | $ | (3,583 | ) | $ | (6,261 | ) | $ | (6,261 | ) | ||||
Net income (loss) available to common stockholders |
$ | 5,747 | $ | 5,747 | $ | (3,583 | ) | $ | (3,583 | ) | $ | (6,261 | ) | $ | (6,261 | ) | ||||
Net income per common share |
||||||||||||||||||||
Basic |
$ | 0.11 | $ | 0.13 | $ | (0.06 | ) | $ | (0.07 | ) | $ | (0.11 | ) | $ | (0.13 | ) | ||||
Diluted |
$ | 0.11 | $ | 0.13 | $ | (0.06 | ) | $ | (0.07 | ) | $ | (0.11 | ) | $ | (0.13 | ) | ||||
Cash dividends per common share |
$ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Total assets |
$ | 371,134 | $ | 290,159 | $ | 480,798 | $ | 399,756 | $ | 507,640 | $ | 426,589 | ||||||||
Total liabilities |
$ | 96,064 | $ | 96,064 | $ | 158,775 | $ | 158,775 | $ | 186,401 | $ | 186,401 | ||||||||
Total equity |
$ | 275,070 | $ | 194,095 | $ | 322,023 | $ | 240,981 | $ | 321,239 | $ | 240,188 |
Pro forma summary unaudited financial information is not presented for the year ended December 31, 2006 since Prospect was not formed until July 9, 2007.
42
HISTORICAL AND UNAUDITED COMPARATIVE PRO FORMA PER SHARE DATA
The following table sets forth selected historical equity ownership information for Prospect and Kennedy-Wilson and unaudited pro forma combined per share ownership information after giving effect to the Merger, assuming: (i) that no holders of Public Shares exercise their conversion rights and that 12,500,000 Public Warrants are purchased for cash; and (ii) that holders of 7,499,999 Public Shares (29.99%) exercise their conversions rights and that 25,000,000 Public Warrants are repurchased for cash. Prospect is providing this information to aid you in your analysis of the financial aspects of the Merger. The historical information should be read in conjunction with " Selected Historical Financial Information " included elsewhere in this proxy statement/prospectus and the historical consolidated financial statements of Prospect and Kennedy-Wilson and the related notes thereto included elsewhere in this proxy statement/prospectus. The unaudited pro forma per share information is derived from, and should be read in conjunction with, the unaudited condensed combined pro forma financial data and related notes included elsewhere in this proxy statement/prospectus.
The unaudited pro forma consolidated per share information does not purport to represent what the actual results of operations of Prospect or Kennedy-Wilson would have been had the Merger been completed or to project Prospect's or Kennedy-Wilson's results of operations that may be achieved after the Merger. The unaudited pro forma book value per share information below does not purport to represent what the value of Prospect and Kennedy-Wilson would have been had the Merger been completed nor the book value per share for any future date or period.
43
KENNEDY-WILSON HOLDINGS, INC.
Comparative Per Share Information
|
Prospect
Acquisition Corp. |
Kennedy-
Wilson, Inc. |
Pro Forma
Consolidated Companies (with No Stock Conversion and Minimum Warrant Repurchase) |
Pro Forma
Consolidated Companies (with Maximum Stock Conversion and Maximum Warrant Repurchase) |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Historical Information |
||||||||||||||||
Number of common shares issued and outstanding |
||||||||||||||||
December 31, 2008 |
31,250,000 | 5,466,150 | | | ||||||||||||
June 30, 2009 |
31,250,000 | 5,387,997 | | | ||||||||||||
Basic net income (loss) per common share from continuing operations |
||||||||||||||||
Year ended December 31, 2006 |
NA | (1) | $ | 1.23 | | | ||||||||||
Year ended December 31, 2007 |
$ | 0.05 | (1) | $ | 1.49 | | | |||||||||
Year ended December 31, 2008 |
$ | 0.05 | $ | (0.32 | ) | | | |||||||||
Six months ended June 30, 2009 |
$ | (0.01 | ) | $ | (1.24 | ) | | | ||||||||
Diluted net income (loss) per common share from continuing operations |
||||||||||||||||
Year ended December 31, 2006 |
NA | (1) | $ | 1.07 | | | ||||||||||
Year ended December 31, 2007 |
$ | 0.05 | (1) | $ | 1.35 | | | |||||||||
Year ended December 31, 2008 |
$ | 0.05 | $ | (0.32 | ) | | | |||||||||
Six months ended June 30, 2009 |
$ | (0.01 | ) | $ | (1.24 | ) | | | ||||||||
Net assets at book value per common shareDecember 31, 2008 |
$ |
7.65 |
(2) |
$ |
18.80 |
|
|
|||||||||
June 30, 2009 |
$ | 7.65 | (2) | $ | 19.30 | | | |||||||||
Pro Forma Information |
||||||||||||||||
Number of common shares issued and outstanding at closing |
||||||||||||||||
Under no conversion assumption |
29,050,000 | 26,000,000 | 55,050,000 | |||||||||||||
(% of total) |
52.77 | % | 47.23 | % | 100.00 | % | ||||||||||
Under maximum conversion assumption |
21,550,001 | 26,000,000 | | 47,550,001 | ||||||||||||
(% of total) |
45.32 | % | 54.68 | % | | 100.00 | % | |||||||||
Basic net income (loss) per common share from continuing operations |
||||||||||||||||
Year ended December 31, 2007 |
| | $ | 0.11 | $ | 0.13 | ||||||||||
Year ended December 31, 2008 |
| | $ | (0.06 | ) | $ | (0.07 | ) | ||||||||
Six months ended June 30, 2009 |
| | $ | (0.11 | ) | $ | (0.13 | ) | ||||||||
Diluted net income (loss) per common share from continuing operations |
||||||||||||||||
Year ended December 31, 2007 |
| | $ | 0.11 | $ | 0.13 | ||||||||||
Year ended December 31, 2008 |
| | $ | (0.06 | ) | $ | (0.07 | ) | ||||||||
Six months ended June 30, 2009 |
| | $ | (0.11 | ) | $ | (0.13 | ) | ||||||||
Net assets at book value per common share |
||||||||||||||||
December 31, 2008 |
| | $ | 5.85 | $ | 5.07 | ||||||||||
June 30, 2009 |
| | $ | 5.84 | $ | 5.05 |
44
You should carefully consider the following risk factors, together with all of the other information included in this proxy statement/prospectus, before you decide whether to vote or instruct your vote to be cast to approve the proposals described in this proxy statement/prospectus.
Risks Related to Kennedy-Wilson's Business and Operations Following the Merger
The success of Kennedy-Wilson's business is significantly related to general economic conditions and the real estate industry and, accordingly, its business has been and could continue to be harmed by the economic slowdown and downturn in real estate asset values, property sales and leasing activities.
Kennedy-Wilson's business is closely tied to general economic conditions and the real estate industry. As a result, Kennedy-Wilson's economic performance, the value of its real estate and real estate secured notes, and its ability to implement its business strategies may be affected by changes in national and local economic conditions. The condition of the real estate markets in which Kennedy-Wilson operates tends to be cyclical and related to the condition of the economy in the U.S. and Japan as a whole and to the perceptions of investors of the overall economic outlook. Rising interest rates, declining demand for real estate or periods of general economic slowdown or recession have had a direct negative impact on the real estate market in the past and a recurrence of these conditions in the U.S. or a deeper recession in Japan could result in a reduction in Kennedy-Wilson's revenues. In addition, the economic condition of each local market where Kennedy-Wilson operates may be dependent on one or more industries. Kennedy-Wilson's ability to change its portfolio promptly in response to economic or other conditions is limited. Certain significant expenditures, such as debt service costs, real estate taxes, and operating and maintenance costs are generally not reduced when market conditions are poor. These factors would impede Kennedy-Wilson from responding quickly to changes in the performance of its investments and could adversely impact its business, financial condition and results of operations. Kennedy-Wilson has experienced in past years, is currently experiencing, and expects in the future to be negatively impacted by, periods of economic slowdown or recession, and corresponding declines in the demand for real estate and related services, within the markets in which it operates. The current economic recession has been extraordinary for its worldwide scope, its severity and its impact on major financial institutions, among other aspects. The current recession and the downturn in the real estate market have resulted in and/or may continue to result in:
Kennedy-Wilson's real estate investments involve risk of losses and fluctuations in operating results.
Kennedy-Wilson participates as a principal in real estate investments, and the timing of its purchases and sales of those investments could result in significant fluctuations in its net operating results and cash flow. Kennedy-Wilson may experience one or more quarters without acquiring or
45
disposing of real estate, which could have a material adverse effect on its business, financial condition and results of operations.
There is the inherent possibility in all of Kennedy-Wilson's real estate investments that it could lose all or part of its investment. Real estate investments are generally illiquid, which may affect Kennedy-Wilson's ability to change its portfolio in response to changes in economic and other conditions. Moreover, in its joint ventures and funds that invest in real estate, Kennedy-Wilson may not be able to unilaterally decide the timing of the disposition of an investment, and as a result, may not control when and whether any gain will be realized or loss avoided. The value of Kennedy-Wilson's investments can also be diminished by:
Part of Kennedy-Wilson's investment strategy is to locate and acquire real estate assets that it believes are undervalued and to improve them to increase their resale value. Kennedy-Wilson faces risks arising from the acquisition of properties not yet fully developed or in need of substantial renovation or redevelopment, particularly the risk that Kennedy-Wilson overestimates the value of the property and the risk that the cost or time to complete the renovation or redevelopment will exceed the budgeted amount. Such delays or cost overruns may arise from:
Any failure to complete a redevelopment project in a timely manner and within budget or to sell or lease the project after completion could have a material adverse effect upon Kennedy-Wilson's business, results of operation and financial condition.
Kennedy-Wilson also has made and expects to continue to make or acquire mezzanine loans, which are loans that are secured by real property, but are subject to the interests of lenders who are senior to Kennedy-Wilson. These mezzanine loans are considered to involve a high degree of risk compared to other types of loans secured by real property. This is due to a variety of factors, including that a foreclosure by the holder of the senior loan could result in its mezzanine loan becoming uncollectible. Accordingly, Kennedy-Wilson may not recover the full amount, or any, of its investment in mezzanine loans. In addition, mezzanine loans may have higher loan to value ratios than conventional term loans.
If Kennedy-Wilson is unable to raise additional debt and equity capital, its results of operations could suffer.
Kennedy-Wilson's operations are dependent upon its ability to raise additional capital, particularly with respect to third-party equity and debt financings used in connection with real estate investments.
46
Kennedy-Wilson's access to capital funding is uncertain. The current global economic crisis has resulted in a severe tightening of the credit markets as well as other sources of capital. Kennedy-Wilson's inability to raise additional capital on terms reasonably acceptable to it could jeopardize the future success of its business.
Kennedy-Wilson may be subject to additional risks resulting from increased operations in Japan.
One of Kennedy-Wilson's strategies for the future is to continue its operations and investments in Asia, particularly in Japan. In furtherance of this strategy, Kennedy-Wilson expects to commit additional resources to expand its sales and marketing activities in Japan and expand its service offerings and products in selected markets throughout Asia. If Kennedy-Wilson is successful in implementing this strategy, the increased scope of its international operations may lead to more volatile financial results and difficulties in managing its businesses. This volatility and difficulty could be caused by, among other things, the following:
The current economic downturn has significantly affected countries throughout Asia, including Japan. The worldwide recession has led to falling stock prices and asset values in Asia and reduced economic growth prospects in Asia. Several property markets in Asia have been affected by real estate developments that resulted in an oversupply of completed or partially completed space. Property prices have fallen along with prices of other investments and asset values.
Kennedy-Wilson's revenues and earnings may be affected by foreign currency fluctuations.
Kennedy-Wilson's revenues from non-U.S. operations have been primarily denominated in the local currency where the associated revenues were earned. Thus, Kennedy-Wilson may experience significant fluctuations in revenues and earnings because of corresponding fluctuations in foreign currency exchange rates. To date, Kennedy-Wilson's foreign currency exposure has been limited to the Japanese Yen. Due to the constantly changing currency exposures to which Kennedy-Wilson will be subject and the volatility of currency exchange rates, there can be no assurance that Kennedy-Wilson will not experience currency losses in the future, nor can Kennedy-Wilson predict the effect of exchange rate fluctuations upon future operating results. Kennedy-Wilson's management may decide to use currency hedging instruments from time to time including foreign currency forward contracts, purchased currency options (where applicable) and foreign currency borrowings. The economic risks associated
47
with these hedging instruments include unexpected fluctuations in inflation rates, which could impact cash flow relative to paying down debt, and unexpected changes in Kennedy-Wilson's underlying net asset position. There can be no assurance that any hedging will be effective.
Kennedy-Wilson's joint venture activities involve unique risks.
Kennedy-Wilson has utilized joint ventures for large commercial investments and real estate developments. Kennedy-Wilson plans to continue to acquire interests in additional limited and general partnerships, joint ventures and other enterprises (collectively, "Joint Ventures") formed to own or develop real property or interests in real property or note pools. It is Kennedy-Wilson's strategy in Japan to invest primarily through Joint Ventures. Kennedy-Wilson has acquired and may acquire minority interests in Joint Ventures and it may also acquire interests as a passive investor without rights to actively participate in management of the Joint Ventures. Investments in Joint Ventures involve additional risks, including the possibility that the other participants may become bankrupt or have economic or other business interests or goals which are inconsistent with Kennedy-Wilson's, that Kennedy-Wilson will not have the right or power to direct the management and policies of the Joint Ventures and that other participants may take action contrary to its instructions or requests and against its policies and objectives. Should a participant in a material Joint Venture act contrary to its interest, it could have a material adverse effect upon Kennedy-Wilson's business, results of operations and financial condition. Moreover, Kennedy-Wilson cannot be certain that it will continue these investments, or that it can identify suitable Joint Venture partners and form new Joint Ventures in the future.
Kennedy-Wilson may incur losses on its note investments.
Kennedy-Wilson may purchase notes that are unsecured or secured by real or personal property. These notes are generally non-performing or sub-performing, and often are in default at the time of purchase. In general, the distressed notes Kennedy-Wilson acquires are highly speculative investments and have a greater than normal risk of future defaults and delinquencies as compared to newly originated loans. Returns on loan investments depend on the borrower's ability to make required payments or, in the event of default, Kennedy-Wilson's security interests, if any, and its ability to foreclose and liquidate whatever property may be securing the note. Kennedy-Wilson cannot be sure that it will be able to collect on a defaulted loan or foreclose on security successfully or in a timely fashion. There may also be instances when Kennedy-Wilson is able to acquire title to an underlying property and sell it, but not make a profit on its investment.
Kennedy-Wilson's operating results may vary from quarter to quarter.
Kennedy-Wilson has experienced a fluctuation in its financial performance from quarter to quarter due in part to the significance of revenues from the sales of real estate on overall performance. The timing of purchases and sales of its real estate investments has varied, and will continue to vary, widely from quarter to quarter due to variability in market opportunities, changes in interest rates, and the overall demand for residential and commercial real estate, among other things. While these factors have contributed to Kennedy-Wilson experiencing increased operating income and earnings in the fourth quarter in past years, there can be no assurance that Kennedy-Wilson will continue to perform better in the fourth quarter.
In addition, the timing and magnitude of brokerage commissions paid to Kennedy-Wilson may vary widely from quarter to quarter depending upon overall activity in the general real estate market and the nature of its brokerage assignments, among other things.
48
The real estate services and investment businesses are highly competitive.
Real estate services and investment businesses are highly competitive. Kennedy-Wilson's principal competitors include both large multinational companies and national and regional firms, such as Jones Lang LaSalle, Inc., and CB Richard Ellis, Inc. Many of its competitors have greater financial resources and broader global presences than Kennedy-Wilson. Kennedy-Wilson competes with companies in the U.S., and to a limited extent, in Japan, with respect to:
Kennedy-Wilson's property management operations must compete with a growing number of national firms seeking to expand market share. There can be no assurance that it will be able to continue to compete effectively, maintain current fee levels or arrangements, continue to purchase investment property profitably or avoid increased competition.
Kennedy-Wilson may lose property management agreements or client relationships.
Kennedy-Wilson is highly dependent on long-term client relationships and on revenues received for services under various property management and leasing agreements with third-party owners of properties. A considerable amount of Kennedy-Wilson's revenues are derived from fees related to these agreements.
The majority of Kennedy-Wilson's property management agreements are cancelable prior to their expiration by the client for any reason on as little as 30 to 60 days' notice. These contracts also may not be renewed when their respective terms expire. Kennedy-Wilson believes many of its clients will continue to use its services for their current holdings and will engage Kennedy-Wilson for newly acquired properties. If, however, Kennedy-Wilson fails to maintain existing relationships, fails to develop and maintain new client relationships or otherwise loses a substantial number of management agreements, Kennedy-Wilson could experience a material adverse change in its business, financial condition and results of operations.
Kennedy-Wilson's property management fees are generally structured as a percentage of the revenues generated by the properties that it manages. Similarly, its leasing commissions typically are based on the value of the lease commitments. As a result, Kennedy-Wilson's revenues are adversely affected by decreases in the performance of the properties it manages and declines in rental value. Property performance will depend upon Kennedy-Wilson's ability to attract and retain creditworthy tenants, its ability to control operating expenses (some of which are beyond its control), financial conditions generally and in the specific areas where properties are located and the condition of the real estate market generally.
The growth of Kennedy-Wilson's business depends on its ability to renew leases or secure new tenants.
A significant portion of Kennedy-Wilson's property management business involves facilitating the leasing of commercial space. In certain areas of operation, there may be inadequate commercial space to meet demand and there is a potential for a decline in the number of overall lease and brokerage transactions. In areas where the supply of commercial space exceeds demand, Kennedy-Wilson may not be able to renew leases or obtain new tenants for its owned and managed rental properties as leases expire. Moreover, the terms of new leases and renewals (including renovation costs or costs of
49
concessions to tenants) may be less favorable than current leases. Kennedy-Wilson's revenues may be adversely affected by the failure to promptly find tenants for substantial amounts of vacant space, if rental rates on new or renewal leases are significantly lower than expected, or if reserves for costs of re-leasing prove inadequate. Kennedy-Wilson cannot be sure that it can continue to lease properties for its clients and for its own account in a profitable manner.
Kennedy-Wilson's ability to lease properties also depends on:
The growth of Kennedy-Wilson's business depends on its ability to integrate acquisitions into existing operations.
Acquisitions and expansion have been, and will continue to be, a significant component of Kennedy-Wilson's growth strategy for the future. While maintaining its existing business lines, Kennedy-Wilson intends to continue to pursue a sustained growth strategy by increasing revenues from existing clients, expanding the breadth of its service offerings, seeking selective co-investment opportunities and pursuing strategic acquisitions.
Kennedy-Wilson's ability to manage its growth will require it to effectively integrate new acquisitions into its existing operations while managing development of principal properties. Kennedy-Wilson expects that significant growth in several business lines occurring simultaneously will place substantial demands on its managerial, administrative, operational and financial resources. Kennedy-Wilson's future success and profitability will depend, in part, on its ability to attract, retain and motivate qualified managers and other personnel, and successfully implement enhancements to management and operating systems. In addition, expansion will likely require increased financing from third-party lenders. Kennedy-Wilson cannot be sure that it will be able to successfully manage all factors necessary for a successful expansion of its business. Moreover, Kennedy-Wilson's strategy of growth depends on the existence of and its ability to identify attractive and synergistic acquisition targets. The unavailability of suitable acquisition targets, or Kennedy-Wilson's inability to find them, may result in a decline in business, financial condition and results of operations.
Kennedy-Wilson depends on key personnel whose continued service is not guaranteed.
Kennedy-Wilson's continued success is dependent to a significant degree upon the efforts of its senior executives, who have each been essential to its business. Certain of its executives have employment contracts with Kennedy-Wilson that are renewable annually. The departure of all or any of its executives for whatever reason or the inability of all or any of them to continue to serve in their present capacities or Kennedy-Wilson's inability to attract and retain other qualified personnel could have a material adverse effect upon its business, financial condition and results of operations. Kennedy-Wilson's executives have built highly regarded reputations in the real estate industry. Its executives attract business opportunities and assist both in negotiations with lenders and potential joint venture partners and in the representation of large and institutional clients. If Kennedy-Wilson lost their services, its relationships with lenders, joint venturers and clients would diminish significantly.
50
In addition, certain of Kennedy-Wilson's officers have strong regional reputations and they aid in attracting and identifying opportunities and negotiating for Kennedy-Wilson and on behalf of its clients. In particular, Kennedy-Wilson views the establishment and maintenance of strong relationships through certain officers as critical to its success in the Japanese market. As Kennedy-Wilson continues to grow, its success will be largely dependent upon its ability to attract and retain qualified personnel in all areas of business. Kennedy-Wilson cannot be sure that it will be able to continue to hire and retain a sufficient number of qualified personnel to support or keep pace with planned growth.
Kennedy-Wilson is highly dependent upon the economy and real estate market in California.
Kennedy-Wilson has a high concentration of its business activities in California. Consequently, its business, results of operations and financial condition are dependent upon general trends in the Californian economy and real estate market. The California economy has experienced a significant downturn in the current recession and a sustained decline in the value of California real estate. Real estate market declines in California have become so severe that the market value of a number of properties securing loans has become significantly less than the outstanding balances of those loans. Real estate market declines may negatively affect Kennedy-Wilson's ability to sell property at a profit. In addition, California historically has been vulnerable to certain natural disaster risks, such as earthquakes, floods, wild fires and erosion-caused mudslides. The existence of adverse economic conditions or the occurrence of natural disasters in California could have a material adverse effect on Kennedy-Wilson's business, financial condition and results of operations.
Kennedy-Wilson's use of debt to finance acquisitions could adversely impact its results.
Kennedy-Wilson has historically financed new acquisitions and property purchases with cash derived from secured and unsecured loans and lines of credit. For instance, it typically purchases real property with loans secured by a mortgage on the property acquired. Kennedy-Wilson anticipates continuing this trend. It does not have a policy limiting the amount of debt that it may incur. Accordingly, Kennedy-Wilson's management and board of directors have discretion to increase the amount of its outstanding debt at any time. Kennedy-Wilson could become more highly leveraged, resulting in an increase in debt service costs that could adversely affect results of operations and increase the risk of default on debt.
Much of Kennedy-Wilson's debt bears interest at variable rates. As a result, Kennedy-Wilson is subject to fluctuating interest rates that may impact, adversely or otherwise, results of operations and cash flows. Kennedy-Wilson may be subject to risks normally associated with debt financing, including the risk that cash flow will be insufficient to make required payments of principal and interest, and the risk that existing indebtedness on its properties will not be able to be refinanced or that the terms of available new financing will not be as favorable as the terms of existing indebtedness. If Kennedy-Wilson is unable to satisfy the obligations owed to any lender with a lien on one of its properties, the lender could foreclose on the real property or other assets securing the loan and Kennedy-Wilson would lose that property or asset. The loss of any property or asset to foreclosure could have a material adverse effect on Kennedy-Wilson's business, financial condition and results of operations.
Kennedy-Wilson has guaranteed a number of loans in connection with various joint venture partnerships which may result in it being obligated to make substantial payments.
Kennedy-Wilson has provided guarantees associated with loans secured by assets held in various joint venture partnerships. The maximum potential amount of future payments (undiscounted) Kennedy-Wilson could be required to make under the guarantees was approximately $68.5 million at June 30, 2009. Subsequent to June 30, 2009, several loans have been paid down, which reduced the maximum potential amount of future payments (undiscounted) Kennedy-Wilson could be required to make under the guarantees to approximately $41.5 million. The guarantees expire by the year end of
51
2011 and Kennedy-Wilson's performance under the guarantees would be required to the extent there is a shortfall in liquidation between the principal amount of the loan and the net sales proceeds of the property. If Kennedy-Wilson were to become obligated to perform on these guarantees, it could have an adverse effect on its financial condition.
Kennedy-Wilson's auction services business has historically been countercyclical, and as a result, its operating results may be adversely affected when general economic conditions are improving.
Kennedy-Wilson's results of operations are dependent on the performance of its auction services group, which historically has been countercyclical. Kennedy-Wilson's auction services group has recently experienced an increase in revenues due to, among other things, the substantial increase in the number of foreclosures stemming from the current economic crisis. Improvements in general economic conditions may cause auction service revenues to decrease, which could cause a material adverse impact on Kennedy-Wilson's results of operations.
Kennedy-Wilson may have liabilities in connection with real estate brokerage and property management activities.
As a licensed real estate broker, Kennedy-Wilson and its licensed employees are subject to certain statutory due diligence, disclosure and standard-of-care obligations. Failure to fulfill these obligations could subject Kennedy-Wilson or its employees to litigation from parties who purchased, sold or leased properties they brokered or managed. In addition, Kennedy-Wilson may become subject to claims by participants in real estate sales claiming that it did not fulfill its statutory obligations as a broker.
In Kennedy-Wilson's property management capacity, it hires and supervises third-party contractors to provide construction and engineering services for its properties. While Kennedy-Wilson's role is limited to that of a supervisor, it cannot be sure that it will not be subjected to claims for construction defects or other similar actions. Adverse outcomes of property management litigation could have a material adverse effect on Kennedy-Wilson's business, financial condition and results of operations.
Kennedy-Wilson's properties may subject it to potential environmental liability.
Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be liable for the clean up of hazardous or toxic substances and may be liable to a governmental entity or to third parties for property damage and for investigation and clean-up costs incurred by governmental entities or third parties in connection with the contamination. Such laws typically impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of the hazardous or toxic substances, even when the contaminants were associated with previous owners or operators. The costs of investigation, remediation or removal of hazardous or toxic substances may be substantial, and the presence of those substances, or the failure to properly remediate those substances, may adversely affect the owner's or operator's ability to sell or rent the affected property or to borrow using the property as collateral. The presence of contamination at a property can impair the value of the property even if the contamination is migrating onto the property from an adjoining property. Additionally, the owner of a site may be subject to claims by parties who have no relation to the property based on damages and costs resulting from environmental contamination emanating from the site.
In connection with the direct or indirect ownership, operation, management and development of real properties, Kennedy-Wilson may be considered an owner or operator of those properties or as having arranged for the disposal or treatment of hazardous or toxic substances. Therefore, Kennedy-Wilson may be potentially liable for removal or remediation costs.
Certain federal, state and local laws, regulations and ordinances also govern the removal, encapsulation or disturbance of asbestos-containing materials during construction, remodeling,
52
renovation or demolition of a building. Such laws may impose liability for release of asbestos-containing materials, and third parties may seek recovery from owners or operators of real properties for personal injuries associated with asbestos-containing materials. Kennedy-Wilson may be potentially liable for those costs for properties that it owns. In the past, Kennedy-Wilson has been required to remove asbestos from certain buildings that it owns. There can be no assurance that in the future Kennedy-Wilson will not be required to remove asbestos from its buildings or incur other substantial costs of environmental remediation.
Before consummating the acquisition of a particular piece of property, it is Kennedy-Wilson's policy to retain independent environmental consultants to conduct a thorough environmental review of the property to check for contaminants, including performing a Phase I environmental review. These assessments have included, among other things, a visual inspection of the properties and the surrounding area and a review of relevant federal, state and historical documents. To date, the assessments Kennedy-Wilson has had done have not revealed any environmental liability that Kennedy-Wilson believes would have a material adverse effect on its business, assets or results of operations as a whole, nor is it aware of any material environmental liability of the types described. Nevertheless, it is possible that the assessments Kennedy-Wilson commissioned do not reveal all environmental liabilities or that there are material environmental liabilities of which Kennedy-Wilson is currently unaware. There can be no assurance that future laws, ordinances or regulations will not impose any material environmental liability or that the current environmental condition of its properties will not be affected by tenants, by the condition of land or operations in the vicinity of those properties, or by unrelated third parties. Kennedy-Wilson believes that its properties are in substantial compliance in all material respects with all federal, state and local laws, ordinances and regulations regarding hazardous or toxic substances. Kennedy-Wilson has not been notified by any governmental authority, and is not otherwise aware of any material noncompliance, liability or claim relating to hazardous or toxic substances in connection with any of its properties. There can be no assurance that federal, state and local agencies or private plaintiffs will not bring these types of actions in the future, or that those actions, if adversely resolved, would not have a material adverse effect on Kennedy-Wilson's business, financial condition and results of operations.
Kennedy-Wilson may incur unanticipated expenses relating to laws benefiting disabled persons.
The Americans with Disabilities Act (the "ADA") generally requires that public accommodations such as hotels and office buildings be accessible to disabled people. Kennedy-Wilson believes that its properties are in substantial compliance with the ADA and that it will not be required to make substantial capital expenditures to address the requirements of the ADA. If, however, its properties are not in compliance with the ADA, the U.S. federal government could fine Kennedy-Wilson or private litigants could be awarded money damages. If Kennedy-Wilson is required to make substantial alterations to one or more of its properties, its results of operations could be materially adversely affected.
Kennedy-Wilson may incur significant costs complying with laws, regulations and covenants that are applicable to its properties and operations.
The properties in Kennedy-Wilson's portfolio and its operations are subject to various covenants and federal, state and local laws and regulatory requirements, including permitting and licensing requirements. Such laws and regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers may restrict Kennedy-Wilson's use of its properties and may require it to obtain approval from local officials or community standards organizations at any time with respect to its properties, including prior to acquiring a property or when undertaking renovations of any of its existing properties. Among other things, these restrictions may relate to fire and safety, seismic, asbestos-cleanup or hazardous material abatement requirements.
53
There can be no assurance that existing laws and regulations will not adversely affect Kennedy-Wilson or the timing or cost of any future acquisitions or renovations, or that additional regulations will not be adopted that increase such delays or result in additional costs. Kennedy-Wilson's failure to obtain required permits, licenses and zoning relief or to comply with applicable laws could have a material adverse effect on its business, financial condition and results of operations.
Kennedy-Wilson has insurance coverage limitations.
Kennedy-Wilson carries comprehensive general liability coverage and umbrella coverage on all of its properties of which it owns more than 50% with limits of liability which Kennedy-Wilson deems adequate and appropriate under the circumstances (subject to deductibles) to insure against liability claims and provide for the cost of legal defense. There are, however, certain types of extraordinary losses that may be either uninsurable, or that are not generally insured because it is not economically feasible to insure against those losses. Should any uninsured loss occur, Kennedy-Wilson could lose its investment in, and anticipated revenues from, a property, which loss or losses could have a material adverse effect on its operations. Currently, Kennedy-Wilson also insures some of its properties for loss caused by earthquake in levels it deems appropriate and, where it believes necessary, for loss caused by flood. Kennedy-Wilson cannot be sure that the occurrence of an earthquake, flood or other natural disaster will not have a materially adverse effect on its business, financial condition and results of operations.
Risks Related to the Merger
If holders of 30% or more of the Public Shares vote against the proposed Merger, Prospect will be forced to liquidate, and Prospect stockholders may receive less than $9.88 per share and the warrants will expire and be worthless.
Pursuant to Prospect's amended and restated certificate of incorporation, if holders of 30% or more of the Public Shares vote against the proposed Merger and elect to convert their shares to cash, Prospect will not be able to close the Merger with Kennedy-Wilson and will be forced to liquidate in accordance with the terms of its amended and restated certificate of incorporation because it will not be able to consummate a business combination by November 14, 2009. In any liquidation, the net proceeds of Prospect's IPO held in the Trust Account, plus any interest earned thereon, less up to $2,750,000 of interest which has been drawn for working capital purposes and less taxes, will be distributed on a pro rata basis to the holders of Public Shares. As of , 2009 (the record date), there was approximately $ per share in the Trust Account after accounting for taxes owing and Prospect's working capital. Upon liquidation there will be no distribution with respect to Prospect's outstanding warrants and, accordingly, the warrants will expire and be worthless.
Working capital will be reduced if any of Prospect's holders of Public Shares exercise their right to convert their common stock into cash and a reduction in working capital may adversely affect the post-Merger company's business and future operations.
Pursuant to Prospect's amended and restated certificate of incorporation, holders of Public Shares may vote against the Merger Proposal and demand that Prospect convert their shares into a pro rata share of the Trust Account, calculated as of two business days prior to the anticipated consummation of the Merger. Prospect and Kennedy-Wilson will not consummate the Merger if holders of 30% or more of the Public Shares exercise these conversion rights. If no holders elect to convert their Public Shares, the Trust Account will be approximately $ million at closing. If the Merger is consummated and holders of Public Shares have demanded to convert their shares, there will be a corresponding reduction in the amount of funds available to the post-Merger company's business and future operations. If conversion rights are exercised with respect to 7,499,999 shares, which is one share
54
less than the 30% of the Public Shares, the maximum potential conversion cost would be approximately $ million.
Prospect's outstanding Sponsors Warrants may be exercised in the future, which would increase the number of shares eligible for future resale in the public market and result in dilution to Prospect's stockholders.
Outstanding redeemable Sponsors Warrants to purchase an aggregate of 5,250,000 shares of common stock issued to the Prospect founders in a private placement concurrent with the IPO will become exercisable upon the consummation of the Merger, assuming it is completed. These Sponsors Warrants likely will be exercised only if the exercise price is below the market price of Prospect common stock. To the extent such Sponsors Warrants are exercised, additional shares of Prospect common stock will be issued, which will result in dilution to Prospect's stockholders and increase the number of shares of common stock eligible for resale in the public market. Sales of such shares of common stock, as well as the sale of common stock issued pursuant to the 2009 Plan, in the public market could adversely affect the market price of Prospect common stock.
Prospect's founders, including its officers and directors, control a substantial interest in Prospect and thus may influence certain actions requiring a stockholder or warrantholder vote.
The Prospect founders (including all of its officers and directors) collectively own 20% of its issued and outstanding shares of common stock as of the record date. Immediately prior to and subject to consummation of the Merger, 2,575,000 founder shares will be cancelled and forfeited. As a result of this forfeiture, at the consummation of the Merger, the founders will own 3,675,000 shares of Prospect common stock. Prospect's founders, because of their ownership position, will continue to exert control at least until the consummation of the Merger. In the event that Prospect's sponsors, initial stockholders, officers or directors purchase additional shares of Prospect's common stock or Prospect's Public Warrants in the open market, Prospect believes that they will vote any such shares acquired by them in favor of the Merger Proposal and in favor of the Charter Amendment Proposal and will vote any Public Warrants acquired by them in favor of the Warrant Amendment Proposal. The sponsors are also expected to vote their Sponsor's Warrants in favor of the Warrant Amendment Proposal as well. Thus, any additional purchase of shares of Prospect's common stock or Public Warrants by its sponsors, initial stockholders, officers or directors would likely allow them to exert additional influence over the approval of these proposals.
Prospect's management's ability to require holders of its warrants to exercise such warrants on a cashless basis will cause holders to receive fewer shares of common stock upon their exercise of the warrants than they would have received had they been able to exercise their warrants for cash.
If Prospect calls its warrants for redemption after the redemption criteria have been satisfied, Prospect's management will have the option to require any holder that wishes to exercise his warrant to do so on a "cashless basis." In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the "fair market value" and (y) the fair market value. The "fair market value" shall mean the average reported last sale prices of Prospect common stock for the 10 trading days ending on the third trading day prior to the date on which notice of redemption is sent to the holders of the warrants. If Prospect's management chooses to require holders to exercise their warrants on a cashless basis, the number of shares of common stock received by a holder upon exercise will be fewer than it would have been had such holder exercised his warrants for cash. This will have the effect of reducing the potential "upside" of the holder's investment in Prospect.
55
Prospect may redeem a warrantholder's unexpired warrants prior to their exercise at a time that is disadvantageous to them, thereby making such warrants worthless.
Assuming approval of the Warrant Amendment Proposal, Prospect will have the ability to redeem outstanding warrants (other than warrants held by Prospect founders or their permitted transferees) at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of Prospect common stock equals or exceeds $19.50 per share for any 20 trading days within a 30 trading day period ending on the third business day prior to proper notice of such redemption provided that on the date Prospect gives notice of redemption and during the entire period thereafter until the time Prospect redeems the warrants, Prospect has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available. Redemption of the outstanding warrants could force a warrant holder (i) to exercise its warrants and pay the exercise price therefor at a time when it may be disadvantageous for it to do so, (ii) to sell its warrants at the then-current market price when it might otherwise wish to hold such warrants, or (iii) to accept the nominal redemption price that, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of the warrants.
If Prospect's founders or its sponsors or their permitted transferees exercise their registration rights with respect to the founders shares or Sponsors Warrants and underlying securities, it may have an adverse effect on the market price of Prospect's common stock.
The Prospect founders or their permitted transferees are entitled to up to three demands that Prospect register the resale of the founders shares at any time generally commencing nine months after the consummation of the Merger. Additionally, Prospect's sponsors or their permitted transferees are entitled to up to three demands that it register the resale of their Sponsors Warrants and underlying shares of common stock at any time after Prospect consummates the Merger. Prospect will bear the cost of registering these securities. If such individuals exercise their registration rights with respect to all of their securities, then there will be an additional 3,675,000 shares of common stock and 5,250,000 warrants (as well as the 5,250,000 shares of common stock underlying the warrants) eligible for trading in the public market. The presence of these additional securities trading in the public market may have an adverse effect on the market price of Prospect's common stock. In addition, the existence of these rights may make it more difficult to effectuate the Merger or increase the cost of acquiring Kennedy-Wilson as their stockholders may be discouraged from approving the Merger with Prospect because of the potential negative effect the exercise of such rights may have on the trading market for Prospect's common stock.
If you do not vote your Public Shares at the special meeting of Prospect stockholders AGAINST the Merger or give instructions to your broker to vote AGAINST the Merger and demand that Prospect convert your shares into cash you will NOT be eligible to exercise your conversion rights and receive a portion of the Trust Account upon consummation of the Merger.
If you are a holder of Public Shares, you have the right to vote against the Merger Proposal and demand that Prospect convert your shares into a pro rata portion of the Trust Account. To exercise your conversion rights, you must (i) affirmatively vote against the Merger Proposal by proxy or in person at the special meeting of Prospect stockholders, (ii) present written instructions to Prospect's transfer agent no later than one business day prior to the vote on the Merger Proposal stating that you wish to convert your shares into cash, (iii) continue to hold your shares through the closing date of the Merger, and (iv) tender your shares to Prospect's transfer agent within the period specified in a notice you will receive from or on behalf of Prospect, which period will be not be less than 20 days. You may tender your shares by either delivering your stock certificate to the transfer agent or by delivering your shares electronically using the Depository Trust Company's DWAC (Deposit/Withdrawal At Custodian)
56
System. Any action that does not include an affirmative vote AGAINST the Merger will prevent you from exercising your conversion rights. You may exercise your conversion rights either by checking the box on the proxy card or by submitting your request in writing to James J. Cahill, Prospect's secretary, at the address listed in this proxy statement/prospectus.
If, notwithstanding your negative vote, the Merger is completed, then, if you have properly exercised your conversion rights, you will be entitled to receive a pro rata portion of the Trust Account, including any interest earned thereon, calculated as of two business days prior to the date of the consummation of the Merger. If you exercise your conversion rights, then you will be exchanging your shares of Prospect common stock for cash and you will no longer own these shares. However, if the Merger is not completed, then these shares will not be converted into cash. Your vote on any proposal other than the Merger Proposal will have no impact on your right to seek conversion. If no more than 30% of the outstanding Public Shares (minus one share) are converted (7,499,999 shares), Prospect may still consummate the Merger. If Prospect does not consummate a business combination by November 14, 2009, Prospect will liquidate and stockholders will receive their per-share distribution from the Trust Account.
The post-Merger company may incur expenses associated with defending law suits filed by Kennedy-Wilson Holders.
Kennedy-Wilson's common stock is currently traded on the Pink Sheets Electronic OTC, and a small percentage of Kennedy-Wilson's outstanding common stock is owned by holders who are not known to Kennedy-Wilson's management. If one or more of these holders were to bring a claim alleging that members of Kennedy-Wilson's board of directors breached their fiduciary duties in connection with approving the Merger, Kennedy-Wilson and the post-Merger company would incur costs defending and/or settling such claim.
Upon consummation of the Merger, the post-Merger company's directors and officers and their affiliates will be significant stockholders, which will make it possible for them to have significant influence over the outcome of all matters submitted to stockholders for approval and which influence may be alleged to conflict with the post-Merger company's interests and the interests of its other stockholders.
Upon the consummation of the Merger, the post-Merger company's directors and executive officers and their respective affiliates will own an aggregate of approximately 38.2% of the outstanding shares of Prospect common stock assuming no Public Shares are converted upon consummation of the Merger. The post-Merger company's directors and executive officers and their respective affiliates also will hold warrants, which if exercised, will give them greater control of the post-Merger company. These stockholders will have significant influence over the outcome of all matters submitted for stockholder approval, including the election of the post-Merger company's directors and other corporate actions. In addition, such influence by one or more of these affiliates could have the effect of discouraging others from attempting to purchase or take over the post-Merger company and/or reducing the market price offered for Prospect common stock in such an event.
Prospect's current directors, executive officers and/or affiliates beneficially own shares of common stock and warrants that will be worthless if the Merger is not consummated by November 14, 2009. Such interests may have influenced their decision to approve the business combination with Kennedy-Wilson.
Certain Prospect directors, executive officers and/or their affiliates beneficially own common stock in Prospect that they purchased prior to Prospect's IPO. Additionally, some of Prospect's founders, who also serve as Prospect's directors and executive officers, or their affiliates, purchased 5,250,000 Sponsors Warrants in a private placement that occurred simultaneously with Prospect's IPO. Additionally, a
57
founder purchased 200,000 Public Warrants on the open market after the IPO. Prospect's directors, executive officers and their affiliates are not entitled to receive any of the cash proceeds that will be distributed upon Prospect's liquidation with respect to common stock these individuals acquired prior to Prospect's IPO. Therefore, if the Merger is not consummated prior to November 14, 2009 and Prospect is forced to liquidate, such shares held by such persons will be worthless. This will also be true with respect to their Sponsors Warrants. As of , 2009 (the record date), Prospect's directors, executive officers and their affiliates held $ in common stock (based on a market price of $ ) and 5,250,000 Sponsors Warrants, which are not publicly traded and will have an exercise price of $12.50 per warrant (assuming approval of the Warrant Amendment Proposal) and 200,000 Public Warrants, which are publicly traded.
These financial interests of Prospect's directors, executive officers and their affiliates may have influenced their decision to approve the Merger and to continue to pursue the Merger. In considering the recommendations of Prospect's board of directors to vote for the Merger Proposal and other proposals, you should consider these interests.
Prospect's Chairman and Chief Executive Officer, David A. Minella and each of LLM Structured Equity Fund L.P. and LLM Investors L.P., entities affiliated with Patrick J. Landers, a director and Prospect's President, are jointly liable to ensure that proceeds of the Trust Account are not reduced by vendor claims in the event the business combination is not consummated. Such liability may have influenced their decision to approve the business combination with Kennedy-Wilson.
If Prospect liquidates prior to the consummation of the Merger, David A. Minella, and each of LLM Structured Equity Fund L.P. and LLM Investors L.P., have agreed, pursuant to an agreement with Prospect and Citigroup, the representative of the underwriters in the IPO, that if Prospect liquidates prior to the consummation of a business combination, they will be jointly liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by Prospect for services rendered or contracted for or products sold to Prospect, other than with respect to amounts claimed by any third-party who executed a waiver (even if such waiver is subsequently found to be invalid and unenforceable). Prospect cannot assure you that they would be able to satisfy those obligations. Pursuant to the underwriting agreement between Prospect and Citigroup, Prospect agreed not to commence its due diligence investigation of any operating business which it sought to acquire or obtain the services of any vendor without using its best efforts to obtain an agreement pursuant to which such party would waive any claims against the Trust Account. As of the date of this proxy statement/prospectus, Prospect has received waiver agreements from each of its vendors other than its independent registered accounting firm and Kennedy-Wilson with respect to certain provisions of the Merger Agreement. There is currently an outstanding balance to Prospect's independent registered accounting firm of approximately $112,000 and Prospect intends to pay such fees in full in accordance with its past practices. Further, under the Merger Agreement, Kennedy-Wilson agreed to waive all rights, title and claims to the Trust Account, except for $10,000,000, in case of breach by Prospect of its no-shop/non-solicit provision.
If Prospect is unable to complete the Merger by November 14, 2009, Prospect's corporate existence will terminate and Prospect will be forced to liquidate. In such event, third parties may bring claims against Prospect and, as a result, the proceeds held in trust could be reduced and the per-share liquidation price received by stockholders could be less than $9.88 per share.
Prospect must complete the Merger with Kennedy-Wilson by November 14, 2009, when Prospect's corporate existence will terminate and Prospect will be required to liquidate. In such event, third parties may bring claims against Prospect, although Prospect has obtained waiver agreements from certain vendors and service providers. Prospect has engaged, and owes money to, third-party vendors and other entities in connection with the negotiation with prospective target businesses. While most
58
parties have waived any right, title, interest or claim of any kind they may have in or to any monies held in the Trust Account, there is no guarantee that they or other vendors who did not execute such waivers will not seek recourse against the Trust Account notwithstanding such agreements. Furthermore, there is no guarantee that a court will uphold the validity of such agreements. Accordingly, the proceeds held in the Trust Account could be subject to claims that could take priority over those of Prospect's stockholders. Additionally, if Prospect is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against Prospect which is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in Prospect's bankruptcy estate and subject to the claims of third parties with priority over the claims of Prospect's stockholders. If any bankruptcy or other claims deplete the Trust Account, Prospect cannot assure you that it will be able to return to Prospect's stockholders at least $9.88 per share.
Prospect's stockholders may be held liable for claims by third parties against Prospect to the extent of distributions received by Prospect's stockholders.
If Prospect is unable to complete the Merger with Kennedy-Wilson by November 14, 2009, Prospect will be liquidated. Under Sections 280 through 282 of the DGCL, stockholders may be liable for claims by third parties against a corporation to the extent of distributions received by them. Pursuant to Section 280, if the corporation complies with certain procedures intended to ensure that it makes reasonable provisions for all claims against it, including a 60 day notice period during which any third-party claims can be brought against the corporation, a 90 day period during which the corporation may reject any claim brought and an additional 150 day waiting period before any liquidating distributions are made to stockholders, any liability of a stockholder with respect to a liquidating distribution is limited to the lesser of such stockholder's pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the liquidation. Prospect will seek to conclude the process as soon as possible and as a result does not intend to comply with those procedures.
Because Prospect will not be complying with those procedures, Prospect is required, pursuant to Section 281 of the DGCL, to adopt a plan that will provide for Prospect's payment, based on facts known to Prospect at such time, of (i) all existing claims, (ii) all pending claims, and (iii) all claims that may be potentially brought against Prospect within the subsequent 10 years. Accordingly, Prospect would be required to provide for any creditors known to Prospect at that time or those that Prospect believes could be potentially brought against Prospect within the subsequent 10 years prior to distributing the funds held in the Trust Account to Prospect's stockholders. All claims that may be potentially brought against Prospect may not be properly assessed. As such, Prospect's stockholders could potentially be liable for any claims to the extent of distributions received by them in a liquidation and any liability of Prospect's stockholders may extend well beyond the third anniversary of such liquidation. Accordingly, third parties may seek to recover from Prospect's stockholders amounts owed to them by Prospect.
Additionally, if Prospect is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against Prospect that is not dismissed, any distributions received by Prospect's stockholders in Prospect's liquidation might be viewed under applicable debtor/creditor and/or bankruptcy laws as either a "preferential transfer" or a "fraudulent conveyance." As a result, a bankruptcy court could seek to recover all amounts received by Prospect's stockholders in Prospect's liquidation. Furthermore, because Prospect intends to distribute the proceeds held in the Trust Account to Prospect's stockholders as soon as possible after Prospect's liquidation, this may be viewed or interpreted as giving preference to Prospect's stockholders over any potential creditors with respect to access to or distributions from Prospect's assets. Furthermore, Prospect's board of directors may be viewed as having breached their fiduciary duties to Prospect's creditors and/or may have acted in bad faith, thereby exposing Prospect's board of directors and Prospect to claims of punitive damages, by paying
59
Prospect's stockholders from the Trust Account prior to addressing the claims of creditors and/or complying with certain provisions of the DGCL with respect to Prospect's liquidation. Claims may be brought against Prospect for these reasons.
Neither Prospect nor its stockholders will have the protection of any practical indemnification, escrow, price adjustment or other provisions that allow for recourse in the event that any of the representations and warranties made by Kennedy-Wilson in the Merger Agreement prove to be inaccurate or incorrect.
The representations and warranties made by Prospect and Kennedy-Wilson to each other in the Merger Agreement generally will survive the completion of the Merger for a period of twelve months. Only Kennedy-Wilson, which will be a wholly-owned subsidiary of Prospect, and not Kennedy-Wilson's stockholders, is providing indemnification to Prospect for breaches of Kennedy-Wilson's representations and warranties in the Merger Agreement. This means Prospect would be seeking to recover damages from its own subsidiary. Kennedy-Wilson's liability is capped at $10,000,000 with a $1,000,000 deductible. In addition, there is no escrow for indemnification and no purchase price adjustment if Kennedy-Wilson's financial position is different than what was represented to Prospect. As a result, Prospect and its stockholders will not have the protection of additional escrow, price adjustment or other provisions that present a real opportunity to recover damages or for a post-closing adjustment to be made to the Merger consideration if any representation or warranty made by Kennedy-Wilson in the Merger Agreement proves to be inaccurate or incorrect.
Prospect and Kennedy-Wilson expect to incur significant costs associated with the Merger, whether or not the Merger is completed, which will reduce the amount of cash available for other corporate purposes.
Both Prospect and Kennedy-Wilson expect to incur significant costs associated with the Merger, whether or not the Merger is completed. These costs will reduce the amount of cash available for other corporate purposes. Prospect estimates that it will incur direct transaction costs of approximately $3.3 million associated with the Merger, which will be recorded as financing expense for accounting purposes if the Merger is completed. Kennedy-Wilson estimates that it will incur direct transaction costs of approximately $4.8 million, which will be recorded as share issuance costs for accounting purposes if the Merger is completed. In addition, upon completion of the Merger, Prospect will be required to pay $6,000,000 of previously accrued deferred underwriting fees to Citigroup (the underwriters have agreed to forgo $4,000,000 of deferred underwriting compensation otherwise payable to them in connection with, and in accordance with the terms of, the underwriting agreement for the IPO), plus $3,000,000 in cash fees for acting as Prospect's financial advisor in connection with the Merger. The actual costs may exceed these estimates. In addition, the post-Merger company may incur additional material charges reflecting additional costs associated with the arrangement in fiscal quarters subsequent to the quarter in which the Merger is completed. There is no assurance that the significant costs associated with the Merger will prove to be justified in light of the benefits ultimately realized.
Kennedy-Wilson has not waived its right to proceed against the assets in the Trust Account in the event of a breach by Prospect or its representatives of certain no-shop/non-solicit provisions in the Merger Agreement and Kennedy-Wilson may be liable for a break-up fee if it should fail to receive stockholder approval for the Merger.
Pursuant to the Merger Agreement, Kennedy-Wilson has generally agreed that it may not proceed against the Trust Account to the extent it may have claims for damages arising out of the proposed Merger and the Merger Agreement. However, this waiver does not extend to damages arising from Prospect's or its representatives' breach of an agreement not to seek to consummate a different business combination. If Prospect or its representatives should breach this provision, Kennedy-Wilson
60
would have the right to proceed against assets in the Trust Account, up to a maximum of $10,000,000, which would reduce the amount of cash available in the Trust Account. In addition, if either party terminates the Merger Agreement because Kennedy-Wilson fails to receive its common stockholder approval for the Merger by November 14, 2009, Kennedy-Wilson is obligated to pay to Prospect $10,000,000 as liquidated damages. If such amount is not paid within 30 days after termination of the Merger Agreement, interest will begin to accrue on this amount. This payment would reduce the amount of working capital available to Kennedy-Wilson.
As a result of the Merger, the ownership interest of Prospect's current stockholders will be substantially reduced, resulting in a dilution of Prospect's current stockholders' voting power.
In connection with the consummation of the Merger, Prospect will issue 30.115 million shares of Prospect common stock, including 26 million shares to be issued to Kennedy-Wilson stockholders, 375,000 shares to be issued to DGA, and 3,740,000 shares to be issued to employees of Kennedy-Wilson under the 2009 Plan. The issuance of these 30.115 million shares of Prospect common stock (offset in part by the forfeiture of 2.575 million shares by the Prospect founders), will dilute Prospect's existing stockholders' voting interest from 100% to approximately 48.8% of the post-Merger company's voting interests (assuming none of Prospect's stockholders exercise their conversion rights), and approximately 41.3% of the post-Merger company's voting interests (assuming 29.99% of Prospect's stockholders exercise their conversion rights).
While a majority of the proposed members of the post-Merger board of directors are considered "independent" under the listing standards of AMEX, the post-Merger company's board will contain six members of Kennedy-Wilson's existing board of directors and one member of Prospect's existing board of directors. In addition, certain officers of Kennedy-Wilson will become officers of Prospect. The directors who were formerly directors of Kennedy-Wilson and the officers who were formerly officers of Kennedy-Wilson may align their interests with those of the former stockholders of Kennedy-Wilson rather than those of the stockholders of Prospect prior to the Merger.
In addition, following the Merger, Prospect's outstanding common stock will be subject to substantial potential dilution by outstanding Prospect warrants and, if the Equity Participation Plan Proposal is approved, by future awards granted under the 2009 Plan.
The post-Merger company may issue additional equity securities which may dilute your interest in the post-Merger company.
In order to expand the post-Merger company's business, the post-Merger company may consider offering and issuing additional equity or equity-based securities. Holders of the post-Merger company's securities may experience a dilution in the net tangible book value per share held by them if this occurs. The number of shares that the post-Merger company may issue for cash without stockholder approval will be limited by the rules of the exchange on which the post-Merger company's securities are then listed. However, there are generally exceptions which allow companies to issue a limited number of equity securities which would dilute your ownership.
The ownership interest of Prospect's current stockholders will be substantially diluted with the assumption of the Guardian Note.
In connection with the Merger, Prospect has agreed to assume the Guardian Note which bears interest at a fixed rate of 7% payable quarterly, the outstanding balance of which is due on November 3, 2010. Under the terms of the Guardian Note, Guardian may convert, in whole or in part, the outstanding principal balance and accrued interest into common stock at a conversion price of $10.52 per share any time prior to the tenth anniversary of the original issue date. To the extent the Guardian Note is converted, additional shares of the post-Merger company's common stock will be
61
issued, which will result in dilution to the post-Merger company's stockholders and increase the number of shares of common stock eligible for resale into the public market. Sales of such shares of common stock could adversely affect the market price of the post-Merger company's common stock.
If the Merger's benefits do not meet the expectations of financial or industry analysts, the market price of the post-Merger company's common stock may decline.
The market price of the post-Merger company's common stock may decline as a result of the Merger if:
Accordingly, the post-Merger company's stockholders may experience a loss as a result of a decline in the market price of Prospect common stock. In addition, a decline in the market price of the post-Merger company common stock could adversely affect the post-Merger company's ability to issue additional securities and the post-Merger company's ability to obtain additional financing in the future.
The price of the post-Merger company's common stock after the consummation of the Merger may be volatile.
The price of the post-Merger company's common stock after the consummation of the Merger may be volatile, and may fluctuate due to factors such as:
If Prospect is unable to consummate the Merger or another business combination, Prospect's holders of Public Shares will be forced to wait before receiving liquidation distributions.
Prospect has until November 14, 2009 to consummate the Merger or another business combination. If Prospect does not consummate the Merger or another business combination during such time period, Prospect will liquidate in accordance with its amended and restated certificate of incorporation. Prospect has no obligation to return funds to Prospect's stockholders prior to such date unless Prospect consummates the Merger or another business combination prior thereto and only then in cases where Prospect's stockholders have sought conversion of their shares. Only after the expiration of this period will Prospect's stockholders be entitled to liquidation distributions if Prospect is unable to complete the Merger or another business combination. Further, Prospect may not be able to disburse
62
the funds in the Trust Account immediately following November 14, 2009, until it has commenced the liquidation process in accordance with its amended and restated certificate of incorporation and the DGCL. If Prospect has not consummated the Merger or another business combination by November 14, 2009, Prospect will automatically liquidate without the need for a stockholder vote.
If the Merger is not consummated, time and resources spent by Prospect in pursuit of the Merger will have been wasted, and Prospect likely will not have time to locate and acquire or merge with another business.
The investigation of Kennedy-Wilson and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and other instruments in connection with the Merger have required substantial management time and attention, along with substantial costs for accountants, attorneys and others. If a decision is made to not complete the Merger, the costs incurred up to that point for the Merger likely would not be recoverable. Furthermore, Prospect may fail to consummate the Merger for any number of reasons including those beyond Prospect's control, such as if the number of Prospect's stockholders who vote against the Merger Proposal and properly exercise their conversion rights represent more than 30% (minus one share) of the outstanding Public Shares. Such an event would result in a loss to Prospect of the related costs incurred which could materially adversely affect Prospect's subsequent attempts to locate and acquire or merge with another business.
Prospect's holders of Public Shares could vote against the Merger Proposal and exercise their conversion rights and a large number of warrantholders could opt for the Cash Exchange, resulting in less working capital for the post-Merger company.
If some of the current Prospect holders of Public Shares vote against the Merger Proposal and decide to convert their shares of Prospect common stock for cash upon consummation of the Merger and if up to one hundred percent of the Prospect warrantholders elect the Cash Exchange in the context of the Warrant Amendment Proposal, it would deplete the amount of cash available to the post-Merger company upon consummation of the Merger. The post-Merger company may be unable to implement its business plan if the maximum number of Prospect's holders of Public Shares exercised their conversion rights and one hundred percent of Prospect warrantholders elect the Cash Exchange option.
Prospect does not have any operations and Kennedy-Wilson has not recently operated as a "reporting company". Fulfilling the post-Merger company's obligations as a "reporting company" after the Merger will be expensive and time consuming.
Kennedy-Wilson has not been a public reporting company since 2004 and since that time has not been required to document and assess the effectiveness of its internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Although Prospect has maintained disclosure controls and procedures and internal control over financial reporting as required under the federal securities laws with respect to its activities, Kennedy-Wilson has not been required to establish and maintain such disclosure controls and procedures and internal controls over financial reporting as will be required with respect to a public company with substantial operations. Under the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC, Kennedy-Wilson will be required to implement additional corporate governance practices and to adhere to a variety of reporting requirements and accounting rules. Compliance with these obligations will require significant time and resources from Kennedy-Wilson's management, finance and accounting staff and will significantly increase Kennedy-Wilson's legal, insurance and financial compliance costs. As a result of the increased costs associated with being a "reporting company," Kennedy-Wilson's operating income as a percentage of revenue is likely to be lower.
63
The completion of the Merger could result in disruptions in business, loss of customers or contracts or other adverse effects.
The completion of the Merger may cause disruptions, including potential loss of customers and other business partners, and have material adverse effects on the post-Merger company's business and operations. It is possible that Kennedy-Wilson's pre-Merger customers and other business partners, in response to the completion of the Merger, may adversely change or terminate their relationships with the post-Merger company, which could have a material adverse effect on the business of the post-Merger company.
The pro forma condensed combined financial statements are not an indication of the post-Merger company's financial condition or results of operations following the Merger.
The pro forma condensed combined financial statements contained in this proxy statement/prospectus are not an indication of the post-Merger company's financial condition or results of operations following the Merger. The pro forma condensed combined financial statements have been derived from the historical financial statements of Prospect and Kennedy-Wilson and many adjustments and assumptions have been made regarding the post-Merger company after giving effect to the Merger. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments and assumptions are difficult to make with complete accuracy. As a result, the actual financial condition and results of operations of the post-Merger company may not be consistent with, or evident from, these pro forma financial statements. In addition, the actual earnings per share ("EPS"), of the post-Merger company may decrease below that reflected in the pro forma condensed combined financial statements for several reasons. The assumptions used in preparing the pro forma financial statements may not prove to be accurate and other factors may affect the post-Merger company's actual EPS following the Merger.
AMEX may delist Prospect's securities from quotation on its exchange, which could limit your ability to trade Prospect securities and subject Prospect to additional trading restrictions.
Prospect's securities are listed on AMEX, a national securities exchange. Although Prospect currently satisfies the minimum listing standards set forth in Section 101 of the AMEX Company Guide, which only requires that it meet certain requirements relating to stockholders' equity, market capitalization, aggregate market value of publicly held shares and distribution requirements, Prospect cannot assure you that its or the post-Merger company's securities will continue to be listed on AMEX in the future. Additionally, in connection with the Merger, it is likely that AMEX will require Prospect to file a new initial listing application and meet its initial listing requirements as opposed to its more lenient continued listing requirements. Even if such application is accepted, the post-Merger company may be unable to maintain the listing of its securities in the future.
If AMEX delists Prospect's or the post-Merger company's securities from trading on its exchange, Prospect could face significant material adverse consequences, including:
64
Activities taken by existing Prospect's stockholders to increase the likelihood of approval of the Merger Proposal and other proposals could have a depressive effect on the value of Prospect common stock.
At any time prior to the special meeting of Prospect stockholders, during a period when they are not then aware of any material non-public information regarding Prospect or its securities, the Prospect founders, Kennedy-Wilson and Kennedy-Wilson Holders and/or their respective affiliates may purchase shares of Prospect common stock or Public Warrants from institutional and other investors, or execute agreements to purchase such shares or Public Warrants from them in the future, or they may enter into transactions with such persons and others to provide them with incentives to acquire shares of Prospect common stock or Public Warrants and vote the acquired shares or Public Warrants in favor of the Merger Proposal or the Warrant Amendment Proposal, as applicable. The purposes of such common stock or Public Warrant purchases and other transactions would be (i) to increase the likelihood of satisfaction of the requirements that holders of a majority of the Public Shares present at the special meeting of Prospect stockholders in person or by proxy and eligible to vote thereon vote in favor of the Merger Proposal, (ii) to increase the likelihood that holders of fewer than 30% of the Public Shares vote against the Merger Proposal and demand conversion of their Public Shares into cash or (iii) to increase the likelihood that the holders of a majority of Public Warrants vote in favor of the Warrant Amendment Proposal. Entering into any such arrangements may have a depressive effect on the value of Prospect common stock or Public Warrants. Prospect will not enter into any such arrangement, either prior to or after the consummation of the Merger, and no funds in its Trust Account will be used to make such purchases or to fund other such arrangements.
An investor will only be able to exercise a Prospect warrant if the issuance of Prospect common stock upon such exercise has been registered or qualified or is deemed exempt under the securities laws of the state of residence of the holder of the warrants.
No Prospect warrants will be exercisable, and Prospect is not required to issue shares of Prospect common stock, unless the Prospect common stock issuable upon such exercise has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. Because the exemptions from qualification in certain states for resales of warrants and for issuances of common stock by the issuer upon exercise of a warrant may be different, a warrant may be held by a holder in a state where an exemption is not available for issuance of Prospect common stock upon exercise and the holder will be precluded from exercise of the warrant. After the closing of the Merger, the Prospect warrants will be exercisable and Prospect expects the Prospect common stock and warrants to be listed on a national securities exchange, which would provide an exemption from registration in every state. If Prospect's securities are not so listed or another exemption is not available, Prospect would be required to register the warrants in every state. Accordingly, Prospect believes holders in every state will be able to exercise their warrants as long as Prospect's prospectus relating to the Prospect common stock issuable upon exercise of the Prospect warrants is current. However, the market for the Prospect warrants may be limited and the holders of the Prospect warrants may not be able to exercise their warrants if the Prospect common stock issuable upon such exercise is not qualified or exempt from qualification in the jurisdictions in which the holders of the Prospect warrants reside.
Although Prospect has agreed to maintain the effectiveness of the registration statement registering the shares of Prospect common stock issuable upon exercise of Prospect warrants, an effective registration statement may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants.
Prospect is not required to issue shares of Prospect common stock unless, at the time such holder seeks to exercise such warrant, Prospect has a registration statement under the Securities Act in effect covering the shares of Prospect common stock issuable upon the exercise of the warrants and a current
65
prospectus relating to the common stock. Under the terms of the Warrant Agreement, as amended, Prospect has agreed to use its best efforts to have a registration statement in effect covering the shares of Prospect common stock issuable upon exercise of the Prospect warrants from the date of the closing until the expiration of the warrants and to maintain a current prospectus relating to the common stock issuable upon exercise of the warrants. However, Prospect cannot assure holders of the Prospect warrants that it will be able to do so, and if it does not maintain a current prospectus related to the common stock issuable upon exercise of Prospect warrants, holders will be unable to exercise their warrants. If the prospectus relating to the common stock issuable upon the exercise of Prospect warrants is not current, Prospect will have no obligation to settle the warrants for cash or by net settlement, and in such event the market for such warrants may be limited. While Prospect intends to list the warrants on AMEX and to maintain such listing during the period in which the warrants are exercisable, there can be no assurance that the listing will be approved or that Prospect will be successful in maintaining the listing.
Prospect's staggered board may entrench management and discourage unsolicited stockholder proposals that may be in the best interests of stockholders and certain anti-takeover provisions in Prospect's organizational documents may discourage a change in control.
Prospect's proposed amended and restated certificate of incorporation provides that its board of directors will be divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. As a result, at any annual meeting only a minority of the board of directors will be considered for election. Since this "staggered board" would prevent its stockholders from replacing a majority of its board of directors at any annual meeting, it may entrench management and discourage unsolicited stockholder proposals that may be in the best interests of stockholders. Additionally, following the consummation of the Merger, certain provisions of Prospect's second amended and restated certificate of incorporation and Prospect's amended and restated bylaws may have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by stockholders.
These provisions provide for, among other things:
In addition, Section 203 of the DGCL may, under certain circumstances, make it more difficult for a person who would be an "interested stockholder," which is defined generally as a person with 15% or more of a corporation's outstanding voting stock, to effect a "business combination" with the corporation for a three-year period. A "business combination" is defined generally as mergers, consolidations and certain other transactions, including sales, leases or other dispositions of assets with an aggregate market value equal to 10% or more of the aggregate market value of the corporation.
These anti-takeover provisions could make it more difficult for a third party to acquire Prospect, even if the third party's offer may be considered beneficial by many stockholders. As a result, stockholders may be limited in their ability to obtain a premium for their shares.
The receipt of Prospect common stock by Kennedy-Wilson stockholders may be taxable if the Merger does not qualify as a tax-free reorganization.
It is intended that the Merger will qualify as a reorganization for United States federal income tax purposes within the meaning of Section 368(a) of the Code. If the Merger is treated as such a reorganization, no gain or loss will be recognized by United States Holders (as such term is defined in
66
" The Merger ProposalMaterial United States Federal Income Tax Consequences General ") of Kennedy-Wilson common stock or preferred stock who receive solely shares of Prospect common stock in exchange for Kennedy-Wilson stock pursuant to the Merger. If the Merger should fail to qualify as a reorganization within the meaning of Section 368(a) of the Code, a United States Holder of Kennedy-Wilson common stock or preferred stock generally will recognize capital gain or loss with respect to its Kennedy-Wilson common stock or preferred stock if such shares are held as a capital asset at the time of the exchange. Such gain or loss generally will be equal to the difference, if any, between the United States Holder's tax basis in its Kennedy-Wilson common stock or preferred stock and the fair market value of the Prospect common stock received in the Merger. See "The Merger ProposalMaterial United States Federal Income Tax ConsequencesTax Consequences of the Merger to United States Holders of Kennedy-Wilson Stock" for additional information.
If Prospect's due diligence investigation of Kennedy-Wilson was inadequate, then stockholders of Prospect following the Merger could lose some or all of their investment.
Even though Prospect conducted a due diligence investigation of Kennedy-Wilson, it cannot be sure that this diligence investigation surfaced all material issues that may be present inside Kennedy-Wilson or its business, or that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Kennedy-Wilson and its business and outside of its control will not later arise. In particular, given the number of properties in which Kennedy-Wilson has an interest, Prospect did only limited environmental due diligence. Even if Prospect's due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with Prospect's preliminary risk analysis.
Prospect may waive one or more of the conditions to the closing of the Merger without resoliciting stockholder or warrantholder approval.
Prospect may agree to waive, in whole or in part, some of the conditions to its obligations to complete the Merger, to the extent permitted by applicable laws. Prospect's board of directors will evaluate the materiality of any waiver to determine whether amendment of this proxy statement/prospectus and resolicitation of proxies is warranted. In some instances, if Prospect's board of directors determines that a waiver is not sufficiently material to warrant resolicitation of stockholders or warrantholders, Prospect has the discretion to complete the Merger without seeking further stockholder or warrantholder approval.
The financial statements included in this proxy statement/prospectus do not take into account the consequences to Prospect of a failure to consummate a business combination by November 14, 2009.
The financial statements included in this proxy statement/prospectus have been prepared assuming that Prospect would continue as a going concern. As discussed in Note 1 to the Notes to Prospect's Audited Financial Statements beginning on page F-8, Prospect is required to consummate an initial business combination by November 14, 2009. The possibility of the Merger or another business combination not being consummated raises substantial doubt as to Prospect's ability to continue as a going concern and the financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Prospect securityholders at the time of the Merger who purchased Prospect units in the IPO and do not properly exercise their conversion rights with respect to their Public Shares may have rescission rights and related claims.
There are several aspects of the Merger and the other matters described in this proxy statement/prospectus which were not described in the prospectus issued by Prospect in connection with its IPO. These include that Prospect may seek to amend the terms of the Warrant Agreement and exchange its
67
outstanding Public Warrants for cash proceeds released from the Trust Account. Consequently, Prospect's exchange of a portion of the outstanding Public Warrants for cash might be grounds for a Prospect stockholder, unitholder or warrantholder who purchased Prospect units, shares or Public Warrants in the IPO, excluding the founders, and who still holds their Prospect units at the time of the Merger, or an IPO Purchaser, without seeking to convert their Public Shares into a pro rata portion of the Trust Account to seek rescission of their purchase of the Prospect units (or shares or Public Warrants) that such Prospect stockholder acquired in the IPO. A successful IPO Purchaser claimant for damages under federal or state law could be awarded an amount to compensate for the decrease in value of such securityholder's securities caused by the alleged violation (including, possibly, punitive damages), together with interest, while retaining the securities.
Risks If the Stockholder Adjournment Proposal Is Not Approved
If the Stockholder Adjournment Proposal is not approved, and an insufficient number of votes is obtained to authorize the consummation of the Merger, Prospect's board of directors will not have the ability to adjourn the special meeting of Prospect stockholders to a later date in order to solicit further votes, and, therefore, the Merger will not be approved and Prospect will be required to liquidate.
Prospect's board of directors is seeking approval to adjourn the special meeting of Prospect stockholders to a later date or dates if, at the special meeting of Prospect stockholders, based upon the tabulated votes, there are insufficient votes to approve the consummation of the Merger. If the Stockholder Adjournment Proposal is not approved, Prospect's board of directors will not have the ability to adjourn the special meeting of Prospect stockholders to a later date and, therefore, will not have more time to solicit additional votes to approve the consummation of the Merger. In such event, the Merger would not be completed and Prospect will be required to liquidate if Prospect does not consummate a business combination by November 14, 2009.
Risks If the Warrantholder Adjournment Proposal Is Not Approved
If the Warrantholder Adjournment Proposal is not approved, and an insufficient number of votes is obtained to approve the Warrant Amendment Proposal, Prospect's board of directors will not have the ability to adjourn the special meeting of Prospect warrantholders to a later date in order to solicit further votes, and, therefore, the Merger will not be approved and Prospect will be required to liquidate.
Prospect's board of directors is seeking approval to adjourn the special meeting of Prospect warrantholders to a later date or dates if, at the special meeting of Prospect warrantholders, based upon the tabulated votes, there are insufficient votes to approve the Warrant Amendment Proposal. If the Warrantholders Adjournment Proposal is not approved, Prospect's board of directors will not have the ability to adjourn the special meeting of Prospect warrantholders to a later date and, therefore, will not have more time to solicit additional votes to approve the Warrant Amendment Proposal. In such event, the Merger would not be completed and Prospect will be required to liquidate if Prospect does not consummate a business combination by November 14, 2009.
68
SPECIAL MEETING OF PROSPECT WARRANTHOLDERS AND
SPECIAL MEETING OF PROSPECT STOCKHOLDERS
General
Prospect is furnishing this proxy statement/prospectus to its warrantholders and stockholders as part of the solicitation of proxies by its board of directors for use at the special meeting of Prospect warrantholders and the special meeting of Prospect stockholders to be held on , 2009 and at any adjournment or postponement thereof. This proxy statement/prospectus is first being furnished to Prospect warrantholders and stockholders on or about , 2009. This proxy statement/prospectus provides you with information you need to know to be able to vote or instruct your vote to be cast at the special meeting of Prospect warrantholders and special meeting of Prospect stockholders, as applicable.
Date, Time and Place
The special meeting of Prospect warrantholders will be held on , 2009, at 8:30 a.m. Eastern time, at 9130 Galleria Court, Suite 318, Naples, Florida 34109, or such other date, time and place to which such meeting may be adjourned or postponed. The special meeting of Prospect stockholders will be held immediately following the special meeting of Prospect warrantholders at 8:30 a.m., Eastern time, at 9130 Galleria Court, Suite 318, Naples, Florida 34109, or such other date, time and place to which such meeting may be adjourned or postponed.
Purpose of Special Meeting of Prospect Warrantholders
At the special meeting of Prospect warrantholders, Prospect is asking holders of its warrants to:
69
Purpose of Special Meeting of Prospect Stockholders
At the special meeting of Prospect stockholders, Prospect is asking holders of its common stock to:
Recommendation of Prospect Board of Directors
After careful consideration of each of the proposals for the special meeting of warrant holders, Prospect's board of directors has determined that each of the Warrant Amendment Proposal and the Warrantholder Adjournment Proposal is fair to, and in the best interests of, Prospect and Prospect warrantholders and recommends that Prospect warrantholders vote "FOR" the Warrant Amendment Proposal and "FOR" the Warrantholder Adjournment Proposal.
After careful consideration of each of the proposals for the special meeting of stockholders, Prospect's board of directors has determined that each of the Merger Proposal, the Charter Amendment Proposal, the Equity Participation Plan Proposal, the Director Election Proposal and the Stockholder Adjournment Proposal is fair to, and in the best interests of, Prospect and Prospect stockholders and recommends that Prospect stockholders vote "FOR" the Merger Proposal, "FOR" the Charter Amendment Proposal, "FOR" the Equity Participation Plan Proposal, "FOR" the Director Election Proposal and "FOR" the Stockholder Adjournment Proposal.
Record Date; Who is Entitled to Vote
Prospect has fixed the close of business on , 2009, as the record date for determining the Prospect warrantholders and the Prospect stockholders entitled to notice of and to attend and vote at the special meeting of Prospect warrantholders and the special meeting of Prospect stockholders, respectively. As of the close of business on , 2009, there were 30,250,000 Prospect warrants outstanding and entitled to vote, of which 25,000,000 are Public Warrants. Each Prospect warrant is entitled to one vote for each share of Prospect common stock issuable upon exercise of the warrants at the special meeting of Prospect warrantholders. As of the close of business on , 2009, there were 31,250,000 shares of Prospect common stock outstanding and entitled
70
to vote, of which 25,000,000 are Public Shares. Each share of Prospect common stock is entitled to one vote per share at the special meeting of Prospect stockholders.
Quorum
A quorum of Prospect stockholders and a quorum of Prospect warrantholders are necessary to hold valid special meetings. The presence, in person or by proxy, of a majority of all the outstanding shares of common stock entitled to vote constitutes a quorum at the special meeting of Prospect stockholders. Abstentions and broker non-votes, as defined below, will count as present for purposes of establishing a quorum.
The presence, in person or by proxy, of a majority of all the outstanding shares of common stock underlying the warrants entitled to vote constitutes a quorum at the special meeting of Prospect warrantholders. Abstentions and broker non-votes will count as present for purposes of establishing a quorum.
Abstentions and Broker Non-Votes
Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your shares or warrants with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. Proxies that are marked "abstain" and proxies relating to "street name" shares that are returned to Prospect, but marked by brokers as "not voted" will be treated as shares present for purposes of determining the presence of a quorum on all matters. The latter will not be treated as shares entitled to vote on the matter as to which authority to vote is withheld from the broker. Prospect believes that all proposals presented to the stockholders at the special meeting of Prospect stockholders, with the exception of the Director Election Proposal, and all proposals presented to the warrantholders at the special meeting of Prospect warrantholders, will be considered non-discretionary and therefore your broker, bank or nominee cannot vote your shares or warrants without your instruction. If you do not provide instructions with your proxy, your bank, broker or nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a bank, broker or nominee is not voting your shares is referred to as a "broker non-vote." Broker non-votes will be counted for the purpose of determining the existence of a quorum at the special meetings of stockholders and warrantholders, as applicable, but will not count for purposes of determining the number of votes cast at the special meetings, and your broker may not vote your shares or warrants on the proposals. Your bank, broker or nominee can vote your shares or warrants only if you provide instructions on how to vote. You should instruct your broker to vote your shares or warrants in accordance with directions you provide. Since a stockholder must affirmatively vote "AGAINST" the Merger Proposal to have conversion rights, individuals who fail to vote or who abstain from voting may not exercise their conversion rights. See the information set forth in " Special Meeting of Prospect Warrantholders and Special Meeting of Prospect StockholdersConversion Rights " for additional information.
Abstentions, while considered present for the purposes of establishing a quorum, will have the same effect as a vote "AGAINST" the Merger Proposal, the Charter Amendment Proposal, the Equity Participation Plan Proposal, and the Stockholder Adjournment Proposal, if the latter is presented. Broker non-votes, while considered present for the purposes of establishing a quorum, will have the same effect as a vote "AGAINST" the Charter Amendment Proposal. Abstentions, while considered present for the purposes of establishing a quorum, will have the same effect as a vote "AGAINST" the Warrant Amendment Proposal and the Warrantholder Adjournment Proposal, if the latter is presented. Broker non-votes, while considered present for the purposes of establishing a quorum, will have the same effect as a vote "AGAINST" the Warrant Amendment Proposal.
71
Vote of Prospect's Stockholders Required
The Merger Proposal will require the affirmative vote of a majority of the issued and outstanding Public Shares represented at the special meeting of Prospect stockholders in person or by proxy and entitled to vote thereon as of the record date. There are 31,250,000 shares of Prospect common stock outstanding as of the record date for the special meeting of Prospect stockholders, of which 25,000,000 are Public Shares. The Merger will not be consummated if the holders of 30% or more of the Public Shares (7,500,000 shares or more) properly demand conversion of their Public Shares into cash. Abstentions will have the same effect as a vote "AGAINST" this proposal.
The Charter Amendment Proposal will require the affirmative vote of a majority of the issued and outstanding shares of Prospect common stock entitled to vote thereon as of the record date. Abstentions and broker non-votes will have the same effect as a vote "AGAINST" this proposal.
Directors are elected by a plurality of all votes cast in person or by proxy at the special meeting of Prospect stockholders and entitled to vote thereon as of the record date. "Plurality" means that the individuals who receive the largest number of votes cast "FOR" are elected as directors.
The approval of the Equity Participation Plan Proposal and the Stockholder Adjournment Proposal, if presented, will require the affirmative vote of a majority of the issued and outstanding shares of Prospect common stock represented at the special meeting of Prospect stockholders in person or by proxy and entitled to vote thereon as of the record date. Abstentions will have the same effect as a vote "AGAINST" either proposal.
Vote of Prospect's Warrantholders Required
Approval of the Warrant Amendment Proposal will require the affirmative vote of a majority in interest of the shares of Prospect common stock issuable upon exercise of the Prospect warrants affected by the Warrant Amendment and entitled to vote thereon as of the record date. Abstentions and broker non-votes will have the same effect as a vote "AGAINST" this proposal.
Approval of the Warrantholder Adjournment Proposal will require the affirmative vote of a majority in interest of the shares of Prospect common stock issuable upon exercise of the Prospect warrants represented in person or by proxy at the special meeting of Prospect warrantholders and entitled to vote thereon as of the record date. Abstentions will have the same effect as a vote "AGAINST" this proposal.
Voting Your Warrants or Shares
Each Prospect warrant or share of Prospect common stock that you own in your name entitles you to one vote on the applicable proposals. Your proxy card shows the number of shares of Prospect common stock or Prospect warrants that you own. If your shares or warrants are held in "street name" or are in a margin or similar account, you should contact your broker, bank or nominee to ensure that votes related to the shares or warrants you beneficially own are properly counted.
There are two ways to vote your shares of Prospect common stock and Prospect warrants:
72
the persons nominated by Prospect's management for election as directors and, if necessary, the Stockholder Adjournment Proposal. Votes received after a matter has been voted upon at the special meeting of Prospect stockholders will not be counted.
IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE STOCKHOLDER PROPOSALS AND YOU WILL NOT BE ELIGIBLE TO HAVE YOUR SHARES CONVERTED INTO A PRO RATA PORTION OF THE TRUST ACCOUNT IN WHICH A SUBSTANTIAL PORTION OF THE NET PROCEEDS OF PROSPECT'S INITIAL PUBLIC OFFERING ARE HELD. IN ORDER TO PROPERLY EXERCISE YOUR CONVERSION RIGHTS, YOU MUST (I) AFFIRMATIVELY VOTE AGAINST THE MERGER PROPOSAL BY PROXY OR IN PERSON AT THE SPECIAL MEETING OF PROSPECT STOCKHOLDERS, (II) PRESENT WRITTEN INSTRUCTIONS TO PROSPECT'S TRANSFER AGENT NO LATER THAN ONE BUSINESS DAY PRIOR TO THE VOTE ON THE MERGER PROPOSAL STATING THAT YOU WISH TO CONVERT YOUR SHARES INTO CASH AND THAT YOU WILL CONTINUE TO HOLD YOUR SHARES THROUGH THE CLOSING DATE OF THE MERGER, (III) CONTINUE TO HOLD YOUR SHARES THROUGH THE CLOSING DATE OF THE MERGER AND (IV) TENDER YOUR SHARES TO PROSPECT'S TRANSFER AGENT WITHIN THE PERIOD SPECIFIED IN A NOTICE YOU WILL RECEIVE FROM OR ON BEHALF OF PROSPECT, WHICH PERIOD WILL NOT BE LESS THAN 20 DAYS. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR STOCK CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY'S DWAC (DEPOSIT/WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE MERGER IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE CONVERTED INTO CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK, BROKER OR NOMINEE TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR CONVERSION RIGHTS. SEE " SPECIAL MEETING OF PROSPECT WARRANTHOLDERS AND SPECIAL MEETING OF PROSPECT STOCKHOLDERSCONVERSION RIGHTS " FOR MORE SPECIFIC INSTRUCTIONS.
Revoking Your Proxy
If you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:
Who Can Answer Your Questions About Voting Your Warrants or Shares
If you have any questions about how to vote or direct a vote in respect of your warrants or shares, you may call James J. Cahill, Prospect's secretary, at (239) 254-4481.
73
No Additional Matters May Be Presented at the Special Meetings
The special meeting of Prospect warrantholders has been called only to consider the approval of the Warrant Amendment Proposal and the Warrantholder Adjournment Proposal, if necessary. The special meeting of Prospect stockholders has been called only to consider the Merger Proposal, the Charter Amendment Proposal, the Equity Participation Plan Proposal, the Director Election Proposal and the Stockholder Adjournment Proposal, if necessary. Under Prospect's bylaws, other than procedural matters incident to the conduct of the meetings, no other matters may be considered at either special meeting if they are not included in the notice of the applicable special meeting.
Conversion Rights
Stockholders holding Public Shares as of the record date of the special meeting of Prospect stockholders who affirmatively vote their Public Shares against the Merger Proposal may also demand that Prospect convert such shares into a pro rata portion of the Trust Account, calculated as of two business days prior to the consummation of the Merger. If demand is properly made and the Merger is consummated, Prospect will convert these shares into a pro rata portion of the funds in the Trust Account plus interest, calculated as of such date.
If you are a holder of Public Shares and wish to exercise your conversion rights, you must (i) affirmatively vote against the Merger Proposal by proxy or in person at the special meeting of Prospect stockholders (abstentions and broker non-votes do not satisfy this requirement), (ii) present written instructions to Prospect's transfer agent no later than one business day prior to the vote on the Merger Proposal stating that you wish to convert your shares into cash and that you will continue to hold your shares through the closing date of the Merger, (iii) continue to hold your shares through the closing date of the Merger, and (iv) tender your shares to Prospect's transfer agent within the period specified in a notice you will receive from or on behalf of Prospect, which period will not be less than 20 days. You may tender your shares by either delivering your stock certificate to the transfer agent or by delivering your shares electronically using the Depository Trust Company's DWAC (Deposit/Withdrawal At Custodian) System. If you hold the shares in street name, you will have to coordinate with your broker to have your shares certificated or delivered electronically. Certificates that have not been tendered (either physically or electronically) in accordance with these procedures will not be converted into cash.
You may exercise your conversion rights either by checking the box on the proxy card or by submitting your request in writing to Prospect's secretary at its principal executive office, 9130 Galleria Court, Suite 318, Naples, Florida. If you (i) initially vote for the Merger Proposal but then wish to vote against it and exercise your conversion rights or (ii) initially vote against the Merger Proposal and wish to exercise your conversion rights but do not check the box on the proxy card providing for the exercise of your conversion rights or do not send a written request to Prospect to exercise your conversion rights or (iii) initially vote against the Merger, but later wish to vote for it, you may request that Prospect send you another proxy card on which you may indicate your intended vote. You may make such request by contacting Prospect at its address at 9130 Galleria Court, Suite 318, Naples, Florida 34109, or by telephone at (239) 254-4481.
Any corrected or changed proxy card or written demand of conversion rights must be received by Prospect's secretary no later than the business day prior to the special meeting of Prospect stockholders.
If, notwithstanding your negative vote, the Merger is completed, then, if you have also properly exercised your conversion rights, you will be entitled to receive a pro rata portion of the Trust Account, including any interest earned thereon, calculated as of two business days prior to the date of the consummation of the Merger. As of , 2009 (the record date for the special meeting of Prospect stockholders), there was approximately $ in the Trust Account, or approximately
74
$ per Public Share. If you exercise your conversion rights, then you will be exchanging your shares of Prospect common stock for cash and will no longer own these shares.
Exercise of your conversion rights does not result in either the exercise or loss of any Prospect warrants that you may hold. Your warrants will continue to be outstanding following a conversion of your common stock and will become exercisable upon consummation of the Merger, in accordance with the terms of the Warrant Amendment. A registration statement must be in effect to allow you to exercise any warrants you may hold or to allow Prospect to call the warrants for redemption if the redemption conditions are satisfied. If the Merger is not consummated and Prospect does not consummate an acquisition by November 14, 2009, the warrants will not become exercisable and will be worthless.
Prior to exercising conversion rights, stockholders should verify the market price of Prospect common stock as they may receive higher proceeds from the sale of their common stock in the public market than from exercising their conversion rights if the market price per share is higher than the conversion price. Prospect cannot assure its stockholders that they will be able to sell their shares of Prospect common stock in the open market, even if the market price per share is higher than the conversion price stated above, as there may not be sufficient liquidity in Prospect securities when Prospect stockholders wish to sell their shares.
If the holders of at least 7,500,000 or more Public Shares (an amount equal to 30% or more of the Public Shares), vote against the Merger Proposal and properly demand conversion of their shares, Prospect will not be able to consummate the Merger. If the Merger is not completed, then these shares will not be converted into cash. Any action that does not include an affirmative vote against the Merger will prevent you from exercising your conversion rights. Your vote on any proposal other than the Merger Proposal will have no impact on your right to seek conversion.
Appraisal Rights
Prospect stockholders do not have appraisal rights in connection with the Merger under the DGCL.
Kennedy-Wilson Holders who do not vote in favor of adopting the Merger, and who otherwise comply with the applicable provisions of Section 262 will be entitled to exercise appraisal rights under Section 262. Any shares held by a Kennedy-Wilson Holder who has not voted in favor of the Merger and who has demanded appraisal for such shares in accordance with the DGCL will not be converted into a right to receive the Merger consideration, unless such Kennedy-Wilson Holder fails to perfect, withdraws or otherwise loses such Kennedy-Wilson Holder's right to appraisal under the DGCL. If, after the consummation of the Merger, such Kennedy-Wilson Holder fails to perfect, withdraws or otherwise loses such Kennedy-Wilson Holder's right to appraisal, each such share will be treated as if it had been converted as of the consummation of the Merger into a right to receive the Merger consideration. Under the Merger Agreement, if more than 10% of the outstanding shares of Kennedy-Wilson common stock or 10% of the outstanding shares of Kennedy-Wilson preferred stock exercise appraisal rights, Prospect is not required to effect the Merger. Prospect shall not waive this condition if the number of outstanding shares of Kennedy-Wilson common stock or preferred stock for which holders exercise appraisal rights is such that, pursuant to the transactions contemplated by the Merger Agreement, Prospect will not be acquiring "control" of Kennedy-Wilson as defined in Section 368(c) of the Code solely in exchange for Prospect common stock. See the section entitled " Appraisal Rights " for additional information.
Kennedy-Wilson's holders of common stock may also have appraisal rights under Chapter 13 of the CGCL. Any stockholder who does not vote in favor of the Merger and remains a holder of Kennedy-Wilson common stock at the effective time of the Merger may, by complying with the procedures set forth in Chapter 13 of the CGCL and sending Kennedy-Wilson a written demand for appraisal before
75
the vote is taken by Kennedy-Wilson stockholders on the Merger Agreement, be entitled to seek appraisal of the fair value of their shares as determined by the proper California superior court. These dissenters' rights are contingent upon consummation of the Merger.
See the section entitled " Appraisal Rights " for additional information.
Proxy Solicitation Costs
Prospect is soliciting proxies on behalf of its board of directors and will pay the cost of this proxy solicitation. This solicitation is being made by mail, but also may be made by telephone or in person. Prospect and its directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means.
Prospect will ask banks, brokers and other institutions, nominees and fiduciaries to forward proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. Prospect will reimburse them for their reasonable expenses.
Prospect Founders
As of , 2009, the record date, the Prospect founders beneficially owned and were entitled to vote 6,250,000 founders shares. The founders shares issued to the Prospect founders constituted approximately 20% of the outstanding shares of Prospect common stock immediately after the IPO. In connection with the IPO, Prospect and Citigroup entered into agreements with each of the Prospect founders (including its officers and directors) pursuant to which each Prospect founder agreed to (i) vote his or its founders shares on the Merger Proposal in accordance with the majority of the votes cast by the holders of Public Shares and (ii) waive any right to receive a liquidation distribution with respect to the founders shares in the event Prospect fails to consummate an initial business combination. The Prospect founders (including its officers and directors) have also indicated that they intend to vote their founders shares in favor of all other proposals being presented at the special meeting of Prospect stockholders. The founders shares have no liquidation rights and will be worthless if no business combination is effected by Prospect. In connection with the IPO, the Prospect founders entered into agreements with Citigroup restricting the sale of their founders shares until one year after the date of the completion of the initial business combination or earlier if, subsequent to the initial business combination, (i) the closing price of Prospect's common stock equals or exceeds $14.50 per share for any 20 trading days within any 30 trading day period or (ii) Prospect consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of Prospect's stockholders having the right to exchange their shares of common stock for cash, securities or other property; provided, however, that transfers can be made to permitted transferees who agree in writing to be bound by the same restrictions, agree to vote in the same manner as a majority of the holders of Public Shares who vote at the special or annual meeting called for the purpose of approving Prospect's initial business combination and waive any rights to participate in any liquidation distribution if Prospect fails to consummate its initial business combination. For so long as the founders shares are subject to such transfer restrictions they will be held in an escrow account maintained by Continental Stock Transfer & Trust Company. Immediately prior to and subject to consummation of the Merger, 2,575,000 founder shares will be cancelled and forfeited. As a result of this forfeiture, at the consummation of the Merger, the founders will own 3,675,000 shares of Prospect common stock.
In addition, at any time prior to the special meeting of Prospect stockholders and special meeting of Prospect warrantholders, during a period when they are not then aware of any material nonpublic information regarding Prospect or its securities, the Prospect founders, Kennedy-Wilson and Kennedy-Wilson Holders and/or their respective affiliates may purchase shares or Public Warrants from institutional and other investors, or execute agreements to purchase such shares of common stock or Public Warrants from them in the future, or they may enter into transactions with such persons and
76
others to provide them with incentives to acquire shares of Prospect common stock or Public Warrants or vote their shares of common stock or Public Warrants in favor of the Merger Proposal and the Warrant Amendment Proposal, as applicable. The purpose of such Public Warrant purchases and other transactions would be to increase the likelihood that holders of a majority of shares underlying the warrants is present and voting at the special meeting of Prospect warrantholders. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements that the holders of a majority of the Public Shares present in person or by proxy and eligible to vote at the special meeting of Prospect stockholders vote in favor of, and that holders of fewer than 30% of the Public Shares vote against, the Merger Proposal and demand conversion of their Public Shares into cash where it appears that such requirements would otherwise not be met.
While the exact nature of any incentives that would be provided by the Prospect founders, Kennedy-Wilson and Kennedy-Wilson Holders and/or their respective affiliates has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares or Public Warrants, including the granting of put options and the transfer to such investors or holders of shares of common stock or Public Warrants owned by the Prospect founders for nominal value. Prospect will not enter into any such arrangement, either prior to or after the consummation of the Merger, and no funds in its Trust Account will be used to make such purchases or to fund other such arrangements. Entering into any such arrangements may have a depressive effect on Prospect's common stock.
If such transactions are effected, the consequence could be to cause the Merger Proposal or the Warrant Amendment Proposal to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares of common stock or Public Warrants by the persons described above would allow them to exert more influence over the approval of the Merger Proposal or the Warrant Amendment Proposal and other proposals and would likely increase the chances that such proposals would be approved. Moreover, any such purchases may make it less likely that the holders of 30% or more of the Public Shares will vote against the Merger Proposal and exercise their conversion shares.
As of the date of this proxy statement/prospectus, there have been no such discussions with respect to any such transaction and no agreements to such effect have been entered into with any such investor or holder. Prospect will file a Current Report on Form 8-K to disclose any arrangements entered into or significant purchases made by any of the aforementioned persons that would affect the vote on the Merger Proposal, the Warrant Amendment Proposal, the Charter Amendment Proposal or the conversion threshold.
Outstanding Public Warrants
The closing price as reported by AMEX of Prospect Public Warrants on , 2009 (the record date for the special meeting of Prospect warrantholders) was $ . Prior to voting on the Warrant Amendment Proposal, holders of Public Warrants should verify the market price of the Prospect Public Warrants as they may receive higher proceeds from the sale of their Public Warrants in the public market than from Prospect's exchange of the Public Warrants for cash in connection with the Merger if the market price per warrant is higher than the Cash Exchange price of $0.55 per warrant. Prospect cannot assure its holders of Public Warrants that they will be able to sell their Public Warrants in the open market, even if the market price per warrant is higher than the exchange price stated above, as there may not be sufficient liquidity in Prospect's securities when holders of Public Warrants wish to sell their Public Warrants. Based on the closing market price of $0.28 per Public Warrant on September 8, 2009, the last trading day prior to the announcement of the Merger Agreement, the Public Warrants had an aggregate value of $7,000,000. Based on the closing market price of $ per Public Warrant on , 2009 (the record date), the Public Warrants had an aggregate value of $ .
77
If you elect to participate in the Cash Exchange, you will be exchanging your Public Warrants for cash and will no longer own those warrants. You will be entitled to receive cash for these Public Warrants only if you deliver your warrant certificate (either physically or electronically) to Prospect's transfer agent in accordance with the procedures outlined in the section entitled " The Warrant Amendment Proposal ." Additionally, if you select the Warrant Exchange, you will be exchanging your Public Warrants for the Amended and Restated Public Warrants and must exchange your Public Warrants in accordance with the procedures outlined in the section entitled " The Warrant Amendment Proposal ."
78
THE WARRANT AMENDMENT PROPOSAL
Purpose of the Warrant Amendment
In connection with the proposed Merger, Prospect is proposing an amendment to the Warrant Agreement governing all of the Prospect warrants, which we refer to as the Warrant Amendment, in order to, among other things, (1) allow each Prospect warrantholder to elect to receive upon the closing of the Merger, for each Public Warrant held by such holder, either (i) the Cash Amount of $0.55, or (ii) an Amended and Restated Public Warrant with an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013, subject to adjustment and proration as described below and (2) provide that the terms of the Sponsors Warrants be amended and restated to provide for an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013. If the Merger is consummated, any holder of Public Warrants who votes against the approval of the Warrant Amendment Proposal or who makes no election will receive the Cash Amount in exchange for its Public Warrants. We refer to the elections by Prospect warrantholders to receive the Cash Amount or the Amended and Restated Public Warrants as the Warrant Election. We further refer to the exchange of Public Warrants for the Cash Amount as the Cash Exchange and the exchange of Public Warrants for the Amended and Restated Public Warrants and the amendment of the Sponsor Warrants as the Warrant Exchange.
Prospect will exchange up to fifty percent (or 12,500,000) of the Public Warrants outstanding immediately prior to the consummation of the Merger for Amended and Restated Public Warrants, which we refer to as the "Warrant Limit." If Prospect warrantholders elect to receive in the aggregate more Amended and Restated Public Warrants than the Warrant Limit, the total Amended and Restated Public Warrants exchanged will be apportioned among the Prospect warrantholders who make a Warrant Election by multiplying the number of Amended and Restated Public Warrants evidenced by a specific Warrant Election by a fraction (x) the numerator of which is the Warrant Limit and (y) the denominator of which is the aggregate number of Amended and Restated Public Warrants evidenced by all Warrant Elections. Further, Public Warrants for which Prospect warrantholders make no election will be converted into the right to receive the Cash Exchange. There is no limit on the number of Public Warrants that may be exchanged for cash. In the event that the Warrant Amendment Proposal is approved, Prospect warrantholders who voted against the Warrant Amendment Proposal will receive the Cash Amount.
The terms of the Amended and Restated Public Warrants will be substantially similar to the terms of the Public Warrants, except that the Amended and Restated Public Warrants:
The terms of the Amended and Restated Sponsors Warrants will be substantially similar to the terms of the Sponsors Warrants, except that the Amended and Restated Sponsors Warrants:
79
Pursuant to Section 18 of the Warrant Agreement, Prospect and its Warrant Agent (as therein defined) may amend any provision of the Warrant Agreement with the consent of the holders of Prospect warrants exercisable for a majority in interest of the shares of Prospect common stock issuable upon exercise of all outstanding Prospect warrants that would be affected by such amendment. Approval of the Warrant Amendment Proposal requires the affirmative vote of the holders of a majority in interest of the shares of Prospect common stock issuable upon exercise of the Prospect warrants as of the record date for the special meeting of Prospect warrantholders. The approval of the Warrant Amendment Proposal is a condition to the consummation of the Merger. If the Prospect warrantholders approve the Warrant Amendment Proposal, then the Warrant Agreement will be amended and the holders of Public Warrants will be permitted to receive the Cash Amount or an Amended and Restated Public Warrant upon consummation of the Merger.
Prospect believes the Cash Exchange and Warrant Exchange will provide benefits to Prospect and its warrantholders, including the following:
In the event the Warrant Amendment Proposal is not approved, the Merger Proposal will not be presented to Prospect stockholders for a vote. If the Merger is not consummated and Prospect does not consummate another business combination by November 14, 2009, Prospect will be required to liquidate and all Prospect warrants will expire and become worthless.
United States Holders of Public Warrants should note that they will recognize gain or loss for United States federal income tax purposes if the Warrant Amendment Proposal is approved and the Cash Exchange is consummated, while United States Holders of Public Warrants who elect the Warrant Exchange, and United States Holders of Sponsor Warrants, should not recognize any gain or loss with respect to the Warrant Exchange. For a discussion of the United States federal income tax consequences of the Warrant Election for United States Holders of Public Warrants and Sponsor Warrants, please see the sections entitled " The Merger ProposalMaterial United States Federal Income Tax ConsequencesTax Consequences of the Warrant Amendment to United States Holders of Prospect Warrants " for additional information.
Certain Effects of the Cash Exchange
A minimum of $6,875,000 will be required to purchase Public Warrants in the Cash Exchange, plus an estimate of approximately $12,000 of related fees and expenses. The Cash Exchange will be funded from the funds released to Prospect from the Trust Account in connection with the consummation of the Merger.
Warrant Election/Exchange Procedures
Continental Stock Transfer & Trust Company (the "Exchange Agent") has been appointed by Prospect to receive elections ("Elections") by holders of Public Warrants to receive either the Cash Amount or the Amended and Restated Public Warrants, and to act as exchange agent with respect to the Merger. Prospect will prepare a form of election, pursuant to which each holder of Public Warrants may make its Election. An Election will have been properly made only if a properly completed and
80
signed form of election, accompanied by the Public Warrant certificate or certificates to which such form of election relates (if any), (i) is received by the Exchange Agent prior to the date and time of the special meeting of Prospect warrantholders (the "Election Date") or (ii) is delivered to the Exchange Agent at the special meeting of Prospect warrantholders.
Any Public Warrant holder may at any time prior to the Election Date change such holder's election if the Exchange Agent receives (i) prior to the Election Date written notice of such change accompanied by a new properly completed form of election or (ii) at the special meeting of Prospect warrantholders a new, properly completed form of election. Prospect will have the right in its sole discretion to permit changes in Elections after the Election Date.
In connection with the above procedures, (i) the holders of warrant certificates evidencing Public Warrants will surrender such certificates to the Exchange Agent, (ii) upon surrender of a warrant certificate the holder thereof will be entitled to receive the Cash Amount or an Amended and Restated Public Warrant, as applicable, and (iii) the warrant certificates surrendered will be canceled. The Cash Amount is substantially less than the market price of the shares of Prospect common stock issuable upon exercise of the Public Warrants, but the Cash Amount is substantially more than the price that could be obtained upon the sale of Public Warrants in the open market. See the section entitled " Price Range of Securities and Dividends " herein for information on the historical market prices for Prospect Public Warrants and Prospect common stock on AMEX.
To physically surrender Public Warrants for exchange, holders should deliver certificates representing their Public Warrants to the Exchange Agent, at the following address:
Mark
Zimkind
Continental Stock Transfer & Trust Company
17 Battery Place
New York, New York 10004
(212) 845-3287
Recommendation and Required Vote
Approval of the Warrant Amendment Proposal requires the affirmative vote of a majority in interest of the shares of Prospect common stock issuable upon exercise of the Prospect warrants affected by the Warrant Amendment and entitled to vote thereon as of the record date. Approval of the Warrant Amendment Proposal is a condition to the Merger and to the presentation of the stockholder proposals at the special meeting of Prospect stockholders.
PROSPECT'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PROSPECT'S WARRANTHOLDERS VOTE "FOR" THE APPROVAL OF THE WARRANT AMENDMENT PROPOSAL.
81
THE WARRANTHOLDER ADJOURNMENT PROPOSAL
The Warrantholder Adjournment Proposal, if adopted, will allow Prospect's board of directors to adjourn the special meeting of Prospect warrantholders to a later date or dates to permit further solicitation of proxies in the event, based on the tabulated votes, there are not sufficient votes at the time of the special meeting to approve the Warrant Amendment Proposal. The Warrantholder Adjournment Proposal will only be presented to Prospect warrantholders in the event, based on the tabulated votes, there are not sufficient votes at the time of the special meeting of Prospect warrantholders to approve the Warrant Amendment Proposal.
Consequences if the Warrantholder Adjournment Proposal is Not Approved
If the Warrantholder Adjournment Proposal is not approved by the warrantholders, Prospect's board of directors may not be able to adjourn the special meeting of Prospect warrantholders to a later date in the event, based on the tabulated votes, there are not sufficient votes at the time of the special meeting to approve the Warrant Amendment Proposal. In such event, the Cash Exchange and the Warrant Exchange would not be approved, the Merger could not be consummated and, unless Prospect were able to consummate another business combination by November 14, 2009, it would be required to dissolve and liquidate and all Prospect warrants would expire worthless.
Recommendation and Required Vote
Adoption of the Warrantholder Adjournment Proposal requires the affirmative vote of a majority in interest of the shares of Prospect common stock issuable upon exercise of the Prospect warrants represented in person or by proxy at the special meeting of Prospect warrantholders and entitled to vote thereon as of the record date. Adoption of the Warrantholder Adjournment Proposal is not a condition to the adoption of any of the other proposals.
PROSPECT'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PROSPECT'S WARRANTHOLDERS VOTE "FOR" THE APPROVAL OF THE WARRANTHOLDER ADJOURNMENT PROPOSAL.
82
The discussion in this proxy statement/prospectus of the Merger and the principal terms of the Merger Agreement by and among Prospect, Merger Sub and Kennedy-Wilson is subject to, and is qualified in its entirety by reference to, the Merger Agreement. A copy of the Merger Agreement is attached as Annex A to this proxy statement/prospectus and incorporated herein by reference.
Structure of the Merger
The Merger Agreement provides for the merger of Merger Sub with and into Kennedy-Wilson, with Kennedy-Wilson continuing as the surviving corporation and becoming a direct wholly-owned subsidiary of Prospect.
Merger Consideration
Pursuant to the Merger Agreement, in the Merger, the Kennedy-Wilson Holders will receive an aggregate of 26 million shares of Prospect common stock (each share of Kennedy-Wilson common stock shall automatically convert into the right to receive 3.8031 shares of Prospect common stock and each share of Kennedy-Wilson preferred stock shall automatically convert into the right to receive 105.6412 shares of Prospect common stock), minus any Dissenting Shares.
If a fractional share is required to be issued to a Kennedy-Wilson Holder, Prospect will round up to the nearest whole share in lieu of issuing fractional shares.
Prospect Warrant Amendment
In addition, each outstanding Public Warrant will be exchanged, at the election of each holder of Public Warrants, for either (i) $0.55 in cash or (ii) an Amended and Restated Public Warrant with an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013; provided that the aggregate number of Amended and Restated Public Warrants issuable upon the closing of the Merger is capped at 50% (or 12,500,000) of the Public Warrants outstanding on the date of the Merger, which we refer to as the "Warrant Limit." If holders of Public Warrants elect to receive in the aggregate more Amended and Restated Public Warrants than the Warrant Limit, the total Amended and Restated Public Warrants exchanged will be apportioned among the holders of Public Warrants who make a Warrant Election by multiplying the number of Amended and Restated Public Warrants evidenced by a specific Warrant Election by a fraction (x) the numerator of which is the Warrant Limit and (y) the denominator of which is the aggregate number of Amended and Restated Public Warrants evidenced by all Warrant Elections. Further, Public Warrants for which holders of Public Warrants make no election will be converted into the right to receive the Cash Exchange. There is, however, no limit on the number of Public Warrants that may be exchanged for cash.
Also, each Sponsor Warrant will be amended and restated to provide for an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013.
Forfeiture of Founder Shares
Immediately prior to the Merger, 2,575,000 founder shares held by the founders will be cancelled and forfeited. As a result of this forfeiture, at the consummation of the Merger, the founders will own 3,675,000 shares of Prospect common stock.
Management Incentive Shares
To reward and incentivize Kennedy-Wilson's key employees and management after the Merger, up to 4,000,000 shares of Prospect common stock will be reserved for issuance under the 2009 Plan. If the Merger is consummated, certain Kennedy-Wilson officers, directors and key employees will be issued an
83
aggregate of 3,740,000 restricted shares of Prospect common stock under the 2009 Plan upon the closing of the Merger as set forth in the table below:
Name of Group
|
Dollar ($) |
Number of Shares
of Restricted Stock |
|||||
---|---|---|---|---|---|---|---|
William McMorrow, Chief Executive Officer |
$ | | 900,000 | ||||
Freeman Lyle, Chief Financial Officer |
$ | | 50,000 | ||||
Mary Ricks, Co-CEO of KW Commercial Investment Group |
$ | | 900,000 | ||||
Barry Schlesinger, Co-CEO of KW Commercial Investment Group |
$ | | 125,000 | ||||
Robert Hart, President of KW Multi-Family Management Group |
$ | | 125,000 | ||||
James Rosten, President of Kennedy-Wilson Properties |
$ | | 125,000 | ||||
All executive officers, as a group |
$ | | 3,495,000 | ||||
All directors who are not executive officers, as a group |
$ | | 25,000 | ||||
All employees, including all current officers who are not executive officers, as a group |
$ | | 220,000 |
In the event that the recipient of the restricted shares remains employed by (or continues to perform services as a director for) the post-Merger company through the relevant vesting date, 1 / 5 of the restricted shares will vest on each of the first five anniversaries of the date of issuance, provided that the Performance Target is met as of the September 30 immediately preceding the applicable anniversary date (in the case of the installments vesting on the fourth and fifth anniversary dates, the Performance Target must be met as of the September 30 immediately preceding the third anniversary date). The Performance Target was established by an independent committee of Prospect and is subject to the approval of the compensation committee of the post-Merger company following the consummation of the Merger. Notwithstanding the foregoing, in the event the employment with the post-Merger company of an employee who has been granted restricted shares is terminated without cause or if the employee resigns from his employment with the post-Merger company for good reason, the restricted shares will continue to vest on the applicable anniversary dates (subject to the satisfaction of the Performance Target), subject to certain limitations. In addition, in the event of a "Change of Control" as defined in the 2009 Plan (see "The Equity Participation Plan ProposalChange of Control" ), any unvested restricted shares of Prospect common stock that have not previously been forfeited will become vested, subject to certain limitations. See section "The Equity Participation Plan ProposalAwards to Particular Officers, Directors and Employees" for additional information.
Management Bonuses
If the Merger is consummated, William J. McMorrow and Mary Ricks will be potentially entitled to receive certain cash bonus payments of up to $11.7 million and $4.0 million, respectively. The cash bonus payments will be payable as follows: (i) Mr. McMorrow and Ms. Ricks will be entitled to receive $4.85 million and $2.0 million, respectively, on October 15, 2009, provided, however, that such payments will be repaid to Kennedy-Wilson in the event the Merger is not consummated by November 15, 2009 or the executive is not employed by Kennedy-Wilson on the effective date of the Merger (these employment requirements will not apply, however, in the case of a termination of employment due to death or disability); (ii) Mr. McMorrow and Ms. Ricks will receive "performance unit awards" under the 2009 Plan which will entitle them to receive $2.425 million and $1.0 million, respectively, on April 1, 2010, provided that the Performance Target is met as of March 31, 2010 (in the event that the Performance Target is not met as of March 31, 2010, the bonus otherwise due April 1, 2010 shall, nevertheless, be paid on July 1, 2010, October 1, 2010, or January 1, 2011, respectively, if the Performance Target is satisfied as of the earliest of June 30, 2010, September 30, 2010, or December 31, 2010, respectively), and the executive remains employed through the date on which the Performance Target is satisfied; and (iii) Mr. McMorrow and Ms. Ricks will receive additional "performance unit awards" under the 2009 Plan which will entitle them to receive cash
84
payments in the amounts of $4.425 and $1.0 million, respectively, on January 1, 2011, provided that the Performance Target is met as of December 31, 2010 and he or she, as applicable, remains employed by the post-Merger company through January 1, 2011. Notwithstanding the foregoing, in the event that the Merger is consummated and the employment of Mr. McMorrow or Ms. Ricks is terminated by the post-Merger company without cause or he or she, as applicable, resigns from his or her, as applicable, employment with the post-Merger company for good reason, the payments referred to in clauses (ii) and (iii) above will still be payable on the applicable payment dates if the Performance Target is met. The Performance Target was established by an independent committee of Prospect and is subject to the approval of the compensation committee of the post-Merger company following the consummation of the Merger.
Note Forgiveness
On April 10, 2006, William J. McMorrow borrowed $3,543,127 from Kennedy-Wilson evidenced by a Promissory Note bearing simple interest at a rate of 7.5% per annum and scheduled to mature on April 9, 2011. Mr. McMorrow's employment agreement has been amended to provide that the McMorrow Note will be forgiven if the Merger is consummated.
Amendments to Employment Agreements
In connection with the Merger, Mr. McMorrow and Ms. Ricks have entered into amendments to their employment agreements which provide for, among other things, (i) the removal of certain benefits in the event of a change in control; (ii) the addition of certain severance benefits if the executive resigns on account of a change in location or a material reduction in duties; (iii) the grant to each executive of 900,000 shares of restricted stock of Prospect pursuant to the 2009 Plan and upon the terms and conditions set forth above; (iv) the cash bonus payments set forth above and (v) in the case of Mr. McMorrow, the McMorrow Note forgiveness described above. Mr. Herrema has also entered into an amendment to his employment agreement which provides for the extension of his employment term from December 31, 2010 to January 31, 2014 as well as clauses (ii)(iii) above. In addition, the employment agreements for Messrs. McMorrow and Herrema and Ms. Ricks have been amended to include language intended (i) to provide for a reduction in the amount of payments or benefits payable or provided to them under their respective employment agreements or otherwise to ensure that no payment or benefit is subject to the excise tax imposed by Section 4999 of the Code (certain golden parachute payments) which reduction may, in certain circumstances, result in the repayment of certain previously paid amounts (plus earnings) to the post-Merger company, and (ii) to achieve compliance with Section 409A of the Code.
Assumption of Guardian Note
In connection with the Merger, Prospect has agreed to assume a convertible subordinated note with a principal amount of $30 million that was issued to Guardian Life Insurance Company of America ("Guardian") in November 2008 (the "Guardian Note"). The Guardian Note bears interest at a fixed rate of 7%, payable quarterly, and the outstanding principal is due on November 3, 2018. Under the terms of the Merger Agreement, Prospect will assume the Guardian Note and Guardian may convert, in whole or in part, the outstanding principal balance and accrued interest into common stock at a conversion price of $10.52 per share any time prior to the tenth anniversary of the original issue date. At any time on or after the ninth anniversary of the original issue date of the note and prior to the due date, Prospect (as successor) may demand that Guardian convert the note in accordance with its terms.
85
Fractional Shares
No fractional shares of Prospect common stock will be issued in the Merger. In lieu thereof, the number of shares of Prospect common stock to be delivered to each Kennedy-Wilson Holder shall be rounded up to the nearest whole share.
Appraisal Rights
Prospect stockholders do not have appraisal rights in connection with the Merger under the DGCL. Kennedy-Wilson Holders with outstanding common stock and preferred stock immediately prior to the effective time of the Merger who do not vote in favor of adopting the Merger, and who otherwise comply with the applicable provisions of Section 262 will be entitled to exercise appraisal rights under Section 262. Any shares held by such Kennedy-Wilson Holder who demands appraisal for such shares in accordance with the DGCL will not be converted into the right to receive shares of Prospect common stock, unless such Holder fails to perfect, withdraws or otherwise loses such Holder's right to appraisal under the DGCL. If, such Holder fails to perfect, withdraws or otherwise loses such Holder's right to appraisal, each such share will be treated as if it had been converted as of the consummation of the Merger into a right to receive the Prospect common stock. Prospect is not required to effect the Merger in the event that either (i) holders of more than 10% of the outstanding shares of Kennedy-Wilson common stock or (ii) the holders of more than 10% of the outstanding shares of Kennedy-Wilson preferred stock exercise their appraisal rights. Prospect shall not waive this condition if the number of outstanding shares of Kennedy-Wilson common stock or preferred stock for which holders exercise appraisal rights is such that, pursuant to the transactions contemplated by the Merger Agreement, Prospect will not be acquiring "control" of Kennedy-Wilson as defined in Section 368(c) of the Code, solely in exchange for Prospect common stock.
Kennedy-Wilson's holders of common stock may also have appraisal rights under Chapter 13 of the CGCL. Any stockholder who does not vote in favor of the Merger and remains a holder of Kennedy-Wilson common stock at the effective time of the Merger may, by complying with the procedures set forth in Chapter 13 of the CGCL and sending Kennedy-Wilson a written demand for appraisal, be entitled to seek appraisal of the fair value of their shares as determined by the proper California superior court. These dissenters' rights are contingent upon consummation of the Merger.
See the section entitled "Appraisal Rights" for additional information.
Indemnification of Directors and Officers
Prospect has agreed that the post-Merger company will, for six years from the date of closing the Merger, maintain in effect the provisions in its amended and restated certificate of incorporation and amended and restated bylaws providing for indemnification of its current and former directors and officers with respect to the facts and circumstances occurring at or prior to the Merger to the fullest extent permitted by the DGCL.
Prospect has agreed that the post-Merger company will, for six years from the date of the closing of the Merger, provide each current and former director or officer of Prospect with insurance for acts or omissions occurring prior to the Merger covering each such person on terms not materially less favorable than those currently covered by Prospect's officers' and directors' liability insurance policy; provided that the premium for such coverage shall not exceed $200,000.
Indemnification
Prospect will indemnify, defend and hold harmless Kennedy-Wilson, including Kennedy-Wilson's successors and permitted assigns, and Kennedy-Wilson will indemnify, defend and hold harmless Prospect, including Prospect's successors and permitted assigns, from and against all liabilities, loss,
86
claims, damages, fines, penalties and expenses, including the costs of investigation and defense and reasonable attorneys' fees and court costs, arising from (i) any breach of any representation or warranty made by Prospect or Kennedy-Wilson in the Merger Agreement or in any certificate delivered by Prospect or Kennedy-Wilson pursuant to the Merger Agreement or (ii) any breach by Prospect or Kennedy-Wilson of its covenants or obligations in the Merger Agreement to be performed or complied with by Prospect or Kennedy-Wilson at or prior to Closing. Neither party is entitled to indemnification as so described unless the aggregate amount of damages exceeds $1,000,000. The aggregate amount of damages for which either party may be liable shall not exceed $10,000,000 and in any event, the practical benefits of this indemnification are limited since Kennedy-Wilson will be a direct, wholly-owned subsidiary of Prospect.
Name; Headquarters; Stock Symbols
After completion of the Merger:
Lock-Up Agreements
In connection with the Merger, William J. McMorrow, Mary Ricks, Freeman Lyle, and Donald Herrema, executive officers of Kennedy-Wilson, have entered into Lock-Up Agreements with Prospect whereby each have agreed to not offer, sell, pledge or otherwise transfer (i) any of the shares of Prospect common stock received as merger consideration for three months after the Merger and (ii) 90% of the shares of Prospect common stock received as merger consideration and 100% of the shares of Prospect common stock received as management incentive shares in connection with grants to executives under the 2009 Plan, in each case, for one year after the Merger. The stockholders subject to such Lock-Up Agreements may transfer their shares to any controlled affiliate, to any partner, stockholder or member of the stockholder, or for estate planning purposes only; provided in each case that any transferee agrees to be bound to the terms of the Lock-Up Agreement prior to any transfer.
Background of the Merger
The terms of the Merger Agreement are the result of arm's-length negotiations between representatives of Prospect and Kennedy-Wilson. The following is a brief discussion of the background of these negotiations, the Merger Agreement and related transactions. Prospect is a blank check company incorporated in Delaware on July 9, 2007 in order to serve as a vehicle for the acquisition of an operating business. A registration statement for Prospect's IPO was declared effective on November 14, 2007. On November 20, 2007, Prospect sold 25,000,000 units. Each of Prospect's units consists of one share of common stock, $0.0001 par value per share, and one warrant. Each warrant sold in the IPO entitles the holder to purchase one share of common stock at an exercise price of $7.50. Prospect's units began publicly trading on November 15, 2007. Prospect's Public Warrants and common stock have traded separately since December 3, 2007. The public offering price of each unit
87
was $10.00, and the IPO raised gross proceeds of $250,000,000. Of the gross proceeds: (i) Prospect deposited $241,750,000 into a Trust Account at JP Morgan Chase Bank, NA, maintained by Continental Stock Transfer & Trust Company, as trustee, which included $10,000,000 of contingent underwriting discount (the underwriters have agreed to forgo $4,000,000 of deferred underwriting compensation otherwise payable to them in connection with, and in accordance with, the terms of the underwriting agreement for the IPO); (ii) the underwriters received $7,500,000 as underwriting discount (excluding the contingent underwriting discount); and (iii) Prospect retained $700,000 for offering expenses, plus $50,000 for working capital. In addition, Prospect deposited into the Trust Account $5,250,000 that it received from the private placement of 5,250,000 Sponsors Warrants to Flat Ridge Investments LLC, an entity affiliated with David A. Minella, Prospect's Chairman and Chief Executive Officer, LLM Structured Equity Fund L.P. and LLM Investors L.P., entities affiliated with Patrick J. Landers, Prospect's President and a director, and Capital Management Systems, Inc., a corporation affiliated with William Landman, one of Prospect's directors.
During the period from November 2007 through August 2009, Prospect was involved in sourcing and evaluating prospective businesses in search of a potential business combination. To minimize potential conflicts of interest which may have arisen from multiple corporate affiliations, each of Prospect's officers and directors agreed, until the earliest of a business combination, liquidation or such time as he ceases to be an officer or director, to present to Prospect prior to any other entity, any business opportunity which may reasonably be required to be presented to Prospect under the DGCL, in accordance with his fiduciary obligations. In general, officers and directors of a corporation incorporated under the DGCL are required to present business opportunities to a corporation if:
Prospect was created to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business. As such, its officers and directors are responsible for identifying, evaluating and selecting a target business and in their capacity as officers and directors of Prospect have focused their work on finding and analyzing potential acquisition targets, analyzing valuation work, negotiating potential transaction terms with potential target companies and reviewing various business case scenarios. In addition, they have assisted Prospect by preparing investment materials, analyzing market and industry research, coordinating and reviewing due diligence work, providing technical financial modeling, including pro forma financial statements, coordinating, conducting and analyzing business plans and assisting in the preparation of applicable SEC financial information and documentation. Prospect attempted to source opportunities both proactively and reactively, and given the mandate to find a suitable business combination partner, did not limit itself to any one transaction structure (i.e. cash versus stock issued to seller, straight merger, corporate spin-out or management buy-out). Proactive sourcing involved Prospect management, among other things:
88
Reactive sourcing involved fielding inquiries or responding to solicitations by either (i) companies looking for capital or investment alternatives, (ii) lenders or equity investors which had portfolio companies for which they had a desire to engage in a sale or fundraising process or (iii) investment bankers or other similar professionals who represented a company engaged in a sale or fundraising process.
The efforts of the officers and directors of Prospect also included discussions with other board members that highlighted general trends and opportunities in the financial services sector, profiled companies which might be attractive business combination candidates and provided introductions to the management teams of such companies where they had relevant contacts.
Promptly following Prospect's IPO, Prospect contacted over 100 investment bankers, private equity firms, consulting firms, legal and accounting firms, as well as numerous other business relationships. In addition, Prospect directly solicited owners and executives of privately and publicly owned businesses and communicated the fact that Prospect was looking to acquire or merge with a company which had a profile that met Prospect's criteria. Through these efforts, Prospect identified and reviewed information with respect to more than 150 potential target companies.
Between December 2007 and August 2009, based on Prospect's screening efforts and criteria evaluation, approximately 34 companies were determined as appropriate targets to advance to the next phase of the selection process. Non-disclosure agreements (and trust waivers) were signed with these potential targets and preliminary discussions were initiated. From this universe of potential targets, nine companies were further pursued to the extent that Prospect held substantive discussions regarding the type, timing and amount of consideration to be provided in a potential transaction, conducted due diligence and engaged the potential seller in a negotiation process. In each of these cases, Prospect pursued the transaction because it believed the target company represented a favorable opportunity for Prospect stockholders. Furthermore, in the cases of the targets in the asset management industries, Prospect's management had experience in managing and/or acquiring businesses similar to these, and it had been Prospect's intention to focus on these businesses from its inception. However, except for Kennedy-Wilson, in each case, Prospect was unable to reach a mutually acceptable transaction value and structure with the target.
89
The following table highlights the target businesses on which Prospect advanced to the negotiation stage, but which were ultimately dismissed as a business combination candidate:
Target Company Business
|
Activity Period | Reason not Pursued | ||
---|---|---|---|---|
Asset Management |
December 2007 - March 2008 | Executed letter of intent; could not agree on valuation | ||
Asset Management |
January 2008 - March 2008 |
Executed letter of intent; did not win auction process |
||
Asset Management |
February 2008 - April 2008 |
Executed letter of intent; seller decided not to sell |
||
Mortgage processing |
June 2008 - September 2008 |
Executed letter of intent; could not agree on valuation |
||
Specialty finance |
November 2008 - March 2009 |
Seller decided to pursue alternative transaction |
||
Investment company |
April 2009 - June 2009 |
Executed letter of intent; could not agree on valuation |
||
Mortgage processing |
April 2009 - June 2009 |
Executed letter of intent; insufficient audited financials of seller |
||
Mortgage insurance |
July 2009 - August 2009 |
Executed letter of intent; did not win auction process |
On June 15, 2009, David A. Minella, Chairman and Chief Executive Officer of Prospect, was contacted by Roberto De Guardiola of De Guardiola. Mr. De Guardiola explained that Kennedy-Wilson was seeking to raise equity capital to enable it to expand its real estate investment activities, and that a special purpose acquisition company, such as Prospect, could address Kennedy-Wilson's equity raising goals while also achieving another objective of listing on a United States securities exchange.
On June 17, 2009, De Guardiola prepared some non-confidential information which outlined the business and management team at Kennedy-Wilson, in preparation for a teleconference between Prospect and Kennedy-Wilson management which was held on June 18, 2009.
On June 18, 2009, Prospect and Kennedy-Wilson entered into a non-disclosure agreement and Prospect received certain confidential information from Kennedy-Wilson. The Prospect team reviewed the materials and began gathering industry research with the assistance of De Guardiola. An initial meeting of Messrs. Minella and Cahill with the Kennedy-Wilson management team was held on June 23, 2009 at the offices of De Guardiola to discuss the Kennedy-Wilson business in more detail and how a potential transaction between the two organizations could be mutually beneficial.
On June 24, 2009, Prospect submitted a preliminary business due diligence request list to Kennedy-Wilson, and began to receive and review information related to the Kennedy-Wilson business, financial history and prospective growth objectives.
At this time, Prospect began to focus more closely on Kennedy-Wilson as a potential target because Prospect management believed that the Kennedy-Wilson business was well positioned to capitalize on growth opportunities in its business, and that the goals of Kennedy-Wilson current owners were strongly aligned with the special purpose acquisition company structure. Specifically, the existing Kennedy-Wilson's owners were interested in retaining their existing equity interest, becoming a public company listed on United States securities exchange, and using Prospect's cash to take advantage of distressed and other real estate investment opportunities. Prospect's management found this type of
90
transaction structure to be very attractive because it aligned the interests of Prospect's stockholder base with those of Kennedy-Wilson's existing owners and also because Prospect's initial due diligence reflected that the real estate investment opportunities available to Kennedy-Wilson could generate significant returns for stockholders.
Continuing throughout the early part of July 2009, Prospect continued to review and consider the Kennedy-Wilson opportunity, while also continuing to investigate various other opportunities. Prospect executive management continued to speak with Kennedy-Wilson management regarding the prospective transaction and why it represented a compelling opportunity for both Prospect and Kennedy-Wilson stockholders.
The Prospect team, led by Mr. Minella, with the help of Prospect's financial advisors, Citigroup and De Guardiola, analyzed the current real estate investment environment, precedent merger and acquisition transaction valuations, and publicly available comparable company valuations. The team also considered Kennedy-Wilson's business plan, including the opportunity to grow both its investments and services businesses, both of which Prospect believed had strong growth potential.
On July 7, 2009, Mr. Minella had a follow-up meeting with William McMorrow and Donald Herrema of Kennedy-Wilson and Mr. De Guardiola, during which the parties shared their preliminary views on general terms that might be attractive to each regarding a transaction. Over the next several days, Prospect and Kennedy-Wilson continued to discuss potential transaction terms.
On July 13, 2009, the acquisition committee of the board of directors of Prospect held a telephonic meeting to discuss Prospect's progress in its discussions with Kennedy-Wilson and to seek approval to submit a non-binding letter of intent. The committee reviewed the general terms of a proposed transaction and unanimously approved execution of a non-binding letter of intent with Kennedy-Wilson.
On July 13, 2009, Prospect submitted a written proposal to Kennedy-Wilson. This proposal contemplated that Prospect would issue to Kennedy-Wilson's existing stockholders a total of 25.5 million shares of Prospect common stock, including common shares to be issued to Kennedy-Wilson's existing convertible preferred stockholders who would be required to convert the shares into common stock. This provided a total value to Kennedy-Wilson's shares of approximately $255 million assuming a Prospect common stock price of $10.00. The proposal also contemplated an allocation of an additional 2.2 million shares to a management incentive plan, as well as the issuance of 0.375 million shares being issued De Guardiola as partial payment of its advisory fee. The proposal also called for the Prospect founders to forfeit 2.575 million shares. In addition, the proposal called for Kennedy-Wilson, and potentially Prospect and De Guardiola, to purchase Prospect Public Warrants subsequent to the execution and announcement of the definitive Merger Agreement and for the existing Kennedy-Wilson management option plan to be cancelled. In connection with the option plan, the parties subsequently agreed that all Public Warrants purchased up to 50% of the amount currently held by the public would be retired, and any additional Public Warrants purchased would be set aside in a management incentive pool.
On July 13, 2009, Prospect and Kennedy-Wilson, executed a non-binding letter of intent which outlined the terms under which both sides agreed to work towards a definitive agreement and provided limitations on Kennedy-Wilson's ability to pursue alternative transactions.
On July 13, 2009, and subsequent to the execution of the non-binding letter of intent, Prospect provided an additional business due diligence request list to Kennedy-Wilson. Over the next several weeks Kennedy-Wilson provided business due diligence information to Prospect and its advisors, including Citigroup and De Guardiola, all of whom continued to review these materials.
On July 14, 2009, Messrs. Minella and Cahill, along with representatives from Citigroup and De Guardiola, met with Kennedy-Wilson's management team at Kennedy-Wilson's headquarters in Beverly Hills, California and discussed in more detail specific opportunities related to the Kennedy-Wilson business lines and how a potential transaction could help it achieve those objectives.
91
On August 1, 2009, Loeb and Loeb LLP, on behalf of Kennedy-Wilson, provided Prospect with a draft Merger Agreement which formed the basis for the negotiation of a definitive agreement between Prospect and Kennedy-Wilson.
On August 8, 2009, Prospect provided a legal due diligence list to Kennedy-Wilson, and over the following several weeks Prospect and its legal counsel, Bingham McCutchen LLP, reviewed the information provided and continued to conduct legal due diligence and revise and negotiate the definitive Merger Agreement with Kennedy-Wilson and its legal representatives.
In the course of negotiating the definitive Merger Agreement, Prospect and Kennedy-Wilson sought to address each party's concerns about deal certainty. Because of logistical issues, obtaining an agreement from a majority of Kennedy-Wilson's common stockholders to vote in favor of the Merger might have precluded Prospect from registering the offering of its shares of common stock issued in the Merger. Accordingly, Prospect and Kennedy-Wilson agreed that Kennedy-Wilson would pay Prospect a break up fee of $10 million if less than a majority of the shares of Kennedy-Wilson common stock approve the Merger. Prospect and Kennedy-Wilson also agreed to an exception to Kennedy-Wilson's blanket waiver of claims against the Trust Account that will permit Kennedy-Wilson to recover its damages up to $10 million if it prevails in a claim that Prospect breached Prospect's no-shop covenant in the Merger Agreement.
On August 20, 2009, Prospect engaged Houlihan Smith to render a fairness opinion to the board of directors as to whether, on the date of such opinion, the purchase price was fair, from a financial point of view, to Prospect's stockholders, and to opine on whether the fair market value of Kennedy-Wilson was at least equal to 80% of the balance of Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount). Representatives of Houlihan Smith held discussions with Prospect and the management team of Kennedy-Wilson, reviewed materials, including a draft of the Merger Agreement, dated September 2, 2009, financial statements of Kennedy-Wilson, internal financial statements and financial projections prepared by Kennedy-Wilson, as well as other due diligence materials concerning both Kennedy-Wilson and its industry.
On August 23, 2009, Prospect engaged RSM McGladrey ("RSM") to conduct limited scope financial and tax due diligence on Kennedy-Wilson. After the audit committee approval noted below, Representatives from RSM met with Kennedy-Wilson's management at its headquarters in Beverly Hills, California, performed limited scope financial due diligence, held discussions with management, met with Kennedy-Wilson's tax preparer and performed limited scope tax due diligence. During the period of its limited scope due diligence, RSM provided updates regarding its findings and analysis to Prospect on a regular basis.
On August 24, 2009, Prospect held a telephonic meeting of the audit committee of its board of directors, at which the audit committee approved the engagement of RSM to perform limited scope financial and tax due diligence on Kennedy-Wilson. Prospect also held an update call with its board of directors on August 24, 2009 to discuss the status of the negotiations regarding the definitive Merger Agreement with Kennedy-Wilson.
On August 31, 2009 Messrs. Minella and Cahill met with the Kennedy-Wilson management team at the offices of Citigroup, along with representatives from De Guardiola and Deutsche Bank, Kennedy-Wilson's financial advisor. The parties discussed the relative benefits of retiring any and all warrants that might be repurchased prior to or after the closing of the potential transaction as opposed to setting those aside for a management incentive pool. In place of the warrants that would have been set aside, the parties agreed to increase the number of management incentive shares to 4.0 million from 2.2 million. In addition, it was agreed that certain executive officer change of control payments which might have been triggered by the transaction, totaling approximately $15.7 million, would be foregone, and instead an incentive bonus arrangement of an equivalent amount would be established. This arrangement called for the payment of $6.9 million prior to closing, (to be returned if the transaction
92
does not close), and an additional $3.4 million during fiscal 2010 and $5.4 million during fiscal 2011, subject to certain performance measures being attained. In addition, it was agreed that a note receivable owed to Kennedy-Wilson by Mr. McMorrow, totaling $4.1 million, including accrued interest through June 30, 2009, would be forgiven. In addition, based upon the current momentum of the business as compared to what had been previously discussed, it was also agreed that the 25.5 million shares to be issued to Kennedy-Wilson common stockholders and convertible preferred stockholders would be increased to 26.0 million, valuing those shares at approximately $260 million, assuming a Prospect common stock price of $10.00.
On September 4, 2009, Prospect convened a telephonic meeting of the acquisition committee of its board of directors and Prospect's executive management presented the transaction to the committee. Citigroup, one of Prospect's financial advisors, presented an overview of the valuation analysis related to the pending transaction. RSM presented its limited scope financial and tax due diligence findings and Bingham McCutchen presented its legal due diligence findings to the acquisition committee. After extensive discussions, the acquisition committee approved making a recommendation to the board of directors that it adopt the Merger Agreement in substantially the form presented to the acquisition committee and authorize and empower certain Prospect officers to execute and deliver the Merger Agreement on behalf of Prospect.
On September 4, 2009, Kennedy-Wilson convened a telephonic meeting of its board of directors to discuss the Merger Agreement and related agreements. Kennedy-Wilson's executive management presented to the board of directors various aspects of the proposed Merger and Berkshire Capital Securities LLC, one of Kennedy-Wilson's financial advisors, delivered a presentation in which it opined that the purchase price was fair, from a financial point of view, to the stockholders of Kennedy-Wilson. In addition, Deutsche Bank Securities Inc., another Kennedy-Wilson financial advisor, provided an overview of the equity markets and the expected process. Finally, Frederic Cook & Co., Kennedy-Wilson's compensation consultant, presented on the 2009 Plan and other related compensation issues involved in the Merger. After a detailed discussion and question and answer session, the board of directors unanimously approved the Merger Agreement and other related documents substantially in the form presented to the board of directors and authorized and empowered certain Kennedy-Wilson officers to execute and deliver the Merger Agreement on behalf of Kennedy-Wilson.
On September 5, 2009, Prospect convened a telephonic meeting of its board of directors to discuss the Merger Agreement and related agreements. Prospect's executive management presented to the board of directors various aspects of the proposed Merger and Houlihan Smith delivered its opinion that the purchase price was fair, from a financial point of view, to the stockholders of Prospect, and that the fair market value of Kennedy-Wilson was equal to at least 80% of the balance in Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount). Bingham McCutchen LLP provided an overview of board fiduciary duties in the context of a transaction, and summarized material terms of the Merger Agreement and ancillary agreements. After extensive discussions, the board of directors approved the Merger Agreement and ancillary documents substantially in the forms presented to the board of directors and authorized and empowered certain Prospect officers to execute and deliver such agreements on behalf of Prospect. The board of directors further determined that the Merger was fair to and in the best interests of Prospect's stockholders and that the fair market value of Kennedy-Wilson was equal to at least 80% of the balance in Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount) and resolved to recommend to the stockholders of Prospect that they approve and adopt the Merger Agreement.
Prospect and Kennedy-Wilson continued to finalize the Merger Agreement and ancillary agreements through September 7, 2009.
On September 8, 2009, Prospect again convened a telephonic meeting of its board of directors to establish a special independent committee to review certain post-closing compensation arrangements,
93
which were presented to the committee by Prospect's executive management and legal representatives. After extensive discussions, the independent committee of the board of directors unanimously approved the post-closing compensation arrangements for Kennedy-Wilson management substantially in the forms presented to the committee.
On the night of September 8, 2009, the parties executed the Merger Agreement and jointly announced the agreement by means of a press release on the morning of September 9, 2009.
On September 11, 2009, Prospect and Kennedy-Wilson filed a Form 8-K containing an investor presentation which provided further public disclosure on the Merger. A joint public conference call was held the morning of September 14, 2009 regarding the Merger.
Prospect's Board of Directors' Reasons for the Approval of the Merger
The Prospect board of directors has concluded that the Merger with Kennedy-Wilson is in the best interests of Prospect's stockholders and unanimously recommends that you vote "FOR" the Merger Proposal.
In arriving at its determination to approve the Merger and the Merger Agreement with Kennedy-Wilson, the board of directors of Prospect relied on information (including financial information) relating to Kennedy-Wilson, the regulatory environment, industry dynamics, the reports of outside due diligence consultants and its own collective experience in investing in, managing and financing growth companies.
The Prospect board of directors also confirmed that the Merger with Kennedy-Wilson would satisfy the conditions for a merger candidate as set forth in the Prospect final prospectus dated November 14, 2007 for Prospect's IPO, including the requirement that Kennedy-Wilson's fair market value as the target business equal at least 80% of the balance of Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount). The fair market value of Kennedy-Wilson was determined by the board of directors based on a variety of factors generally accepted by the financial community in valuing companies, including a comparative company analysis in which the board of directors analyzed other real estate services companies. The board of directors also considered the opinion of Houlihan Smith dated September 5, 2009 that the Merger is fair from a financial point of view to the Prospect stockholders and to the effect that, as of such date, the fair market value of Kennedy-Wilson as indicated by Houlihan Smith's financial analyses was at least equal to $194 million. A copy of Houlihan Smith's opinion, which sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Smith in preparing its opinion is attached as Annex E and is discussed below under the section entitled "The Merger ProposalFairness Opinion."
The Prospect board of directors considered financial data for selected companies with publicly traded securities that it deemed similar to Kennedy-Wilson in one or more financial, operating or other respects as part of its analysis, as well as similar analyses which Houlihan Smith reviewed with the board of directors in connection with rendering its opinion.
The Prospect board of directors considered a wide variety of factors in connection with its evaluation of the Merger. In light of the complexity of those factors, the Prospect board of directors did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it considered in reaching its decision. In addition, individual members of the Prospect board may have given different weight to different factors. Such factors included, among other things:
94
The analysis of Prospect's board of directors in reaching this conclusion is described in more detail below. In considering the Merger, Prospect's board gave considerable weight to the following positive factors:
Prospect's board of directors' belief that Kennedy-Wilson has the ability to continue its growth because opportunities exist to:
The Experience of Kennedy-Wilson's Management
An important consideration of Prospect's board of directors in approving the Merger was Kennedy-Wilson's seasoned management team, which has acquired, developed and managed more than $15 billion of real estate. On average, the members of Kennedy-Wilson's senior management team have more than 25 years of real estate experience and have worked together for more than a decade. Kennedy-Wilson's executives have built highly regarded reputations in the real estate industry, which they have utilized to attract large institutional clients, execute successful, high return real estate
95
transactions, negotiate with lenders and potential joint venture partners and develop a diversified real estate services firm. Prospect's board of directors believes that the experience of Kennedy-Wilson's management team provides it with a competitive advantage in this regard.
Comparable Company and Comparable Transaction Valuation Metrics
The Prospect board of directors reviewed valuation metrics from management's analysis and that of third-party investment banks for companies that it believed were somewhat representative of Kennedy-Wilson's services and asset management business lines and, in that regard, within the context of the proposed Merger. Comparable asset management and real estate companies considered included:
The Terms of the Merger Agreement
The terms of the Merger Agreement, including the closing conditions, restrictions on each party's ability to respond to competing proposals and the termination provisions are customary and reasonable.
Additional Factors
Prospect's board of directors believes that the above factors strongly supported its determination and recommendation to approve the Merger. The Prospect board of directors did, however, consider potentially negative factors, among others, including the risk factors included in this proxy statement/prospectus, in its deliberations concerning the Merger.
Prospect's board of directors also considered the risk that the current public stockholders of Prospect would vote against the Merger and demand to convert their shares for cash upon consummation of the Merger, thereby depleting the amount of cash available to the combined company following the Merger. For the reasons stated below, Prospect's board of directors deemed this risk to be less with regard to Kennedy-Wilson than it would be for other target companies and believes that Kennedy-Wilson will still be able to implement its business plan even if the maximum number of public stockholders exercise their conversion rights and the post-Merger company receives only approximately 70% of the funds deposited in the Trust Account.
Prospect's board of directors also believes that a transaction with Kennedy-Wilson presents less risk than other investments based on the quantitative and qualitative analysis conducted by Prospect's board. The quantitative analysis focused on Kennedy-Wilson's balance sheet and past results of operations and Kennedy-Wilson's management's projections and expected growth opportunities given its market position. The qualitative analysis of the investment includes the potential value represented by Kennedy-Wilson's strong management team and industry fundamentals that support Kennedy-Wilson's ability to leverage its industry relationships to raise additional funds and identify and consummate successful, off-market real estate transactions.
Prospect's board of directors also considered the fact that certain officers and directors of Prospect may have interests in the Merger that are different from, or are in addition to, the interests of Prospect stockholders generally, including the matters described below under the section entitled "The Merger ProposalInterests of Prospect's Directors and Officers in the Merger. " However, this fact would exist with respect to a merger with any target company.
After deliberation, the Prospect board of directors determined that these potentially negative factors were outweighed by the potential benefits of the Merger, including the opportunity for Prospect stockholders to share in Kennedy-Wilson's future possible growth prospects. Prospect expects Kennedy-
96
Wilson to benefit from strong organic growth in raising significant additional assets for investment and realizing strong investment returns through its real estate investment transactions.
Satisfaction of 80% Test
It is a requirement that any business acquired by Prospect have a fair market value equal to at least 80% of the balance of Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount). Based on the financial analysis Prospect generally used to approve the transaction, including a comparison of comparable companies, the Prospect board of directors determined that this requirement was met. The board also determined that the consideration being paid in the Merger, which amount was negotiated at arms-length, was fair to and in the best interests of Prospect and its stockholders and appropriately reflected Kennedy-Wilson's value. In reaching this determination, the board concluded that it was appropriate to base such valuation on qualitative factors such as management strength and depth, competitive positioning, marketing relationships and investment skills as well as quantitative factors such as Kennedy-Wilson's potential for future growth in revenues and profits and the historical return on investment realized by its separate account investors. The Prospect board of directors believes because of the financial skills and background of several of its members, it was qualified to conclude that the acquisition of Kennedy-Wilson met this requirement. Prospect has also received an opinion from Houlihan Smith that the 80% test has been met which was based on a comparison of comparable companies, comparable transactions and a discounted cash flow analysis.
Interests of Prospect's Directors and Officers in the Merger
When you consider the recommendation of Prospect's board of directors in favor of approval of the Merger Proposal, you should keep in mind that Prospect's executive officers and members of Prospect's board have interests in the Merger that are different from, or in addition to, your interests as a stockholder or warrantholder. These interests include, among other things:
97
exercisable, and (iv) the Sponsors Warrants are exercisable on a cashless basis at the holder's option so long as the Sponsors Warrants are held by the sponsors or their affiliates. Prospect has agreed to register the shares underlying the Sponsors Warrants at any time after Prospect has consummated its initial business combination, but the purchasers of the Sponsors Warrants have agreed that the Sponsors Warrants will not be sold or, subject to certain limited exceptions, transferred by them and they may not exercise the Sponsors Warrants until 30 days after Prospect has completed a business combination. Accordingly, the Sponsors Warrants have been placed in escrow and will not be released until 30 days after the completion of a business combination. The Sponsors Warrants are not publicly traded and as amended by the Warrant Amendment, will have an exercise price of $12.50 per warrant. All of the Sponsors Warrants will become worthless if the Merger is not consummated by November 14, 2009 (as will the remainder of the Public Warrants).
In addition, at any time prior to the special meeting of Prospect stockholders and special meeting of Prospect warrantholders, during a period when they are not then aware of any material nonpublic information regarding Prospect or its securities, the Prospect founders, Kennedy-Wilson and Kennedy-Wilson Holders and/or their respective affiliates may purchase shares of common stock or Public Warrants from institutional and other investors, or execute agreements to purchase such shares of common stock or Public Warrants from them in the future, or they may enter into transactions with such persons and others to provide them with incentives to acquire shares of Prospect common stock or Public Warrants or vote their shares of common stock or Public Warrants in favor of the Merger Proposal and the Warrant Amendment Proposal, as applicable. The purpose of such Public Warrant purchases and other transactions would be to increase the likelihood that holders of a majority of shares underlying the warrants is present and voting at the special meeting of Prospect warrantholders. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements that the holders of a majority of the Public Shares present in person or by proxy and eligible to vote at the special meeting of Prospect stockholders vote in favor of, and that holders of fewer than 30% of the Public Shares vote against, the Merger Proposal and demand conversion of their Public Shares into cash where it appears that such requirements would otherwise not be met.
98
While the exact nature of any incentives that would be provided by the Prospect founders, Kennedy-Wilson and Kennedy-Wilson Holders and/or their respective affiliates has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares of common stock or Public Warrants, including the granting of put options and the transfer to such investors or holders of shares of common stock or Public Warrants owned by the Prospect founders for nominal value. Prospect will not enter into any such arrangement, either prior to or after the consummation of the Merger, and no funds in its Trust Account will be used to make such purchases or to fund other such arrangements. Entering into any such arrangements may have a depressive effect on Prospect's common stock and Public Warrants.
If such transactions are effected, the consequence could be to cause the Merger Proposal or the Warrant Amendment Proposal to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares of common stock or Public Warrants by the persons described above would allow them to exert more influence over the approval of the Merger Proposal or the Warrant Amendment Proposal and other proposals and would likely increase the chances that such proposals would be approved. Moreover, any such purchases may make it less likely that the holders of 30% or more of the Public Shares will vote against the Merger Proposal and exercise their conversion shares.
As of the date of this proxy statement/prospectus, there have been no such discussions with respect to any such transactions and no agreements to such effect have been entered into with any such investor or holder. Prospect will file a Current Report on Form 8-K to disclose any arrangements entered into or significant purchases made by any of the aforementioned persons that would affect the vote on the Merger Proposal, the Warrant Amendment Proposal, the Charter Amendment Proposal, or the conversion threshold.
Recommendation of Prospect's Board of Directors
After careful consideration of the matters described above, particularly Kennedy-Wilson's record of high return on investments, potential for growth and profitability, the experience of Kennedy-Wilson's management, its competitive positioning, its customer and employee relationships, and its significant fund raising potential, Prospect's board of directors determined unanimously that each of the Merger Proposal, the Charter Amendment Proposal, the Director Election Proposal, the Equity Participation Plan Proposal and the Stockholder Adjournment Proposal is fair to and in the best interests of Prospect and its stockholders. Prospect's board of directors has approved and declared advisable and unanimously recommends that you vote or give instructions to vote "FOR" each of these proposals.
The foregoing discussion of the information and factors considered by the Prospect board of directors is not meant to be exhaustive, but includes the material information and factors considered by the Prospect board of directors.
Kennedy-Wilson Board of Directors' Reasons for Approving the Merger
Kennedy-Wilson's board of directors believes the Merger is in the best interests of Kennedy-Wilson and its stockholders. In reaching its determination to adopt the Merger Agreement, Kennedy-Wilson's board of directors consulted with its management and its financial and legal advisors, and considered a number of factors. The following is a description of some of the material factors that Kennedy-Wilson's board believes favor the Merger:
99
presentations by Berkshire Capital Securities LLC, whom Kennedy-Wilson retained to render a fairness opinion, and Kennedy-Wilson's management and the results of the due diligence investigation of Prospect conducted by Kennedy-Wilson's management and financial and legal advisors;
In the course of its deliberations regarding the Merger, Kennedy-Wilson's board of directors also considered the following factors that Kennedy-Wilson's board of directors determined did not outweigh the benefits to Kennedy-Wilson and its stockholders expected to be generated by the Merger:
Kennedy-Wilson's board of directors did not assign any relative or specific weights to the factors considered in reaching that determination, and individual directors may have given differing weights to different factors.
Interests of Kennedy-Wilson's Directors and Executive Officers in the Merger
You should be aware that certain members of the Kennedy-Wilson board and certain executive officers of Kennedy-Wilson have agreements or arrangements that provide them with interests in the Merger.
If the Merger is consummated, William J. McMorrow and Mary Ricks will be potentially entitled to receive certain cash bonus payments of up to $11.7 million and $4.0 million, respectively. The cash bonus payments will be payable as follows: (i) Mr. McMorrow and Ms. Ricks will receive "performance unit awards" under the 2009 Plan which will entitle them to receive $4.85 million and $2.0 million, respectively, on October 15, 2009, provided, however, that such payments will be repaid to Kennedy-
100
Wilson in the event the Merger is not consummated by November 15, 2009 or the executive is not employed by Kennedy-Wilson on the effective date of the Merger (these employment requirements will not apply, however, in the case of a termination of employment due to death or disability); (ii) Mr. McMorrow and Ms. Ricks will be entitled to receive $2.425 million and $1.0 million, respectively, on April 1, 2010, provided that the Performance Target is met as of March 31, 2010 (in the event that the Performance Target is not met as of March 31, 2010, the bonus otherwise due April 1, 2010 shall, nevertheless, be paid on July 1, 2010, October 1, 2010, or January 1, 2011, respectively, if the Performance Target is satisfied as of the earliest of June 30, 2010, September 30, 2010, or December 31, 2010, respectively), and the executive remains employed through the date on which the Performance Target is satisfied; and (iii) Mr. McMorrow and Ms. Ricks will receive additional "performance unit awards" under the 2009 Plan which will entitle them to receive cash payments in the amounts of $4.425 and $1.0 million, respectively, on January 1, 2011, provided that the Performance Target is met as of December 31, 2010 and he or she, as applicable, remains employed by the post-Merger company through January 1, 2011. Notwithstanding the foregoing, in the event that the Merger is consummated and the employment of Mr. McMorrow or Ms. Ricks is terminated by the post-Merger company without cause or he or she, as applicable, resigns from his or her, as applicable, employment with the post-Merger company for good reason, the payments referred to in clauses (ii) and (iii) above will still be payable on the applicable payment dates if the Performance Target is met. The Performance Target was established by an independent committee of Prospect and is subject to the approval of the compensation committee of the post-Merger company following the consummation of the Merger.
On April 10, 2006, William J. McMorrow borrowed $3,543,127 from Kennedy-Wilson evidenced by a Promissory Note bearing simple interest at a rate of 7.5% per annum and scheduled to mature on April 9, 2011. Mr. McMorrow's employment agreement has been amended to provide that the McMorrow Note will be forgiven if the Merger is consummated.
If the Merger is consummated, certain of Kennedy-Wilson's executive officers will continue to be employed with the post-Merger company, including William J. McMorrow, Freeman A. Lyle, Barry S. Schlesinger, Mary Ricks, James A. Rosten, Robert E. Hart and Donald J. Herrema. In addition, it is proposed that six members of the board of directors of Kennedy-Wilson will be elected to serve as directors of the post-Merger company. To reward and incentivize Kennedy-Wilson's key employees and management after the Merger, up to 4,000,000 shares of Prospect common stock will be reserved for issuance under the 2009 Plan. If the Merger is consummated, certain Kennedy-Wilson officers, directors and key employees will be issued an aggregate of 3,740,000 restricted shares of Prospect common stock under the 2009 Plan upon the closing of the Merger as set forth in the table below:
Name of Group
|
Dollar ($) |
Number of Shares
of Restricted Stock |
|||||
---|---|---|---|---|---|---|---|
William McMorrow, Chief Executive Officer |
$ | | 900,000 | ||||
Freeman Lyle, Chief Financial Officer |
$ | | 50,000 | ||||
Mary Ricks, Co-CEO of KW Commercial Investment Group |
$ | | 900,000 | ||||
Barry Schlesinger, Co-CEO of KW Commercial Investment Group |
$ | | 125,000 | ||||
Robert Hart, President of KW Multi-Family Management Group |
$ | | 125,000 | ||||
James Rosten, President of Kennedy-Wilson Properties |
$ | | 125,000 | ||||
All executive officers, as a group |
$ | | 3,495,000 | ||||
All directors who are not executive officers, as a group |
$ | | 25,000 | ||||
All employees, including all current officers who are not executive officers, as a group |
$ | | 220,000 |
101
In the event that the recipient of the restricted shares remains employed by (or continues to perform services as a director for) the post-Merger company through the relevant vesting date, 1 / 5 of the restricted shares will vest on each of the first five anniversaries of the date of issuance, provided that the Performance Target is met as of the September 30 immediately preceding the applicable anniversary date (in the case of the installments vesting on the fourth and fifth anniversary dates, the Performance Target must be met as of the September 30 immediately preceding the third anniversary date). The Performance Target was established by an independent committee of Prospect and is subject to the approval of the compensation committee of the post-Merger company following the consummation of the Merger. Notwithstanding the foregoing, in the event the employment with the post-Merger company of an employee who has been granted restricted shares is terminated without cause or if the employee resigns from his employment with the post-Merger company for good reason, the restricted shares will continue to vest on the applicable anniversary dates (subject to the satisfaction of the Performance Target), subject to certain limitations. In addition, in the event of a "Change of Control" as defined in the 2009 Plan (see "The Equity Participation Plan Proposal"Change of Control") , any unvested restricted shares of Prospect common stock that have not previously been forfeited will become vested, subject to certain limitations. See section "The Equity Participation Plan ProposalAwards to Particular Officers, Directors and Employees" for additional information.
In connection with the Merger, Mr. McMorrow and Ms. Ricks have entered into amendments to their employment agreements which provide for, among other things, (i) the removal of certain benefits in the event of a change in control; (ii) the addition of certain severance benefits if the executive resigns on account of a change in location or a material reduction in duties; (iii) the grant to each executive of 900,000 shares of restricted stock of Prospect pursuant to the 2009 Plan and upon the terms and conditions set forth above; (iv) the cash bonus payments set forth above and (v) in the case of Mr. McMorrow, the McMorrow Note forgiveness described above. Mr. Herrema has also entered into an amendment to his employment agreement which provides for the extension of his employment term from December 31, 2010 to January 31, 2014 as well as clauses (ii) - (iii) above. In addition, the employment agreements for Messrs. McMorrow and Herrema and Ms. Ricks have been amended to include language intended (i) to provide for a reduction in the amount of payments or benefits payable or provided to them under their respective employment agreements or otherwise to ensure that no payment or benefit is subject to the excise tax imposed by Section 4999 of the Code (certain golden parachute payments) which reduction may, in certain circumstances, result in the repayment of certain previously paid amounts (plus earnings) to the post-Merger company, and (ii) to achieve compliance with Section 409A of the Code.
Fairness Opinion
Houlihan Smith delivered a presentation in conjunction with its written opinion to the board of directors of Prospect on September 5, 2009, which stated that, as of September 5, 2009, and based upon and subject to the assumptions made, matters considered, and limitations on its review as set forth in the fairness opinion, (i) the Merger consideration to be paid by Prospect for Kennedy-Wilson in conjunction with the Merger is fair from a financial point of view to the stockholders of Prospect, and (ii) the fair market value of Kennedy-Wilson is at least equal to 80% of the balance in Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount). The amount of the Merger consideration was determined pursuant to negotiations between Prospect and Kennedy-Wilson and not pursuant to recommendations of Houlihan Smith. The full text of the written opinion of Houlihan Smith is attached as Annex F and is incorporated by reference into this proxy statement/prospectus. Prospect paid Houlihan Smith a non-contingent, non-refundable fee in the amount of $85,000 for its services in rendering the fairness opinion, plus the reimbursement of reasonable out-of-pocket expenses up to $5,000. Prospect also agreed to indemnify Houlihan Smith in the event Houlihan Smith were to incur certain losses as a
102
result of its engagement by Prospect. No material relationship exists or has existed within the past between Houlihan Smith and Prospect, or Kennedy-Wilson.
You are urged to read the Houlihan Smith opinion carefully and in its entirety for a description of the assumptions made, matters considered, procedures followed and limitations on the review undertaken by Houlihan Smith in rendering its opinion. The summary of the Houlihan Smith opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion attached as Annex F. Prospect will make available the fairness opinion for inspection and copying at its principal executive office during regular business hours to any interested security holder or an authorized representative. A copy of the fairness opinion will also be mailed to any interested security holder or authorized representative upon written request to Prospect's secretary and at the expense of the requesting security holder.
The Houlihan Smith opinion is for the use and benefit of Prospect's board of directors in connection with its consideration of the Merger and is not intended to be and does not constitute a recommendation to you as to how you should vote or proceed with respect to the Merger. Houlihan Smith was not requested to opine as to, and its opinion does not in any manner address, the relative merits of the transaction as compared to any alternative business strategy that might exist for Prospect, its underlying business decision to proceed with or effect the Merger, and other alternatives to the Merger that might exist for Prospect. Houlihan Smith does not express any opinion as to the underlying valuation or future performance of Kennedy-Wilson or the price at which Prospect's securities might trade at any time in the future.
In arriving at its opinion, Houlihan Smith took into account an assessment of general economic, market and financial conditions, as well as its experience in connection with similar transactions and securities valuations generally. In so doing, among other things, Houlihan Smith:
103
In arriving at its opinion, Houlihan Smith relied upon and assumed, without independent verification, the accuracy, completeness and reasonableness of the financial, legal, tax, and other
104
information discussed with or reviewed by Houlihan Smith and assumed such accuracy and completeness for purposes of rendering its opinion. In addition, Houlihan Smith did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of Kennedy-Wilson, nor was Houlihan Smith furnished with any such evaluation or appraisal. In addition, Houlihan Smith did not attempt to confirm whether Kennedy-Wilson had good title to its assets. Further, Houlihan Smith relied upon the assurances of both Prospect's management and Kennedy-Wilson's management that they were not aware of any facts or circumstances that would make any such information inaccurate or misleading. With respect to the financial information and projections utilized, Houlihan Smith assumed that such information has been reasonably prepared on a basis reflecting the best currently available estimates and judgments, and that such information provides a reasonable basis upon which it could make an analysis and form an opinion. The projections were prepared by Kennedy-Wilson's management and are not to be interpreted as projections of future performance (or "guidance") by Prospect's management. Houlihan Smith did not receive any instructions from Prospect or Kennedy-Wilson on how to use or rely on the projections used in rendering its fairness opinion. Houlihan Smith did not evaluate the solvency or fair value of Kennedy-Wilson under any foreign, state or federal laws relating to bankruptcy, insolvency or similar matters.
Houlihan Smith assumed that the transaction will be consummated in a manner that complies in all respects with the applicable provisions of the Securities Act, the Securities Exchange Act of 1934 (the "Exchange Act") and all other applicable foreign, federal and state statutes, rules and regulations. Houlihan Smith assumed that the transaction will be consummated substantially in accordance with the terms set forth in the Merger Agreement as in effect as of the date of its opinion, without any further amendments thereto, and that any amendments, revisions or waivers thereto will not be detrimental to Prospect's stockholders.
Further, Houlihan Smith's analysis and opinion are necessarily based upon information made available to Houlihan Smith, as well as the economic, monetary, market, financial, and other conditions as they existed as of the date of its opinion. Accordingly, although subsequent developments may affect its opinion, Houlihan Smith has not assumed any obligation to update, review or reaffirm its opinion.
In connection with rendering its opinion, Houlihan Smith performed certain financial, comparative and other analyses as summarized below. Each of the analyses conducted by Houlihan Smith was carried out to provide a different perspective on the transaction, and to enhance the total mix of information available. Houlihan Smith did not form a conclusion as to whether any individual analysis, considered in isolation, supported or failed to support an opinion as to the fairness from a financial point of view, of the Merger consideration to be paid by Prospect for Kennedy-Wilson in conjunction with the Merger to Prospect's stockholders. The summary below describes the material information in Houlihan Smith's opinion, including the material analyses performed and the material factors considered by Houlihan Smith. However, the preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Houlihan Smith made qualitative judgments as to the relevance of each analysis and factors that it considered. In addition, Houlihan Smith may have given various analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions, so that the range of valuations resulting from any particular analysis described above should not be taken to be Houlihan Smith's view of the value of Kennedy-Wilson's assets. The estimates contained in Houlihan Smith's analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the value of businesses or assets neither purports to be appraisals nor do they necessarily reflect the prices at which businesses or assets may actually be sold. Accordingly, Houlihan Smith's analyses and estimates are inherently subject to
105
substantial uncertainty. Houlihan Smith believes that its analyses must be considered as a whole and that selecting portions of its analyses or the factors it considered, without considering all analyses and factors collectively, could create an incomplete and misleading view of the process underlying the analyses performed by Houlihan Smith in connection with the preparation of its opinion. The summaries of the financial reviews and analyses include information presented in tabular format. In order to fully understand Houlihan Smith's financial reviews and analyses, the tables must be read together with the accompanying text of each summary. The tables alone do not constitute a complete description of the financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a misleading or incomplete view of the financial analyses performed by Houlihan Smith. The analyses performed were prepared solely as part of Houlihan Smith's analysis of (i) the fairness, from a financial point of view, of the Merger consideration to be paid by Prospect for Kennedy-Wilson in conjunction with the Merger to Prospect's stockholders, and (ii) the fair market value of Kennedy-Wilson as at least equal to 80% of the balance in Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount), and were provided to Prospect's board of directors in connection with the delivery of Houlihan Smith's opinion. The opinion of Houlihan Smith was just one of the many factors taken into account by Prospect's board of directors in making its determination to approve the transaction, including those described elsewhere in this proxy statement/prospectus.
Houlihan Smith's opinion did not constitute a recommendation to proceed with the Merger. Houlihan Smith's opinion relates solely to the question of (i) the fairness, from a financial point of view, to Prospect's stockholders of the Merger Consideration to be paid by Prospect for Kennedy-Wilson in conjunction with the Merger, and (ii) the fair market value of Kennedy-Wilson as at least equal to 80% of the balance in Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount). Houlihan Smith expressed no opinion as to the income tax consequences of the acquisition to the stockholders of Prospect.
Valuation Overview
Based on a review of the historical and projected financial data and certain other qualitative data for Kennedy-Wilson, Houlihan Smith utilized the income valuation approach, applying the discounted cash flow method, and the market valuation approach, applying the guideline public company method and the comparable transactions method.
Income ApproachDiscounted Cash Flow Method
A discounted cash flow analysis estimates present value based upon a company's projected future free cash flow discounted at a rate reflecting risks inherent in its business and capital structure. Unlevered free cash flow represents the amount of cash generated and available for principal, interest and dividend payments after providing for ongoing business operations. Kennedy-Wilson's management prepared and provided Houlihan Smith with financial projections for Kennedy-Wilson through Kennedy-Wilson's 2014 fiscal year. Houlihan Smith used the projections for Kennedy-Wilson's 2009 fiscal year, adjusted for the last four months, through 2012 fiscal year in its discounted cash flow analysis. Houlihan Smith used the financial projections to determine the enterprise net cash flows of Kennedy-Wilson over the projected period.
To calculate the fair market equity value of Kennedy-Wilson applying the discounted cash flow method, Houlihan Smith determined the present value of Kennedy-Wilson's enterprise net cash flows by applying a discount rate of 13% to the enterprise net cash flows for each year in the projected period as well as to a terminal enterprise net cash flow value. Houlihan Smith used this discount rate based on the weighted average cost of capital for Kennedy-Wilson, which was determined by Houlihan Smith by taking into consideration the estimated cost of equity capital in Kennedy-Wilson on a capital-structure weighted basis, the risk-free rate of return for long-term United States Treasury securities,
106
rates of return for relevant corporate debt and equity securities, and specific industry risks and company risks as they relate to Kennedy-Wilson. Houlihan Smith used a build-up method to determine the cost of equity. The 30-year U.S. Treasury Coupon Bond yield of 4.18% was added to the equity risk premium 5.25% (2009 Ibbotson Stocks, Bonds, Bills and Inflation Valuation Yearbook), the industry risk premium of 4.49% (2009 Ibbotson Stocks, Bonds, Bills and Inflation Valuation Yearbook), and a size premium of 5.81% (2009 Ibbotson Stocks, Bonds, Bills and Inflation Valuation Yearbook). These items result in a cost of equity of 19.73%. Houlihan Smith assumed a cost of debt of 9% and a tax rate of 40%, resulting in an after-tax cost of debt of 5.40%. Assuming a capital structure of 50% equity and 50% debt, Houlihan Smith determined the weighted average cost of capital was 13.0%.
Houlihan Smith subtracted Kennedy-Wilson's net interest bearing debt (excluding debt attributable to minority interest) from the present value of Kennedy-Wilson's enterprise value indicated by the discounted cash flow method to calculate the equity value of Kennedy-Wilson.
Based on such assumptions and methodology, and after performing a series of sensitivity analyses to measure the impact of changes in the underlying assumptions and discount rate, Houlihan Smith calculated an equity value range based on the discounted cash flow analysis for Kennedy-Wilson of between $167.7 million and $273.3 million. On September 22, 2009, Prospect held a subsequent meeting of its board of directors (the "Update Meeting") to discuss matters related to the S-4. During the Update Meeting, Houlihan presented an updated range of equity value to reflect revised information regarding depreciation and capital expenditures. The range of equity value presented after incorporating that revised information was $206.8 million to $323.9 million.
Market Approach
Houlihan Smith determined that Kennedy-Wilson has two main streams of revenue based on its segmented operations, including direct real estate ownership and fund management. Due to the significant size of the direct real estate segment, Houlihan Smith modeled these two segments separately and applied the guideline public company method to the fund management segment. Houlihan Smith valued the direct real estate segment by determining the properties' total asset value, which was reduced by debt and applied to Kennedy-Wilson's ownership percent to calculate the indicated equity value of the direct real estate segment. Houlihan Smith determined the equity value to be allocated to Kennedy-Wilson based on the following methodologies: divided the properties' net operating income by the appropriate overall capitalization rate (based on PricewaterhouseCoopers' Korpacz Real Estate Investor Survey for 2nd quarter 2009), appraisal values, value from units sold applied to the number of remaining units, recent purchase price, book value, or company estimates from previous sales. Based on these methodologies, Houlihan Smith arrived at a fair market value of the direct real estate segment of $90.4 million.
Guideline Public Company Method
The guideline public company method applies the trading multiples of publicly-traded companies to the subject company to derive an indication of value. The analyst searches for guideline public companies in industries similar to the subject company with operating structures and target customers as similar to the subject company as possible.
107
Houlihan Smith found eight companies within the real estate services and real estate management industries that met the criteria for guideline public companies of Kennedy-Wilson's fund management segment. The companies that Houlihan Smith analyzed were as follows:
Company
|
Ticker Symbol | |
---|---|---|
CB Richard Ellis Group, Inc. | NYSE:CBG | |
Jones Lang Lasalle, Inc. | NYSE:JLL | |
FirstService Corp. | TSX:FSV | |
Grubb & Ellis Company | NYSE:GBE | |
Stratus Properties, Inc. | NasdaqGS:STRS | |
Century21 Real Estate of Japan Ltd. | JASDAQ:8898 | |
AEONMALL Co. Ltd. | TSE:8905 | |
Sumitomo Real Estate Sales Co. Ltd. | TSE:8870 |
Houlihan Smith determined that the valuations derived from revenue and EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) multiples of the guideline public companies would provide the most meaningful indication of value of Kennedy-Wilson's fund management segment. Houlihan Smith determined the indicated equity values for each multiple to derive the minimum and maximum values for the fund management segment.
The median multiples derived from this analysis were enterprise value to revenue of 1.9 times and enterprise value to EBITDA of 10.5 times. Houlihan Smith applied these median multiples to Kennedy-Wilson's estimated 2009 revenue and EBITDA, which was discounted to the present value based on Kennedy-Wilson's weighted average cost of capital. Houlihan Smith added the fair market value of the direct real estate segment and reduced this value by net interest bearing debt to conclude a range of equity value of $101.4 million (based on revenue multiple) to $262.1 million (based on EBITDA multiple).
At the Update Meeting, Houlihan also presented an estimated equity value for Prospect pro forma for the Merger of $555.1 million, excluding approximately $182 million in net proceeds from the transaction, based on Kennedy-Wilson's estimated 2010 EBITDA.
Comparable Transactions Method
The comparable transactions method is a market approach which analyzes transactions involving companies operating in industries similar to Kennedy-Wilson's fund management segment. While it is known that no two companies are exactly alike, nor are any two transactions structured exactly the same, consideration is given to the similarity in size and profitability, as well as other operating characteristics of a company.
108
Houlihan Smith found six transactions within the real estate services and real estate management industries that met the criteria of Kennedy-Wilson's fund management segment. The transactions that Houlihan Smith analyzed were as follows:
Announced/
Initial Filing Date |
Target/Issuer |
Total
Transaction Value ($mm) |
Buyers/Investors | ||||
---|---|---|---|---|---|---|---|
10/23/2008 | Nihon Housing Co. Ltd. | $ | 34.1 | Relo Holdings, Inc. | |||
04/30/2008 | Bank Building Corp. | $ | 38.1 | Carter Bank & Trust | |||
04/26/2008 | Century Properties Fund XIV | $ | 13.0 | Sutter Capital Management LLC; MacKenzie Patterson Fuller, LP | |||
09/06/2007 | Bay Equities, Inc. | $ | 8.7 | Individual Investors | |||
08/16/2007 | Diamond City Co Ltd. | $ | 1,929.0 | AEONMALL Co. Ltd. | |||
04/10/2007 | Realogy Corp. | $ | 9,261.9 | Apollo Investment Fund VI LP; Apollo Management LP |
Houlihan Smith determined that the valuations derived from revenue and EBITDA multiples of the comparable transactions would provide the most meaningful indication of value of Kennedy-Wilson's fund management segment. Houlihan Smith determined the indicated equity values for each multiple to derive the minimum and maximum values for the fund management segment.
The median multiples derived from this analysis were enterprise value to revenue of 2.9 times and enterprise value to EBITDA of 10.3 times. Houlihan Smith applied these median multiples to Kennedy-Wilson's estimated 2009 revenue and EBITDA, which was discounted to the present value based on Kennedy-Wilson's weighted average cost of capital. Houlihan Smith added the fair market value of the direct real estate segment and reduced this value by net interest bearing debt to conclude a range of equity value of $158.1 million (based on revenue multiple) to $256.0 million (based on EBITDA multiple).
At the Update Meeting, Houlihan also presented an estimated equity value for Prospect pro forma for the Merger of $621.6 million, excluding approximately $182 million in net proceeds from the transaction, based on Kennedy-Wilson's estimated 2010 EBITDA.
80% Test
Prospect's initial business combination must be with a target business whose fair market value is at least equal to 80% of the balance in Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount) at the time of such acquisition. In support of its opinion that, as of the date of its opinion, the fair market value of Kennedy-Wilson is at least equal to 80% of the balance in Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount), Houlihan Smith reviewed and estimated Prospect's net Trust Account based on its balance as of June 30, 2009, which was approximately $242.5 million, 80% of which is approximately $194.0 million. Houlihan Smith compared this threshold to Kennedy-Wilson's indicated range of fair market value from Houlihan Smith's three valuation methodologies: discounted cash flow method, guideline public company method, and comparable transactions method. Based on such analysis, Houlihan Smith concluded that the midpoint of the fair market value indicated by these methodologies (approximately $203.1 million) exceeds 80% of the balance in Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount). While Prospect's board of directors considered the opinion and analysis of Houlihan Smith in approving the Kennedy-Wilson acquisition, prior to completing the acquisition, the board of directors will make its definitive determination of whether the 80% test is satisfied as of the date of the acquisition.
109
Based on the information and analyses set forth above, Houlihan Smith delivered its written opinion to Prospect's board of directors, which stated that, as of September 5, 2009, based upon and subject to the assumptions made, matters considered, and limitations on its review as set forth in the opinion, (i) the Merger consideration to be paid by Prospect for Kennedy-Wilson in conjunction with the Merger is fair from a financial point of view to the stockholders of Prospect, and (ii) the fair market value of Kennedy-Wilson is at least equal to 80% of the balance in Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount).
Houlihan Smith is an investment banking firm that, as part of its investment banking business, regularly is engaged in the evaluation of businesses and their securities in connection with mergers, acquisitions, corporate restructurings, private placements, and for other purposes. Prospect's board of directors determined to use the services of Houlihan Smith because it is a recognized investment banking firm that has substantial experience in similar matters. Houlihan Smith has received a fee in connection with the preparation and issuance of its opinion and will be reimbursed for its reasonable out-of-pocket expenses, including attorneys' fees up to $5,000. In addition, Prospect has agreed to indemnify Houlihan Smith for certain liabilities that may arise out of the rendering of its opinion. Houlihan Smith does not beneficially own any interest in Prospect or Kennedy-Wilson and has not provided any such company with any other services.
Material United States Federal Income Tax Consequences
General
The following section is a summary description of the material United States federal income tax consequences of the Merger to Prospect and to the United States Holders (as that term is defined below) of Kennedy-Wilson common stock and preferred stock (sometimes referred to as "KW Securities") and to the United States Holders of Prospect common stock, and of the Warrant Amendment to United States Holders of Public Warrants and Sponsor Warrants. This discussion addresses only those United States Holders of KW Securities and United States Holders of Prospect common stock, Public Warrants and Sponsor Warrants that hold their stock or warrants, as applicable, as capital assets within the meaning of Section 1221 of the Code, and does not address all the United States federal income tax consequences that may be relevant to Prospect or any United States Holders of KW Securities or Prospect common stock or warrants in light of their individual circumstances. This discussion also does not address the potential application of the alternative minimum tax or the United States federal income tax consequences to holders that are subject to special rules, such as:
110
This summary is based upon the Code, applicable treasury regulations thereunder, published rulings and court decisions, all as currently in effect as of the date hereof, and all of which are subject to change, possibly with retroactive effect. Tax considerations under state, local and foreign laws, or federal laws other than those pertaining to the income tax, are not addressed.
For purposes of this discussion, a United States Holder is a beneficial owner of KW Securities, Prospect common stock, Public Warrants or Sponsor Warrants that is for United States federal income tax purposes:
If a partnership (or other entity classified as a partnership for United States federal income purposes) holds Prospect common stock or warrants, or KW Securities, the tax treatment of a partner generally depends upon the status of the partner and the activities of the partnership. A partner of a partnership holding such stock or warrants should consult their own tax advisor.
Neither Prospect nor Kennedy-Wilson has requested, or intends to request, any ruling from the Internal Revenue Service as to the United States federal income tax consequences described herein. The Internal Revenue Service may disagree with the discussion herein, and its determination may be upheld by a court. Moreover, there can be no assurance that future legislation, regulation, administrative rulings or court decisions will not adversely affect the accuracy of the statements un this discussion.
Tax Consequences of the Merger to United States Holders of Kennedy-Wilson Stock
It is intended that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. If the Merger is treated as such a reorganization:
111
If the Merger should fail to qualify as a reorganization within the meaning of Section 368(a) of the Code, a United States Holder of KW Securities generally will recognize a gain or loss with respect to its shares of KW Securities in an amount equal to the difference, if any, between the United States Holder's adjusted tax basis in its KW Securities and the fair market value of the Prospect common stock received in the Merger. In such an event, the United States Holder's adjusted tax basis in the Prospect common stock generally will equal the fair market value of such Prospect common stock, and the United States Holder's holding period for the Prospect common stock generally will begin on the day following the date of the Merger.
Tax Consequences of the Merger to Prospect and United States Holders of Prospect Common Stock
No gain or loss will be recognized by Prospect as a result of the Merger. No gain or loss will be recognized by the United States Holders of Prospect common stock as a result of the Merger if their conversion rights are not exercised.
A United States Holder of Prospect common stock who exercises conversion rights and effects a complete termination of such stockholder's interest in Prospect (including any actual or constructive interest in Prospect) generally will be required to recognize gain or loss upon the exchange of that stockholder's shares of common stock of Prospect for cash. Such gain or loss will be measured by the difference between the amount of cash received and the tax basis of that stockholder's shares of Prospect common stock. This gain or loss will be a capital gain or loss if such shares were held as a capital asset at the time of the exchange and will be a long-term capital gain or loss if the holding period for the shares of Prospect common stock is more than one year at such time. There are limitations on the extent to which United States Holders may deduct capital losses from ordinary income. If a United States Holder of Prospect common stock who receives cash in exchange for all of the United States Holder's shares of Prospect common stock actually or constructively owns Prospect common stock after the conversion (as the result of prior actual or constructive ownership of Prospect common stock or otherwise), all or a portion of the cash received by the United States Holders of common stock may be taxed as a dividend, and those United States Holders should consult their tax advisors to determine the amount and character of the income recognized in connection with the exercise of such holder's conversion rights.
Tax Consequences of the Warrant Amendment to United States Holders of Prospect Warrants
In the event that a United States Holder of Public Warrants elects the Cash Exchange, such holder will recognize capital gain or loss with respect to the Public Warrants equal to the difference between the amount of cash received for the Public Warrants and the holder's adjusted basis in the Public Warrants. A United States Holder of Public Warrants who elects the Warrant Exchange and a holder of Sponsor Warrants will be treated as exchanging his or her "old" warrants for "new" warrants in connection with the merger transaction. As such, a United States Holder of Public Warrants and a United States Holder of Sponsor Warrants should not recognize any gain or loss on the Warrant Exchange, and such holder's adjusted tax basis and holding period in the "new" warrants received (or deemed received) in the Warrant Exchange should be the same as such holder's adjusted tax basis and holding period in the "old" warrants exchanged or deemed exchanged in the Warrant Exchange.
Information Reporting and Backup Withholding
A United States Holder of KW Securities who exercises its appraisal rights or a United States Holder of Prospect common stock who exercises its conversion rights may be subject to information reporting. In addition, such holder may be subject to backup withholding on the proceeds from the exchange of shares for cash unless such holder is an exempt recipient (such as a corporation) or provides to the paying agent such holder's correct taxpayer identification number and certifies that such holder is exempt from or otherwise is not subject to backup withholding. Backup withholding is not an
112
additional tax. The amount of any backup withholding will be refunded (or allowed as a credit against the U.S. federal income tax liability of the United States Holder) provided that the required information is furnished to the Internal Revenue Service.
Comparison of Rights of Stockholders of Prospect and Kennedy-Wilson
Prospect and Kennedy-Wilson are incorporated under the laws of the State of Delaware. Upon consummation of the Merger, Kennedy-Wilson stockholders will become stockholders of Prospect. Prospect's amended and restated certificate of incorporation that will be in effect at the closing of the Merger differs from Kennedy-Wilson's amended and restated certificate of incorporation. For a more complete description of the differences between the rights of the stockholders of Prospect and the rights of stockholders of Kennedy-Wilson, please refer to the section entitled " Comparison of Rights of Prospect and Kennedy-Wilson Holders. "
Rescission Rights
A Prospect securityholder at the time of the closing of the Merger that purchased Prospect units in the IPO (an IPO Purchaser), may have securities law claims against Prospect for rescission or damages on the basis, for example, that the IPO Prospectus, did not disclose that Prospect may seek to amend the terms of the Warrant Agreement and exchange a portion of its outstanding Public Warrants for cash proceeds released from the Trust Account. Rescission would give a successful IPO Purchaser claimant the right to receive the total amount paid for his or her securities pursuant to an allegedly deficient prospectus, plus interest and less any income earned on the securities, in exchange for surrender of the securities. An IPO Purchaser who has properly exercised its conversion rights or dissenters' rights will not be eligible for rescission in connection with any securities law claims it may have against Prospect in connection with Prospect units purchased in the IPO. In addition, an IPO Purchaser who purchased Prospect units in the IPO but who has separated its Prospect units into the component common stock and Public Warrants and no longer owns the common stock or Public Warrants included in such Prospect units may not be entitled to rescission in connection with any such securities law claims.
A successful IPO Purchaser claimant for damages under federal or state law could be awarded an amount to compensate for the decrease in value of his or her securities caused by the alleged violation (including, possibly, punitive damages), together with interest, while retaining such securities. Such claims may entitle IPO Purchasers asserting them to up to $10.00 per Prospect unit, based on the initial offering price of the Prospect units sold in the IPO, or $10.00 per share less any amount received from the sale or fair market value of the original Public Warrants purchased as part of the Prospect units, plus interest from the date of the IPO. In the case of IPO Purchasers, this amount may be more than the cash to which they are entitled upon exercise of their conversion rights or dissenters' rights or upon liquidation of Prospect.
In general, a person who contends that he or she purchased a security pursuant to a prospectus that contains a material misstatement or omission must make a claim for rescission within the applicable statute of limitations period, which, for claims made under Section 12 of the Securities Act and some state statutes, is one year from the time the claimant discovered or reasonably should have discovered the facts giving rise to the claim, but not more than three years from the occurrence of the event giving rise to the claim. Claims under the anti-fraud provisions of the federal securities laws must generally be brought within two years of discovery, but not more than five years after occurrence. Rescission and damages claims would not necessarily be finally adjudicated by the time the Merger is completed, and such claims would not be extinguished by consummation of that transaction.
113
Anticipated Accounting Treatment
The acquisition will be accounted for as a "reverse merger" and recapitalization since immediately following the completion of the transaction, the stockholders of Kennedy-Wilson immediately prior to the business combination will have effective control of Prospect through its approximately 44.2% stockholder interest in the combined entity, assuming no share conversions (50.7% in the event of maximum share conversion), which includes its largest principal stockholder owning approximately 24.8% of the Kennedy-Wilson stockholder interest in the combined company. In addition, through Kennedy-Wilson's 44.2% stockholder interest, Kennedy-Wilson will maintain effective control of the combined entity through control of a substantial portion of the board of directors by maintaining six of the seven board seats for an expected term ranging from one to of three years. Additionally, all of Kennedy-Wilson's senior executive positions will continue on as management of the post-Merger company after consummation of the Merger. For accounting purposes, Kennedy-Wilson will be deemed to be the accounting acquirer in the Merger and, consequently, the Merger will be treated as a recapitalization of Kennedy-Wilson. Accordingly, Kennedy-Wilson's assets, liabilities and results of operations will become the historical financial statements of the registrant, and Prospect's assets, liabilities and results of operations will become consolidated with Kennedy-Wilson effective as of the acquisition date. No step-up in basis or intangible assets or goodwill will be recorded in this transaction. All direct costs of the Merger will be charged to operations in the period that such costs are incurred.
Regulatory Matters
Prospect and Kennedy-Wilson do not expect that the Merger will be subject to any state or federal regulatory requirements other than (i) filings under applicable securities laws and the effectiveness of the registration statement of which this proxy statement/prospectus is part, (ii) expiration or early termination of any applicable waiting periods under the HSR Act, and (iii) the filing of certain merger documents with the Secretary of State of the State of Delaware. Prospect and Kennedy-Wilson intend to comply with all such requirements.
Recommendation and Vote Required
The approval of the Merger Proposal requires the affirmative vote of a majority of the issued and outstanding Public Shares represented in person or by proxy at the special meeting of Prospect stockholders and entitled to vote thereon as of the record date. Adoption of the Merger Proposal is a condition to the consummation of the Merger and a condition to the presentation of the other stockholder proposals.
PROSPECT'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PROSPECT'S STOCKHOLDERS VOTE "FOR" THE MERGER PROPOSAL.
114
For a discussion of the Merger structure and merger consideration, see the section entitled " The Merger Proposal " for additional information. Such discussion and the following summary of other material provisions of the Merger Agreement are qualified by reference to the complete text of the Merger Agreement which is attached as Annex A to this proxy statement/prospectus and incorporated herein by reference. All stockholders are encouraged to read the Merger Agreement in its entirety for a more complete description of the terms and conditions of the Merger.
Closing and Effective Time of the Merger
The closing of the Merger will take place as soon as practicable following the satisfaction or waiver of the last of the conditions described below under the subsection entitled " Conditions to Closing of the Merger. " The Merger is expected to be consummated as soon as practicable after the special meeting of Prospect's stockholders and the special meeting of Prospect warrantholders described in this proxy statement/prospectus. The Merger will become effective at the time designated in the Certificate of Merger as the effective time of the Merger that the Parties have agreed upon and designated, or if no such time has been designated, the Merger will be effective on the filing of the Certificate of Merger with the Secretary of State of the State of Delaware.
Merger Consideration
Pursuant to the Merger Agreement, in the Merger, the Kennedy-Wilson Holders will receive an aggregate of 26 million shares of Prospect common stock (each share of Kennedy-Wilson common stock shall automatically convert into the right to receive 3.8031 shares of Prospect common stock and each share of Kennedy-Wilson preferred stock shall automatically convert into the right to receive 105.6412 shares of Prospect common stock), minus any Dissenting Shares.
If a fractional share is required to be issued to a Kennedy-Wilson Holder, Prospect will round up to the nearest whole share in lieu of issuing fractional shares.
Prospect Warrant Amendment
In addition, each outstanding Public Warrant will be exchanged, at the election of each holder of Public Warrants, for either (i) $0.55 in cash or (ii) an Amended and Restated Public Warrant with an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013; provided that the aggregate number of Amended and Restated Public Warrants issuable upon the closing of the Merger is capped at 50% of the Public Warrants outstanding on the date of the Merger, which we refer to as the Warrant Limit. If holders of Public Warrants elect to receive in the aggregate more Amended and Restated Public Warrants than the Warrant Limit, the total Amended and Restated Public Warrants exchanged will be apportioned among the holders of Public Warrants who make a Warrant Election by multiplying the number of Amended and Restated Public Warrants evidenced by a specific Warrant Election by a fraction (x) the numerator of which is the Warrant Limit and (y) the denominator of which is the aggregate number of Amended and Restated Public Warrants evidenced by all Warrant Elections. Further, Public warrants for which holders of Public Warrants make no election will be converted into the right to receive the Cash Exchange. There is, however, no limit on the number of Public Warrants that may be exchanged for cash.
Also, each Sponsor Warrant will be amended and restated to provide for an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013.
115
Forfeiture of Founder Shares
Immediately prior to the Merger, 2,575,000 founder shares held by the founders will be cancelled and forfeited. As a result of this forfeiture, at the consummation of the Merger, the founders will own 3,675,000 shares of Prospect common stock.
Management Incentive Shares
To reward and incentivize Kennedy-Wilson's key employees and management after the Merger, up to 4,000,000 shares of Prospect common stock will be reserved for issuance under the 2009 Plan. If the Merger is consummated, certain Kennedy-Wilson officers, directors and key employees will be issued an aggregate of 3,740,000 restricted shares of Prospect common stock under the 2009 Plan upon the closing of the Merger as set forth in the table below:
Name of Group
|
Dollar ($) |
Number of Shares
of Restricted Stock |
|||||
---|---|---|---|---|---|---|---|
William McMorrow, Chief Executive Officer |
$ | | 900,000 | ||||
Freeman Lyle, Chief Financial Officer |
$ | | 50,000 | ||||
Mary Ricks, Co-CEO of KW Commercial Investment Group |
$ | | 900,000 | ||||
Barry Schlesinger, Co-CEO of KW Commercial Investment Group |
$ | | 125,000 | ||||
Robert Hart, President of KW Multi-Family Management Group |
$ | | 125,000 | ||||
James Rosten, President of Kennedy-Wilson Properties |
$ | | 125,000 | ||||
All executive officers, as a group |
$ | | 3,495,000 | ||||
All directors who are not executive officers, as a group |
$ | | 25,000 | ||||
All employees, including all current officers who are not executive officers, as a group |
$ | | 220,000 |
In the event that the recipient of the restricted shares remains employed by (or continues to perform services as a director for) the post-Merger company through the relevant vesting date, 1 / 5 of the restricted shares will vest on each of the first five anniversaries of the date of issuance, provided that the Performance Target is met as of the September 30 immediately preceding the applicable anniversary date (in the case of the installments vesting on the fourth and fifth anniversary dates, the Performance Target must be met as of the September 30 immediately preceding the third anniversary date). The Performance Target was established by an independent committee of Prospect and is subject to the approval of the compensation committee of the post-Merger company following the consummation of the Merger. Notwithstanding the foregoing, in the event the employment with the post-Merger company of an employee who has been granted restricted shares is terminated without cause or if the employee resigns from his employment with the post-Merger company for good reason, the restricted shares will continue to vest on the applicable anniversary dates (subject to the satisfaction of the Performance Target), subject to certain limitations. In addition, in the event of a "Change of Control" as defined in the 2009 Plan (see "The Equity Participation Plan ProposalChange of Control" ), any unvested restricted shares of Prospect common stock that have not previously been forfeited will become vested, subject to certain limitations. See section "The Equity Participation Plan ProposalAwards to Particular Officers, Directors and Employees" for additional information.
Management Bonuses
If the Merger is consummated, William J. McMorrow and Mary Ricks will be potentially entitled to receive certain cash bonus payments of up to $11.7 million and $4.0 million, respectively. The cash bonus payments will be payable as follows: (i) Mr. McMorrow and Ms. Ricks will be entitled to receive $4.85 million and $2.0 million, respectively, on October 15, 2009, provided, however, that such payments will be repaid to Kennedy-Wilson in the event the Merger is not consummated by November 15, 2009 or the executive is not employed by Kennedy-Wilson on the effective date of the
116
Merger (these employment requirements will not apply, however, in the case of a termination of employment due to death or disability); (ii) Mr. McMorrow and Ms. Ricks will receive "performance unit awards" under the 2009 Plan which will entitle them to receive $2.425 million and $1.0 million, respectively, on April 1, 2010, provided that the Performance Target is met as of March 31, 2010 (in the event that the Performance Target is not met as of March 31, 2010, the bonus otherwise due April 1, 2010 shall, nevertheless, be paid on July 1, 2010, October 1, 2010, or January 1, 2011, respectively, if the Performance Target is satisfied as of the earliest of June 30, 2010, September 30, 2010, or December 31, 2010, respectively), and the executive remains employed through the date on which the Performance Target is satisfied; and (iii) Mr. McMorrow and Ms. Ricks will receive additional "performance unit awards" under the 2009 Plan which will entitle them to receive cash payments in the amounts of $4.425 and $1.0 million, respectively, on January 1, 2011, provided that the Performance Target is met as of December 31, 2010 and he or she, as applicable, remains employed by the post-Merger company through January 1, 2011. Notwithstanding the foregoing, in the event that the Merger is consummated and the employment of Mr. McMorrow or Ms. Ricks is terminated by the post-Merger company without cause or he or she, as applicable, resigns from his or her, as applicable, employment with the post-Merger company for good reason, the payments referred to in clauses (ii) and (iii) above will still be payable on the applicable payment dates if the Performance Target is met. The Performance Target was established by an independent committee of Prospect and is subject to the approval of the compensation committee of the post-Merger company following the consummation of the Merger.
Note Forgiveness
On April 10, 2006, William J. McMorrow borrowed $3,543,127 from Kennedy-Wilson evidenced by a Promissory Note bearing simple interest at a rate of 7.5% per annum and scheduled to mature on April 9, 2011. Mr. McMorrow's employment agreement has been amended to provide that the McMorrow Note will be forgiven if the Merger is consummated.
Amendments to Employment Agreements
In connection with the Merger, Mr. McMorrow and Ms. Ricks have entered into amendments to their employment agreements which provide for, among other things, (i) the removal of certain benefits in the event of a change in control; (ii) the addition of certain severance benefits if the executive resigns on account of a change in location or a material reduction in duties; (iii) the grant to each executive of 900,000 shares of restricted stock of Prospect pursuant to the 2009 Plan and upon the terms and conditions set forth above; (iv) the cash bonus payments set forth above and (v) in the case of Mr. McMorrow, the McMorrow Note forgiveness described above. Mr. Herrema has also entered into an amendment to his employment agreement which provides for the extension of his employment term from December 31, 2010 to January 31, 2014 as well as clauses (ii) - (iii) above. In addition, the employment agreements for Messrs. McMorrow and Herrema and Ms. Ricks have been amended to include language intended (i) to provide for a reduction in the amount of payments or benefits payable or provided to them under their respective employment agreements or otherwise to ensure that no payment or benefit is subject to the excise tax imposed by Section 4999 of the Code (certain golden parachute payments) which reduction may, in certain circumstances, result in the repayment of certain previously paid amounts (plus earnings) to the post-Merger company, and (ii) to achieve compliance with Section 409A of the Code.
Lock-Up Agreements
In connection with the Merger, William J. McMorrow, Mary Ricks, Freeman Lyle, and Donald Herrema, executive officers of Kennedy-Wilson, have entered into Lock-Up Agreements with Prospect whereby each have agreed to not offer, sell, pledge or otherwise transfer (i) any of the shares of
117
Prospect common stock received as merger consideration for three months after the Merger and (ii) 90% of the shares of Prospect common stock received as merger consideration and 100% of the shares of Prospect common stock received as management incentive shares in connection with grants to executives under the 2009 Plan, in each case, for one year after the Merger. The stockholders subject to such Lock-Up Agreements may transfer their shares to any controlled affiliate, to any partner, stockholder or member of the stockholder, or for estate planning purposes only; provided in each case that any transferee agrees to be bound to the terms of the Lock-Up Agreement prior to any transfer.
Assumption of Guardian Note
In connection with the Merger, Prospect has agreed to assume the Guardian Note. The Guardian Note bears interest at a fixed rate of 7%, payable quarterly, and the outstanding principal is due on November 3, 2018. Under the terms of the Merger Agreement, Prospect will assume the Guardian Note and Guardian may convert, in whole or in part, the outstanding principal balance and accrued interest into common stock at a conversion price of $10.52 per share any time prior to the tenth anniversary of the original issue date. At any time on or after the ninth anniversary of the original issue date of the note and prior to the due date, Prospect (as successor) may demand that Guardian convert the note in accordance with its terms.
Representations and Warranties
The Merger Agreement contains representations and warranties of each of Prospect and Merger Sub and Kennedy-Wilson relating, among other things, to:
118
Materiality and Material Adverse Effect
Certain of the representations and warranties are qualified by the concept of "material adverse effect." For purposes of the Merger Agreement, a "material adverse effect" as to Kennedy-Wilson means a material adverse effect to the condition (financial or otherwise), properties, assets, liabilities, business, operations or results of operations of Kennedy-Wilson and its subsidiaries taken as a whole. A material adverse effect on Prospect means a material adverse effect to the condition (financial or otherwise), properties, assets, liabilities, business, operations or results of operations of Prospect taken as a whole.
None of the following will constitute, either alone or in combination, or will be taken into account in determining whether there has been or would be, a material adverse effect with respect to Kennedy-Wilson or Prospect, respectively:
119
respectively, or any failure to meet publicly announced revenue or earnings projections or internal projections; or
Mutual Covenants
The parties to the Merger Agreement have agreed to various mutual covenants regarding general matters which include, but are not limited to:
Covenants Relating to Interim Operations
Prospect and Kennedy-Wilson have agreed to continue to operate their respective businesses in the ordinary course prior to the closing of the Merger and not to take the following actions, among others, without the prior written consent of the other party:
120
In addition, Prospect will not fail to timely file or furnish with the SEC all reports, schedules, forms, statements and other documents required to be filed or furnished that would have a material adverse effect on Prospect or its ability to consummate the Merger without the prior written consent of Kennedy-Wilson.
In addition, Kennedy-Wilson will not take any of the following actions without the prior written consent of Prospect:
Additional Kennedy-Wilson Covenants
The additional covenants that Kennedy-Wilson has made in the Merger Agreement include, but are not limited to the following:
121
effect on Kennedy-Wilson or would require any amendment or supplement to the proxy statement/prospectus;
Additional Prospect Covenants
The additional covenants that Prospect has made in the Merger Agreement include, but are not limited to the following:
122
Prospect No Shop/Non-Solicit Provision
The Merger Agreement provides that from September 8, 2009 until the earlier of the (x) termination of the Merger Agreement in accordance with its terms or (y) the effective time of the Merger, Prospect:
For purposes of the Merger Agreement, a Prospect third-party acquisition means:
Kennedy-Wilson No Shop/Non-Solicit Provision
The Merger Agreement provides that from September 8, 2009 until the earlier of the (x) termination of the Merger Agreement in accordance with its terms or (y) the effective time of the Merger, Kennedy-Wilson:
123
For purposes of the Merger Agreement, a Kennedy-Wilson third-party acquisition means:
Conditions to Closing of the Merger
General Conditions
Consummation of the Merger by Prospect and Kennedy-Wilson is conditioned upon, among other things:
Either party may waive one or more conditions to the consummation of the Merger. However, to the extent a material condition is waived by one of the parties, which waiver would render any prior disclosure materially misleading, Prospect intends to resolicit the approval of its stockholders of the Merger.
124
Kennedy-Wilson's Conditions to Closing
The obligations of Kennedy-Wilson to consummate the transactions contemplated by the Merger Agreement also are conditioned upon the following, among other things:
125
Prospect's Conditions to Closing
The obligations of Prospect to consummate the transactions contemplated by the Merger Agreement also are conditioned upon the following, among other things:
126
Termination
The Merger Agreement may be terminated prior to closing:
Effect of Termination
Except as otherwise provided in the Merger Agreement, in the event of proper termination of the Merger Agreement by either Prospect or Kennedy-Wilson, the Merger Agreement will have no further force and effect, without any liability or obligation on the part of Prospect or Kennedy-Wilson and each party will destroy all documents, work papers and materials of the other party relating to the transactions contemplated; provided, however, that those provisions which survive the termination of the Merger Agreement, including that Kennedy-Wilson will not seek recourse against the Trust Account except for a claim for damages if Prospect breaches its no shop/non-solicit provision, shall not be void and that such termination will not terminate the rights or remedies of any party against another party that has violated or breached the Merger Agreement prior to such termination.
If the Merger Agreement is terminated by either party should Kennedy-Wilson fail to receive its common stockholder approval, Kennedy-Wilson shall be obligated to pay Prospect $10,000,000. If such amount is not paid within 30 days after termination of the Merger Agreement, interest will begin to accrue on this amount.
Indemnification of Directors and Officers
Prospect has agreed that the post-Merger company will, for six years from the date of closing the Merger, maintain in effect the provisions in its amended and restated certificate of incorporation and amended and restated bylaws providing for indemnification of its current and former directors and officers with respect to the facts and circumstances occurring at or prior to the Merger to the fullest extent permitted by the DGCL.
Prospect has agreed that the post-Merger company will, for six years from the date of the closing of the Merger, provide each current and former director or officer of Prospect with insurance for acts or omissions occurring prior to the Merger covering each such person on terms not materially less favorable than those currently covered by Prospect's officers' and directors' liability insurance policy; provided that the premium for such coverage shall not exceed $200,000.
127
Indemnification
Prospect will indemnify, defend and hold harmless Kennedy-Wilson, including Kennedy-Wilson's successors and permitted assigns, and Kennedy-Wilson will indemnify, defend and hold harmless Prospect, including Prospect's successors and permitted assigns, from and against all liabilities, loss, claims, damages, fines, penalties, expenses, including the costs of investigation and defense and reasonable attorneys' fees and court costs, arising from (i) any breach of any representation or warranty made by Prospect or Kennedy-Wilson in the Merger Agreement or in any certificate delivered by Prospect or Kennedy-Wilson pursuant to the Merger Agreement or (ii) any breach by Prospect or Kennedy-Wilson of its covenants or obligations in the Merger Agreement to be performed or complied with by Prospect or Kennedy-Wilson at or prior to Closing. Neither party is entitled to indemnification as so described unless the aggregate amount of damages exceeds $1,000,000. The aggregate amount of damages for which either party may be liable shall not exceed $10,000,000 and in any event, the practical benefits of this indemnification are limited since Kennedy-Wilson will be a direct, wholly-owned subsidiary of Prospect.
Fees and Expenses
All fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such expenses, except that the parties will each pay one-half of fees related to filings under the HSR Act.
Confidentiality; Access to Information
Prospect and Kennedy-Wilson will afford to the other party and its financial advisors, accountants, counsel and other representatives prior to the completion of the Merger reasonable access during normal business hours, upon reasonable notice, to all of their respective properties, books, records and personnel to obtain all information concerning the business, including the status of properties, results of operations and personnel, as each party may reasonably request. Prospect and Kennedy-Wilson will maintain in strict confidence any non-public information received from the other party, and use such non-public information only for purposes of consummating the transactions contemplated by the Merger Agreement.
Amendments
The Merger Agreement may be amended by the parties at any time in writing signed by each of the parties.
128
SELECTED HISTORICAL FINANCIAL INFORMATION
The following financial information is being provided to assist you in your analysis of the financial aspects of the Merger. The information is only a summary and should be read in conjunction with each company's audited historical consolidated financial statements and related notes contained elsewhere herein. The historical results included below and elsewhere in this proxy statement/prospectus are not indicative of the future performance of Kennedy-Wilson or Prospect.
Kennedy-Wilson Selected Financial Data
The following table sets forth selected historical financial data of Kennedy-Wilson. The information presented below was derived from Kennedy-Wilson's unaudited financial statements for the six months ended June 30, 2009 and 2008 and Kennedy-Wilson's audited financial statements for each of the years ended December 31, 2008, 2007, 2006, 2005 and 2004. This information is only a summary. You should read this information together with Kennedy-Wilson's historical financial statements and accompanying notes contained elsewhere in this proxy statement/prospectus.
|
Six Months Ended
June 30, |
Year Ended December 31, | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2009 | 2008 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||
|
(Unaudited)
|
|
|
|
|
|
|
|||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Management and leasing fees |
$ | 9,266,000 | $ | 8,346,000 | $ | 19,051,000 | $ | 20,142,000 | $ | 16,578,000 | $ | 15,217,000 | $ | 18,077,000 | ||||||||||
Commissions |
2,462,000 | 7,082,000 | 10,201,000 | 13,153,000 | 9,920,000 | 8,190,000 | 8,407,000 | |||||||||||||||||
Sale of real estate |
6,272,000 | | | | | 18,346,000 | 12,055,000 | |||||||||||||||||
Interest and other |
1,482,000 | 1,587,000 | 3,535,000 | 963,000 | 646,000 | 1,057,000 | 3,497,000 | |||||||||||||||||
Total revenue |
19,482,000 | 17,015,000 | 32,787,000 | 34,258,000 | 27,144,000 | 42,810,000 | 42,036,000 | |||||||||||||||||
Operating expense: |
||||||||||||||||||||||||
Compensation and related expenses |
9,997,000 | 9,667,000 | 21,292,000 | 34,151,000 | 24,892,000 | 32,035,000 | 20,079,000 | |||||||||||||||||
Cost of real estate sold |
5,752,000 | | | | | 14,410,000 | 10,408,000 | |||||||||||||||||
General and administrative |
3,696,000 | 4,238,000 | 8,901,000 | 8,490,000 | 9,026,000 | 9,341,000 | 10,812,000 | |||||||||||||||||
Other operating expense |
1,157,000 | 818,000 | 2,378,000 | 539,000 | 688,000 | 1,570,000 | 2,193,000 | |||||||||||||||||
Total operating expense |
20,602,000 | 14,723,000 | 32,571,000 | 43,180,000 | 34,606,000 | 57,356,000 | 43,492,000 | |||||||||||||||||
Equity in joint venture income |
(461,000 | ) | 1,533,000 | 10,097,000 | 27,433,000 | 14,689,000 | 35,855,000 | 11,520,000 | ||||||||||||||||
Total operating income |
(1,581,000 | ) | 3,825,000 | 10,313,000 | 18,511,000 | 7,227,000 | 21,309,000 | 10,064,000 | ||||||||||||||||
Non-operating income (expense) |
(3,169,000 | ) | (3,591,000 | ) | (9,646,000 | ) | (9,474,000 | ) | (686,000 | ) | (10,319,000 | ) | (5,703,000 | ) | ||||||||||
Income from continuing operations |
(4,750,000 | ) | 234,000 | 667,000 | 9,037,000 | 6,541,000 | 10,990,000 | 4,361,000 | ||||||||||||||||
Income from discontinued operations, net of tax |
| | | 2,797,000 | | | (246,000 | ) | ||||||||||||||||
Net income |
(4,750,000 | ) | 234,000 | 667,000 | 11,834,000 | 6,541,000 | 10,990,000 | 4,115,000 | ||||||||||||||||
Net income attributable to the noncontrolling interest |
267,000 | (50,000 | ) | (54,000 | ) | (2,441,000 | ) | (586,000 | ) | | | |||||||||||||
Preferred stock dividends |
(1,964,000 | ) | (394,000 | ) | (2,264,000 | ) | | | | | ||||||||||||||
Net (loss) income attributable to Kennedy-Wilson, Inc. common shareholders |
$ | (6,447,000 | ) | $ | (210,000 | ) | $ | (1,651,000 | ) | $ | 9,393,000 | $ | 5,955,000 | $ | 10,990,000 | $ | 4,115,000 | |||||||
Other Financial Data: |
||||||||||||||||||||||||
Net cash provided by (used in): |
||||||||||||||||||||||||
Operating activities |
$ | (3,009,000 | ) | $ | (13,021,000 | ) | $ | (14,669,000 | ) | $ | (14,809,000 | ) | $ | (7,026,000 | ) | $ | (13,422,000 | ) | $ | (2,328,000 | ) | |||
Investing activities |
(38,491,000 | ) | (74,999,000 | ) | (96,373,000 | ) | 5,839,000 | (3,614,000 | ) | 47,255,000 | 45,269,000 | |||||||||||||
Financing activities |
31,875,000 | 77,295,000 | 112,625,000 | 17,886,000 | 6,548,000 | (24,985,000 | ) | (38,658,000 | ) |
|
As of June 30, | As of December 31, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2009 | 2008 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
|
(Unaudited)
|
|
|
|
|
|
||||||||||||||||
Balance sheet data: |
||||||||||||||||||||||
Cash and cash equivalents |
$ | 16,206,000 | $ | 13,523,000 | $ | 25,831,000 | $ | 24,248,000 | $ | 15,332,000 | $ | 19,424,000 | $ | 10,576,000 | ||||||||
Investments in real estate and joint ventures |
222,459,000 | 160,671,000 | 190,915,000 | 80,026,000 | 57,744,000 | 36,847,000 | 43,923,000 | |||||||||||||||
Total assets |
283,416,000 | 214,959,000 | 255,883,000 | 145,814,000 | 107,746,000 | 93,461,000 | 99,831,000 | |||||||||||||||
Debt |
146,399,000 | 94,940,000 | 131,423,000 | 65,084,000 | 40,517,000 | 33,746,000 | 49,519,000 | |||||||||||||||
Total equity |
103,966,000 | 106,265,000 | 105,802,000 | 57,076,000 | 49,603,000 | 42,120,000 | 38,559,000 |
129
Prospect Selected Financial Data
The following table sets forth selected historical financial data of Prospect. The information presented below was derived from Prospect's audited financial statements for the years ended and as of December 31, 2008 and 2007 and from its unaudited financial statements for the six months ended June 30, 2009 and 2008. This information is only a summary. You should read this information together with Prospect's historical financial statements and accompanying notes contained elsewhere in this proxy statement/prospectus.
|
June 30, 2009
(Unaudited) |
December 31,
2008 |
December 31,
2007 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Selected Balance Sheet Data: |
||||||||||
Cash |
$ | 9,425 | $ | 28,678 | $ | 58,075 | ||||
Investments held in Trust Account |
248,535,987 | 248,924,201 | 247,340,887 | |||||||
Total assets |
249,116,069 | 249,449,560 | 248,161,221 | |||||||
Total liabilities |
10,177,138 | 10,253,245 | 10,476,121 | |||||||
Common stock, subject to possible conversion |
74,099,990 | 74,099,990 | 74,099,990 | |||||||
Total stockholders' equity |
$ | 164,838,941 | $ | 165,096,325 | $ | 163,585,110 |
|
For the six
months ended June 30, 2009 |
For the six
months ended June 30, 2008 |
For the period
from July 9, 2007 (date of inception) through June 30, 2009 |
For the year ended
December 31, 2008 |
For the period
from July 9, 2007 (date of inception) through December 31, 2007 |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Statement of Operations Data: |
||||||||||||||||
Net interest income |
$ | 41,150 | $ | 2,528,586 | $ | 4,930,379 | $ | 3,808,688 | $ | 1,080,541 | ||||||
Operating expenses |
449,707 | 383,135 | 1,202,213 | 679,661 | 72,845 | |||||||||||
State capital based tax provision |
| 184,156 | 816,301 | 740,724 | 75,577 | |||||||||||
Federal income tax (benefit) provision |
(151,173 |
) |
693,110 |
1,042,836 |
877,088 |
316,921 |
||||||||||
Net (loss) income |
(257,384 | ) | 1,268,185 | 1,869,029 | 1,511,215 | 615,198 | ||||||||||
Net (loss) income per common share |
$ |
(0.01 |
) |
$ |
0.04 |
$ |
0.07 |
$ |
0.05 |
$ |
0.05 |
130
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information has been prepared assuming that the acquisition of Kennedy-Wilson by Prospect had occurred (i) at the beginning of the period for the pro forma statements of operations for the year ended December 31, 2008 and for the six months ended June 30, 2009, and (ii) at June 30, 2009 for the pro forma balance sheet.
Pursuant to Prospect's amended and restated certificate of incorporation, Prospect will not proceed with a transaction if public stockholders owning 30% or more of the Public Shares vote against the transaction and exercise their conversion rights. Accordingly, Prospect may effect a transaction if stockholders owning up to one share less than 30% of the Public Shares exercise their conversion rights. If this occurred, Prospect would be required to convert for cash up to one share less than 30% of the 25,000,000 shares of common stock included in the units sold in the IPO, or 7,499,999 shares of common stock.
Furthermore, as a condition of the proposed transaction, each of the 25,000,000 Public Warrants will either be redeemed for a cash payment of $0.55 per warrant at closing, or each holder of Public Warrants must agree to exchange its Public Warrants for Amended and Restated Public Warrants, with each such Amended and Restated Public Warrant entitling the holder thereof to purchase one share of common stock at an exercise price of $12.50 per share, with a redemption price of $19.50 per share, and an expiration date of November 14, 2013. No more than 50% of the outstanding Public Warrants may be exchanged for Amended and Restated Public Warrants. Accordingly, Prospect will be required to redeem a minimum of 12,500,000 Public Warrants and a maximum of 25,000,000 Public Warrants for an aggregate cash payment at closing ranging from $6,875,000 to $13,750,000, respectively.
Accordingly, the unaudited pro forma condensed consolidated financial information presents two possible scenarios for the approval of the Merger by the stockholders of Prospect, as follows:
The unaudited pro forma condensed consolidated financial information is provided for illustrative purposes only. The historical financial information in the unaudited pro forma condensed consolidated balance sheet has been adjusted to give effect to pro forma events that are directly attributable to the Merger and are factually supportable. The historical financial information in the unaudited pro forma condensed consolidated statements of operations has been adjusted to give effect to pro forma events that are directly attributable to the Merger, are factually supportable, and are expected to have a continuing impact on the consolidated results.
You should not rely on the unaudited pro forma condensed consolidated balance sheet as being indicative of the historical financial position that would have been achieved had the Merger been consummated as of June 30, 2009, or the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2008 or for the six months ended June 30, 2009, as being indicative of the historical financial results of operations that would have been achieved had the Merger been consummated at the beginning of each of such periods. Actual results could differ from the pro forma information presented herein. See the section entitled " Risk FactorsRisks Related to the Merger ."
131
The following information is being provided to aid in the analysis of the financial aspects of the Merger. The historical financial information of Prospect was derived from the audited financial statements of Prospect for the year ended December 31, 2008 and the unaudited financial statements of Prospect for the six months ended June 30, 2009 included elsewhere in this proxy statement/prospectus. The historical financial information of Kennedy-Wilson was derived from the audited financial statements of Kennedy-Wilson for the year ended December 31, 2008 and the unaudited consolidated financial statements of Kennedy-Wilson for the six months ended June 30, 2009 included elsewhere in this proxy statement/prospectus. This information should be read together with Prospect's and Kennedy-Wilson's audited and unaudited financial statements and related notes, " Management's Discussion and Analysis of Financial Condition and Results of Operations " for Prospect and Kennedy-Wilson, and other financial information included elsewhere in this proxy statement/prospectus.
The Merger will be accounted for as a reverse recapitalization since, immediately following completion of the Merger, the stockholders of Kennedy-Wilson immediately prior to the consummation of the Merger will have effective control of Prospect through: (1) their stockholder interest comprising the largest single control block of shares in the combined entity, (2) a majority of the members of the board of directors of the combined company being comprised of current Kennedy-Wilson directors (initially, six directors of Kennedy-Wilson and one director of Prospect), and (3) all of the senior executive officers of the combined company being comprised of current Kennedy-Wilson executive officers. For accounting purposes, Kennedy-Wilson will be deemed to be the accounting acquirer in the Merger and, consequently, the Merger will be treated as a recapitalization of Kennedy-Wilson, i.e., a capital transaction involving the issuance of stock by Prospect for the stock of Kennedy-Wilson. Accordingly, the assets, liabilities and results of operations of Kennedy-Wilson will become the historical financial statements of Prospect at the closing of the Merger, and Prospect's assets (primarily cash and cash equivalents), liabilities and results of operations will be consolidated with Kennedy-Wilson beginning on the acquisition date. No step-up in basis or intangible assets or goodwill will be recorded in the Merger. All direct costs of the Merger will be charged to operations in the period that such costs are incurred.
The unaudited pro forma condensed consolidated financial information does not include the impact from the expected pay-down of $22,000,000 of Kennedy-Wilson's outstanding debt at the closing of the Merger, nor any adjustments for incremental general and administrative costs which are anticipated to be incurred by Kennedy-Wilson as a fully reporting public company.
132
The following tables set forth certain of the pro forma financial information about the post-Merger company after giving effect to the Merger.
KENNEDY-WILSON HOLDINGS, INC.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 2009
(In thousands of U.S. Dollars, except per share amounts)
|
|
|
|
|
|
Pro Forma
Adjustments for Conversion of 7,499,999 Shares of Common Stock and Maximum Repurchase of Warrants |
|
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
|
Pro Forma
Consolidated Companies (with No Stock Conversion and Minimum Warrant Repurchase See Notes) |
Pro Forma
Consolidated Companies (with Maximum Stock Conversion and Maximum Warrant Repurchase See Notes) |
||||||||||||||||||||
|
|
|
Pro Forma
Adjustments |
|||||||||||||||||||||||
|
Prospect
Acquisition Corp. |
Kennedy-
Wilson, Inc. |
||||||||||||||||||||||||
|
Debit | Credit | Debit | Credit | ||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 9 | $ | 16,206 | 248,539 | (1) | 6,000 | (13) | $ | 239,541 | 74,176 | (10) | $ | 158,490 | ||||||||||||
|
54 | (15) | 11,095 | (4) | 6,875 | (12) | ||||||||||||||||||||
|
6,875 | (12) | ||||||||||||||||||||||||
|
1,297 | (18) | ||||||||||||||||||||||||
Investments held in Trust Account |
248,536 | | 248,536 | (1) | | | ||||||||||||||||||||
Accrued interest income on Trust Account |
3 | | 3 | (1) | | | ||||||||||||||||||||
Accounts receivable |
| 2,886 | 2,886 | 2,886 | ||||||||||||||||||||||
Accounts receivable from related parties |
| 4,813 | 661 | (14) | 4,152 | 4,152 | ||||||||||||||||||||
Notes receivable |
| 541 | 541 | 541 | ||||||||||||||||||||||
Notes receivable from related parties |
| 6,118 | 3,455 | (14) | 2,663 | 2,663 | ||||||||||||||||||||
Investments in real estate available for sale |
| 34,260 | 34,260 | 34,260 | ||||||||||||||||||||||
Investments in real estate, net |
| 40,618 | 40,618 | 40,618 | ||||||||||||||||||||||
Investments in joint ventures |
| 147,581 | 147,581 | 147,581 | ||||||||||||||||||||||
Other assets, net |
252 | 6,428 | 6,680 | 6,680 | ||||||||||||||||||||||
Deferred income tax asset |
316 | | 4,437 | (20) | 4,753 | 4,753 | ||||||||||||||||||||
Goodwill |
23,965 | 23,965 | 23,965 | |||||||||||||||||||||||
Total assets |
$ | 249,116 | $ | 283,416 | $ | 507,640 | $ | 426,589 | ||||||||||||||||||
Liabilities and equity |
||||||||||||||||||||||||||
Accounts payable |
$ | 101 | $ | 441 | $ | 542 | $ | 542 | ||||||||||||||||||
Accrued expenses and other liabilities |
| 8,399 | 8,399 | 8,399 | ||||||||||||||||||||||
Accrued salaries and benefits |
| 1,097 | 1,097 | 1,097 | ||||||||||||||||||||||
Accrued officers compensation |
| | 6,850 | (16) | 6,850 | 6,850 | ||||||||||||||||||||
Deferred and accrued income taxes |
| 9,114 | 9,114 | 9,114 | ||||||||||||||||||||||
Deferred interest income |
76 | | 76 | (3) | | | ||||||||||||||||||||
Deferred underwriting commission |
10,000 | | 6,000 | (13) | | | ||||||||||||||||||||
|
4,000 | (2) | ||||||||||||||||||||||||
Notes payable |
| 14,000 | 14,000 | 14,000 | ||||||||||||||||||||||
Borrowings under lines of credit |
| 26,000 | 26,000 | 26,000 | ||||||||||||||||||||||
Mortgage loans payable on real estate held for sale |
| 26,115 | 26,115 | 26,115 | ||||||||||||||||||||||
Mortgage loans payable |
| 26,956 | 26,956 | 26,956 | ||||||||||||||||||||||
Convertible subordinated debt |
| 27,328 | 27,328 | 27,328 | ||||||||||||||||||||||
Junior subordinated debentures |
| 40,000 | 40,000 | 40,000 | ||||||||||||||||||||||
Total liabilities |
10,177 | 179,450 | 186,401 | 186,401 | ||||||||||||||||||||||
Common stock subject to possible conversion |
74,100 | | 74,100 | (3) | | | ||||||||||||||||||||
Equity |
||||||||||||||||||||||||||
Preferred stock |
| 1 | 1 | (5) | | | ||||||||||||||||||||
Common stock |
3 | 54 | | (9) | 2 | (19) | 6 | 1 | (10) | 5 | ||||||||||||||||
|
54 | (19) | | (7) | ||||||||||||||||||||||
|
| (18) | | (15) | ||||||||||||||||||||||
|
1 | (5) | ||||||||||||||||||||||||
|
| (8) | ||||||||||||||||||||||||
Additional paid-in capital |
162,967 | 58,903 | 74,100 | (3) | 296,519 | 74,099 | (10) | 215,469 | ||||||||||||||||||
|
8,063 | (11) | 1,036 | (17) | 76 | (10) | ||||||||||||||||||||
|
6,875 | (12) | 52 | (19) | 6,875 | (12) | ||||||||||||||||||||
|
| (7) | 3,716 | (8) | ||||||||||||||||||||||
|
54 | (15) | ||||||||||||||||||||||||
|
1,297 | (18) | 7,927 | (6) | ||||||||||||||||||||||
|
4,000 | (2) | ||||||||||||||||||||||||
|
| (5) | ||||||||||||||||||||||||
|
| (9) | ||||||||||||||||||||||||
Retained earnings |
1,869 | 39,020 | 6,292 | (4) | 76 | (3) | 18,726 | 18,726 | ||||||||||||||||||
|
1,036 | (17) | 8,063 | (11) | ||||||||||||||||||||||
|
4,803 | (4) | 4,437 | (20) | ||||||||||||||||||||||
|
4,116 | (14) | ||||||||||||||||||||||||
|
6,850 | (16) | ||||||||||||||||||||||||
|
7,927 | (6) | ||||||||||||||||||||||||
|
3,716 | (8) | ||||||||||||||||||||||||
Accumulated other comprehensive income |
| 119 | 119 | 119 | ||||||||||||||||||||||
Total stockholders' equity |
164,839 | 98,097 | 315,370 | 234,319 | ||||||||||||||||||||||
Noncontrolling interests |
| 5,869 | 5,869 | 5,869 | ||||||||||||||||||||||
Total equity |
164,839 | 103,966 | 321,239 | 240,188 | ||||||||||||||||||||||
Total liabilities and equity |
$ | 249,116 | $ | 283,416 | $ | 507,640 | $ | 426,589 | ||||||||||||||||||
133
Pro Forma Adjustments (in thousands of U.S. Dollars, except for share and per share data):
|
Prospect | Kennedy-Wilson | |||||
---|---|---|---|---|---|---|---|
Merger and acquisition fee |
$ | 3,030 | $ | | |||
Advisor fees |
1,505 | 3,025 | |||||
Fairness opinion |
90 | 500 | |||||
Legal fees |
1,250 | 575 | |||||
Accounting fees |
175 | 415 | |||||
Hart-Scott-Rodino antitrust filings |
62 | 63 | |||||
Printing costs |
125 | 125 | |||||
Travel and other |
55 | 100 | |||||
Total estimated direct cash transaction costs |
$ | 6,292 | $ | 4,803 | |||
Total estimated costs do not include contingent underwriters fees that are payable upon consummation of a transaction as these costs were incurred in connection with Prospect's IPO and have already been provided for on Prospect's books. Total estimated costs also do not include the fair value of 375,000 shares of Prospect common shares issued to DeGuardiola which have been recorded separately.
|
Deal Modified
Terms |
Original
Terms |
Difference | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Number of preferred shares outstanding |
53,000 | 53,000 | ||||||||
Liquidation value per share |
$ | 1,000 | $ | 1,000 | ||||||
Total liquidation value |
$ | 53,000 | $ | 53,000 | ||||||
Kennedy-Wilson conversion price per share |
$ | 36 | $ | 42 | ||||||
Kennedy-Wilson conversion shares |
1,472,222 | 1,261,905 | 210,317 | |||||||
Ratio of Kennedy-Wilson to Prospect common shares |
3.803082 | |||||||||
Prospect conversion shares |
799,855 | |||||||||
Market price of Prospect common shares |
$ | 9.91 | ||||||||
Fair value of conversion premium |
$ | 7,927 | ||||||||
|
With Minimum
Warrant Repurchase |
With Maximum
Warrant Repurchase |
Increase | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Number of Public Warrants repurchased |
12,500,000 | 25,000,000 | ||||||||
Price per Public Warrant |
$ | 0.55 | $ | 0.55 | ||||||
Total amount |
$ | 6,875 | $ | 13,750 | $ | 6,875 | ||||
134
|
No. of
Options |
Exercise Price
Per Share |
Proceeds | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
13,500 | $ | 3.813 | $ | 51 | |||||
|
540 | $ | 5.450 | 3 | ||||||
|
14,040 | $ | 54 | |||||||
|
Pro Forma
Adjustment No. |
With Minimum
Warrant Repurchase |
||||||
---|---|---|---|---|---|---|---|---|
Pro forma adjustments: |
||||||||
McMorrow Note forgiveness |
(14 | ) | $ | 4,116 | ||||
McMorrow and Ricks 2009 performance bonuses |
(16 | ) | 6,850 | |||||
Accelerated vesting of previously issued restricted stock |
(17 | ) | 1,036 | |||||
Total income tax deductible pro forma adjustments |
$ | 12,002 | ||||||
Income tax benefit of pro forma adjustments: |
||||||||
Federal tax at 34% statutory rate, net of state taxes |
$ | 3,897 | ||||||
State tax at 4.5% statutory rate |
540 | |||||||
Combined income tax benefit |
$ | 4,437 | ||||||
Pro Forma Notes (in thousands of U.S. Dollars, except for share and per share data):
(E) The current market price of Prospect common stock utilized in above calculations was as follows as of September 18, 2009: |
$9.91 | |
135
KENNEDY-WILSON HOLDINGS, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six Months Ended June 30, 2009
(In thousands of U.S. Dollars, except per share amounts)
|
|
|
|
|
|
Pro Forma
Adjustments for Conversion of 7,499,999 Shares of Common Stock and Maximum Repurchase of Warrants |
|
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
|
Pro Forma
Consolidated Companies (with No Stock Conversion and Minimum Warrant Repurchase See Notes) |
Pro Forma
Consolidated Companies (with Maximum Stock Conversion and Maximum Warrant Repurchase See Notes) |
||||||||||||||||||||
|
|
|
Pro Forma Adjustments | |||||||||||||||||||||||
|
Prospect
Acquisition Corp. |
Kennedy-
Wilson, Inc. |
||||||||||||||||||||||||
|
Debit | Credit | Debit | Credit | ||||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||
Property management and leasing fees |
$ | | $ | 6,552 | $ | 6,552 | $ | 6,552 | ||||||||||||||||||
Property management and leasing feesrelated party |
| 2,714 | 2,714 | 2,714 | ||||||||||||||||||||||
Commissions |
| 2,204 | 2,204 | 2,204 | ||||||||||||||||||||||
Commissionsrelated party |
| 258 | 258 | 258 | ||||||||||||||||||||||
Rental income |
| 1,274 | 1,274 | 1,274 | ||||||||||||||||||||||
Sales of real estate |
| 6,272 | 6,272 | 6,272 | ||||||||||||||||||||||
Interest and other income |
50 | 208 | $ | 50 | (1) | 78 | 78 | |||||||||||||||||||
|
$ | 130 | (3) | |||||||||||||||||||||||
Deferred interest income |
(9 | ) | | 9 | (1) | | | |||||||||||||||||||
Total revenue |
41 | 19,482 | 19,352 | 19,352 | ||||||||||||||||||||||
Operating expenses |
||||||||||||||||||||||||||
Commissions and marketing expenses |
| 1,430 | 1,430 | 1,430 | ||||||||||||||||||||||
Rental operating expense |
| 739 | 739 | 739 | ||||||||||||||||||||||
Cost of real estate sold |
| 5,752 | 5,752 | 5,752 | ||||||||||||||||||||||
Compensation and related expenses |
| 9,997 | 3,198 | (4) | 507 | (5) | 12,688 | 12,688 | ||||||||||||||||||
General and administrative |
450 | 2,266 | 450 | (1) | 2,266 | 2,266 | ||||||||||||||||||||
Depreciation and amortization |
| 418 | 418 | 418 | ||||||||||||||||||||||
Total operating expenses |
450 | 20,602 | 23,293 | 23,293 | ||||||||||||||||||||||
Equity in joint venture loss |
| 461 | (461 | ) | 461 | |||||||||||||||||||||
Operating loss |
(409 | ) | (1,581 | ) | (4,402 | ) | (4,402 | ) | ||||||||||||||||||
Non-operating expense |
||||||||||||||||||||||||||
Interest expense |
| (5,061 | ) | (5,061 | ) | (5,061 | ) | |||||||||||||||||||
Other than temporary impairment on available for-sale security |
| (323 | ) | (323 | ) | (323 | ) | |||||||||||||||||||
Loss before income tax benefit |
(409 | ) | (6,965 | ) | (9,786 | ) | (9,786 | ) | ||||||||||||||||||
Income tax benefit |
151 | 2,215 | 151 | (1) | 1,043 | (6) | 3,258 | 3,258 | ||||||||||||||||||
Net loss |
(258 | ) | (4,750 | ) | (6,528 | ) | (6,528 | ) | ||||||||||||||||||
Net loss attributable to the noncontrolling interest |
| 267 | 267 | 267 | ||||||||||||||||||||||
Net loss attributable to common stockholders |
(258 | ) | (4,483 | ) | (6,261 | ) | (6,261 | ) | ||||||||||||||||||
Less preferred stock dividend |
| (1,964 | ) | 1,964 | (2) | | | |||||||||||||||||||
Net loss available to common stockholders |
$ | (258 | ) | $ | (6,447 | ) | $ | (6,261 | ) | $ | (6,261 | ) | ||||||||||||||
Net loss per common share |
||||||||||||||||||||||||||
Basic |
$ | (0.01 | ) | $ | (1.24 | ) | $ | (0.11 | ) | $ | (0.13 | ) | ||||||||||||||
Diluted |
$ | (0.01 | ) | $ | (1.24 | ) | $ | (0.11 | ) | $ | (0.13 | ) | ||||||||||||||
Weighted average number of common shares |
||||||||||||||||||||||||||
outstanding (Note E) |
||||||||||||||||||||||||||
Basic |
31,250,000 | 5,195,273 | 55,424,000 | 47,924,001 | ||||||||||||||||||||||
Diluted |
31,250,000 | 5,195,273 | 55,424,000 | 47,924,001 | ||||||||||||||||||||||
136
Pro Forma Adjustments (In thousands of U.S. Dollars, except for share and per share data):
Number of restricted common shares issued |
3,740,000 | |||
Value per share at closing |
$ | 9.91 | ||
Total value of restricted common shares issued |
$ | 37,063 | ||
Value of restricted shares vested in period presented |
$ | 3,706 | ||
Less expense of 2009 Equity Participation Plan charged to operations during the period presented |
(508 | ) | ||
Incremental expense for the period presented |
$ | 3,198 | ||
|
Pro Forma
Adjustment No. |
Amount | ||||||
---|---|---|---|---|---|---|---|---|
Pro forma adjustments: |
||||||||
Vesting of newly issued restricted stock |
(4 | ) | $ | 3,198 | ||||
Interest relating to the McMorrow note forgiven at closing |
(3 | ) | 130 | |||||
Amortization of equity compensation accelerated at closing |
(5 | ) | (507 | ) | ||||
Total income tax deductible pro forma adjustments, net |
$ | 2,821 | ||||||
Income tax benefit of pro forma adjustments: |
||||||||
Federal tax at 34% statutory rate, net of state taxes |
$ | 916 | ||||||
State tax at 4.5% statutory rate |
127 | |||||||
Combined income tax benefit |
$ | 1,043 | ||||||
Pro Forma Notes (In thousands of U.S. Dollars, except for share and per share data):
137
|
Pro Forma
Balance Sheet Adjustment No. |
Shares with
No Stock Conversion and Minimum Warrant Repurchase |
Shares with
Maximum Stock Conversion and Maximum Warrant Repurchase |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Actual number of common shares outstanding |
31,250,000 | 31,250,000 | |||||||||
Pro forma shares: |
|||||||||||
Shares issued to Kennedy-Wilson preferred stockholders |
(5 | ) | 5,598,982 | 5,598,982 | |||||||
Shares issued to Kennedy-Wilson common stockholders |
(19 | ) | 20,401,018 | 20,401,018 | |||||||
Shares issued to Kennedy-Wilson senior management |
(7 | ) | 3,740,000 | 3,740,000 | |||||||
Shares surrendered and cancelled by Prospect founders |
(6 | ) | (2,575,000 | ) | (2,575,000 | ) | |||||
Shares issued to DeGuardiola |
(8 | ) | 375,000 | 375,000 | |||||||
Shares converted by public stockholders |
(10 | ) | | (7,499,999 | ) | ||||||
Pro forma weighted average number of common shares issued |
58,790,000 | 51,290,001 | |||||||||
Non-vested shares issued to senior management |
(7 | ) | (3,366,000 | ) | (3,366,000 | ) | |||||
Pro forma weighted average number of common shares outstandingbasic |
55,424,000 | 47,924,001 | |||||||||
Potentially dilutive securities |
|||||||||||
Potentially dilutive securities consist of (i) outstanding warrants, relating to Prospect's initial public offering and private placement, to acquire an aggregate of 17,750,000 shares of common stock, with a minimum warrant repurchase, and 5,250,000 shares of common stock with a maximum warrant repurchase, (ii) debt convertible into 3,042,480 common shares, and (iii) 3,366,000 non-vested shares issued to senior management. All such potentially dilutive securities are anti-dilutive for the period presented and as such there are no dilutive common stock equivalents for the period presented. The total number of potentially dilutive securities is 24,158,480 with a minimum warrant repurchase, and 11,658,480 with a maximum warrant repurchase. |
|||||||||||
Number of potentially dilutive securities |
| | |||||||||
Pro forma weighted average number of common shares outstandingdiluted |
55,424,000 | 47,924,001 | |||||||||
(F) The current market price of Prospect common stock utilized in above calculations was as follows as of September 18, 2009: |
$ | 9.91 | ||||||||
138
KENNEDY-WILSON HOLDINGS, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2008
(In thousands of U.S. Dollars, except per share amounts)
|
|
|
|
|
|
Pro Forma
Adjustments for Conversion of 7,499,999 Shares of Common Stock and Maximum Repurchase of Warrants |
|
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
|
Pro Forma
Consolidated Companies (with No Stock Conversion and Minimum Warrant Repurchase See Notes) |
Pro Forma
Consolidated Companies (with Maximum Stock Conversion and Maximum Warrant Repurchase See Notes) |
||||||||||||||||||||
|
|
|
Pro Forma Adjustments | |||||||||||||||||||||||
|
Prospect
Acquisition Corp. |
Kennedy-
Wilson, Inc. |
||||||||||||||||||||||||
|
Debit | Credit | Debit | Credit | ||||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||
Property management and leasing fees |
$ | | $ | 10,671 | $ | 10,671 | $ | 10,671 | ||||||||||||||||||
Property management and leasing feesrelated party |
| 8,380 | 8,380 | 8,380 | ||||||||||||||||||||||
Commissions |
| 5,906 | 5,906 | 5,906 | ||||||||||||||||||||||
Commissionsrelated party |
| 4,295 | 4,295 | 4,295 | ||||||||||||||||||||||
Rental income |
| 2,409 | 2,409 | 2,409 | ||||||||||||||||||||||
Interest and other income |
3,876 | 1,126 | $ | 3,876 | (1) | 867 | 867 | |||||||||||||||||||
|
$ | 259 | (3) | |||||||||||||||||||||||
Deferred interest income |
(67 | ) | | $ | 67 | (1) | | | ||||||||||||||||||
Total revenue |
3,809 | 32,787 | 32,528 | 32,528 | ||||||||||||||||||||||
Operating expenses |
||||||||||||||||||||||||||
Commissions and marketing expenses |
| 2,827 | 2,827 | 2,827 | ||||||||||||||||||||||
Rental operating expense |
| 1,458 | 1,458 | 1,458 | ||||||||||||||||||||||
Compensation and related expenses |
| 21,292 | 7,413 | (4) | 1,015 | (5) | 27,690 | 27,690 | ||||||||||||||||||
General and administrative |
1,421 | 6,074 | 1,421 | (1) | 6,074 | 6,074 | ||||||||||||||||||||
Depreciation and amortization |
| 920 | 920 | 920 | ||||||||||||||||||||||
Total operating expenses |
1,421 | 32,571 | 38,969 | 38,969 | ||||||||||||||||||||||
Equity in joint venture income |
| 10,097 | 10,097 | 10,097 | ||||||||||||||||||||||
Operating income |
2,388 | 10,313 | 3,656 | 3,656 | ||||||||||||||||||||||
Non-operating expense |
||||||||||||||||||||||||||
Interest expense |
| (8,596 | ) | (8,596 | ) | (8,596 | ) | |||||||||||||||||||
Other than temporary impairment on available-for-sale security |
| (445 | ) | (445 | ) | (445 | ) | |||||||||||||||||||
Income (loss) before provision for income tax |
2,388 | 1,272 | (5,385 | ) | (5,385 | ) | ||||||||||||||||||||
Income tax benefit (expense) |
(877 | ) | (605 | ) | 877 | (1) | 1,856 | 1,856 | ||||||||||||||||||
|
2,461 | (6) | ||||||||||||||||||||||||
Net income (loss) |
1,511 | 667 | (3,529 | ) | (3,529 | ) | ||||||||||||||||||||
Net income attributable to the noncontrolling interest |
| (54 | ) | (54 | ) | (54 | ) | |||||||||||||||||||
Net income (loss) attributable to common stockholders |
1,511 | 613 | (3,583 | ) | (3,583 | ) | ||||||||||||||||||||
Less preferred stock dividend |
| (2,264 | ) | 2,264 | (2) | | | |||||||||||||||||||
Net income (loss) available to common stockholders |
$ | 1,511 | $ | (1,651 | ) | $ | (3,583 | ) | $ | (3,583 | ) | |||||||||||||||
Net income (loss) per common share |
||||||||||||||||||||||||||
Basic |
$ | 0.05 | $ | (0.32 | ) | $ | (0.06 | ) | $ | (0.07 | ) | |||||||||||||||
Diluted |
$ | 0.05 | $ | (0.32 | ) | $ | (0.06 | ) | $ | (0.07 | ) | |||||||||||||||
Weighted average number of common shares outstanding (Note E) |
||||||||||||||||||||||||||
Basic |
31,250,000 | 5,119,684 | 55,798,000 | 48,298,001 | ||||||||||||||||||||||
Diluted |
31,250,000 | 5,119,684 | 55,798,000 | 48,298,001 | ||||||||||||||||||||||
139
Pro Forma Adjustments (In thousands of U.S. Dollars, except for share and per share data):
Number of restricted common shares issued |
3,740,000 | |||
Value per share at closing |
$ | 9.91 | ||
Total value of restricted common shares issued |
$ | 37,063 | ||
Value of restricted shares vested in period presented |
$ | 7,413 | ||
Less expense of 2009 Equity Participation Plan charged to operations during the period presented |
| |||
Incremental expense |
$ | 7,413 | ||
|
Pro Forma
Adjustment No. |
Amount | ||||||
---|---|---|---|---|---|---|---|---|
Pro forma adjustments: |
||||||||
Vesting of newly issued restricted stock |
(4 | ) | $ | 7,413 | ||||
Interest relating to the McMorrow note forgiven at closing |
(3 | ) | 259 | |||||
Amortization of equity compensation accelerated at closing |
(5 | ) | (1,015 | ) | ||||
Total income tax deductible pro forma adjustments, net |
$ | 6,657 | ||||||
Income tax benefit of pro forma adjustments: |
||||||||
Federal tax at 34% statutory rate, net of state taxes |
$ | 2,162 | ||||||
State tax at 4.5% statutory rate |
300 | |||||||
Combined income tax benefit |
$ | 2,461 | ||||||
Pro Forma Notes (In thousands of U.S. Dollars, except for share and per share data):
140
shares for the entire period. Shares surrendered and cancelled have been excluded from the calculation of pro forma earnings per share for the entire period. To the extent that restricted shares are accounted for as a period charge to operations, such shares have also been treated as outstanding for basic and diluted earnings per share calculations. For purposes of determining potentially dilutive securities, the most recent trading price for Prospect's common stock of $9.91 on September 18, 2009 was utilized. Basic and diluted weighted average number of common shares outstanding is calculated as follows:
|
Pro Forma
Balance Sheet Adjustment No. |
Shares with
No Stock Conversion and Minimum Warrant Repurchase |
Shares with
Maximum Stock Conversion and Maximum Warrant Repurchase |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Actual number of common shares outstanding |
31,250,000 | 31,250,000 | |||||||||
Pro forma shares: |
|||||||||||
Shares issued to Kennedy-Wilson preferred stockholders |
(5 | ) | 5,598,982 | 5,598,982 | |||||||
Shares issued to Kennedy-Wilson common stockholders |
(19 | ) | 20,401,018 | 20,401,018 | |||||||
Shares issued to Kennedy-Wilson senior management |
(7 | ) | 3,740,000 | 3,740,000 | |||||||
Shares surrendered and cancelled by Prospect founders |
(6 | ) | (2,575,000 | ) | (2,575,000 | ) | |||||
Shares issued to DeGuardiola |
(8 | ) | 375,000 | 375,000 | |||||||
Shares converted by public stockholders |
(10 | ) | | (7,499,999 | ) | ||||||
Pro forma weighted average number of common shares issued |
58,790,000 | 51,290,001 | |||||||||
Non-vested shares issued to senior management |
(7 | ) | (2,992,000 | ) | (2,992,000 | ) | |||||
Pro forma weighted average number of common shares outstandingbasic |
55,798,000 | 48,298,001 | |||||||||
Potentially dilutive securities |
|||||||||||
Potentially dilutive securities consist of (i) outstanding warrants, relating to Prospect's initial public offering and private placement, to acquire an aggregate of 17,750,000 shares of common stock, with a minimum warrant repurchase, and 5,250,000 shares of common stock with a maximum warrant repurchase, (ii) debt convertible into 3,042,480 common shares, and (iii) 2,992,000 non-vested shares issued to senior management. All such potentially dilutive securities are anti-dilutive for the period presented and as such there are no dilutive common stock equivalents for the period presented. The total number of potentially dilutive securities is 23,784,480 with a minimum warrant repurchase, and 11,284,480 with a maximum warrant repurchase. |
|||||||||||
Number of potentially dilutive securities |
| | |||||||||
Pro forma weighted average number of common shares outstandingdiluted |
55,798,000 | 48,298,001 | |||||||||
(F) The current market prices of Prospect common stock utilized in above calculations was as follows as of September 18, 2009: |
$ | 9.91 | ||||||||
141
PRO FORMA SENSITIVITY ANALYSIS
KENNEDY-WILSON HOLDINGS, INC.
(In thousands of U.S Dollars)
The following table sets forth certain pro forma financial information assuming consummation of the Merger, as of June 30, 2009, at levels of no common stock conversion and 12,500,000 Public Warrant repurchase (the minimum warrant repurchase per the transaction agreement), 10% common stock conversion and 16,666,667 Public Warrant repurchase, 20% common stock conversion and 20,833,334 Public Warrant repurchase, and at a common stock conversion level of one share less than 30% conversion (the maximum conversion amount under which the Merger can be completed) and 25,000,000 Public Warrant repurchase (the maximum warrant repurchase per the Merger Agreement). Common stock subject to possible conversion has been fully accounted for in this analysis.
This unaudited pro forma sensitivity analysis should be read in conjunction with the unaudited pro forma condensed consolidated balance sheet located elsewhere in this proxy statement/prospectus.
|
Pro Forma
Consolidated Companies (with No Stock Conversion and 12,500,000 Warrant Repurchase) |
Pro Forma
Consolidated Companies (with 10% Stock Conversion and 16,666,667 Warrant Repurchase) |
Pro Forma
Consolidated Companies (with 20% Stock Conversion and 20,833,334 Warrant Repurchase) |
Pro Forma
Consolidated Companies (with Maximum Stock Conversion and 25,000,000 Warrant Repurchase) |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Number of shares converted |
| 2,500,000 | 5,000,000 | 7,499,999 | ||||||||||
Number of Public Warrants repurchased |
12,500,000 | 16,666,667 | 20,833,334 | 25,000,000 | ||||||||||
Assets |
||||||||||||||
Cash and cash equivalents |
$ | 239,541 | $ | 212,524 | $ | 185,507 | $ | 158,490 | ||||||
Other assets |
268,099 | 268,099 | 268,099 | 268,099 | ||||||||||
Total assets |
507,640 | 480,623 | 453,606 | 426,589 | ||||||||||
Liabilities and equity |
||||||||||||||
Total liabilities |
186,401 | 186,401 | 186,401 | 186,401 | ||||||||||
Total equity |
321,239 | 294,222 | 267,205 | 240,188 | ||||||||||
Total liabilities and equity |
$ | 507,640 | $ | 480,623 | $ | 453,606 | $ | 426,589 | ||||||
Pursuant to Prospect's amended and restated certificate of incorporation, Prospect will not proceed with a transaction if public stockholders owning 30% or more of the Public Shares vote against the transaction and exercise their conversion rights. Accordingly, Prospect may effect a transaction if holders of Public Shares owning up to one share less than 30% of the aggregate number of Public Shares exercise their conversion rights. If this occurred, Prospect would be required to convert for cash up to one share less than 30% of the 25,000,000 shares of Prospect common stock included in the units sold in the IPO, or 7,499,999 shares of Prospect common stock.
As a condition of the Merger, each of the 25,000,000 Public Warrants will either be redeemed for a cash payment of $0.55 per warrant at closing, or each holder of Public Warrants must agree to exchange its Public Warrants for Amended and Restated Public Warrants, with each such Amended and Restated Public Warrant entitling the holder thereof to purchase one share of Prospect common stock at an exercise price of $12.50 per share (increased from $7.50 per share), with a redemption trigger price of $19.50 per share (increased from $14.50 per share), and an expiration date of November 14, 2013 (extended from November 14, 2012). No more than 50% of the outstanding Public Warrants may exchanged for Amended and Restated Public Warrants. Accordingly, Prospect will be required to redeem a minimum of 12,500,000 Public Warrants and a maximum of 25,000,000 Public Warrants for an aggregate cash payment at closing ranging from $6,875,000 to $13,750,000, respectively. As the fair value of the new warrants was determined to be less than the value of the old warrants, no accounting entry is required with respect to the warrant exchange.
142
CAPITALIZATION
KENNEDY-WILSON HOLDINGS, INC.
Capitalization Table
(In thousands of U.S Dollars)
The following table sets forth the capitalization as of June 30, 2009 as described below:
You should read this capitalization table together with the section entitled " Management's Discussion and Analysis of Financial Condition and Results of Operations ", the financial statements and related notes, and the unaudited pro forma condensed consolidated financial statements and related notes, all appearing elsewhere in this proxy statement/prospectus.
|
As of June 30, 2009
(in thousands) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Actual |
As
Adjusted |
As
Further Adjusted |
|||||||||
Debt: |
||||||||||||
Notes payable |
$ | 14,000 | $ | 14,000 | $ | 14,000 | ||||||
Borrowings under lines of credit |
26,000 | 26,000 | 26,000 | |||||||||
Mortgage loans payable on real estate held for sale |
26,115 | 26,115 | 26,115 | |||||||||
Mortgage loans payable |
26,956 | 26,956 | 26,956 | |||||||||
Convertible subordinated debt |
27,328 | 27,328 | 27,328 | |||||||||
Junior subordinated debentures |
40,000 | 40,000 | 40,000 | |||||||||
Total debt |
160,399 | 160,399 | 160,399 | |||||||||
Equity: |
||||||||||||
Preferred stock |
1 | | | |||||||||
Common stock |
54 | 6 | 5 | |||||||||
Additional paid-in capital |
58,903 | 296,519 | 215,469 | |||||||||
Retained earnings |
39,020 | 18,726 | 18,726 | |||||||||
Accumulated other comprehensive income |
119 | 119 | 119 | |||||||||
Total stockholders' equity |
98,097 | 315,370 | 234,319 | |||||||||
Noncontrolling interests |
5,869 | 5,869 | 5,869 | |||||||||
Total equity |
103,966 | 321,239 | 240,188 | |||||||||
Total capitalization |
$ | 264,365 | $ | 481,638 | $ | 400,587 | ||||||
143
THE CHARTER AMENDMENT PROPOSAL
The Charter Amendment Proposal, if approved, will provide for the amendment of Prospect's present amended and restated certificate of incorporation to:
(i) change Prospect's corporate name to "Kennedy-Wilson Holdings, Inc.";
(ii) increase the number of authorized shares of its common stock from 72,000,000 shares to 80,000,000 (and the total number of shares of authorized capital stock from 73,000,000 shares to 81,000,000);
(iii) change the period of its corporate existence to perpetual;
(iv) delete the present Article Sixth and its preamble, as such provisions will no longer be applicable to Prospect after the Merger, and replace it with a new Article Sixth; and
(v) make certain other changes in tense and numbers that Prospect's board of directors believes are immaterial.
The increase in the number of authorized shares of Prospect capital stock, the name change, the provision for Prospect's perpetual existence, and the deletion of Article Sixth of Prospect's current amended and restated certificate of incorporation are being undertaken as a result of and in conjunction with the Merger. Accordingly, the proposal to approve the amended and restated certificate of incorporation is conditioned upon and subject to the approval of the Merger Proposal.
In the judgment of Prospect's board of directors, the Charter Amendment Proposal is desirable for the following reasons:
144
Public Shares are entitled to receive distributions from the Trust Account only if a business combination is not consummated by the Termination Date or by demanding conversion in accordance with Clause C. Clause F of Article Sixth provides that Prospect must consummate a "Business Combination," as defined in the preamble of Article Sixth, before Prospect can consummate any other type of business combination. Clause G of Article Sixth provides that Prospect shall not, and no employee of Prospect shall, disburse any funds from the Trust Account other than set forth in such clause. Clause H of Article Sixth provides the procedure by which Prospect's Audit Committee must approve all payments to Prospect's initial stockholders, sponsors, officers, directors and their or Prospect's affiliates. Clause I of Article Sixth provides the procedure by which the Audit Committee is required to review and monitor compliance with the requirements of the agreements entered into by Prospect in connection with its IPO. Clause J of Article Sixth prohibits Prospect's board of directors from issuing any securities (other than those issued in the IPO) that would participate in the proceeds of the Trust Account or vote as a class with the common stock on a business combination prior to the consummation of the initial business combination. Clause K of Article Sixth permits Prospect to have a classified board of directors prior to the initial business combination (which provision will continue to be in effect but shall be re-numbered). Accordingly, Article Sixth and its preamble will serve no further purpose and will be replaced with a new Article Sixth.
A copy of Prospect's amended and restated certificate of incorporation, as it will be in effect assuming approval of the Charter Amendment Proposal and the filing of the second amended and restated certificate of incorporation in the office of the Secretary of State of the State of Delaware, is attached to this proxy statement/prospectus as Annex D.
Recommendation and Required Vote
Pursuant to the Merger Agreement, approval of the Charter Amendment Proposal is a condition to the consummation of the Merger. If the Merger Proposal is not approved, the Charter Amendment Proposal will not be presented at the special meeting of Prospect stockholders. If the Charter Amendment Proposal is not approved, the Merger will not be consummated even if the Merger Proposal is approved and the holders of fewer than 30% of the Public Shares vote against the Merger Proposal and properly demand that their Public Shares be converted into cash. See the section entitled " Merger ProposalInterests of Prospect's Directors and Officers in the Merger " for additional information.
The approval of the Charter Amendment Proposal requires the affirmative vote of a majority of the issued and outstanding shares of Prospect common stock entitled to vote thereon as of the record date.
PROSPECT'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PROSPECT'S STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE CHARTER AMENDMENT PROPOSAL.
145
THE EQUITY PARTICIPATION PLAN PROPOSAL
Prospect is requesting that the stockholders vote in favor of approving the 2009 Plan, which was adopted by the board on September 5, 2009. The principal features of the 2009 Plan are summarized below, but the summary is qualified in its entirety by reference to the text of the 2009 Plan, which is attached hereto as Annex E. Prospect encourages you to read the 2009 Plan carefully.
Purpose
The purpose of the 2009 Plan is to retain and reward employees (including officers), nonemployee consultants and nonemployee directors of Prospect and its affiliates and to provide them with additional incentives to promote the success of Prospect's business through the grants of awards of or pertaining to shares of Prospect's common stock.
Administration of the 2009 Plan
The 2009 Plan will be administered by the compensation committee of the board of directors which will be formed upon consummation of the Merger. Each of the compensation committee members must be (i) an "outside director" within the meaning of Section 162(m) of the Code, (ii) a "non-employee director" within the meaning of Rule 16b-3 of the Exchange Act, and (iii) "independent" for purposes of any applicable listing requirements.
Subject to the provisions of the 2009 Plan, the compensation committee has sole authority to make all determinations under the 2009 Plan. The compensation committee also has such additional powers as are delegated to it under the 2009 Plan. Absent specific rules to the contrary, action by the compensation committee requires the consent of a majority of the members of the compensation committee.
Securities Subject to the 2009 Plan
Pursuant to the 2009 Plan, the maximum aggregate number of shares of common stock that may be issued is 4,000,000 shares. The maximum number of shares of common stock subject to option awards and stock appreciation rights ("SARs") granted to any one employee during any calendar year under the 2009 Plan is 2,000,000 shares. The limitation set forth in the preceding sentence shall be applied in a manner which shall permit compensation generated in connection with the exercise of options or SARs to constitute "performance-based" compensation for purposes of Section 162(m) of the Code, including, but not limited to, counting against such maximum number of shares, to the extent required under Section 162(m) of the Code, any shares subject to options or SARs that are canceled or repriced.
In the event that changes are made to Prospect's outstanding common stock by reason of an extraordinary cash dividend, reorganization, merger, consolidation, combination, split-up, spin-off or exchange occurring after the date of grant, any outstanding awards and any award agreements evidencing such awards will be adjusted by the board of directors in its discretion in such manner as the board of directors deems equitable or appropriate taking into consideration the accounting and tax consequences as to the number and price or other consideration subject to such awards. In addition, in the event of certain adjustments to Prospect's common stock, the aggregate number of shares available under the 2009 Plan and Section 162(m) deduction limits will be appropriately adjusted by the board of directors.
Subject to certain conditions, for purposes of the 2009 Plan, the fair market value of a share of common stock as of any given date will be (i) if the common stock is listed on any U.S. national securities exchange, the closing sales price of the common stock for such date (or, in the event that the common stock is not traded on such date, on the immediately preceding trading date) on the principal
146
U.S. national securities exchange on which the shares are listed and traded on such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported; (ii) if the shares are not listed on any U.S. national securities exchange but are quoted in an inter-dealer quotation system on a last sale basis, the final ask price of the shares reported on the inter-dealer quotation system for such date, or, if there is no such sale on such date, then on the last preceding date on which a sale was reported; or (iii) if the shares are neither listed on a U.S. national securities exchange nor quoted on an inter-dealer quotation system on a last sale basis, the amount determined by the compensation committee to be the fair market value of the shares as determined by the compensation committee in its sole discretion. If the common stock is not quoted or listed as set forth above, fair market value shall be determined by the compensation committee in good faith by any fair and reasonable means and consistent with applicable law.
Eligibility
Prospect's and its affiliates' employees (including officers), nonemployee consultants and nonemployee directors are eligible to receive awards under the 2009 Plan. Approximately 300 employees and non-employee consultants and 5 non-employee directors are eligible to receive awards under the 2009 Plan. Subject to the provisions of the 2009 Plan, the compensation committee determines which employee, consultant or director will be granted awards. No employee, director or consultant is entitled to participate in the 2009 Plan as a matter of right, nor does any such participation constitute assurance of continued employment or board service. Only those employees, directors and consultants who are selected to receive grants by the compensation committee may participate in the 2009 Plan.
Awards Under the 2009 Plan
The 2009 Plan provides that the compensation committee may grant or issue stock options, restricted stock awards, unrestricted stock awards, restricted stock units, performance unit awards, performance share awards, distribution equivalent rights, stock appreciation rights, or any combination thereof.
Non-Qualified Stock Options. Non-qualified stock options ("NQSOs") provide for the right to purchase shares of Prospect common stock at a price determined by the compensation committee which may not be less than fair market value on the date of grant, subject to certain adjustments, and usually will become exercisable (in the discretion of the compensation committee) in one or more installments after the grant date, subject to the completion of the applicable vesting period. NQSOs may be granted for any term specified by the compensation committee, but may not exceed ten years.
Incentive Stock Options. Incentive stock options ("ISOs") are designed to comply with the provisions of Section 422 of the Code, and will be subject to certain restrictions contained in the Code. Among such restrictions, ISOs must have an exercise price not less than the fair market value of a share of Prospect common stock on the date of grant, may only be granted to employees, and must not be exercisable after a period of ten years measured from the date of grant. ISOs, however, may be subsequently modified to disqualify them from treatment as ISOs. The total fair market value of shares (determined as of the respective date or dates of grant) for which one or more options granted to any employee by Prospect (including all options granted under the 2009 Plan and all other option plans of any parent corporation or subsidiary corporation) that may for the first time become exercisable as ISOs during any one calendar year shall not exceed the sum of $100,000. To the extent this limit is exceeded, the options granted will be NQSOs. In the case of an ISO granted to an individual who owns (or is deemed to own) more than 10% of the total combined voting power of Prospect (a "10% Owner"), the 2009 Plan provides that the exercise price must be at least 110% of the fair market value of a share of Prospect common stock subject to the ISO and the ISO must not be exercisable after a period of five years measured from the date of grant.
147
Restricted and Unrestricted Stock. Restricted stock may be issued at such price, if any, and may be made subject to such restrictions (including time vesting or satisfaction of performance milestones), as may be determined by the compensation committee. Restricted stock, typically, is subject to forfeiture if certain conditions or restrictions are not met. In general, restricted stock may not be sold, or otherwise hypothecated or transferred, until the vesting restrictions applicable to such shares are removed or expire. Recipients of restricted stock, unlike recipients of options, generally will have voting rights and will receive dividends prior to the time when the restrictions lapse if the applicable award agreement so provides. The compensation committee is also permitted to award or sell shares of unrestricted stock which are not subject to restrictions under the 2009 Plan.
Restricted Stock Unit Awards. The holder of a restricted stock unit will be entitled to receive payment in cash or shares of Prospect common stock, based upon the number of restricted stock units awarded to the holder, if the holder satisfies individual service-based vesting requirements. The payment will be made no later than the fifteenth day of the third calendar month following the end of the calendar year in which the restricted stock unit first becomes vested. The payment will be subject to a "substantial risk of forfeiture" under Section 409A of the Code. At the time of the award, the compensation committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to the restricted stock units, including rules pertaining to the effect of termination of employment, director status or consultant status prior to expiration of the applicable vesting period. The terms and conditions of the award agreements need not be identical.
Performance Unit Awards. Performance unit awards entitle the holder to a cash payment upon the satisfaction of predetermined goals and objectives relating to the performance of the holder, Prospect and/or its affiliates that is based upon the dollar value assigned to such unit under the award agreement. The performance unit award agreement may provide that, depending on the degree of performance achieved, different amounts of performance units, or no performance units, may be awarded.
Performance Share Awards. Performance share awards entitle the holder to receive shares of Prospect common stock upon the satisfaction of certain performance goals and objectives determined by the compensation committee. At the time of such award, the compensation committee may prescribe additional terms and conditions or restrictions relating to the awards, including, but not limited to, rules pertaining to the effect of termination of the holder's employment, director status or consultant status prior to the expiration of the applicable period. The holder of a performance share award will have no rights as a stockholder of Prospect until such time, if any, as the holder actually receives shares pursuant to the award.
Distribution Equivalent Rights. Distribution equivalent rights entitle a holder to receive bookkeeping credits, cash payments and/or common stock distributions equal in amount to the distributions that would have been made to the holder if such holder held a specified number of shares of Prospect common stock during the period the holder held the right.
Stock Appreciation Rights. SARs provide for the payment of an amount to the holder based upon increases in the price of Prospect's common stock over a set base price. The base price of any SAR granted under the 2009 Plan must be at least 100% of the fair market value of a share of common stock on the date of grant. Under the 2009 Plan, SARs will be settled in cash or shares of common stock, or a combination of both.
Termination of Employment, Director Status or Consultant Status
Termination of Employment or Director Status. The following terms will apply with respect to the termination of a holder's employment with, or status as a director of, Prospect or its affiliates for any reason, except to the extent such terms are inconsistent with the terms of the applicable award
148
agreement (in which case the terms of the applicable award agreement will control) or the terms of the holder's employment agreement (in which case the terms of the applicable employment agreement will control). A holder's rights to exercise NQSOs and SARs will terminate:
A holder's rights to exercise ISOs will terminate:
Subject to the discretion of the compensation committee, if a holder's employment with, or status as a director of, Prospect or its affiliates terminates for any reason prior to the satisfaction or lapse of the restrictions, vesting requirements, or terms and conditions applicable to an award of restricted stock or restricted stock unit, the restricted stock or restricted stock unit, as the case may be, will immediately be canceled, and the holder will forfeit any rights or interests in and with respect to any such restricted stock or restricted stock unit.
Termination of Consultant Status. The following terms will apply with respect to the termination of a holder's status as a consultant, except to the extent such terms are inconsistent with the terms of the applicable award agreement (in which case the terms of the applicable award agreement will control). A holder's rights to exercise NQSOs or SARs will terminate:
Subject to the discretion of the compensation committee, if the status of a holder as a consultant terminates for any reason prior to the satisfaction or lapse of the restrictions, vesting requirements, or terms and conditions applicable to an award of restricted stock, or restricted stock unit, as the case may be, the restricted stock or restricted stock unit will immediately be canceled, and the holder will forfeit any rights or interests in and with respect to any such restricted stock or restricted stock unit.
Special Termination Rule. If a holder's employment with, or status as a director of, Prospect or its affiliates is terminated, and if, within ninety days of such termination, such holder becomes a consultant to Prospect or any of its affiliates, the holder's rights with respect to any award granted prior to the date of termination may be preserved. Similarly, if a holder's status as a consultant is terminated, and if, within ninety (90) days of such termination, the holder becomes an employee or a director of Prospect or any of its affiliates, such holder's rights with respect to any award granted prior to the date of termination may be preserved.
149
Termination for "Cause." If a holder's employment, director status or engagement as a consultant with Prospect is terminated by Prospect for "Cause" (as defined in the 2009 Plan), all of the holder's then outstanding awards will expire immediately and be forfeited in their entirety upon termination.
"Change of Control"
Only if so provided in the applicable award agreements, options granted under the 2009 Plan may automatically become fully vested and exercisable and shares of restricted stock granted under the 2009 Plan may automatically become fully vested and no longer subject to restrictions in the event of a "Change of Control" of Prospect.
For a holder who is a party to an employment or consulting agreement with Prospect or an affiliate that defines "Change of Control," "Change of Control" will have the same meaning as provided for in the agreement. For a holder who is not a party to such an agreement, "Change of Control" will mean the satisfaction of any one or more of the following conditions:
A "Change of Control" will not occur if Prospect files for bankruptcy, liquidation or reorganization under the United States Bankruptcy Code.
Prohibition Against Repricing
The compensation committee is not permitted to reduce the exercise price of any outstanding option or SAR, or grant any new award or make any payment of cash in substitution for or upon the cancellation of options or SARs previously granted, unless such action is approved by the holders of a majority of the shares of Prospect common stock or results from a "Change of Control" or adjustment as provided in the 2009 Plan.
150
Transferability of Awards
Awards generally may not be assigned, transferred, sold, exchanged, encumbered, pledged or otherwise hypothecated or disposed of in any manner except (i) by will or by the laws of descent and distribution or (ii) except for an ISO, by gift to certain family members of the holder. Awards may be exercised, during the lifetime of the holder, only by the holder or by the holder's guardian or legal representative unless it has been transferred by gift to a permitted family member of the holder, in which case it may only be exercised by such transferee. Except for awards which are ISOs, awards may be transferred pursuant to the terms of any valid separation agreement or divorce decree.
Amendment and Termination of the 2009 Plan
The 2009 Plan will continue in effect until the tenth anniversary of the date on which it is adopted by the board of directors. The board of directors in its discretion may terminate the 2009 Plan at any time with respect to any shares for which awards have not been granted; provided, however, that the 2009 Plan's termination must not materially and adversely impair the rights of a holder with respect to any outstanding award without the consent of the holder. The board of directors has the right to alter or amend the 2009 Plan from time to time; provided, however, that without stockholder approval, no amendment or modification of the 2009 Plan may (i) materially increase the benefits accruing to holders, (ii) except as otherwise expressly provided in the 2009 Plan, materially increase the number of shares of common stock subject to the 2009 Plan or certain individual award agreements, (iii) materially modify the requirements for participation in the 2009 Plan, or (iv) amend, modify or suspend the provisions of the 2009 Plan relating to repricing prohibitions or amendment and termination of the 2009 Plan. In addition, no change in any outstanding award may be made which would materially and adversely impair the rights of a holder with respect to such award without the consent of the holder (unless such change is required in order to cause the benefits under the 2009 Plan to qualify as "performance-based" compensation within the meaning of Section 162(m) of the Code or to exempt the 2009 Plan or any award from Section 409A of the Code).
Section 162(m) of the Code
It is intended that the 2009 Plan shall comply fully with and meet all the requirements of Section 162(m) of the Code so that awards under the 2009 Plan which are made to holders who are "covered employees" (as defined in Section 162(m) of the Code) shall constitute "performance-based" compensation within the meaning of Section 162(m) of the Code. Any performance goal(s) applicable to qualified performance-based awards shall be objective, shall be established not later than ninety (90) days after the beginning of any applicable performance period (or at such other date as may be required or permitted for "performance-based" compensation under Section 162(m) of the Code) and shall otherwise meet the requirements of Section 162(m) of the Code, including the requirement that the outcome of the performance goal or goals be substantially uncertain (as defined in the regulations under Section 162(m) of the Code) at the time established. The performance goals to be utilized under the 2009 Plan to establish performance goals shall consist of objective tests based on one or more of the following: net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income (before or after allocation of corporate overhead and bonus); earnings per share; net income (before or after taxes); return on equity; total stockholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the shares or any other publicly-traded securities of Prospect; market share; gross profits; earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; expense levels; working capital levels, including cash, inventory and accounts receivable;
151
operating margins, gross margins or cash margin; year-end cash; debt reduction; stockholder equity; operating efficiencies; strategic partnerships or transactions; co-development, co-marketing, profit sharing, joint venture or other similar arrangements); financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital; assets under management; financing and other capital raising transactions (including sales of Prospect's equity or debt securities; sales or licenses of the Prospect's assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions). Performance goals may be established on a company-wide basis or with respect to one or more company business units, divisions, subsidiaries or individuals; and measured either quarterly, annually or over a period of years, in absolute terms, relative to a pre-established target, to the performance of one or more similarly situated companies, or to the performance of an index covering a peer group of companies, in each case as specified by the compensation committee. When establishing performance goals for the applicable performance period, the compensation committee may exclude any or all "extraordinary items" as determined under U.S. generally accepted accounting principles including, without limitation, the charges or costs associated with restructurings of Prospect, discontinued operations, other unusual or non-recurring items, and the cumulative effects of accounting changes, and as identified in Prospect's financial statements, notes to Prospect's financial statements or management's discussion and analysis of financial condition and results of operations contained in Prospect's most recent annual report filed with the U.S. Securities and Exchange Commission pursuant to the Exchange Act. Holders who are "covered employees" (as defined in Section 162(m) of the Code) shall be eligible to receive payment under a qualified performance-based award which is subject to achievement of a performance goal or goals only if the applicable performance goal or goals are achieved within the applicable performance period, as determined by the compensation committee. If any provision of the 2009 Plan would disqualify the 2009 Plan or would not otherwise permit the 2009 Plan to comply with Section 162(m) of the Code as so intended, such provision shall be construed or deemed amended to conform to the requirements or provisions of Section 162(m) of the Code. The compensation committee may postpone the exercising of awards, the issuance or delivery of Prospect common stock under any award or any action permitted under the 2009 Plan to prevent Prospect or any subsidiary from being denied a federal income tax deduction with respect to any award other than an ISO, provided that such deferral satisfies the requirements of Section 409A of the Code. For purposes of the requirements of Treasury Regulation Section 1.162-27(e)(4)(i), the maximum amount of compensation that may be paid to any employee under the 2009 Plan for a calendar year shall be $10,000,000.
Section 409A of the Code
The compensation committee has no authority to issue an award under the 2009 Plan with terms and conditions which would cause such award to constitute non-qualified "deferred compensation" under Section 409A of the Code. By way of example, no option shall be granted under the 2009 Plan with a per share option exercise price which is less than the fair market value of a share of common stock on the date of grant of the option. No award agreement shall provide for any deferral feature with respect to an award which constitutes a deferral of compensation under Section 409A of the Code. The 2009 Plan and all award agreements are intended to be exempt from the requirements of Section 409A of the Code. In the event that the board of directors determines that awards should in the future be subject to deferral, it shall have the authority to make appropriate amendments to the 2009 Plan to authorize deferrals of compensation under Section 409A of the Code.
Federal Income Tax Consequences Associated with the 2009 Plan
The following is a brief and general discussion under current law of the federal income tax consequences to recipients of awards granted under the 2009 Plan. This summary is not comprehensive and is provided only for general information. Tax laws are complex and subject to change and may vary depending on individual circumstances and from locality to locality. The summary does not discuss all
152
aspects of income taxation that may be relevant in light of a holder's personal circumstances. This summary is intended for the information of stockholders considering how to vote and is not tax advice. Participants in the 2009 Plan should consult their own tax advisors as to the tax consequences of participation.
NQSOs. Generally, there are no federal income tax consequences to the optionee upon grant of a NQSO. Upon the exercise of a NQSO, the optionee will recognize ordinary income in an amount equal to the amount by which the fair market value of a share of common stock acquired upon the exercise of such NQSO exceeds the exercise price, if any, and will have a tax basis in the common stock equal to its fair market value. A sale of common stock so acquired will give rise to a capital gain or loss equal to the difference between the fair market value of the common stock on the date of sale and such stock's adjusted tax basis.
ISOs. Except as noted at the end of this paragraph, there are no federal income tax consequences to the participant upon grant or exercise of an ISO. If the participant holds shares of common stock purchased pursuant to the exercise of an ISO for at least two years after the date the ISO was granted and at least one year after the exercise of the ISO, the subsequent sale of common stock will give rise to a long term capital gain or loss to the participant and no deduction will be available to Prospect. If the participant sells the shares of common stock within two years after the date an ISO is granted or within one year after exercise, the participant will recognize ordinary income in an amount equal to the difference between the fair market value at the exercise date and the ISO exercise price, and any additional gain or loss will be a capital gain or loss. Some participants may have to pay alternative minimum tax in connection with exercise of an ISO, however.
Restricted Stock. In general, a participant will recognize ordinary income on receipt of an award of restricted stock when his or her rights in that award become substantially vested, in an amount equal to the amount by which the then fair market value of the common stock acquired exceeds the price the participant paid, if any, for such restricted stock. Recipients of restricted stock may, however, within 30 days of receiving an award of restricted stock, choose to have any applicable risk of forfeiture disregarded for tax purposes by making an election under Section 83(b) of the Code (an "83(b) election"). If the participant makes an 83(b) election, he or she will have to report compensation income equal to the difference, if any, between the fair market value of the shares and the price paid for the shares, if any, at the time of the transfer of the restricted stock. If the Section 83(b) election is made, the participant will not recognize any additional income as and when the restrictions applicable to the restricted stock lapse.
Restricted Stock Units. A participant generally will not have ordinary income upon grant of restricted stock units. When cash or shares of common stock are delivered under the terms of the award, the participant will recognize ordinary income equal to the cash payment or the fair market value of the shares delivered, as the case may be, less any amount paid by the participant for such shares.
Performance Unit Awards. A participant generally will not recognize taxable income upon grant of the award. A participant will generally recognize ordinary income on receipt of the cash payment in satisfaction of the award under the 2009 Plan.
Performance Share Awards. A participant generally will not recognize ordinary income upon grant of performance share awards. A participant will generally recognize ordinary income equal to the fair market value of the shares delivered, less any amount paid by the participant for such shares, at the time of receipt of the shares.
Distribution Equivalent Rights. A recipient of a distribution equivalent right generally will not recognize taxable income at the time of grant, and Prospect will not be entitled to a deduction at that
153
time. At the time a distribution equivalent is paid, however, the participant will generally recognize ordinary income and Prospect will be entitled to a deduction.
SARs. A participant will generally recognize ordinary income upon the receipt of cash or other property pursuant to the exercise of an award of SARs.
Stock Payments. A participant who receives a stock payment in lieu of a cash payment will generally recognize ordinary income in the same amount as if he or she received a cash payment in satisfaction of the award.
Tax Deductions and Section 162(m) of the Code. In general, whenever a recipient is required to recognize ordinary income in connection with an award, Prospect will be entitled to a corresponding tax deduction. However, Prospect will not be entitled to a deduction in connection with awards under the 2009 Plan to certain senior executive officers to the extent that the amount of deductible income in a year to any such officer, together with his or her other compensation from Prospect exceeds the $1,000,000 limitation of Section 162(m) of the Code. Compensation which qualifies as "performance-based" is not subject to this limitation, however.
Potential Deferred Compensation. For purposes of the foregoing summary of federal income tax consequences, we assumed that no award under the 2009 Plan will be considered "deferred compensation" as that term is defined for purposes of Section 409A of the Code, which governs the taxation of nonqualified deferred compensation arrangements, as the 2009 Plan does not permit the issuance of awards which would provide for deferred compensation subject to Section 409A. For example, the award of an option with an exercise price of less than 100% of the fair market value of the common stock would constitute deferred compensation. If an award were to include deferred compensation, and its terms did not comply with the requirements of Section 409A of the Code, then such award would be taxable when it was earned and vested (even if not then payable) and the recipient would be subject to a 20% additional tax.
Awards to Particular Officers, Directors and Employees
Pursuant to the Merger Agreement, Prospect has agreed to issue an aggregate of 3,740,000 shares of restricted stock (an additional 260,000 shares are unallocated) under the 2009 Plan to certain officers, directors and employees of Kennedy-Wilson, effective upon consummation of the Merger and stockholder approval of the 2009 Plan. These grants are reflected in the following table:
Name of Group
|
Dollar ($) |
Number of Shares
of Restricted Stock |
|||||
---|---|---|---|---|---|---|---|
William McMorrow, Chief Executive Officer |
$ | | 900,000 | ||||
Freeman Lyle, Chief Financial Officer |
$ | | 50,000 | ||||
Mary Ricks, Co-CEO of KW Commercial Investment Group |
$ | | 900,000 | ||||
Barry Schlesinger, Co-CEO of KW Commercial Investment Group |
$ | | 125,000 | ||||
Robert Hart, President of KW Multi-Family Management Group |
$ | | 125,000 | ||||
James Rosten, President of Kennedy-Wilson Properties |
$ | | 125,000 | ||||
All executive officers, as a group |
$ | | 3,495,000 | ||||
All directors who are not executive officers, as a group |
$ | | 25,000 | ||||
All employees, including all current officers who are not executive officers, as a group |
$ | | 220,000 |
In the event that the recipient of the restricted shares remains employed by (or continues to perform services as a director for) the post-Merger company through the relevant vesting date, 1 / 5 of the restricted shares will vest on each of the first five anniversaries of the date of issuance, provided that the Performance Target is met as of the September 30 immediately preceding the applicable
154
anniversary date (in the case of the installments vesting on the fourth and fifth anniversary dates, the Performance Target must be met as of the September 30 immediately preceding the third anniversary date). The Performance Target was established by an independent committee of Prospect and is subject to the approval of the compensation committee of the post-Merger company following the consummation of the Merger. Notwithstanding the foregoing, in the event the employment with the post-Merger company of an employee who has been granted restricted shares is terminated without cause or if the employee resigns from his employment with the post-Merger company for good reason, the restricted shares will continue to vest on the applicable anniversary dates (subject to the satisfaction of the Performance Target), subject to certain limitations. In addition, in the event of a "Change of Control" as defined in the 2009 Plan (see "The Equity Participation Plan Proposal"Change of Control") , any unvested restricted shares of Prospect common stock that have not previously been forfeited will become vested, subject to certain limitations. See section "The Equity Participation Plan ProposalAwards to Particular Officers, Directors and Employees" for additional information.
Recommendation and Vote Required
If either the Merger Proposal or the Charter Amendment Proposal is not approved, or holders of 30% or more of the Public Shares elect to convert their Public Shares into cash, the Equity Participation Plan Proposal will not be submitted to the stockholders for a vote.
Approval of the 2009 Plan requires the affirmative vote of a majority of the issued and outstanding shares of Prospect common stock represented in person or by proxy at the special meeting of Prospect stockholders and entitled to vote thereon as of the record date. Adoption of the Equity Participation Plan Proposal is not a condition to the adoption of any of the other proposals.
PROSPECT'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PROSPECT'S STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE EQUITY PARTICIPATION PLAN PROPOSAL.
155
THE DIRECTOR ELECTION PROPOSAL
Election of Directors
At the special meeting of Prospect stockholders, Prospect stockholders will be asked to elect seven directors to Prospect's board of directors, effective immediately following and contingent upon closing of the Merger, of whom two will serve until the annual meeting of Prospect stockholders to be held in 2010, two will serve until the annual meeting of Prospect stockholders to be held in 2011 and three will serve until the annual meeting of Prospect stockholders to be held in 2012, and, in each case, until their successors are elected and qualified.
Following consummation of the Merger, if the nominees are elected, the directors of Prospect will be classified as follows:
The election of directors requires the vote of a plurality of the shares of common stock present in person or represented by proxy and entitled to vote at the special meeting of Prospect stockholders. "Plurality" means that the individuals who receive the largest number of votes cast "FOR" are elected as directors. Consequently, any shares not voted "FOR" a particular nominee (whether as a result of abstentions or broker non-votes or a direction to withhold authority) will not be counted in the nominee's favor.
In case any of the nominees becomes unavailable for election to the board of directors, an event that is not anticipated, the persons named as proxies, or their substitutes, will have full discretion and authority to vote or refrain from voting for any other candidate in accordance with their judgment.
If either the Merger Proposal or the Charter Amendment Proposal is not approved, or holders of 30% or more of the Public Shares elect to convert their Public Shares into cash, the Director Election Proposal will not be submitted to the stockholders for a vote and Prospect's current directors will continue in office until Prospect is liquidated.
Following the effective time of the Merger and assuming the election of the individuals set forth above, the board of directors and executive officers of Prospect will be as follows:
Name
|
Age | Position | |||
---|---|---|---|---|---|
William J. McMorrow | 62 | Chairman and Chief Executive Officer | |||
Mary Ricks | 45 | Co-CEO of KW Commercial Investment Group | |||
Freeman A. Lyle | 54 | Executive Vice President and Chief Financial Officer | |||
Barry S. Schlesinger | 68 | Co-CEO of KW Commercial Investment Group | |||
James A. Rosten | 51 | President of Kennedy-Wilson Properties | |||
Robert E. Hart | 51 | President of KW Multi-Family Management Group | |||
Donald J. Herrema | 57 | Executive Vice Chairman and CEO of KW Capital Markets | |||
Kent Mouton | 55 | Director | |||
Jerry R. Solomon | 58 | Director | |||
Norm Creighton | 74 | Director | |||
Thomas Sorell | 54 | Director | |||
David A. Minella | 57 | Director | |||
Cathy Hendrickson | 62 | Director |
156
Information About the Nominees and Executive Officers
William J. McMorrowChairman and Chief Executive Officer. Mr. McMorrow joined Kennedy-Wilson in 1988 and has been Chairman and Chief Executive Officer since 1998. Mr. McMorrow is the architect of Kennedy-Wilson's expansion into real estate brokerage, property management and investment services. In addition to his real estate experience, Mr. McMorrow has more than 17 years of banking experience. Prior to joining Kennedy-Wilson, he was the Executive Vice President and Chairman of the Credit Policy Committee at Imperial Bancorp and also has held senior positions with a variety of financial services companies, including eight years as a Senior Vice President of Fidelity Bank. He received a B.S. in Business and an M.B.A from the University of Southern California. Mr. McMorrow is on the Executive Board of the USC Lusk Center for Real Estate and is involved in numerous charities in Southern California, including Chrysalis, the Rape Treatment Center, the Village School and Loyola High School.
Mary RicksCo-CEO of KW Commercial Investment Group. Ms. Ricks joined Kennedy-Wilson in 1990 and has been has been Co-Chief Executive Officer of KW Commercial Investment Group since 2008. Ms. Ricks is responsible for Kennedy-Wilson's acquisitions and dispositions of commercial assets as well as oversight of Kennedy-Wilson's activities in Japan. Prior to joining Kennedy-Wilson, Ms. Ricks was a commercial broker at Hanes Company. She has been named by the L.A. Business Journal as one of the top women in commercial real estate and was featured on the covers of Forum Magazine and Real Estate California recognizing women at the top of the field. She received a B.A. in Sociology from the University of California, Los Angeles, where she was an All-American athlete. Ms. Ricks is a founding board member of the Richard S. Ziman Center for Real Estate at UCLA.
Freeman A. LyleExecutive Vice President and Chief Financial Officer. Mr. Lyle joined Kennedy-Wilson in 1996 and has been Executive Vice President and Chief Financial Officer since 1996. Mr. Lyle is responsible for all aspects of finance and administration for Kennedy-Wilson, including strategic planning, capital formation, financial reporting, risk management, investor relations and information technology. Prior to joining Kennedy-Wilson, he was Vice President and Controller for R&B Realty Group. Prior to R&B Realty, Mr. Lyle was with Ernst & Young LLP. He received a B.S. in Business from the California State University at Northridge and an M.B.A. from the University of Southern California. He is a Certified Public Accountant.
Barry S. SchlesingerCo-CEO of KW Commercial Investment Group. Mr. Schlesinger joined Kennedy-Wilson in 1998 and has been Co-Chief Executive Officer of KW Commercial Investment Group since 2008. Mr. Schlesinger is primarily responsible for the portfolio management activities of the Commercial Investment Group. Mr. Schlesinger has held several other senior management positions during his tenure at Kennedy-Wilson. Prior to joining Kennedy-Wilson, he served as a Director of Heitman Financial Ltd. and was Chairman and CEO of Heitman Properties Ltd. Prior to joining Heitman in 1971, Mr. Schlesinger worked for Tishman Realty and Construction Company and the U.S. Army Corps of Engineers. He also served as a Captain in the U.S. Army commanding a combat engineering company. Mr. Schlesinger received a B.S. in Civil Engineering from New York University College of Engineering and the U S. Army Engineering School (Civil and Nuclear).
James A. RostenPresident of Kennedy-Wilson Properties. Mr. Rosten joined Kennedy-Wilson in 2000 and has been President of Kennedy-Wilson Properties since 2000. Mr. Rosten is responsible for several of KW Services' business lines including: Property Management, Facilities Management, Construction Management, Development, Leasing and Asset Management for KWP. Prior to joining Kennedy-Wilson, he was President of Grubb and Ellis Management Services for the Western U.S. Prior to Grubb and Ellis, Mr. Rosten was the Executive Vice President for CB Richard Ellis' Western Region. He received a B.B.A. in Finance from Central Michigan University and an M.B.A. from the University of Redlands. He is a Certified Property Manager and a Certified Commercial Investment member. Mr. Rosten is a Director of US Bank and serves as a member of the L.A. Advisory Board.
157
Robert E. HartPresident of KW Multi-Family Management Group. Mr. Hart has been President of KW Multi-Family Management Group since 2006. He joined Kennedy-Wilson in 2000. Mr. Hart is responsible for the oversight of acquisitions, asset management and dispositions of multifamily assets in the U.S. and Japan. Prior to joining Kennedy-Wilson, Mr. Hart served as a Senior Vice President of Portfolio Management for Heitman Capital Management as well as Director of Real Estate Marketing for Executive Life Insurance Company Enhancement Trusts. He received a B.S. in Civil Engineering from Worcester Polytechnic Institute and an M.B.A from UCLA's Anderson School of Management. Mr. Hart is Chair of the Board of Directors of Chrysalis and an Associate of the Richard S. Ziman Center for Real Estate at UCLA. He is a member of the Real Estate Investment Advisory Council, the Urban Land Institute and the California Lexington Group. He is a former President of the UCLA Anderson School of Management Alumni Association and a former member of both the Board of the UCLA Alumni Association and the Anderson School Board of Visitors.
Donald J. HerremaExecutive Vice Chairman and CEO of KW Capital Markets. Mr. Herrema is Executive Vice Chairman and CEO of KW Capital Markets. He joined Kennedy-Wilson in 2009. Mr. Herrema is responsible for Kennedy-Wilson's capital markets and fundraising activities. Prior to joining Kennedy-Wilson, he founded BlackSterling Partners, LLC, served as CEO of Bessemer Trust, Loring Ward, Atlantic Trust (subsidiary of Invesco), and was Head of Private Wealth Management at Morgan Stanley. He began his career at Wells Fargo Bank, where he ultimately served as both President of Wells Fargo Securities and Head of the Mutual Funds Division. Mr. Herrema received a B.A. from Whittier College and an M.A. in Economics from the University of Southern California. Mr. Herrema is a Director of TD Bank Asset Management USA Funds and Lepercq, de Neuflize and Co and also serves as a Senior Advisor to Stone Point Capital.
Kent MoutonDirector. Mr. Mouton has been a director of Kennedy-Wilson since 1995. Mr. Mouton is a partner with the law firm Kulik, Gottesman, Mouton & Siegel LLP, where he specializes in real estate law, primarily in the areas of real estate lending and finance, joint ventures, land use, acquisitions and dispositions, leasing, development and construction, common interest subdivisions (condominiums and planned unit developments) and real estate brokerage. He has been an Adjunct Professor of real estate law at the UCLA Extension since 1979, and teaches various real estate related UCLA Extension courses. Mr. Mouton has been honored by his peers by being designated a Southern California Real Estate "Super Lawyer" in 2005, 2006, 2007 and 2008. Mr. Mouton is a former member of the Board of Governors of the Century City Bar Association and formerly was a Co-Chairperson of the Century City Bar Association Real Estate Law Section. He also serves on the Los Angeles County Bar Real Property Section Real Estate Finance, Land Use Planning and Commercial Development Steering Committees. Mr. Mouton graduated from the University of California at Los Angeles in 1975 with a Bachelor of Arts degree in Economics (Dean's List, Summa Cum Laude, Phi Beta Kappa ) and received his law degree in 1978 from the University of California at Los Angeles.
Jerry R. SolomonDirector. Mr. Solomon has been a director of Kennedy-Wilson since 2001. Mr. Solomon received both his BS Degree in accounting (1973) and an MBA (1974) from UC Berkeley. Throughout college and following graduation, he worked in the tax department of JK Lasser & Company that later became Touche Ross & Company. After leaving JK Lasser, Mr. Solomon joined a large local CPA firm where he became the partner in charge of the comprehensive business services department as well as the administrative partner in charge of 7 partners and 80 staff. In 1988 he formed Solomon & Company CPA's Inc. that later merged with Harold G. Winnett and the firm was renamed Solomon, Winnett & Rosenfield Certified Public Accountants, Inc. Mr. Solomon's practice areas of expertise include both real estate industry and service industries. He consults frequently with high net worth individuals and families in tax and transactional planning. Mr. Solomon currently sits on several board of directors and on the boards of several philanthropic organizations.
158
Norm CreightonDirector. Mr. Creighton has been a director of Kennedy-Wilson since 2004. From 1975 to 2001, Mr. Creighton was employed with Imperial Bank, serving as President and Chief Executive Officer from 1983 to 2001. During Mr. Creighton's tenure with Imperial Bank, its assets increased from approximately 200 million in 1975 to approximately 7 billion in 2001. Prior to Imperial Bank, Mr. Creighton served as Regional Vice President for Southern Arizona of Great Western Bank from 1971-1974. From 1958 to 1971, Mr. Creighton was employed with Arizona Bank, including as Manager of the Tuscon Headquarters. Mr. Creighton holds a B.S. in banking and finance from the University of Montana.
Thomas SorellDirector. Mr. Sorell has been a director of Kennedy-Wilson since 2008. Mr. Sorell is Executive Vice President and Chief Investment Officer of Guardian, Guardian Investor Services LLC and other Guardian subsidiaries. Mr. Sorell has over 30 years of financial experience. He is responsible for Guardian's investment policy and strategies for over $30 billion in assets. This includes investments in both public and private equity, fixed income, and commercial real estate. Mr. Sorell recently served as President of The Park Avenue Portfolio® Family of Mutual Funds and is a Director of RS Investment Co. Mr. Sorell joined Guardian in 1994 from White River Corporation, where he served as Director of Fixed Income. Prior to that, he held investment management positions at Fund American Enterprises, Inc. and AIG Investment Advisors as well as institutional fixed income sales and research positions at Drexel Burnham Lambert & Co., and Kidder, Peabody & Co. Mr. Sorell holds a B.A. from Colgate University and an M.B.A. from New York University. He has a Chartered Financial Analyst (CFA) designation, and is a member of the ACLI-CIO Board of Advisors, CFA Institute and the New York Society of Security Analysts.
David A. MinellaDirector. Mr. Minella has been Prospect's Chairman and Chief Executive Officer since its inception in July 2007. Mr. Minella has been the managing member of Minella Capital Management LLC, a financial services advisory firm, since December 2006 and the managing member of Flat Ridge Investments LLC, a private investment vehicle, since July 2007. Between 1997 and March 2007, Mr. Minella served as the Chief Executive Officer and a director of Value Asset Management LLC, or VAM, a strategic investment management holding company. At VAM, Mr. Minella was responsible for its overall business strategy, acquisitions and financial results. Under Mr. Minella's leadership, VAM acquired a controlling interest in five separate investment management firms: Dalton Hartman Greiner and Maher, New York, NY; Harris Bretall Sullivan and Smith, San Francisco, CA; Hillview Capital Advisors, LLC, New York, NY; Grosvenor Capital Management LP, Chicago, IL; and MDT Advisers LLC, Cambridge, MA. All of the original acquisitions have been sold. From 1995 to 1997, Mr. Minella was the President and Chief Executive Officer of the asset management division of Liechtenstein Global Trust, or LGT, a wealth and asset management firm, where he was responsible for the overall business strategy and financial results. During Mr. Minella's tenure as LGT's Chief Executive Officer, he also led LGT's acquisition of Chancellor Capital Management, a large United States equity investment firm. Mr. Minella originally joined the LGT group in 1987 as the head of its United States subsidiaries, GT Capital Management and GT Global. Mr. Minella established its United States mutual fund business through the broker-dealer community, reestablished LGT's institutional separate account capabilities, and developed the firm's global equity sector expertise. Currently, Mr. Minella serves as a director of Lindsell Train Japan Fund and Lindsell Train Global Media Fund, both offshore hedge funds managed out of London, UK. In addition, Mr. Minella is a member of the Executive Council at Bunker Hill Capital Management, a private equity firm in Boston, Massachusetts, the former Chairman of the board of directors of MDT Advisers LLC and a former board member of the Investment Company Institute. Mr. Minella holds a B.S. in accounting from Bentley College.
Cathy HendricksonDirector. Ms. Hendrickson has been a director of Kennedy-Wilson since 2004. Ms. Hendrickson has forty one years experience in banking which includes eight years with Union Bank in Los Angeles in Economic Research/Corporate Planning, Leveraged Leasing, Credit, and the
159
National Division; three years at Philadelphia based Fidelity Bank's Los Angeles Loan Production Office; one year in Crocker Bank's Southern California Corporate Banking Division; two years as Manager of Imperial Bank's Headquarters Office located at the Los Angeles International Airport; ten years as Regional Vice President of Metrobank's South Bay Headquarters Office in Torrance; and two years as President of Palos Verdes National Bank. Since May, 1993, Ms. Hendrickson served as President and Chief Executive Officer of Bay Cities National Bank (formerly Peninsula National Bank). Ms. Hendrickson also serves as President and Chief Executive Officer of Peninsula Banking Group, Inc. and on the boards of Bay Cities National Bank, Peninsula Banking Group, Inc. and Community First Financial Group, Inc. (Indiana).
Independence of Directors
AMEX requires that a majority of a listed company's board of directors be composed of "independent directors," defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company's board of directors would interfere with the director's exercise of independent judgment in carrying out the responsibilities of a director. The post-Merger company will adhere to the AMEX Company Guide in determining whether a director is independent post-Merger.
Audit Committee
Upon consummation of the Merger, the audit committee will consist of Norman Creighton, as chairman, and Cathy Hendrickson and David A. Minella. The post-Merger company will ensure that each member of the audit committee is independent as defined in the AMEX Company Guide and as defined in Rule 10A-3 of the Exchange Act. The post-Merger company also will comply with requirements that its audit committee have at least one audit committee financial expert within the meaning of Item 407(d)(5)(ii) of Regulation S-K of the Exchange Act.
The post-Merger company's audit committee will be responsible for providing independent, objective oversight with respect to the post-Merger company's accounting and financial reporting functions, internal and external audit functions, and systems of internal controls over financial reporting and legal, ethical, and regulatory compliance duties. The audit committee's duties, which are specified in Prospect's current audit committee charter, will include, but are not limited to:
160
The post-Merger company's audit committee will operate under Prospect's current written charter, a copy of which is available on Prospect's website at http://www.prospectac.com , under the caption "Investor Relations/Corporate Governance."
Financial Experts on Audit Committee
The post-Merger company's audit committee will at all times be composed exclusively of "independent directors" who, as required by the AMEX Company Guide, are able to read and understand fundamental financial statements, including a company's balance sheet, income statement and cash flow statement.
In addition, the post-Merger company will be required to certify to AMEX that the audit committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual's financial sophistication.
Nominating Committee
Upon consummation of the Merger, the nominating committee will consist of Ms. Hendrickson, as chairman, and Messrs. Creighton and Minella. The post-Merger company's board of directors will ensure that each such person is an independent director as defined in the AMEX Company Guide. The post-Merger company's nominating committee will be responsible for overseeing the selection of persons to be nominated to serve on the board of directors. The post-Merger company's nominating committee will consider persons identified by its members, management, stockholders, investment bankers and others.
The committee's responsibilities will include:
The post-Merger company's nominating committee will operate under Prospect's current written charter, a copy of which is attached as Exhibit 99.2 to Prospect's Annual Report on Form 10-K filed
161
with the SEC on March 31, 2008. A copy of the charter is not currently available to stockholders on Prospect's website.
Guidelines for Selecting Director Nominees
The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:
The post-Merger company's nominating committee will consider a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person's candidacy for membership on the board of directors. The post-Merger company's nominating committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time. The post-Merger company's nominating committee will not distinguish among nominees recommended by stockholders and other persons.
Compensation Committee
Upon consummation of the Merger, the post-Merger company will establish a compensation committee, which will consist of Mr. Creighton, as chairman, and Ms. Hendrickson and Mr. Minella, and the post-Merger company will ensure that each such person is an independent director as defined in the AMEX Company Guide. The purpose of the compensation committee will be to discharge the board's responsibilities in respect of compensation of the post-Merger company's executive officers, including approving individual executive officer compensation, oversight of the post-Merger company's overall compensation and benefit philosophies, production of an annual report on executive compensation for inclusion in the post-Merger company's proxy statement and administration of the post-Merger company's incentive compensation plans, including authority to make and modify awards under such plans.
The compensation committee's duties, which will be specified in the post-Merger company's compensation committee charter, will include, but will not be limited to:
162
The compensation committee will operate under a written charter, which is expected to be adopted shortly following the Merger.
Compensation Committee Interlocks and Insider Participation
Because none of Prospect's officers or directors presently receive compensation from it, it does not presently have a compensation committee.
No members of Prospect's board of directors has a relationship that would constitute an interlocking relationship with executive officers or directors of Prospect or another entity.
Code of Ethics
The Prospect board of directors adopted a code of ethics that applies to Prospect's directors, officers and employees as well as those of its subsidiaries. A copy of the code of ethics was filed with Prospect's Registration Statement on Form S-1 (Reg. No. 33-145110) and is available on Prospect's website at http://www.prospectac.com , under the caption "Investor Relations/Corporate Governance." You are also able to review Prospect's code of ethics, as well as its committee charters, by accessing its public filings at the SEC's web site at http://www.sec.gov . In addition, a copy of the code of ethics will be provided without charge upon request to Prospect's secretary.
Arrangements and Understandings
In November 2008, Kennedy-Wilson issued a convertible subordinated note with a principal amount of $30 million to Guardian. In connection with the issuance, Guardian entered into a shareholders agreement with Kennedy-Wilson, William McMorrow, Mary Ricks and Lyle Freeman pursuant to which the parties agreed to appoint one person designated by Guardian as a member of the board of directors of Kennedy-Wilson. Thomas Sorell currently serves as the director designee of Guardian.
163
Recommendation and Vote Required
The election of directors requires a plurality of all votes cast in person or by proxy at the special meeting of Prospect stockholders and entitled to vote thereon as of the record date. The election of directors is not a condition to the adoption of any of the other proposals.
Each nominee has consented to being named in this proxy statement/prospectus as a nominee and has agreed to serve as a director if elected. If for any reason any nominee shall not be a candidate for election as a director at the special meeting of Prospect stockholders (an event that is not now anticipated), the enclosed proxy will be voted for such substitute, if any, as shall be designated by the board of directors.
PROSPECT'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PROSPECT'S STOCKHOLDERS VOTE "FOR" THE NOMINEES.
164
THE STOCKHOLDER ADJOURNMENT PROPOSAL
The adjournment proposal allows Prospect's board of directors to submit a proposal to adjourn the special meeting of Prospect stockholders to a later date or dates, if necessary, to permit further solicitation of proxies in the event that, based on the tabulated votes, there are not sufficient votes at the time of the special meeting of Prospect stockholders to approve the consummation of the Merger. In no event will Prospect solicit proxies to adjourn the special meeting of Prospect stockholders or consummate the Merger beyond the date by which it may properly do so under its amended and restated certificate of incorporation and the DGCL. The purpose of the Stockholder Adjournment Proposal is to provide more time for Prospect, the Prospect founders, Kennedy-Wilson and the Kennedy-Wilson Holders to make purchases of Public Shares or other arrangements that would increase the likelihood of obtaining a favorable vote on the Merger Proposal and the Charter Amendment Proposal and to meet the requirement that the holders of fewer than 30% of the Public Shares vote against the Merger Proposal and demand that their Public Shares be converted into cash. See the section entitled " Merger ProposalInterests of Prospect's Directors and Officers in the Merger" for additional information.
In addition to an adjournment of the special meeting of Prospect stockholders upon approval of the Stockholder Adjournment Proposal, the board of directors of Prospect is empowered under the DGCL to postpone the special meeting of Prospect stockholders at any time prior to the meeting being called to order. In such event, Prospect will issue a press release and take such other steps as it believes are necessary and practical in the circumstances to inform its stockholders of the postponement.
Consequences if the Stockholder Adjournment Proposal is not Approved
If a Stockholder Adjournment Proposal is presented at the special meeting of Prospect stockholders and is not approved by the stockholders, Prospect's board of directors may not be able to adjourn the special meeting of Prospect stockholders to a later date in the event that, based on the tabulated votes, there are not sufficient votes at the time of the special meeting of Prospect stockholders to approve the consummation of the Merger (because either the Merger Proposal or the Charter Amendment Proposal is not approved or because the holders of 30% or more of the Public Shares vote against the Merger Proposal and demand conversion of their Public Shares into cash). In such event, the Merger would not be completed and Prospect will be required to liquidate.
Recommendation and Required Vote
Adoption of the Stockholder Adjournment Proposal requires the affirmative vote of a majority of the issued and outstanding shares of Prospect common stock represented in person or by proxy at the special meeting of Prospect stockholders and entitled to vote thereon as of the record date. Adoption of the Stockholder Adjournment Proposal is not a condition to the adoption of any of the other proposals.
PROSPECT'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PROSPECT'S STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE STOCKHOLDER ADJOURNMENT PROPOSAL.
165
INFORMATION RELATED TO PROSPECT
Business of Prospect
Prospect is a blank check development stage company organized under the laws of the State of Delaware on July 9, 2007. Prospect was formed to acquire control of, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination, one or more businesses or assets in the financial services industry. Other than interest income, Prospect has generated no revenue to date. Since its IPO in November 2007, Prospect has been actively engaged in identifying a suitable business combination candidate. Prior to executing the Merger Agreement, Prospect's efforts were limited to meeting with potential target companies, service professionals and other intermediaries to discuss their companies, the background of their management and their combination preferences to evaluate possible business combinations.
Offering Proceeds Held in Trust
On November 20, 2007, Prospect completed its IPO of 25,000,000 units. Each unit consists of one share of its common stock, $0.0001 par value per share, and one warrant. Each warrant sold in the IPO entitles the holder to purchase from Prospect one share of common stock at an exercise price of $7.50. Prospect's units began publicly trading on November 15, 2007. Prospect's Public Warrants and common stock have traded separately since December 3, 2007. The public offering price of each unit was $10.00, and the IPO raised gross proceeds of $250,000,000 in its IPO. Of the gross proceeds: (i) Prospect deposited $241,750,000 into a Trust Account at JP Morgan Chase Bank, NA, maintained by Continental Stock Transfer & Trust Company, as trustee, which included $10,000,000 of contingent underwriting discount (the underwriters have agreed to forgo $4,000,000 of deferred underwriting compensation otherwise payable to them in connection with, and in accordance with the terms of, the underwriting agreement for the IPO); (ii) the underwriters received $7,500,000 as underwriting discount (excluding the deferred underwriting fees); and (iii) Prospect retained $700,000 for offering expenses, plus $50,000 for working capital. In addition, Prospect deposited into the Trust Account $5,250,000 that it received from the private placement of 5,250,000 Sponsors Warrants to Flat Ridge Investments LLC, an entity affiliated with David A. Minella, Prospect's Chairman and Chief Executive Officer, LLM Structured Equity Fund L.P. and LLM Investors L.P., entities affiliated with Patrick J. Landers, Prospect's President and a director, and CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), a corporation affiliated with William Landman, one of Prospect's directors.
The Trust Account will not be released until the earlier of the consummation of a business combination or the liquidation of Prospect. The Trust Account contained approximately $ as of , 2009 (the record date). If the Merger with Kennedy-Wilson is consummated, the Trust Account will be released to Prospect, less the amounts paid to holders of Public Shares who vote against the Merger and elect to convert their shares of common stock into their pro-rata share of the Trust Account.
The holders of Public Shares will be entitled to receive funds from the Trust Account only in the event of Prospect's liquidation or if such stockholders seek to convert their respective shares into cash and the Merger is completed. In no other circumstances will a stockholder have any right or interest of any kind to or in the Trust Account.
Fair Market Value of Target Business
Under Prospect's amended and restated certificate of incorporation and the underwriting agreement for Prospect's IPO, the initial target business that Prospect acquires must have a fair market value equal to at least 80% of the balance of Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount). Prospect's board of directors has determined that this test was met in connection with its acquisition of Kennedy-Wilson. Further,
166
Prospect has received an opinion from Houlihan Smith that, as of the date of such opinion, this test has been met.
Stockholder and Warrantholder Approvals
Prospect will proceed with the Merger only if the holders of a majority of the Public Shares voting on the Merger Proposal at the special meeting of Prospect stockholders vote in favor of the Merger Proposal. The Prospect founders have agreed to vote their common stock issued prior to the IPO on the Merger Proposal in accordance with the vote of holders of a majority of the Public Shares present in person or represented by proxy and entitled to vote at the special meeting of Prospect stockholders. If the holders of 30% or more of the Public Shares vote against the Merger Proposal and properly demand that Prospect convert their Public Shares into their pro rata share of the Trust Account, then Prospect will not consummate the Merger. In this case, Prospect will be forced to liquidate.
In addition, Prospect will only proceed with the Merger if the Charter Amendment Proposal is approved by the affirmative vote of a majority of the outstanding shares of Prospect common stock as of the record date and the Warrant Amendment Proposal is approved by the affirmative vote of the majority of the outstanding shares of Prospect common stock issuable upon exercise of the Public Warrants as of the record date.
Liquidation If No Business Combination
Prospect's amended and restated certificate of incorporation provides for the termination of Prospect's corporate existence and mandatory liquidation if Prospect does not consummate a business combination by November 14, 2009. If Prospect has not completed a business combination by such date, its corporate existence will cease except for the purposes of winding up its affairs and liquidating, pursuant to Section 278 of the DGCL. This has the same effect as if Prospect's board of directors and stockholders had formally voted to approve its dissolution pursuant to Section 275 of the DGCL. Accordingly, limiting Prospect's corporate existence to a specified date as permitted by Section 102(b)(5) of the DGCL removes the necessity to comply with the formal procedures set forth in Section 275 (which would have required Prospect's board of directors and stockholders to formally vote to approve its dissolution and liquidation and to have filed a certificate of dissolution with the Delaware Secretary of State). Instead, Prospect will notify the Delaware Secretary of State in writing on the termination date that its corporate existence is ceasing, and include with such notice payment of any franchise taxes then due to or assessable by the state.
If it fails to complete a business combination by November 14, 2009, Prospect anticipates notifying the trustee of the Trust Account to begin liquidating such assets promptly after November 14, 2009 and anticipates that it will take no more than ten business days to effectuate such distribution. Prospect's founders have waived their rights to participate in any liquidation distribution with respect to their founders shares. There will be no distribution from the Trust Account with respect to Prospect's warrants, which will expire and become worthless. Also, as there may be no funds available to pay the costs associated with the implementation and completion of the liquidation and distribution, David A. Minella, LLM Structured Equity Fund L.P. and LLM Investors L.P. have agreed to advance Prospect the funds necessary to complete such liquidation (currently anticipated to be no more than $15,000) and have agreed not to seek repayment for such expenses.
In connection with the liquidation, Prospect will distribute to the holders of Public Shares, in proportion to their respective amounts of Public Shares, an aggregate sum equal to the amount in the Trust Account, inclusive of any interest thereon, plus remaining net assets (subject to its obligations under the DGCL to provide for claims of credits as described below). Prospect's founders have waived their rights to participate in any liquidation distribution with respect to the founders shares. As a consequence of the provisions of Prospect's amended and restated certificate of incorporation and such
167
waivers, a liquidating distribution will be made only with respect to the Public Shares and no liquidating distribution will be made with respect to any other shares of Prospect capital stock. There will be no distribution from the Trust Account with respect to the Prospect warrants, which will expire and become worthless.
The per-share liquidation price for the Public Shares as of , 2009, the record date for the special meeting of Prospect stockholders, is approximately $ . The proceeds deposited in the Trust Account could, however, become subject to the claims of Prospect's creditors (which could be prior to the claims of the holders of Public Shares and could include vendors and service providers that Prospect has engaged to assist it in connection with its search for a target business and that are owed money by it, as well as target businesses themselves and there is no assurance that the actual per-share liquidation price will not be less than $ , due to those claims. David A. Minella and each of LLM Structured Equity Fund L.P. and LLM Investors L.P. have agreed that if Prospect liquidates prior to the consummation of a business combination, they will be jointly liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by Prospect for services rendered or contracted for or products sold to Prospect, other than with respect to amounts claimed by any third-party who has not executed a waiver (even if such waiver is subsequently found to be invalid and unenforceable). Prospect cannot assure you that they would be able to satisfy those obligations. Pursuant to the underwriting agreement between Prospect and Citigroup, Prospect agreed not to commence its due diligence investigation of any operating business which it sought to acquire or obtain the services of any vendor without using its best efforts to obtain an agreement pursuant to which such party would waive any claims against the Trust Account. As of the date of the proxy statement/prospectus, Prospect has received waiver agreements from each of its vendors other than its independent registered accounting firm and Kennedy-Wilson with respect to certain provisions of the Merger Agreement. There is currently an outstanding balance to Prospect's independent registered accounting firm of approximately $112,000 and Prospect intends to pay such fees in full in accordance with its past practices. Further, under the Merger Agreement, Kennedy-Wilson agreed to waive all rights, title and claims to the Trust Account, except for $10,000,000, in case of breach by Prospect of its no-shop/non-solicit provision. Accordingly, Prospect cannot assure you that the per-share distribution from the Trust Account, if it liquidates, will not be less than $9.88, plus interest, due to claims of creditors.
Prospect's holders of Public Shares will be entitled to receive funds from the Trust Account only in the event of the expiration of its corporate existence and its liquidation or if they seek to convert their respective shares into cash upon the initial business combination that the stockholder voted against and that is completed by Prospect. In no other circumstances will a stockholder have any right or interest of any kind to or in the Trust Account.
Under Sections 280 through 282 of the DGCL, stockholders may be liable for claims by third parties against a corporation to the extent of distributions received by them. Pursuant to Section 280, if the corporation complies with certain procedures intended to ensure that it makes reasonable provisions for all claims against it, including a 60 day notice period during which any third-party claims can be brought against the corporation, a 90 day period during which the corporation may reject any claim brought and an additional 150 day waiting period before any liquidating distributions are made to stockholders, any liability of a stockholder with respect to a liquidating distribution is limited to the lesser of such stockholder's pro rata share of the claim or amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the liquidation. Prospect will seek to conclude the process as soon as possible and as a result does not intend to comply with those procedures.
Because Prospect will not be complying with those procedures, Prospect is required, pursuant to Section 281 of the DGCL, to adopt a plan that will provide for Prospect's payment, based on facts known to Prospect at such time, of (i) all existing claims, (ii) all pending claims and (iii) all claims that
168
may be potentially brought against Prospect within the subsequent 10 years. Accordingly, Prospect would be required to provide for any creditors known to Prospect at that time or those that Prospect believes could be potentially brought against Prospect within the subsequent 10 years prior to distributing the funds held in the Trust Account to Prospect's stockholders. All claims that may be potentially brought against Prospect may not be properly assessed. As such, Prospect's stockholders could potentially be liable for any claims to the extent of distributions received by them in a liquidation and any liability of Prospect's stockholders may extend well beyond the third anniversary of such liquidation. Accordingly, third parties may seek to recover from Prospect's stockholders amounts owed to them by Prospect.
Additionally, if Prospect is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against Prospect that is not dismissed, any distributions received by Prospect's stockholders in Prospect's liquidation might be viewed under applicable debtor/creditor and/or bankruptcy laws as either a "preferential transfer" or a "fraudulent conveyance." As a result, a bankruptcy court could seek to recover all amounts received by Prospect's stockholders in Prospect's liquidation. Furthermore, because Prospect intends to distribute the proceeds held in the Trust Account to Prospect's stockholders as soon as possible after Prospect's liquidation, this may be viewed or interpreted as giving preference to Prospect's stockholders over any potential creditors with respect to access to or distributions from Prospect's assets. Furthermore, Prospect's board of directors may be viewed as having breached their fiduciary duties to Prospect's creditors and/or may have acted in bad faith, thereby exposing Prospect's board of directors and Prospect to claims of punitive damages by paying Prospect's stockholders from the Trust Account prior to addressing the claims of creditors and/or complying with certain provisions of the DGCL with respect to Prospect's liquidation. Claims may be brought against Prospect for these reasons.
Competition
In identifying, evaluating and selecting a target business for a business combination, Prospect has encountered and may continue to encounter intense competition from other entities having a business objective similar to Prospect's, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic acquisitions. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than Prospect. Prospect's ability to acquire larger target businesses is limited by its available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore:
169
Due to any of these factors, Prospect has faced competitive disadvantage in negotiating and consummating a business combination.
Properties
Prospect maintains its principal executive offices at 9130 Galleria Court, Suite 318, Naples, Florida. Teleos Management, L.L.C., a company that is affiliated with Daniel Gressel, one of Prospect's directors, and LLM Capital Partners LLC, an entity affiliated with Patrick J. Landers, Prospect's President and a director, are providing general and administrative services, including office space, utilities and administrative support, pursuant to a letter agreement between them and Prospect. Prospect agreed to pay Teleos Management, L.L.C., $4,500 per month and LLM Capital Partners LLC, $3,000 per month for these services (amended December 31, 2008 to $4,083.15 and $2,722,10, respectively). Prospect considers its current office space, combined with the other office space otherwise available to its executive officers, adequate for its current operations.
Employees
As of August 31, 2009, Prospect had three executive officers. These individuals are not obligated to devote any specific number of hours to Prospect's matters and have and intend to continue to devote only as much time as they deem necessary to its affairs and receive no salary or similar compensation. Prospect does not believe the value of these services to be significant to its operating results. Prospect does not intend to add any additional full time employees prior to the consummation of a business combination. None of Prospect's employees is covered by a collective bargaining agreement.
Periodic Reporting and Audited Financial Statements
Prospect has registered its units, common stock and Public Warrants under the Exchange Act and has reporting obligations, including the requirement that it file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Exchange Act. Prospect will provide, at no additional charge, copies of these reports, proxy and information statements and other information upon request to its address at 9130 Galleria Court, Suite 318, Naples, Florida 34109, or by telephone at (239) 254-4481. These reports, proxy statements and other information, and related exhibits and schedules may also be inspected and copied at the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet site that contains reports, proxy and information statements and other information filed electronically by Prospect with the SEC, which are available at http://www.sec.gov .
In accordance with the requirements of the Exchange Act, Prospect's filings will contain financial statements audited and reported on by its independent registered public accountants. In addition, Prospect is providing its stockholders with audited financial statements of Kennedy-Wilson as part of this proxy statement/prospectus to assist them in assessing Kennedy-Wilson. These financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP").
Prospect is required to have its internal control procedures audited, as required by the Sarbanes-Oxley Act, however, Kennedy-Wilson may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal controls of the post-Merger entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete the Merger.
170
Legal Proceedings
There is no material litigation currently pending against Prospect or any members of its management team in their capacity as such.
Current Directors and Executive Officers of Prospect
Name
|
Age | Position | |||
---|---|---|---|---|---|
David A. Minella |
57 | Chairman of the Board and Chief Executive Officer | |||
Patrick J. Landers |
53 | Director and President | |||
James J. Cahill |
46 | Chief Financial Officer and Secretary | |||
Michael P. Castine |
54 | Director | |||
William Cvengros |
60 | Director | |||
Michael Downey |
65 | Director | |||
Daniel Gressel |
55 | Director | |||
William Landman |
56 | Director | |||
John Merchant |
60 | Director |
David A. MinellaChairman of the Board and Chief Executive Officer. Mr. Minella has been Prospect's Chairman and Chief Executive Officer since its inception in July 2007. Mr. Minella has been the managing member of Minella Capital Management LLC, a financial services advisory firm, since December 2006 and the managing member of Flat Ridge Investments LLC, a private investment vehicle, since July 2007. Between 1997 and March 2007, Mr. Minella served as the Chief Executive Officer and a director of Value Asset Management LLC, or VAM, a strategic investment management holding company. At VAM, Mr. Minella was responsible for its overall business strategy, acquisitions and financial results. Under Mr. Minella's leadership, VAM acquired a controlling interest in five separate investment management firms: Dalton Hartman Greiner and Maher, New York, NY; Harris Bretall Sullivan and Smith, San Francisco, CA; Hillview Capital Advisors, LLC, New York, NY; Grosvenor Capital Management LP, Chicago, IL; and MDT Advisers LLC, Cambridge, MA. All of the original acquisitions have been sold. From 1995 to 1997, Mr. Minella was the President and Chief Executive Officer of the asset management division of Liechtenstein Global Trust, or LGT, a wealth and asset management firm, where he was responsible for the overall business strategy and financial results. During Mr. Minella's tenure as LGT's Chief Executive Officer, he also led LGT's acquisition of Chancellor Capital Management, a large United States equity investment firm. Mr. Minella originally joined the LGT group in 1987 as the head of its United States subsidiaries, GT Capital Management and GT Global. Mr. Minella established its United States mutual fund business through the broker- dealer community, reestablished LGT's institutional separate account capabilities, and developed the firm's global equity sector expertise. Currently, Mr. Minella serves as a director of Lindsell Train Japan Fund and Lindsell Train Global Media Fund, both offshore hedge funds managed out of London, UK. In addition, Mr. Minella is a member of the Executive Council at Bunker Hill Capital Management, a private equity firm in Boston, Massachusetts, the former Chairman of the board of directors of MDT Advisers LLC and a former board member of the Investment Company Institute. Mr. Minella holds a B.S. in accounting from Bentley College.
Patrick J. LandersDirector and President. Mr. Landers has been a director and Prospect's President since August 2007. Mr. Landers currently serves as the President and Chief Executive Officer of Annascaul Advisors LLC, a FINRA member firm, and a managing director of LLM Capital Partners LLC, a private equity firm based in Boston. Mr. Landers has served in these capacities since 2003 and 2004, respectively. From 2001 to 2003, Mr. Landers was President of Landers Partners LLC, a financial advisory firm that he founded. From 1981 until 2001, Mr. Landers was an investment banker at Dillon, Read & Co. Inc., an investment banking firm, and subsequently at UBS AG, an investment banking firm, after UBS AG's acquisition of Dillon, Read & Co. Inc. Mr. Landers has served as a
171
director of The Endurance International Group, Inc., a web hosting company. Mr. Landers has also served as a director of Connell Limited Partnership, an industrial conglomerate, Haas Publishing Company, a publishing company, and Student/Sponsor Partners, a New York educational foundation established to help disadvantaged youth attain a quality high school education. Mr. Landers is a graduate of Williams College and received his M.P.P.M. from Yale University.
James J. CahillChief Financial Officer and Secretary. Mr. Cahill has been Prospect's chief financial officer and secretary since September 2007. Mr. Cahill has served as the Chief Financial Officer of Minella Capital Management LLC, an entity affiliated with David A. Minella, Prospect's Chairman and Chief Executive Officer, since October 2007. From 2004 to August 2007, Mr. Cahill was the managing member of Milestone Business Developments LLC, a financial advisory firm that he co-founded. In 1995, Mr. Cahill joined Value Asset Management LLC, or VAM, a strategic investment management holding company, as a Vice President. From January 2001 to 2004, Mr. Cahill served as an Executive Vice President and the Chief Financial Officer of VAM and from December 2001 to 2004, Mr. Cahill served as a director. At VAM, Mr. Cahill was responsible for acquisitions and financial administration. From August 2002 to June 2004, Mr. Cahill was the Chief Financial Officer of MDT Advisers LLC, a subsidiary of VAM, and is a former director of that firm. Mr. Cahill received an M.B.A. from the University of Pennsylvania's Wharton School of Business in 1991 and a B.S. in mechanical engineering from Boston University in 1985.
Michael P. CastineDirector. Mr. Castine has been a director since August 2007. Mr. Castine has served as Chairman, Investment Management of Korn/Ferry International since August 2008. Since November 2007, Mr. Castine has been the Chief Executive Officer of Sugar Hill Investments, LLC, or Sugar Hill, a private investment office and consulting firm which he founded. Previously Mr. Castine served as the President of Dover Management LLC, an investment advisory firm, from 2003 to 2007, and a member of Dover Corporate Responsibility Management LLC, a mutual fund investment firm, from 2005 to 2007. From 1999 to 2003, Mr. Castine served as a partner and global sector head in the executive search division of TMP Worldwide. Prior to 1999, Mr. Castine was a partner of the Highland Group, an executive recruiting firm, which he and his partners sold to TMP Worldwide in 1999. Previously, from 1987 to 1997, Mr. Castine was employed by Spencer Stuart, an executive recruiting firm, where he built the investment management practice and co-headed the financial services practice including investment management, investment banking, insurance, real estate, private banking and private equity on a global platform. Mr. Castine also served as the Director of International Communication and Information for the National Security Council from 1986 to 1987 and as the Deputy Director of the Office of Private Sector Initiatives in the White House under President Ronald Reagan from 1981 to 1984. In addition, from 1979 to 1981, he worked for the United States House of Representatives as an aid to Congressman Jack Kemp. Mr. Castine currently serves on the board of several nonprofit organizations including Brunswick School, the Communities in Schools Leadership Council, Connecticut Chapter of the Knights of Malta, and the Ronald Reagan Presidential Library Foundation. Mr. Castine has a masters degree in public administration from Harvard University and a B.A. in political science from Fredonia College.
William CvengrosDirector. Mr. Cvengros has been a director since August 2007. Mr. Cvengros is the managing member and Chief Executive Officer of SJC Capital LLC, his personal consulting and investment business, which was formed in 2002. Mr. Cvengros joined National Retirement Partners, Inc., a retirement plan advisory services firm, in an advisory capacity in March 2005, and has served as Chairman of the board of directors since December 2005. From 2002 to 2004, Mr. Cvengros was a venture partner and advisory board member of the Edgewater Funds, a private equity firm. From its inception in 1998 until its sale in 2005, Mr. Cvengros was Chairman of the board of directors of PacketVideo Corporation, a privately-held company providing wireless multi-media software and services for mobile applications. From 1994 to 2000, Mr. Cvengros served as the Chief Executive Officer, President and a director of PIMCO Advisors Holdings L.P., a publicly traded investment
172
management firm. From 1986 to 1994, he served as Chairman of the board of directors of Pacific Investment Management Company, an investment management firm, and from 1990 to 1994, he served as Vice Chairman of the board of directors and chief investment officer of Pacific Life Insurance Company, an insurance company. Mr. Cvengros previously served as a director of HK Enterprise Group, a producer of gourmet foods, and ACG Corporation, an aviation equipment trust sponsored by Pacific Life. Mr. Cvengros received an M.B.A. from Northwestern University's Kellogg Graduate School of Management in 1972 and a B.A. in economics from the University of Notre Dame in 1970. Mr. Cvengros is also a Chartered Financial Analyst.
Michael DowneyDirector. Mr. Downey has been a director since September 2007. Since 2003, Mr. Downey has been a private investor. In May 2003, Mr. Downey was appointed as an independent consultant to Bear Stearns, Inc., an investment banking and securities brokerage firm, and since that time he has been responsible for the procurement of independent research according to a 2003 settlement agreement between the SEC, NASD (now the FINRA), New York Stock Exchange, and ten of the largest United States investment firms to address issues of conflicts of interest within their businesses. From 1997 to December 2003, Mr. Downey was the managing partner of Lexington Capital, L.L.C., a private investment advisory firm. From 1993 to 1996, Mr. Downey was a private investor. From 1968 to 1993, Mr. Downey was employed at Prudential Securities, Inc., an investment firm, in various roles, most recently as Chairman and Chief Executive Officer of Prudential Mutual Fund Management. Mr. Downey currently serves as Chairman of the board of directors of Asia Pacific Fund, Inc., a closed-end fund, and a director of The Merger Fund, an open-end mutual fund, and Alliance Bernstein Mutual Funds. Formerly, Mr. Downey served as a director of Value Asset Management LLC. Mr. Downey received an M.B.A. from Syracuse University and a B.A. in economics from Le Moyne College.
Daniel GresselDirector. Mr. Gressel has been a director since August 2007. Mr. Gressel formed Teleos Management, L.L.C., a hedge fund management firm, in 1991 and since such time has served as its President, managing member and portfolio manager. Prior to forming Teleos Management, L.L.C., Mr. Gressel was a portfolio manager at G.T. Capital Management, an investment management firm, from 1988 to 1991. From 1986 to 1988, he worked as an economist for G.T. Management (Asia) in Hong Kong and, from 1984 to 1986, he traded futures and options for his own account on the Comex and New York Futures Exchange. Mr. Gressel currently serves as a director of Teleos Asset Management, LLC and the Yankee Institute, a public policy think tank. Mr. Gressel received a B.S. in business administration from Ohio State University, and an M.A. and Ph.D. in economics from the University of Chicago.
William LandmanDirector. Mr. Landman has been a director since September 2007. Mr. Landman has been a Vice President and director of CMS Fund Advisors, Inc., an investment advisory firm, since its inception in 2002. Mr. Landman joined CMS Investment Resources, Inc., a broker-dealer firm, and CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), an insurance and investment firm, as a principal in 1987. Mr. Landman has served as a Vice President of CMS Investment Resources, Inc. since 1987, and has served as a director of that firm since May 2003. Mr. Landman has served as a Vice President and a director of CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.) since May 2003. Mr. Landman received a J.D. from the University of Pittsburgh Law School and a B.A. from the University of Pittsburgh. Mr. Landman is admitted to the Florida and Pennsylvania Bars.
John Merchant, C.P.A.Director. Mr. Merchant has been a director since October 2007. Mr. Merchant is the owner and a director of Cullen, Murphy & Co., P.C., a public accounting firm located in Massachusetts, and has served as its President since 1996. Mr. Merchant has been employed by the firm since 1981 and, prior to becoming President, held various positions including staff accountant, manager, and Vice President. Mr. Merchant is a certified public accountant and received a
173
B.A. degree in accounting, an M.S. degree in finance, and an M.S. degree in taxation from Bentley College.
Meetings and Committees of the Board of Directors of Prospect
Prospect is managed under the direction of its board of directors. Its board of directors is divided into three classes of directors and each class serves a three year term. The Prospect board of directors presently has an audit committee, nominating committee and acquisition committee. During the fiscal year ended December 31, 2008, Prospect's board of directors held four meetings, the audit committee held five meetings and the acquisition committee met once. The nominating committee did not meet in 2008. In 2009, Prospect's board of directors held four meetings, the audit committee held four meetings and the acquisition committee met twice. Prospect expects its directors to attend all board and any committee meetings and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. Each of Prospect's current directors attended at least 75% of the aggregate number of meetings of the board and its committees for which they were members in 2008, with the exception of William Landman who attended 50% of such meetings and Daniel Gressel who attended 71% of the meetings. Prospect does not have a policy regarding director attendance at annual meetings, but encourages the directors to attend if possible.
Independence of Directors
AMEX requires that a majority of Prospect's board of directors must be composed of "independent directors," which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company's board of directors would interfere with the director's exercise of independent judgment in carrying out the responsibilities of a director.
Prospect's board of directors has determined that each of Michael P. Castine, William Cvengros, Michael Downey, Daniel Gressel and John Merchant is an independent director as such term is defined under the rules of AMEX and Rule 10A-3 of the Exchange Act.
Audit Committee
Prospect's board of directors has established a standing audit committee, which consists of Michael P. Castine, William Cvengros, Daniel Gressel and John Merchant as the chairman, each of whom has been determined to be "independent" as defined in Rule 10A-3 of the Exchange Act and the rules of the AMEX.
The audit committee's duties, which are specified in our audit committee charter, include, but are not limited to:
174
For more information about the audit committee's duties, please see the audit committee charter, which is available on Prospect's website at http://www.prospectac.com under the caption "Investor RelationsGovernance" and which is attached as Exhibit 99.1 to Prospect's Annual Report on Form 10-K filed with the SEC on March 31, 2008.
Nominating Committee
Prospect's board of directors has established a standing nominating committee, which consists of Michael P. Castine, William Cvengros, Daniel Gressel and Michael Downey, each of whom is an independent director under the AMEX Company Guide. The nominating committee is responsible for overseeing the selection of persons to be nominated to serve on Prospect's board of directors. The nominating committee considers persons identified by its members, management, stockholders, investment bankers and others.
For more information about the nominating committee's duties, please see the nominating committee charter, which is attached as Exhibit 99.2 to Prospect's Annual Report on Form 10-K filed with the SEC on March 31, 2008.
Acquisition Committee
Prospect's board of directors has established a standing acquisition committee, which consists of David A. Minella, Patrick J. Landers and Michael Downey. The acquisition committee is responsible for considering potential target businesses for Prospect's initial business combination. Pursuant to Prospect's amended and restated by-laws, Prospect's board of directors did not have authority to consider this Merger until the acquisition committee first unanimously recommended such Merger to Prospect's board of directors.
175
PROSPECT'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
Prospect was formed on July 9, 2007 to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more operating business in the financial services industry. Prospect's initial business combination must be with a business or businesses whose collective fair market value is in excess of 80% of the balance of Prospect's Trust Account (excluding the amount held in the Trust Account representing a portion of the underwriters' discount).
On November 20, 2007, Prospect issued and sold 25,000,000 units in its IPO. Each of Prospect's units consist of one share of Prospect's common stock, $0.0001 par value per share, and one warrant. Each warrant sold in the IPO entitles the holder to purchase one share of common stock at an exercise price of $7.50. Prospect's units began publicly trading on November 15, 2007. Prospect's Public Warrants and common stock have traded separately since December 3, 2007. The public offering price of each unit was $10.00, and the IPO raised gross proceeds of $250,000,000. Of the gross proceeds: (i) Prospect deposited $241,750,000 into a Trust Account at JP Morgan Chase Bank, NA, maintained by Continental Stock Transfer & Trust Company, as trustee, which included $10,000,000 of contingent underwriting discount (the underwriters have agreed to forgo $4,000,000 of deferred underwriting compensation otherwise payable to them in connection with, and in accordance with the terms of, the underwriting agreement for the IPO); (ii) the underwriters received $7,500,000 as underwriting discount (excluding the contingent underwriting discount); and (iii) Prospect retained $700,000 for offering expenses, plus $50,000 for working capital. In addition, Prospect deposited into the Trust Account $5,250,000 that it received from the private placement of 5,250,000 Sponsors Warrants to Flat Ridge Investments LLC, an entity affiliated with David A. Minella, Prospect's Chairman and Chief Executive Officer, LLM Structured Equity Fund L.P. and LLM Investors L.P., entities affiliated, with Patrick J. Landers, Prospect's President and a director, and CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), a corporation affiliated with William Landman, one of Prospect's directors. The $247,000,000 held in the Trust Account will not be released until the earlier of (i) the completion of the initial business combination or (ii) Prospect's liquidation. Therefore, unless and until an initial business combination is consummated, the proceeds held in the Trust Account will not be available to Prospect, other than amounts required to pay taxes on any interest income earned on the Trust Account balance and up to $2,750,000 of interest income earned on the Trust Account balance, net of income taxes payable on such amount, which can be released to Prospect to fund working capital requirements. As of , 2009, (the record date) approximately $ was held in deposit in the Trust Account, including $10,000,000 of deferred underwriting compensation (the underwriters have agreed to forgo $4,000,000 of deferred underwriting compensation otherwise payable to them in connection with, and in accordance with the terms of, the underwriting agreement for the IPO, Prospect intends to use the funds released from the Trust Account (i) to pay Prospect stockholders who exercise conversion rights, (ii) to pay Prospect holders of Public Warrants in connection with the Cash Exchange, (iii) to pay expenses related to the Merger, (iv) to pay the deferred underwriting compensation, and (v) to pay investment banker's and advisor's fees and to use the remaining funds released from the Trust Account for working capital and general corporate purposes.
To fund pre-offering expenses associated with its IPO, Flat Ridge Investments LLC, LLM Structured Equity Fund L.P. and LLM Investors L.P. advanced an aggregate of $200,000 to Prospect in exchange for a promissory note, without interest, which was repaid from the proceeds of its IPO.
176
Recent Events
On September 8, 2009, Prospect signed the Merger Agreement pursuant to which it will acquire Kennedy-Wilson. If the Merger is completed, Kennedy-Wilson Holders, will receive an aggregate of 26 million shares of Prospect common stock (each share of Kennedy-Wilson common stock shall automatically convert into the right to receive 3.8031 shares of Prospect common stock and each share of Kennedy-Wilson preferred stock shall automatically convert into the right to receive 105.6130 shares of Prospect common stock), minus any shares of Prospect common stock that would otherwise have been issuable to Kennedy-Wilson Holders of Dissenting Shares, plus shares issued in lieu of fractional shares. Based on the closing market price of $9.79 per share on September 8, 2009, the last trading day of Prospect common stock prior to the announcement of the Merger Agreement, the Initial Shares had an aggregate value of $254.5 million. Based on the closing market price of Prospect common stock of $ per share on , 2009 (the record date), the Initial Shares had an aggregate value of $ . Prospect anticipates using approximately $12.3 million of the net proceeds in its Trust Account to consummate the Merger, including transaction expenses, but not including payments with respect to the conversion of Public Shares. Merger expenses will include professional fees for legal and accounting services, deferred underwriting compensation of $6,000,000 (the underwriters have agreed to forgo $4,000,000 of deferred underwriting compensation otherwise payable to them in connection with, and in accordance with the terms of the underwriting agreement, for the IPO), plus $3,000,000 in cash and the reimbursement or reasonable out-of-pocket expenses not to exceed $30,000, to Citigroup for acting as Prospect's financial advisor in connection with the Merger, a financial advisory fee of $1,500,000, plus the reimbursement of reasonable out-of-pocket expenses, as well as 375,000 shares of Prospect common stock to De Guardiola (to be held by its parent company, De Guardiola Holdings, Inc.) for acting as Prospect's financial advisor in connection with the Merger, and $85,000, plus the reimbursement of reasonable out-of-pocket expenses not to exceed $5,000 that will be paid to Houlihan Smith for the fairness opinion it issued in connection with the Merger. The balance of the proceeds held in the Trust Account, which Prospect anticipates will be approximately $ , will be used to fund conversions into cash of its Public Shares, to pay Prospect warrantholders in connection with the Cash Exchange, and to finance the operations of Kennedy-Wilson's business.
Results of Operations, Financial Condition and Liquidity and Capital Resources
Through July 13, 2009, Prospect's efforts have been limited to organizational activities, activities relating to its IPO, activities relating to identifying and evaluating prospective acquisition candidates, and activities relating to general corporate matters. Prospect has neither engaged in any operations nor generated any revenues, other than interest income earned on the proceeds of its private placement and IPO.
For the year ended December 31, 2008, Prospect had a net income of $1,511,215, consisting of net interest income of $3,808,688 less costs attributable to organization, formation and general and administrative expenses of $679,661, state taxes of $740,724 and a net provision for federal income taxes of $877,088. For the period from July 9, 2007 (date of inception) through December 31, 2007, Prospect had net income of $615,198, consisting of interest income of $1,080,541 less costs attributable to organization, formation and general and administrative expenses of $72,845, state taxes of $75,577 and a net provision for federal income taxes of $316,921.
For the six months ended June 30, 2009, Prospect had a net loss of $257,384 as compared to net income of $1,268,185 for the six months ended June 30, 2008. The decrease in net income was primarily due to the decrease in interest rates, resulting in a decrease in net interest income of $2,487,436, combined with an increase in professional fees of $81,370, partially offset by a decrease in formation, operating, rent and office expenses of $14,879 and a decrease in state and federal taxes of $1,028,358.
177
For the period from July 9, 2007 (date of inception) through June 30, 2009, Prospect had a net income of $1,869,029, consisting of net interest income of $4,930,379 less costs attributable to organization, formation and general and administrative expenses of $1,202,213, state taxes of $816,301 and a net provision for federal income taxes of $1,042,836.
Through June 30, 2009 Prospect did not engage in any significant operations. Prospect's activities from inception through December 31, 2008 were to prepare for its IPO and begin the identification of a suitable business combination candidate.
Prospect consummated its IPO of 25,000,000 units on November 20, 2007. Gross proceeds raised from its IPO were $250,000,000. Prospect paid a total of $7,500,000 in underwriting discounts and commissions and $705,004 for other costs and expenses related to the offering. After deducting the underwriting discounts and commissions and the offering expenses, the total net proceeds including $5,250,000 from the sale of the Sponsors Warrants from the offering were $247,044,996, and an amount of $247,000,000, including $10,000,000 of deferred underwriting commissions (the underwriters have agreed to forgo $4,000,000 of deferred underwriting compensation otherwise payable to them in connection with, and in accordance with the terms of, the underwriting agreement for the IPO), was deposited into a Trust Account at JP Morgan Chase Bank, NA, maintained by Continental Stock Transfer & Trust Company, as trustee. Since it is anticipated that Prospect's capital stock will be the sole consideration in the Merger, the proceeds held in the Trust Account as well as any other net proceeds not expended will be used to finance the operations of Kennedy-Wilson. Prospect believes it will have sufficient available funds outside of the Trust Account to operate through November 14, 2009, assuming that the business combination is not consummated during that time.
The following table reconciles the amount of net proceeds from its IPO and private placement to the amount held in the Trust Account at June 30, 2009:
Amounts placed in Trust Account |
$ | 247,000,000 | ||
Interest income received |
5,003,944 | |||
Amounts withdrawn for payment of federal & state taxes |
(2,387,057 | ) | ||
Amounts withdrawn for working capital |
(1,080,900 | ) | ||
Total held in Trust Account |
$ | 248,535,987 | ||
Prospect believes that the funds available to it outside of the Trust Account of $50,000 and up to $2,750,000 of the interest earned on the Trust Account will be sufficient to allow it to operate through at least November 14, 2009, assuming that an initial business combination is not consummated. As of June 30, 2009, Prospect anticipated that it would incur expenses through November 14, 2009 for the following purposes:
As indicated in Prospect's condensed financial statements included elsewhere in this proxy statement/prospectus, at June 30, 2009, Prospect had cash held out of trust of approximately $9,425 and approximately $100,957 in accounts payable and accrued expenses. Prospect expects to incur significant costs pursuing the Merger. There is no assurance that Prospect will be able to consummate the Merger by November 14, 2009. If the Merger is not consummated by November 14, 2009, Prospect will be required to dissolve and liquidate. Prospect's financial statements do not include any adjustments that may result from the outcome of this uncertainty.
178
Contractual Obligations
On September 4, 2009, Prospect signed an engagement letter with De Guardiola engaging it to act as Prospect's non-exclusive financial advisor in respect of the Merger. De Guardiola will receive a fee of $1,500,000 as well as 375,000 shares of Prospect common stock (to be held by its parent company, De Guardiola Holdings, Inc.), plus reimbursement for reasonable out-of-pocket expenses. On August 20, 2009, Prospect signed an engagement letter with Houlihan Smith to provide certain opinions in respect of the Merger. The fee for providing the opinion is $85,000 and will be paid prior to closing the Merger, plus the reimbursement of reasonable out-of-pocket expenses not to exceed $5,000. The fee to Houlihan Smith was fully paid on September 18, 2009. On August 5, 2009, Prospect also signed an engagement letter with Citigroup as its financial advisor in connection with the Merger. Citigroup will receive a cash fee of $3,000,000 to be paid upon the consummation of the Merger, plus the reimbursement of reasonable out-of-pocket expenses not to exceed $30,000. The underwriters of Prospect's IPO have agreed to reduce their deferred commission payable upon the consummation of the Merger from $10,000,000 to $6,000,000.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with general accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. Prospect has determined that it currently is not subject to any critical accounting policies.
New Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. Under SFAS 157, fair value measurements are disclosed by level within that hierarchy. In February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157 , which permits a one-year deferral for the implementation of SFAS 157 with regard to non-financial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis. Prospect adopted SFAS 157 for the fiscal year beginning January 1, 2008, except for the non-financial assets and non-financial liabilities for which delayed application is permitted until Prospect's fiscal year beginning January 1, 2009. The adoption of the remaining provisions of SFAS 157 is not expected to have a material impact on Prospect's financial position, results of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an Amendment of FASB No. 115 ("SFAS 159"). SFAS 159 allows a company to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and financial liabilities on a contract-by-contract basis, with changes in fair value recognized in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007 and will be applied prospectively. The adoption of SFAS 159 did not have a significant impact on Prospect's financial statements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations ("SFAS 141R") which establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any
179
non-controlling interest in the acquiree. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R will have an impact to Prospect for any acquisitions consummated on or after January 1, 2009.
In December 2007, the FASB released SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51 ("SFAS 160"), which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent and for the deconsolidation of a subsidiary. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interest of the parent and the interests of the non-controlling owners. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. SFAS 160 may have a material impact to Prospect with respect to any acquisitions consummated on or after January 1, 2009.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.
Going Concern and Management's Plan and Intentions
Prospect's funds may not be sufficient to maintain Prospect until a business combination is consummated. In addition, there can be no assurance that Prospect will consummate a business combination prior to November 14, 2009. Pursuant to Prospect's amended and restated certificate of incorporation, if Prospect is unable to consummate a timely business combination, it would have to liquidate and return the funds held in the Trust Account to holders of Public Shares as previously described. These factors raise substantial doubt about Prospect's ability to continue as a going concern.
Off-Balance Sheet Arrangements
Other than contractual obligations incurred in the normal course of business, Prospect does not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets or any obligations arising out of a material variable interest in unconsolidated entity.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is the sensitivity of income to changes in interest rates, foreign exchanges, commodity prices, equity prices, and other market-driven rates or prices. To date, Prospect's efforts have been limited to organizational activities, activities relating to its IPO and the identification of a target business. Prospect has neither engaged in any operations nor generated any revenues. As the proceeds from its IPO held in the Trust Account have been invested in short term investments, Prospect's only market risk exposure relates to fluctuations in interest.
Prospect has not engaged in any hedging activities since its inception on July 9, 2007. Prospect does not expect to engage in any hedging activities with respect to the market risk to which it is exposed.
Disclosure Controls and Procedures
Prospect maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in Prospect's periodic reports filed with the SEC pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules, regulations and related forms, and that such information is accumulated and communicated to Prospect's management on a timely basis to allow decisions regarding required disclosure.
180
Management, including its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined under Rules 13a-15(e) and 15(d)-15(e) of the Exchange Act) as of June 30, 2009. Based upon that evaluation, management has concluded that its disclosure controls and procedures were effective as of the end of the period covered by this proxy statement/prospectus.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there was no change in its internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, Prospect's internal control over financial reporting.
181
Company Overview
Founded in 1977, Kennedy-Wilson is a diversified, international real estate company that provides investment and real estate services. Kennedy-Wilson has grown from an auction business in one office into a vertically-integrated operating company with over 300 professionals in 21 offices throughout the U.S. and Japan. Kennedy-Wilson is an industry leader, currently owning real estate (through its closed-end funds and joint ventures) representing $2.9 billion in aggregate value and managing over 40 million square feet of residential, multifamily and commercial real estate, including 10,000 apartment units, throughout the U.S. and Japan. Kennedy-Wilson's operations are defined by two core business units: KW Investments and KW Services.
KW Investments
Kennedy-Wilson formalized its investing activities in 1999 by creating an investment arm, KW Investments. Through this investment arm, Kennedy-Wilson co-invests through separate accounts and closed-end funds in the acquisition of properties including office, multi-family, retail, hotels, residential condominiums and land for development. Kennedy-Wilson aims to create value with its hands-on approach and seeks to harvest value through an exit strategy which is established at the time of acquisition. KW Investments consists of more than 20 investment professionals whose time is dedicated to sourcing, analyzing, executing and managing fund and joint venture investments. In June 2009, Kennedy-Wilson formed KW Capital Markets with the primary function of raising private and institutional capital, assisting with investor relations, and managing other strategic initiatives.
Kennedy-Wilson is a strategic investor and a manager of portfolio investments both in wholly-owned projects and in partnership with institutional investors in the U.S. and Japan. Since 1999, Kennedy-Wilson has invested over $2.0 billion of equity across office, multifamily, retail, hotels, and residential properties, representing more than $5.8 billion in aggregate value through its joint ventures and closed-end funds.
Kennedy-Wilson has historically raised equity for its investments in three ways: through its joint-ventures, closed-end funds and on its own behalf.
182
the publicly-traded Kenedix, is no longer owned by or affiliated with Kennedy-Wilson. Kennedy-Wilson sold all of its interest in Kenedix at a substantial gain.
In 2005, Kennedy-Wilson re-entered the Japanese market when it formed KW Investment Co., Ltd. to acquire multifamily properties in several key markets in Japan with Wachovia Development Corporation as its partner. Since 2005, KW Investment Co. has invested more than $200 million of equity in the acquisition of 2,410 multifamily units, totaling approximately one million square feet and representing an aggregate value of approximately $545 million. Including its prior investment experience through what is now Kenedix, Kennedy-Wilson has invested a total of approximately $1.7 billion in the acquisition of 81 investments, primarily in multifamily and office properties.
Kennedy-Wilson manages two Double Bottom-Line funds that seek to provide market rate returns for investors and positive social, economic and environmental benefits to the communities in which they invest. The Double Bottom-Line Funds are typically geographically focused on a specific target market.
KW Services
Through its services group, KW Services, Kennedy-Wilson offers a comprehensive line of real estate services for the full life-cycle of real estate ownership and investment. KW Services provides property management, auction marketing, brokerage, construction and trust management services to financial institutions, other institutional clients and individual investors. Through its extensive network of property managers and brokers, KW Services provides access to real-time market knowledge and trends, along with proprietary deal flow to KW Investments.
183
Services group conducts live and online auctions and executes accelerated marketing programs for all types of residential and commercial real estate.
Kennedy-Wilson Strengths
Kennedy-Wilson believes it has a unique platform from which to execute its investment and services strategy. Kennedy-Wilson believes that its platform provides significant competitive advantages over other real estate buyers operating stand-alone or investment-focused firms and may allow Kennedy-Wilson to generate superior risk-adjusted returns. Kennedy- Wilson's investment strategy focuses on investments that offer significant appreciation potential through intensive property management, leasing, repositioning, redevelopment and the opportunistic use of capital.
Kennedy-Wilson competitive advantages include:
184
Strategy and Target Markets
Kennedy-Wilson's investment style and philosophy have been consistent to its approach over the past decade and seeks to drive the ongoing strategy for future investments. The three core fundamentals include:
Kennedy-Wilson continues to focus primarily on equity real estate investments, utilizing leverage where determined appropriate. In addition, Kennedy-Wilson also acquires real estate-related financings, such as a first trust deeds. Specifically, the investment strategy of Kennedy-Wilson focuses on the following situations:
Kennedy-Wilson intends to pursue acquisition opportunities for its current investment platforms as follows:
Kennedy-Wilson's initial target submarkets, which include Southern California, the San Francisco Bay area, the Puget Sound area (Greater Seattle), Hawaii and the Greater Tokyo area, share certain similar characteristics that Kennedy-Wilson believes can create investment opportunities. Among these commonalities are dense populations, high barriers to entry, scarcity of land and supply constraints.
185
KW Services plays a critical role in supporting Kennedy-Wilson's investment strategy and various platforms. KW Services intends to continue to facilitate the gathering of local market intelligence and market data for evaluating and valuing investments, generate proprietary transaction flow and create value once an investment is made through efficient implementation of asset management or repositioning strategies.
Industry and Market Overview
United States
Kennedy-Wilson believes that the acquisition outlook for 2010 and beyond is one of opportunity. Since capitalization rates have begun to rise and based on Kennedy-Wilson's market analysis, well-capitalized investors will potentially be able to purchase properties at significant discounts to historical cost that may provide significant cash-on-cash returns. The recent credit crunch in the financial markets has dried up liquidity. As a result, many financial institutions have been forced to mark-to-market or sell both their performing and non-performing assets in order to firm up their balance sheets. Kennedy-Wilson believes that U.S. financial institutions and public traded companies, such as Real Estate Investment Trusts ("REITs"), will continue to be forced sellers of their real estate hard assets and loans for the next several quarters.
Due to the current disarray in the financial markets, many U.S. real estate markets are experiencing a downturn in occupancy and property values. Unlike the last cycle, this downturn has been driven by the lack of liquidity and the tightening of the credit markets rather than by an oversupply of new product. Kennedy-Wilson believes that underlying real estate fundamentals have remained solid, particularly in major metropolitan and downtown areas where supply constraints exist, and companies continue to consolidate in proximity to their corporate headquarters. Also, downward pricing pressures exist that create potential buying opportunities. Kennedy-Wilson will seek to exploit the opportunities caused by the current economic downturn and closed capital markets by identifying the cities and submarkets that have the most predictable, near-term positive indicators.
Kennedy-Wilson believes the recent economic, capital and credit markets events will create tremendous buying opportunities as properties may be purchased at significant discounts to historical cost. Many asset dispositions will result from: (i) forced liquidation through bankruptcy proceedings; (ii) companies reducing real estate portfolios to raise cash to shore up their balance sheets; and (iii) highly leveraged property owners who will have loans come due between 2009 and 2011 and will be unable to refinance.
As sellers are under greater pressure to move assets off of their balance sheets, Kennedy-Wilson's strong sourcing relationships will position Kennedy-Wilson as the buyer of choice to acquire properties at steep discounts. Sellers will look to firms that they have relationships with and can execute quickly and discreetly. Kennedy-Wilson has long-standing relationships with healthy regional and international lenders who have expressed an ability and willingness to offer financing for investments.
Although interest rates remain low, the lack of available debt has constrained highly-leveraged buyers. Kennedy-Wilson believes that the timing of the real estate market cycle combined with Kennedy-Wilson's deep market relationships, systematic research process and cross-platform synergies will be crucial to its potential success.
Japan
Kennedy-Wilson predicts that Japan, while still subject to the same market forces affecting economies across the globe, will likely experience a downturn that is shorter than that in other industrialized economies as the Japanese banking system remains strong relative to its peers. Kennedy-Wilson believes that the country's economy is in a better position to weather current economic conditions relative to the economies of certain other countries because over the past decade Japanese
186
households generally have saved money, and companies have steeply reduced their debt as a proportion of GDP. In the current credit environment, as in the U.S., highly-leveraged investors in Japan have been forced to reduce their debt resulting in a rise in capitalization rates.
Japan's current demographic trends include an influx of migration to major cities creating strong demand for housing. Kennedy-Wilson's research shows that real estate fundamentals have remained strong in Greater Tokyo's residential market, and, in particular, in Tokyo's three major wards: Minato-ku, Shibuy-ku, and Setagaya-ku. With diminishing supply of new inventory due to stricter building regulations imposed in 2007, rents for quality assets are expected to remain strong while vacancy rates remains stable. Kennedy-Wilson expects that properties in the Greater Tokyo area that are newer and of higher quality will remain target assets for acquisition by many institutional investors.
Competition
Kennedy-Wilson competes with a range of both local and national real estate firms, individual investors and corporations. Because of Kennedy-Wilson's unique combination of businesses, it competes with brokerage and property management companies as well as companies that invest in real estate and distressed notes. The brokerage and property management businesses are both highly fragmented and competitive. Kennedy-Wilson competes with real estate brokerage companies on the basis of its relationship with property owners, quality of service, and commissions charged. Kennedy-Wilson competes with property management and leasing firms also on the basis of its relationship with clients, the range and quality of services provided, and fees and commissions charged. Kennedy-Wilson's investment operations compete to varying degrees with real estate investment partnerships and other investment companies. Kennedy-Wilson competes with these other investors on the basis of its relationship with the sellers and the amounts that it pays for the investments acquired.
Kennedy-Wilson differentiates itself from other firms in the industry with its full service, investment oriented structure. Whereas most other firms use an investment platform to obtain additional service business revenue, Kennedy-Wilson uses its service platform to enhance the investment process and ensure the alignment of interest with its investors.
Since each market and opportunity is unique, different competitors surface in each transaction. Due to its proprietary sourcing capabilities, Kennedy-Wilson often acquires properties in off-market transactions where it faces limited competition. In more widely marketed transactions, Kennedy-Wilson's significant on-the-ground operations provide insight into market conditions and trends that it believes allows for informed acquisition strategies.
In contrast to Kennedy-Wilson's vertically-integrated platform and deep market knowledge, many large institutional players act as "asset allocators" and rely on firms similar to Kennedy-Wilson and the third-party brokerage community to source their deals. These competitors tend to focus on large, widely-marketed "Class A" properties that do not require significant on-the-ground expertise, hands-on redevelopment or local market knowledge.
Kennedy-Wilson also competes for investment opportunities with regional investors and developers who understand the local markets but lack the equity to close deals with their own capital.
Due to its reputation for certainty of close, capital availability and discretion in publicizing deals, Kennedy-Wilson is often able to acquire properties even when it is not the highest bidder. Kennedy-Wilson's relationship-driven approach, reputation for certainty of close, local market knowledge and on-the-ground experience strongly position Kennedy-Wilson when compared to its competition.
Kennedy-Wilson's Markets
Kennedy-Wilson believes that real estate is a local business. With this in mind, Kennedy-Wilson intends to continue to focus on the markets that it knows well through both its investment experience
187
and service businesses. Kennedy-Wilson intends to continue to target markets that it has been successful in historically due to its in-depth knowledge and relationships.
Kennedy-Wilson's focused research process begins with a macro analysis (economic growth, overall market cycles, property specific cycles, availability and pricing, ranking/evaluation) and ends with a micro analysis (submarket/neighborhood analysis, site analysis, due diligence and risk/return analysis). Kennedy-Wilson will often leverage KW Services to access real-time market knowledge and trends to determine its investment analysis and strategy process and choices of markets/submarkets. This rigorous process continues to be a key driver of Kennedy-Wilson's investment decisions.
The choice of markets and submarkets for its investment strategy will be based on a research-driven process that involves five stages of extensive analysis.
In parallel with its thorough examination of market dynamics, Kennedy-Wilson conducts an in-depth risk management analysis on each of its acquisitions. This analysis applies various economic conditions and scenario forecasts that include changes to rental rates, operating expenses, interest rates, exit values and holding periods. Kennedy-Wilson uses this analysis to develop its disciplined pricing strategies.
188
This market analysis will help to determine the acquisition strategies for a variety of markets and submarkets that have the highest probability for near-term value appreciation and to develop operating and exit strategies that enhance returns and limit risk exposure.
Kennedy-Wilson Clients and Customers
Kennedy-Wilson has long and extensive relationships with a broad range of prominent institutions with which it has invested through joint venture and fund arrangements and for which it has provided services. These institutions include sovereign funds, financial institutions, insurance companies, pension funds, endowments, money managers and family offices.
Employees
As of August 3, 2009, Kennedy-Wilson had approximately 300 employees. Kennedy-Wilson considers its relationship with its employees to be good and has not experienced any interruptions of its operations as a result of labor disagreements.
Properties
Kennedy-Wilson's corporate headquarters is located in Beverly Hills, California. Kennedy-Wilson also has 20 other offices in 10 different states and one office in Japan. The Beverly Hills office operates as the main investment and asset management center for Kennedy-Wilson in the United States, while the Japan office is the main investment and asset management center for the Japanese operations. The remaining office locations primarily operate as property management satellites. In general, Kennedy-Wilson leases all of its offices. In addition, Kennedy-Wilson has on-site property management offices located within properties that it manages. The most significant terms of the leasing arrangements for Kennedy-Wilson's offices are the length of the lease and the rent. Kennedy-Wilson's leases have terms varying in duration. The rent payable under Kennedy-Wilson's office leases varies significantly from location to location as a result of differences in prevailing commercial real estate rates in different geographic locations. Kennedy-Wilson's management believes that except as provided below, no single office lease is material to its business, results of operations or financial condition. In addition, Kennedy-Wilson's management believes there is adequate alternative office space available at acceptable rental rates to meet Kennedy-Wilson's needs, although adverse movements in rental rates in some markets may negatively affect its profits in those markets when it enters into new leases.
The following table sets forth certain information regarding Kennedy-Wilson's corporate headquarters and regional office located in Austin, Texas.
Location
|
Use |
Approximate
Square Footage |
Lease Expiration | ||||||
---|---|---|---|---|---|---|---|---|---|
Beverly Hills, CA |
Corporate Headquarters | 16,000 | 12/31/2016 | ||||||
Austin, TX |
Regional Office; Disaster Recovery Office | 6,864 | 3/31/2012 |
Legal Proceedings
Kennedy-Wilson may be involved in various legal proceedings arising in the ordinary course of business, none of which is material to its business. From time to time, Kennedy-Wilson's real estate management division is named in "slip and fall" type litigation relating to buildings it manages. Kennedy-Wilson's standard management agreement contains an indemnity provision whereby the building owner indemnifies and agrees to defend its real estate management division against such claims. In such cases, Kennedy-Wilson is defended by the building owner's liability insurer.
189
Management
The current directors and executive officers of Kennedy-Wilson are as follows:
Name
|
Age | Position | |||
---|---|---|---|---|---|
William J. McMorrow | 62 | Chairman and Chief Executive Officer | |||
Mary Ricks | 45 | Co-CEO of KW Commercial Investment Group | |||
Freeman A. Lyle | 54 | Executive Vice President and Chief Financial Officer | |||
Barry S. Schlesinger | 68 | Co-CEO of KW Commercial Investment Group | |||
James A. Rosten | 51 | President of Kennedy-Wilson Properties | |||
Robert E. Hart | 51 | President of KW Multi-Family Management Group | |||
Donald J. Herrema | 57 | Executive Vice Chairman and CEO of KW Capital Markets | |||
Kent Mouton | 55 | Director | |||
Jerry R. Solomon | 58 | Director | |||
Norm Creighton | 74 | Director | |||
Thomas Sorell | 54 | Director | |||
Jeff Hudson* | 57 | Director | |||
Cathy Hendrickson | 62 | Director |
See the section entitled " The Director Election ProposalInformation About the Nominees and Executive Officers " for a brief description of the business experience of each Kennedy-Wilson executive officer and director that is expected to be appointed or elected as an executive officer or director of the combined company.
190
KENNEDY-WILSON'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the financial statements and related notes and the other financial information appearing elsewhere in this proxy statement/prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See the section entitled "Forward-Looking Statements" for more information. Actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors, including those discussed in "Risk Factors" and elsewhere in this proxy statement/prospectus.
In the interest of providing a more complete presentation of Kennedy-Wilson's financial performance since its inception in 1977, this discussion and analysis includes comparisons of: Kennedy-Wilson's consolidated financial results for the six months ended June 30, 2009 as well as Kennedy-Wilson's results for the period from 2006 through 2008.
Overview
Founded in 1977, Kennedy-Wilson is a diversified, international real estate company that provides investment and real estate services. Kennedy-Wilson has grown from an auction business in one office into a vertically-integrated operating company with over 300 professionals in 21 offices throughout the U.S. and Japan. Kennedy-Wilson is an industry leader, currently owning real estate (through its closed-end funds and joint ventures) representing $2.9 billion in aggregate value and managing over 40 million square feet of residential, multifamily and commercial real estate, including 10,000 apartment units, throughout the U.S. and Japan. Kennedy-Wilson's operations are defined by two core business units: KW Investments and KW Services.
Acquisitions, Dispositions, and Financings
Acquisitions
During the six months ended June 30, 2009, Kennedy-Wilson completed the following acquisition transactions:
Dispositions
During the six months ended June 30, 2009, Kennedy-Wilson completed the following disposition transactions:
191
Financings
Critical Accounting Policies
Basis of Presentation The consolidated financial statements include the accounts of Kennedy-Wilson and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In addition, Kennedy-Wilson evaluates its relationships with other entities to identify whether they are variable interest entities as defined by FASB Interpretation No. 46 (revised December 2003) Consolidation of Variable Interest Entities ("FIN 46R") and to assess whether it is the primary beneficiary of such entities. If the determination is made that Kennedy-Wilson is the primary beneficiary, then that entity is included in the consolidated financial statements in accordance with FIN 46R.
Revenue Recognition Management and leases fees and commissions revenues are accounted for in accordance with the provisions of SEC Staff Accounting Bulletin 104. Management fees for property
192
and asset management are recognized over time as earned based upon the terms of the management agreement.
Leasing fees that are payable upon tenant occupancy, payment of rent or other events beyond Kennedy-Wilson's control are recognized upon the occurrence of such events. In the case of real estate sales commissions, this generally occurs when escrow closes. In accordance with EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, Kennedy- Wilson records commission revenues and expenses on a gross basis. Of the criteria listed in the EITF, Kennedy-Wilson is the primary obligor in the transaction, does not have inventory risk, performs all, or part, of the service, has credit risk, and has wide latitude in establishing the price of services rendered and discretion in selection of agents and determination of service specifications.
Sales of real estate are recognized at the close of escrow when title to the real property passes to the buyer. Kennedy-Wilson follows the requirements for profit recognition as set forth by Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate.
In accordance with SEC Staff Accounting Bulletin No. 51 ("SAB 51"), Kennedy-Wilson records gains as a result of equity transactions by its subsidiaries in the consolidated statements of operations.
Investments in Joint Ventures Kennedy-Wilson has a number of joint venture interests, generally ranging from 5% to 50%, that were formed to acquire, manage, develop and/or sell real estate. Investments in joint ventures which Kennedy-Wilson does not control are accounted for under the equity method of accounting as Kennedy-Wilson can exercise significant influence, but does not have the ability to control the joint venture. An investment in joint ventures is recorded at its initial investment plus or minus Kennedy-Wilson's share of undistributed net income or loss and less distributions. Declines in value of Kennedy-Wilson's investment in joint ventures that are other than temporary are recognized when evidence indicates that such a decline has occurred.
Profit on the sales of real estate held by joint ventures that have continuing involvement are deferred until such time that the continuing involvement has been resolved and all the risks and rewards of ownership have passed to the buyer. Profit on sales to joint ventures in which Kennedy-Wilson retains an equity ownership interest results in partial sales treatment in accordance with the provisions of SFAS 66 and Statement of Position 78-9, thus deferring a portion of the gain on Kennedy-Wilson's continuing ownership percentage in the joint ventures.
One of Kennedy-Wilson's investments in joint ventures, KW Property Fund III, L.P. (the "Fund") is, for GAAP purposes, an investment company under the AICPA Audit and Accounting Guide Investment Companies. Thus, the Fund reflects its investments at fair value, with unrealized gains and losses resulting from changes in fair value reflected in earnings. Kennedy-Wilson has retained the specialized accounting for the Fund pursuant to EITF Issue No. 85-12, Retention of Specialized Accounting for Investments in Consolidation in recording its equity in joint venture income from the Fund.
Fair Value Measurements On January 1, 2008, Kennedy-Wilson adopted the provisions of FASB Statement No. 157, Fair Value Measurements, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Statement 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Statement 157 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.
Goodwill Goodwill results from the difference between the purchase price and the fair value of net assets acquired based upon the purchase method of accounting for business combinations. In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
193
Assets ("SFAS 142"), goodwill is no longer amortized, but instead is reviewed for impairment at least annually by Kennedy-Wilson management. In testing for impairment in accordance with SFAS 142, goodwill is assigned to the reporting unit based upon the amount of goodwill generated at the time of acquisition of the businesses by the reporting unit. An earnings multiple appropriate to the respective reporting unit was applied to the cash basis net operating income of the reporting unit. This process enables a fair approximation of the reporting unit's value, which is then compared to the net book value of the reporting unit. As a result of the evaluation performed of its goodwill as described above, Kennedy-Wilson has determined that there was no goodwill impairment as of December 31, 2008.
Long-Lived Assets Kennedy-Wilson reviews its long-lived assets (excluding goodwill) whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with Statement of Financial Accounting Standards No. 144 Accounting for Impairment or Disposal of Long-Lived Assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.
Discontinued Operations Kennedy-Wilson presents components as discontinued operations if the operations and cash flows of the component have been or will be eliminated from the ongoing operations in a disposal transaction where Kennedy-Wilson will not have any significant continuing involvement in the operations of the component after the disposal transaction. A component comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of Kennedy-Wilson. Because each of its real estate assets generally constitutes a discrete subsidiary, many assets that Kennedy-Wilson holds for sale in the ordinary course of business must be reported as a discontinued operation unless it has significant continuing involvement in the operations of the asset after its disposition. Furthermore, operating profits and losses on such assets are required to be recognized and reported as operating profits and losses on discontinued operations in the periods in which they occur. Interest expense is only allocated to discontinued operations to the extent that the interest is specific to the component.
Share-Based Payment Arrangements Kennedy-Wilson accounts for its share-based payment arrangements under the provisions of FASB Statement No. 123(R), Share-Based Payments. The statement requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the share-based award. The cost of employee services is recognized over the period during which an employee provides service in exchange for the share-based payment award.
Fair Value Option Effective January 1, 2008, Kennedy-Wilson adopted the provisions of FASB Statement No.159, The Fair Value Option for Financial Assets and Financial Liabilities ("Statement 159"). Statement 159 gives Kennedy-Wilson the irrevocable option to report most financial assets and financial liabilities at fair value on an instrument-by-instrument basis, with changes in fair value.
Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Beginning with the
194
adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, as of January 1, 2007, Kennedy-Wilson recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Prior to the adoption of FIN 48, Kennedy-Wilson recognized the effect of income tax positions only if such positions were probable of being sustained. There was no impact upon adoption. Kennedy-Wilson records interest related to unrecognized tax benefits in interest expense and penalties in selling, general, and administrative expenses.
Results of Operations
The following compares results of operations for the periods ending June 30, 2009 and June 30, 2008, as well as the years ended 2008, 2007, and 2006.
Kennedy-Wilson Consolidated Financial Results and Comparison of six months ended June 30, 2009 and six months ended June 30, 2008
Kennedy-Wilson's revenues for the six months ended June 30, 2009 and six months ended June 30, 2008 were $19.5 million and $17.0 million, respectively. Total operating expenses for the same periods were $20.6 million and $14.7 million, respectively. Kennedy-Wilson is reporting a loss of $4.5 million for the six months ended June 30, 2009 and net income of $0.2 million for the same period in 2008, before payment of its stock dividend.
Revenues
In the six months ended June 30, 2009, management and leasing generated revenues of $9.3 million (including related party fees of $2.7 million), representing 48% of Kennedy-Wilson's total revenue, compared to approximately $8.3 million (including approximately $3.9 million in related party fees) and 49% of total revenue in the six months ended June 30, 2008. Comparing the two six-month periods, management and leasing fees increased 11% primarily due to increased asset management fees associated with KW Property Funds II and III. Management and leasing fees include asset management, construction management, leasing services, engineering and other services to property owners.
Commission revenues in the six months ended June 30, 2009 decreased to $2.5 million (including approximately $0.3 million in related party fees), representing 13% of total revenues compared to commission revenues in the six months ended June 30, 2008 of $7.1 million (including related party fees of approximately $2.9 million). Acquisition fees decreased $3.6 million in the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. The decrease can be attributed primarily to the current disarray in the debt and equity markets, which has caused a reduction in the acquisition of commercial and apartment properties and the related acquisition fees. Kennedy-Wilson's brokerage activities provide clients and Kennedy-Wilson with development and implementation of marketing plans, sealed bid auctions and open bid auctions.
Rental income increased 22% to $1.3 million in the six months ended June 30, 2009 from $1.0 million in the six months ended June 30, 2008. Rental income includes rental and other income from properties in which Kennedy-Wilson holds a controlling interest. The acquisition of an office property in Japan in 2008 was the main cause for the increase in rental income.
Sale of real estate for the six months ended June 30, 2009 produced gross revenue of $6.3 million related to the sale of land in southern California to KW Property Fund III. The resulting gain was approximately $0.5 million. Kennedy-Wilson has a 5% investment in KW Property Fund III.
195
Interest and other income totaled approximately $0.2 million in the six months ended June 30, 2009, compared to $0.5 million in the six months ended June 30, 2008. The change was due to lower interest income on bank and escrow deposits, which resulted from lower interest rates in 2009. In addition, one of the notes receivable was paid off during the six months ended June 30, 2008.
Operating Expenses
Operating expenses in the six months ended June 30, 2009 were approximately $20.6 million, representing a 40% increase over $14.7 million in the six months ended June 30, 2008. This increase was due to the cost of real estate sold associated with the sale of land in southern California.
Commissions and marketing expenses increased to $1.4 million in the six months ended June 30, 2009 from $1.1 million in the six months ended June 30, 2008. The increase in commission expense corresponds to the higher percentage of auction fees in commission revenues in the first six months of 2009 compared to 2008, which incur the majority of commission expenses. As noted above, commission revenue for the first six months of 2008 included a greater component of acquisition fees, which incur a relatively minor portion of expenses.
Rental operating expenses in the six months ended June 30, 2009 and 2008 were approximately $0.7 million and $0.3 million, respectively. Rental operating expense includes operating expenses from properties, in which Kennedy-Wilson holds a controlling interest. The increase of 114% can be attributed to the consolidation of a condominium project acquisition beginning in June 2009 and a large apartment project consolidation starting in February 2008. The apartment project was consolidated for six months in 2009 in comparison to four and a half months in 2008.
Cost of real estate sold was $5.8 million for the six months ended June 30, 2009 and relates to the disposition of land in southern California and the sale of an apartment building in Northern California. Cost of real estate sold was zero for the six months ended June 30, 2008 as Kennedy-Wilson did not recognized any sales outside of joint venture partnerships.
Compensation and related expenses were approximately $10.0 million in the six months ended June 30, 2009, up 3% from $9.7 million in the six months ended June 30, 2008. The increase resulted from an expense of $0.6 million related to stock options granted during 2009.
General and administrative expenses were $2.3 million in the six months ended June 30, 2009, representing a 28% decrease from expenses of $3.2 million in the six months ended June 30, 2008. The reduction in general and administrative expenses was primarily attributable to approximately $0.5 million in cost cutting. Additionally, the acquisition of four commercial properties in the Los Angeles area increased the payroll reimbursements for property management services.
Depreciation and amortization expense decreased to $0.4 million in the six months ended June 30, 2009, a 12% decrease from $0.5 million in the six months ended June 30, 2008. The change was primarily due to the sale of an office building in southern California in 2008.
Equity in joint venture income was a loss of approximately $0.5 million during the six months ended June 30, 2009, a decrease of 130% from income of approximately $1.5 million recorded in the six months ended June 30, 2009. Kennedy-Wilson sold two assets during the first six months of 2008 as compared to one sale during the same period of 2009.
Non-Operating Items
Interest expense was $5.1 million in the six months ended June 30, 2009, an increase of 49% compared to approximately $3.4 million in the six months ended June 30, 2008. The increase was due, in part, to the debt service of approximately $1.0 million on a $30 million subordinate convertible loan
196
originated in November 2008. Additionally, the interest expense increased by approximately $0.4 million 2009 for two assets, in which Kennedy-Wilson holds a controlling interest.
Other than temporary impairment on available-for-sale security of $0.3 million represents the write-down of the value of a stock investment during the six months ended June 30, 2009. There was no write-down during the six months ended June 30, 2008.
The benefit from income taxes was approximately $2.2 million for the six months ended June 30, 2009, compared to the income tax provision of approximately $0.2 million for the six months ended June 30, 2008. The change was due to change in income before provision for income taxes.
Income of approximately $0.3 million attributable to a non-controlling interest in three properties was recognized for the six months ended June 30, 2009.
Kennedy-Wilson Consolidated Financial Results and Comparison of years ended December 31, 2008 and 2007
Notwithstanding the current disarray in the capital markets, especially the debt and equity markets that most significantly affect real estate, Kennedy-Wilson is uniquely positioned because it is a full service real estate operating company to take advantage of the opportunities arising from the current economic difficulties that affect real estate. In 2008, the general shortage of available equity and debt, was overcome through Kennedy-Wilson's extensive relationships in the capital markets that allowed Kennedy-Wilson to place debt for those properties that met Kennedy-Wilson's criteria as appropriate and potentially profit producing investments. This ability to properly provide for the capitalization of investments made available to Kennedy-Wilson, through its extensive relationships in the real estate markets, enables Kennedy-Wilson to acquire well located, income producing properties that are not distressed from owners that have distressed financial positions. Current economic conditions have not only made available to Kennedy-Wilson excellent buying opportunities but also have provided additional opportunities for our real estate service groups such as our auction group and our asset and property management divisions where experience and professional excellence is being sought by distressed real estate owners. Kennedy-Wilson is sensitive to the challenges of the current economic climate and as a vertically intergraded company, Kennedy-Wilson has the in-house expertise and skill sets to navigate through these challenging times by taking advantage of opportunities in real estate and the capital markets. Kennedy-Wilson has been implementing and continues to implement cost-savings measures across its business lines to maximize its competitive position.
Kennedy-Wilson's revenues for the year ended December 31, 2008 and the year ended December 31, 2007 were $32.8 million and $34.3 million, respectively. Total operating expenses for the same periods were $32.6 million and $43.2 million, respectively. Operating income included equity in income of joint ventures of $10.1 million for 2008 and $27.4 million for 2007. Net income attributable to Kennedy-Wilson before payment of its preferred stock dividend for the same periods was $0.6 million and $9.4 million, respectively.
197
Revenue
In 2008, management and leasing generated revenue of $19.1 million (including related party fees of $8.4 million), representing 58% of Kennedy-Wilson's total revenue, compared to approximately $20.1 million (including related party fees of approximately $10.3 million) and 59% of total revenue in 2007. Management and leasing fees include asset management, construction management, leasing services, engineering and other services to property operators. Management fees and leasing fees in aggregate decreased by approximately 5% primarily due to the decrease in the total number of multifamily properties under management. Lower interest rates and favorable loan terms resulted in increased number of building sale transactions in 2007, including some of the buildings managed by Kennedy-Wilson. Construction management fees declined primarily due to completion of major renovation projects.
Commission revenues in 2008 decreased 22% to $10.2 million (including approximately $4.3 million in related party fees), representing 31% of total revenues compared to commission revenues in 2007 of $13.2 million (including related party fees of approximately $8.9 million). Kennedy-Wilson's brokerage activities provide clients and Kennedy-Wilson with development and implementation of marketing plans, sealed bid auctions and open bid auctions. The increase in auction activity resulted in an increase of residential commissions of approximately $1.5 million in 2008. The decrease in transaction activity across all commercial asset classes led to a decrease of approximately $4.4 million in acquisition, disposition, and financing fees.
Rental income increased to $2.4 million in 2008 from $100,000 in 2007. Rental income was 7% of total revenue in 2008. Rental income includes rental and other revenue from properties, in which Kennedy-Wilson held a controlling interest. The acquisition of several assets, including an office building in Japan and an apartment project in California, was the main cause for the increase in rental income.
Interest and other income totaled approximately $1.1 million or 3% of total revenues in 2008, compared to approximately $0.9 million in 2007. Interest and other income includes interest on corporate notes receivable that are held as a result of investment sales, interest on cash investments and other miscellaneous sources of revenue. Most of the increase in interest and other income can be attributed to the gain on sale of an office building in southern California, partially offset by lower interest income on bank and escrow deposits, which resulted from lower interest rates in 2008.
Operating Expenses
Operating expenses in 2008 were approximately $32.6 million, representing a decrease of 25% from $43.2 million in 2007. The decrease in operating expenses was primarily due to decrease in compensation and related expenses.
Commissions and marketing expenses increased to $2.8 million in 2008 from $2.1 million in 2007. While most commission and marketing expenses decreased due to decreased commercial transactions, the auction commission and business development expenses combined increased by approximately $1 million.
Rental operating expense increased to $1.5 million in 2008 from $34,000 in 2007. Rental operating expense includes operating expenses from properties, in which Kennedy-Wilson held a controlling interest. The acquisition of several assets, including an office building in Japan and an apartment project in California, was the main cause for the increase in rental operating expense.
Compensation and related expenses were approximately $21.3 million in 2008, down 38% from $34.2 million in 2007. The decrease was primarily a result of decreased bonus pay of approximately $10.6 million.
198
General and administrative expenses were $6.1 million in 2008, representing a 5% decrease from 2007 expenses of $6.4 million. General and administrative expenses decreased slightly due to aggregate general cost cutting measures at the corporate level of approximately $0.7 million.
Depreciation and amortization expense increased to $0.9 million in 2008, a 82% increase from $0.5 million in 2007. The expense in 2008 increased as a result of the consolidation of large apartment project depreciation and amortization expenses in 2008.
Equity in joint venture income totaled approximately $10.1 million in 2008, a decrease of 63% compared to $27.4 million recognized in 2007. The revenue from joint venture investments includes income from the operation and sale of numerous real estate investments in the U.S. which are owned primarily in joint ventures with institutional investor partners. During 2008, six residential investments and one commercial investment were sold to third parties and Kennedy-Wilson recorded equity gain on those sales of approximately $0.3 million. In addition income of $4.3 million related to a participating loan investment was recognized in 2008. During 2007, ten residential investments, two commercial investments, and one land investment were sold to third parties and Kennedy-Wilson recorded equity gain on those sales of approximately $28.4 million.
Non-Operating Items
Interest expense was $8.6 million in 2008, an increase of 69% compared to approximately $5.1 million in 2007 due, in part, to $0.3 million in additional debt service under a junior subordinated note and debt service of $1.3 million for a new $15 million loan. Interest expense includes the amortization of loan fees and related loan costs in the amount of $0.5 million and $0.3 million for the years 2008 and 2007, respectively.
Other-than-temporary impairment on available-for-sale security, loss was $0.4 million and relates to Kennedy-Wilson's recognition of an impairment loss on a stock investment in 2008. There was no impairment loss or income recognized in 2007.
The provision for income taxes was approximately $0.6 million for 2008 compared to $4.4 million in 2007 as a result of the change in income before provision for income taxes.
Outside of joint ventures, there were no sales of real estate in 2008. In 2007, Kennedy-Wilson executed the sale of a commercial project in southern California for $39.4 million. Income from discontinued operations included the net gain of $2.8 million from this sale.
Net income attributable to the noncontrolling interests was approximately $0.05 million in 2008, a decrease of approximately 98% compared to approximately $2.4 million in 2007. The decrease was related to a non-controlling interest in a commercial project in southern California, which was sold in 2007.
Kennedy-Wilson Consolidated Financial Results and Comparison of years ended December 31, 2007 and 2006
Kennedy-Wilson's revenues for the year ended December 31, 2007 and the year ended December 31, 2006 were $34.3 million and $27.1 million, respectively. Total operating expenses for the same periods were $43.2 million and $34.6 million, respectively. Operating income included equity in income of joint ventures of $27.4 million for 2007 and $14.7 million for 2006. Net income attributable to Kennedy-Wilson net income for the same periods was $9.4 million and $6.0 million, respectively.
Revenues
In 2007, management and leasing generated revenue of $20.1 million (including related party fees of $10.2 million), representing 59% of Kennedy-Wilson's total revenue, compared to $16.6 million (including related party fees of $8.2 million) and 61% of total revenue in 2006. Management and
199
leasing fees include asset management, construction management, leasing services, engineering and other services to property operators. Management and leasing fees increased approximately 21% in 2007 due to increased fees earned by the property management group of $1.5 million, the asset management fees from a newly formed real estate fund and a disposition fee in 2007 of $1.4 million on the sale of a commercial property in southern California.
Commission revenues in 2007 increased 33% to $13.2 million (including related party fees of $8.9 million), representing 38% of total revenues compared to commission revenues in 2006 of $9.9 million (including related party fees of approximately $7.9 million). Kennedy-Wilson's brokerage activities provide clients and Kennedy-Wilson with development and implementation of marketing plans, sealed bid auctions and open bid auctions. Increased residential auction activity raised residential commission revenues by approximately $2.4 million in 2007. Commercial commissions also increased by nearly $0.5 million in 2007 due to acquisition and financing fees for several large transactions.
Rental income increased to $100,000 in 2007 from zero in 2006. Rental income includes rental and other income from properties, in which Kennedy-Wilson held a controlling interest. The acquisition of a commercial property in southern California contributed to the increase in rental income.
Interest and other income totaled approximately $0.9 million or 3% of total revenues in 2007, compared to approximately $0.6 million in 2006. Interest and other income includes interest on corporate notes receivable that are held as a result of investment sales, interest on cash investments and other miscellaneous sources of revenue.
Operating Expenses
Operating expenses in 2007 were approximately $43.2 million, representing an increase of 25% from $34.6 million in 2006. The increase was primarily due to an increase of compensation and related expenses by approximately $9.3 million.
Commissions and marketing expenses increased to $2.1 million in 2007 from $1.8 million in 2006. While the property management group commission and marketing expenses fell by approximately $0.3 million in 2007, the overall increase is primarily due to an increase of auction commission and marketing expenses of $0.6 million in 2007.
Rental operating expense totaled $34,000 in 2007 as compared to zero in 2006. Rental operating expense includes operating expenses from properties, in which Kennedy-Wilson holds a controlling interest. The increase was due to the acquisition of a commercial project in southern California.
Compensation and related expenses were approximately $34.1 million in 2007, up 37% from $24.9 million in 2006. The increase was primarily due to higher bonus accruals of approximately $7 million as well as increase in staff.
General and administrative expenses were $6.4 million in 2007 representing an 11% decrease from 2006 expenses of $7.2 million. General and administrative expenses decreased mostly due to a decrease in corporate general and administrative expenses of $0.8 million.
Depreciation and amortization expense decreased to $0.5 million in 2007, a 27% decrease from $0.7 million in 2006. The decrease was primarily due to amortization of acquired property management contracts, which were fully amortized in 2006.
Equity in joint venture income totaled approximately $27.4 million in 2007, an increase of 87% compared to $14.7 million realized in 2006. The revenue from joint venture investments includes income from the operation and sale of numerous real estate investments in the U.S. which are owned primarily in joint venture funds with institutional investor partners. During 2007, ten residential investments, two commercial investments, and one land investment were sold to third parties and Kennedy-Wilson recorded equity gain on those sales of approximately $28.4 million. During 2006, two
200
commercial buildings, and five apartment projects were sold to either third parties or joint ventures, in which Kennedy-Wilson retained an ownership interest. These dispositions contributed approximately $13.9 to the equity in joint venture income in 2006.
Non-Operating Items
In January 2006, Kennedy-Wilson sold a 20% interest in its wholly-owned apartment management division to Kenedix, Inc., a Japanese real estate company, for $9 million. A gain on the sale in the amount of $7.1 million was recognized after deduction of related expenses.
Interest expense was $5.1 million in 2007, an increase of 60% compared to approximately $3.2 million in 2006 due, in part, to additional corporate debt of $40 million issued in 2007. The debt service on this new loan totaled approximately $3.3 million in 2007.
The provision for income taxes was approximately $4.4 million for 2007 compared to $4.6 million in 2006 due to the impact of deferred income taxes.
Kennedy-Wilson executed the sale of a commercial project in southern California for $39.4 million. Income from discontinued operations included the net gain of $2.8 million from this sale. Outside of joint ventures, there were no sales of real estate in 2006.
Net income attributable to the non-controlling interest income was approximately $2.4 million in 2007, an increase of 317% compared to approximately $0.6 million in 2006. The increase was related to a non-controlling interest in a commercial project in southern California.
Liquidity and Capital Resources
Kennedy-Wilson's liquidity and capital resources requirements include expenditures for joint venture investments, real estate held for sale, distressed debt and working capital needs. Historically, Kennedy-Wilson has not required significant capital resources to support Kennedy-Wilson's brokerage and property management operations. Kennedy-Wilson finances its operations with internally generated funds and borrowings under Kennedy-Wilson's revolving lines of credit. Kennedy-Wilson's investments in real estate are typically financed by mortgage loans secured primarily by that real estate. These mortgage loans are generally nonrecourse in that, in the event of default, recourse will be limited to the mortgaged property serving as collateral. In some cases, Kennedy-Wilson guarantees a portion of the loan related to a joint venture investment, usually until some condition, such as completion of construction or leasing or certain net operating income criteria, has been met. Kennedy-Wilson does not expect these guarantees to materially affect liquidity or capital resources.
Historical Cash Flows
Net cash used in operating activities totaled $3.0 million for the six months ended June 30, 2009, a decrease of $10.0 million as compared to the six months ended June 30, 2008. The change was primarily due to the decrease in equity in joint venture income and the increase in deferred and accrued income taxes as well as accruals for expenses and other liabilities during the six months ended June 30, 2009.
Net cash used in operating activities totaled $14.7 million for the year ended December 31, 2008, a decrease of $0.1 million as compared to the year ended December 31, 2007. The change was primarily due to the decrease in net income and accruals for bonuses and income taxes, offset by lower equity in joint venture income and no gain on sale of commercial real estate during the year ended December 31, 2008.
Net cash used in operating activities totaled about $14.8 million for the year ended December 31, 2007, an increase of $7.8 million as compared to the year ended December 31, 2006. The change was primarily due to the increase in net income and accruals for bonuses and income taxes, offset by higher
201
equity in joint venture income and gain from sale of commercial real estate, during the year ended December 31, 2007.
Net cash used in investing activities totaled approximately $38.5 million for the six months ended June 30, 2009, a decrease of $36.5 million as compared to the six months ended June 30, 2008. The decrease was primarily due to decreased investment activity during the six months ended June 30, 2009.
Net cash used in investing activities totaled about $96.4 million for the year ended December 31, 2008, an increase of $102.2 million as compared to the year ended December 31, 2007. The increase was primarily driven by the use of cash for new investments, which included additional investment in the Japanese joint venture and acquisition of an apartment building, a condominium project, and land in California as well as an office building in Japan during the year ended December 31, 2008.
Net cash provided by investing activities totaled approximately $5.8 million for the year ended December 31, 2007, compared to net cash of about $3.6 million used in investing activities for the year ended December 31, 2006. The change was primarily due to the sale of an office building and other investments in California during the year ended December 31, 2007.
Net cash provided by financing activities totaled approximately $31.9 million for the six months ended June 30, 2009, a decrease of $45.4 million as compared to the six months ended June 30, 2008. The decrease was primarily due to no preferred stock issued during the six months ended June 30, 2009.
Net cash provided by financing activities totaled about $112.6 million for the year ended December 31, 2008, an increase of $94.7 million as compared to the year ended December 31, 2007. The increase was primarily due to issuance of preferred stock, additional borrowings under lines of credit, and fewer mortgage loan repayments from the sale of real estate during the year ended December 31, 2008.
Net cash provided by financing activities totaled about $17.9 million for the year ended December 31, 2007, an increase of $11.3 million as compared to the year ended December 31, 2006. The increase was primarily due to issuance of subordinated debentures, partially offset by higher repayments of lines of credit and repurchase of common stock during the year ended December 31, 2007.
To the extent that Kennedy-Wilson engages in additional strategic investments, including real estate, note portfolio, or acquisitions of other property management companies, it may need to obtain third party financing which could include bank financing or the public sale or private placement of debt or equity securities. Kennedy-Wilson believes that existing cash, plus capital generated from property management and leasing, brokerage, sales of real estate owned, collections from notes receivable, as well as its current lines of credit, will provide Kennedy-Wilson with sufficient capital requirements for the foreseeable future.
Under its current joint venture strategy, Kennedy-Wilson generally contributes property, expertise, and typically a fully funded initial cash contribution (without commitment to additional funding by Kennedy-Wilson). Capital required for additional improvements and supporting operations during lease-up and stabilization periods is generally obtained at the time of acquisition via debt financing or third party investors. Accordingly, Kennedy-Wilson generally does not have significant capital commitments with unconsolidated entities. Infrequently, there may be some circumstances when Kennedy-Wilson, usually with the other members of the joint venture entity, may be required to contribute additional capital for a limited period of time. Kennedy-Wilson believes that it has the capital resources, generated from its business activities and borrowing capacity, to finance any such capital requirements, and does not believe that any additional capital contributions to joint ventures will materially affect liquidity.
202
Kennedy-Wilson's need, if any, to raise additional funds to meet its capital requirements will depend on many factors, including the success and pace of the implementation of its strategy for growth. Kennedy-Wilson regularly monitors capital raising alternatives to be able to take advantage of other available avenues to support its working capital and investment needs, including strategic partnerships and other alliances, bank borrowings, and the sale of equity or debt securities. Kennedy-Wilson expects to meet the repayment obligations of notes payable and borrowings under lines of credit from cash generated by its business activities, including the sale of assets and the refinancing of debt. Kennedy-Wilson intends to retain earnings to finance its growth and, therefore, does not anticipate paying dividends.
Contractual Obligations and Commercial Commitments
At June 30, 2009, Kennedy-Wilson's contractual cash obligations, including debt, lines of credit, capital lease obligations and operating leases include the following:
|
Payments due by period | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Total |
Less than
1 year |
1 - 3 years | 4 - 5 years |
After
5 years |
||||||||||||
Contractual obligations |
|||||||||||||||||
Borrowings: |
|||||||||||||||||
Notes payable |
$ | 14,000,000 | $ | 14,000,000 | $ | | $ | | $ | | |||||||
Borrowings under lines of credit |
26,000,000 | | 26,000,000 | | | ||||||||||||
Mortgage loans payable |
53,071,000 | 26,956,000 | 26,115,000 | | | ||||||||||||
Subordinated debt |
70,000,000 | | | | 70,000,000 | ||||||||||||
Total borrowings |
163,071,000 | 40,956,000 | 52,115,000 | | 70,000,000 | ||||||||||||
Capital lease obligations |
62,000 | 21,000 | 21,000 | | | ||||||||||||
Operating leases |
8,863,000 | 1,753,000 | 2,602,000 | 1,424,000 | 3,084,000 | ||||||||||||
Total contractual cash obligations |
$ | 171,996,000 | $ | 42,730,000 | $ | 54,758,000 | $ | 1,424,000 | $ | 73,084,000 |
At December 31, 2008, Kennedy-Wilson's contractual cash obligations, including debt, lines of credit, capital lease obligations and operating leases include the following:
|
Payments due by period | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Total |
Less than
1 year |
1 - 3 years | 4 - 5 years |
After
5 years |
||||||||||||
Contractual obligations |
|||||||||||||||||
Borrowings: |
|||||||||||||||||
Notes payable |
$ | 21,188,000 | $ | 21,188,000 | $ | | $ | | $ | | |||||||
Borrowings under lines of credit |
13,500,000 | | 13,500,000 | | | ||||||||||||
Mortgage loans payable |
29,548,000 | 8,808,000 | 20,740,000 | | | ||||||||||||
Subordinated debt |
70,000,000 | | | | 70,000,000 | ||||||||||||
Total borrowings |
134,236,000 | 29,996,000 | 34,240,000 | | 70,000,000 | ||||||||||||
Capital lease obligations |
| | | | | ||||||||||||
Operating leases |
2,549,000 | 1,340,000 | 1,161,000 | 48,000 | | ||||||||||||
Total contractual cash obligations |
$ | 136,785,000 | $ | 31,336,000 | $ | 35,401,000 | $ | 48,000 | $ | 70,000,000 |
Off-Balance Sheet Arrangements
Kennedy-Wilson has provided guarantees associated with loans secured by assets held in various joint venture partnerships. The maximum potential amount of future payments (undiscounted)
203
Kennedy-Wilson could be required to make under the guarantees was approximately $68.5 million and $46.0 million at June 30, 2009 and December 31, 2008, respectively. Subsequent to June 30, 2009, several loans have been paid down, which reduced the guarantees to approximately $41.5 million. The guarantees expire by the year end of 2011 and Kennedy-Wilson's performance under the guarantees would be required to the extent there is a shortfall in liquidation between the principal amount of the loan and the net sales proceeds of the property. If Kennedy-Wilson were to become obligated to perform on these guarantees, it could have an adverse affect on its financial condition.
Impact of Inflation and Changing Prices
Inflation has not had a significant impact on the results of operations of Kennedy-Wilson in recent years and is not anticipated to have a significant impact in the foreseeable future. Kennedy-Wilson's exposure to market risk from changing prices consists primarily of fluctuations in rental rates of commercial and residential properties, market interest rates on residential mortgages and debt obligations and real estate property values. The revenues associated with the commercial services businesses are impacted by fluctuations in interest rates, lease rates, real property values and the availability of space and competition in the market place. Commercial service revenues are derived from a broad range of services that are primarily transaction driven and are therefore volatile in nature and highly competitive. The revenues of the property management operations with respect to rental properties are highly dependent upon the aggregate rents of the properties managed, which are affected by rental rates and building occupancy rates. Rental rate increases are dependent upon market conditions and the competitive environments in the respective locations of the properties. Employee compensation is the principal cost element of property management. Economic trends in 2009 were characterized by general decrease in commercial leasing volume in the U.S.
Qualitative and Quantitative Disclosures about Market Risk
The primary market risk exposure of Kennedy-Wilson relates to changes in interest rates in connection with its short-term borrowings, some of which bear interest at variable rates based on lender's base rate, Prime Rate, and LIBOR plus an applicable borrowing margin. These borrowings do not give rise to a significant interest rate risk because they have short maturities. Historically, Kennedy-Wilson has not experienced material gains or losses due to interest rate changes.
Interest Rate Risk
Kennedy-Wilson has established an interest rate management policy, which attempts to minimize its overall cost of debt, while taking into consideration the earnings implications associated with the volatility of short-term interest rates. As part of this policy, Kennedy-Wilson has elected to maintain a combination of variable and fixed rate debt.
The tables below represent contractual balances of Kennedy-Wilson's financial instruments at the expected maturity dates as well as the fair value at June 30, 2009, and December 31, 2008. The expected maturity categories take into consideration actual amortization of principal and do not take into consideration reinvestment of cash. The weighted average interest rate for the various assets and liabilities presented are actual as of June 30, 2009, and December 31, 2008. Kennedy-Wilson closely monitors the fluctuation in interest rates, and if rates were to increase significantly, Kennedy-Wilson
204
believes that it would be able to either hedge the change in the interest rate or to refinance the loans with fixed interest rate debt. All instruments included in this analysis are non-trading.
Recently Issued Accounting Pronouncements
In December 2007, the FASB issued FASB Statement No. 141(R), Business Combinations . Statement 141(R) requires most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at "full fair value" and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. Statement 141(R) is effective for periods beginning on or after December 15, 2008, and earlier adoption is prohibited.
In April 2008, the FASB issued FASB Staff Position FAS 142-3, "Determination of the Useful Life of Intangible Assets". FSP FAS 142-3 amends the factors that should be considered in developing
205
renewal or extension assumptions used to determine the useful life of a recognized intangible asset under Statement 142. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. Kennedy-Wilson is currently evaluating the impact, if any, of adopting FSP FAS 142-3 on its financial position and results of operations.
In November 2008, the FASB's Emerging Issues Task Force reached a consensus on EITF Issue No. 08-6, "Equity Method Investment Accounting Considerations". EITF 08-6 continues to follow the accounting for the initial carrying value of equity method investments in APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, which is based on a cost accumulation model and generally excludes contingent consideration. EITF 08-6 also specifies that other-than-temporary impairment testing by the investor should be performed at the investment level and that a separate impairment assessment of the underlying assets is not required. An impairment charge by the investee should result in an adjustment of the investor's basis of the impaired asset for the investor's pro-rata share of such impairment. In addition, EITF 08-6 reached a consensus on how to account for an issuance of shares by an investee that reduces the investor's ownership share of the investee. An investor should account for such transactions as if it had sold a proportionate share of its investment with any gains or losses recorded through earnings. EITF 08-6 also addresses the accounting for a change in an investment from the equity method to the cost method after adoption of Statement 160. EITF 08-6 affirms the existing guidance in APB 18, which requires cessation of the equity method of accounting and application of FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, or the cost method under APB 18, as appropriate. EITF 08-6 is effective for transactions occurring on or after December 15, 2008. Kennedy-Wilson does not anticipate that the adoption of EITF 08-6 will materially impact its financial position or results of operations.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
206
Prospect Executive Compensation
Compensation Discussion and Analysis
None of Prospect's executive officers has received any cash or other compensation for services rendered to it in any capacity. Commencing on November 14, 2007, the date of Prospect's prospectus related to its IPO, through the consummation of the initial business combination or its liquidation, pursuant to a letter agreement, Prospect has paid and will continue to pay Teleos Management, L.L.C., an entity affiliated with Daniel Gressel, one of Prospect's directors, and LLM Capital Partners LLC, an entity affiliated with Patrick J. Landers, Prospect's President and a director, LLM Structured Equity Fund L.P. and LLM Investors L.P., a fee of $4,500 and $3,000, respectively, per month for office space and administrative services, including secretarial support (amended December 31, 2008 to $4,083.15 and $2,722.10, respectively). This arrangement has been agreed to by Teleos Management, L.L.C. and LLM Capital Partners LLC for Prospect's benefit and is not intended to provide Mr. Gressel or Mr. Landers compensation in lieu of a salary. Prospect believes that such fees are at least as favorable as it could have obtained from an unaffiliated third-party. Other than the fees payable to Teleos Management, L.L.C. and LLM Capital Partners LLC, no compensation of any kind, whether from Prospect or any entity affiliated with it, including finder's fees, consulting fees or other similar compensation, will be paid to, awarded to, or earned by any of Prospect's initial stockholders, sponsors, officers or directors, in each case in any capacity, or to any of its respective affiliates, for any services rendered prior to or in connection with the consummation of Prospect's initial business combination. However, such individuals and entities will be reimbursed for any out-of-pocket expenses incurred in connection with activities on Prospect's behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. There is no limit on the amount of these out-of-pocket expenses; provided, however, that to the extent such out-of-pocket expenses exceed the available proceeds not deposited in the Trust Account and interest income of up to $2.75 million on the balance in the Trust Account (subject to the holdback of a sufficient amount of interest income to pay any due and unpaid taxes on such $2.75 million), such out-of-pocket expenses would not be reimbursed by Prospect unless Prospect consummates an initial business combination. Prospect's audit committee will review and approve all payments made to its founders, sponsors, officers and directors, and any payments made to members of Prospect's audit committee will be reviewed and approved by Prospect's board of directors, with the interested director or directors abstaining from such review and approval.
Compensation Committee Report
Without a compensation committee, Prospect's board of directors has reviewed and discussed the Compensation Discussion and Analysis with management, and based on such review and discussion, the board of directors determined that the Compensation, Discussion and Analysis be included in this proxy statement/prospectus.
Kennedy-Wilson Executive Compensation
Compensation Discussion and Analysis
Executive Compensation Philosophy and Objectives
Kennedy-Wilson's core compensation philosophy has been to pay its executive officers a competitive level of compensation that best reflects (i) individual performance, (ii) overall responsibility to Kennedy-Wilson, and (iii) performance of Kennedy-Wilson and its business units.
This philosophy was implemented for the executive officers (the "Named Executive Officers" or "NEOs") who are named in the Summary Compensation Table ("SCT") in 2008, through a combination of base salary, the opportunity to earn significant bonuses and executive benefits. As will
207
be described below, except in the case of the Chief Executive Officer ("CEO"), whose bonus is determined by Kennedy-Wilson's Compensation Committee of its board of directors ("KW Compensation Committee"), the CEO generally determines the bonuses to be paid to the other NEOs.
Elements of Compensation
Kennedy-Wilson generally utilizes three components of compensation: base salary, annual bonuses and benefits (in 2009, as discussed below, stock options were also issued). Due to Kennedy-Wilson's overall philosophy of maintaining a pay mix that results fundamentally in a pay-for-performance orientation for executives, in years prior to 2008 the most significant element of compensation for the NEOs was bonuses. While, as reflected in the SCT, bonuses for 2008 were much less than salary for 2008, this reflects the fact that the decline in Kennedy-Wilson's financial performance in 2008, as compared to prior years, made it appropriate to award much lower bonuses or no bonuses to the NEOs for that year.
Base Salary Base salary is determined by the level of the position within Kennedy-Wilson and the individual's current and sustained performance results. Except in the case of the CEO, whose base pay is set by the KW Compensation Committee, the base salary for the other NEOs is set by the CEO, in some cases after consultation with the KW Compensation Committee.
With respect to 2008, base salary for each of the NEOs was increased in the amounts set forth below. These modifications stemmed from the decision of the KW Compensation Committee (in the case of the CEO) and the decision of the CEO (in the case of the other NEOs) that such increases were appropriate in light of the responsibilities of the executives and their job performance,
Annual Bonus In general, the determination of the annual bonus payable to an NEO is a discretionary determination. While the NEO's individual performance is taken into account, a primary determinant of the bonus to be paid is the financial performance of the business unit over which the NEO has responsibility (in the case of the Chief Executive Officer and the Chief Financial Officer, the primary determinant is the financial performance of Kennedy-Wilson as a whole). The KW Compensation Committee determines the CEO's bonus based on its evaluation of both his and Kennedy-Wilson's performance. While the KW Compensation Committee does not determine the bonus for the other NEOs, it is consulted as part of the process by which the Chief Executive Officer determines or participates in the determination of bonuses for the other NEOs. Except as noted below, the bonus determination process does not take into account specific targets or metrics; instead, it is based on a discretionary evaluation by the KW Compensation Committee (in the case of the CEO) or the CEO (in the case of the other NEOs) of the performance of the executive and the business unit for which he or she has responsibility. The following bonus determinations were made for 2008:
208
Other Executive Benefits NEOs are entitled to employee benefits generally available to all full time employees (subject to fulfilling any minimum service period). These employee benefits include, among other things, vacation and health and welfare benefits generally available to all employees. Kennedy-Wilson believes these benefits are generally competitive with those offered by similar companies in the markets in which Kennedy-Wilson operates.
Kennedy-Wilson employees, including the NEOs (except for Mr. Schlesinger, who is an independent contractor) participate in a tax-qualified 401(k) plan, pursuant to which Kennedy-Wilson may match a certain portion of employee contributions. Kennedy-Wilson may annually match 50% of employee contributions to the plan, limited to employee contributions equal to 4% of compensation, but not to exceed $1,500 for any participant.
The Chief Executive Officer receives certain additional benefits, which includes a car allowance of $18,000 and the use of certain club memberships that are maintained by Kennedy-Wilson for business purposes only. Further details regarding these benefits are contained in the SCT and accompanying footnotes. These benefits are provided because the KW Compensation Committee has concluded that they are generally competitive with those provided to comparable executives or provide benefits to Kennedy-Wilson which are appropriate in light of their cost.
Employment Agreements
Kennedy-Wilson is a party to employment agreements with five of its six NEOs. Mr. Schlesinger provides his executive services as an independent contractor to the KW Commercial Investment Group and there is currently no contract in effect between him and Kennedy-Wilson.
Mr. McMorrow The employment agreement in effect with Mr. McMorrow generally provides for base salary of $950,000, a bonus at the sole discretion of the KW Compensation Committee, and insurance coverages and other benefits generally available to officers. In addition, it provides for entrance fees and monthly dues for two country clubs. Mr. McMorrow's agreement was amended effective February 1, 2009. The amended agreement extends through December 31, 2019. It further
209
provides that, in the event of a "Change in Control," as defined in the agreement, Mr. McMorrow would receive a payment equal to two times his average annual compensation over the preceding three years (the agreement previously provided for a payment in a similar amount if Mr. McMorrow was terminated after a change in control or his agreement was not renewed upon its expiration). It also generally provides that Mr. McMorrow will receive continued benefit coverage (as well as continued salary) for the remainder of the term of his employment agreement in the event of a qualifying termination of employment, which will occur if Mr. McMorrow dies, becomes disabled, is terminated without cause, or terminates after a Change in Control on account of a change in location or a material reduction in his duties. In connection with this amendment, Mr. McMorrow received a signing bonus of $2 million, which must be returned on a pro rata basis if he voluntarily terminates employment prior to the expiration of the term. The KW Compensation Committee determined that the 2009 amendments and signing bonus were appropriate additional elements of compensation to Mr. McMorrow in light of the critical role of Mr. McMorrow in the future success of Kennedy-Wilson.
Ms. Ricks Ms. Ricks entered into an employment agreement with Kennedy-Wilson effective February 1, 2009. The agreement extends through January 31, 2014. The employment agreement provides for base salary of $600,000, a bonus at the sole discretion of the KW Compensation Committee, and other benefits generally available to employees of Kennedy-Wilson. The employment agreement further provides that, in the event of a "Change in Control," as defined in the agreement, Ms. Ricks is entitled to receive a payment equal to two times her average annual compensation over the preceding three years. In the case of death or disability, Ms. Ricks is entitled to base salary, discretionary bonus and benefits to the date of termination. In the event Ms. Ricks is terminated by Kennedy-Wilson without cause, or terminates after a Change in Control on account of a change in location or a material reduction in her duties, she is entitled to the payment of base salary and benefits through the end of the term. If employment with Kennedy-Wilson is terminated by Ms. Ricks without cause, she is entitled to base salary and discretionary bonus (not benefits) to the date of termination. In connection with the execution of the agreement, Ms. Ricks received a signing bonus of $1 million, which is subject to return on a pro rata basis if she voluntarily terminates employment prior to the expiration of the term. The CEO determined (after consultation with the KW Compensation Committee) that the 2009 amendments and signing bonus were appropriate additional elements of compensation to Ms. Ricks in light of her important role in the future success of KW.
Mr. Hart Mr. Hart entered into an employment agreement with KW Multi-Family Management Group dated January 1, 2006, which has been subsequently amended and extended on a year-to-year basis. The employment agreement was most recently amended as of January 1, 2009 to extend the term through December 31, 2009. In addition to base salary of $600,000, the agreement provides for Mr. Hart's participation in the annual bonus pool equal to 20% of the net operating income of KW Multi-Family Management Group for the applicable calendar year, plus benefits generally available to employees of KW Multi-Family Management Group. In the event Mr. Hart's employment is terminated by KW Multi-Family Management Group without cause, Mr. Hart is entitled to receive base salary, participation in the bonus pool and benefits through the end of the term.
Mr. Rosten Mr. Rosten entered into an employment agreement with Kennedy-Wilson Properties dated January 1, 2001, which has been subsequently amended and extended on a year-to-year basis. The employment agreement was most recently amended as of January 1, 2009 to extend the term through December 31, 2009. The employment agreement provides for a base salary of $550,000 plus benefits generally available to employees of Kennedy-Wilson Properties. In addition, the agreement provides for Mr. Rosten's participation in a bonus pool equal to 20% of the net operating income of Kennedy-Wilson Properties, less (1) a 12% cost of capital charge, and (2) an annual overhead charge (both charges reflecting capital and services provided to Kennedy-Wilson Properties by Kennedy-Wilson or its affiliates). The agreement provides that Mr. Rosten shall receive a portion of the bonus pool, as determined by the bonus pool committee. In the event Mr. Rosten's employment is terminated by
210
Kennedy-Wilson Properties without cause, Mr. Rosten is entitled to receive base salary, participation in the bonus pool and benefits through the end of the term (less the aggregate value of compensation and benefits received by him during the remainder of the term from any source and without regard to characterization).
Mr. Lyle Mr. Lyle entered into an employment agreement with Kennedy-Wilson on April 1, 1996, which has been subsequently amended and extended on a year-to-year basis. The employment agreement was most recently amended to extend the term through December 31, 2009. In addition to base salary of $450,000, the agreement provides for a discretionary bonus of up to 100% of base salary and benefits generally available to employees of Kennedy-Wilson. In the event Mr. Lyle's employment is terminated by Kennedy-Wilson without cause, Mr. Lyle is entitled to receive base salary, discretionary bonus, and benefits through the end of the term.
2009 Stock Option Grants
The KW Compensation Committee determined to issue stock options in early 2009 to senior executives and members of the Board of Directors as a long-term incentive retention tool. The grants were designed to retain the services of senior executives and directors of Kennedy-Wilson and to align their interests with the interest of Kennedy-Wilson stockholders. Additional stock option grants going forward are not currently contemplated. A total of 750,000 stock options were issued, of which the following amounts were issued to the NEOs: 150,000 options to each of Mr. McMorrow and Ms. Ricks; 100,000 options to Mr. Hart; 41,500 options to Mr. Schlesinger; and 20,000 options to each of Mr. Rosten and Mr. Lyle. The options vest over seven years in equal annual installments and have a strike price of $30. A condition to the closing of the Merger is that the holders of these options agree to cancel them prior to the closing.
Executive Compensation Actions in Connection with the Merger
In connection with the Merger, the KW Compensation Committee has approved several additional executive compensation arrangements:
211
Proposal"Change of Control" ), any unvested restricted shares of Prospect common stock that have not previously been forfeited will become vested, subject to certain limitations. See section "The Equity Participation Plan ProposalAwards to Particular Officers, Directors and Employees" for additional information.
212
otherwise to ensure that no payment or benefit is subject to the excise tax imposed by Section 4999 of the Code (certain golden parachute payments) which reduction may, in certain circumstances, result in the repayment of certain previously paid amounts (plus earnings) to the post-Merger company, and (ii) to achieve compliance with Section 409A of the Code.
Compensation Committee Report
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement/prospectus.
Submitted by: |
Kent Mouton, Chairman
Cathy Hendrickson Norm Creighton Members of the Compensation Committee |
Notwithstanding anything to the contrary set forth in any Kennedy-Wilson filings under the Securities Act or the Exchange Act that incorporate other filings, including this proxy statement/prospectus, in whole or in part, the foregoing Compensation Committee Report shall not be incorporated by reference into any such filings.
2008 Executive Compensation Information
2008 Summary Compensation Table
Name and Principal Position
|
Year |
Salary
($) |
Bonus
($) |
Stock
Awards ($) |
Option
Awards ($) |
Non-Equity
Incentive Plan Compensation ($) |
Change in
Pension Value and Nonqualified Deferred Compensation Earnings ($) |
All Other
Compensation ($) |
Total
($) |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
William J. McMorrow
|
2008 | $ | 950,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 19,500 | (1) | $ | 969,500 | ||||||||||
Freeman A. Lyle
|
2008 | $ | 410,417 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 1,500 | (2) | $ | 411,917 | ||||||||||
Barry S. Schlesinger(3)
|
2008 | $ | 600,000 | $ | 205,616 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 805,616 | |||||||||||
Mary Ricks(4)
|
2008 | $ | 600,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 1,500 | (2) | $ | 601,500 | ||||||||||
James A. Rosten
|
2008 | $ | 550,000 | $ | 69,265 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 769 | (2) | $ | 620,034 | ||||||||||
Robert E. Hart
|
2008 | $ | 600,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 1,500 | (2) | $ | 601,500 |
213
Kennedy-Wilson did not make any grants of plan-based awards to its NEOs in 2008; at December 31, 2008, the NEOs did not hold any outstanding equity awards; and in 2008, none of the NEOs exercised stock options or vested in stock awards.
Termination of Employment and Change-in-Control Agreements for Named Executive Officers
Chief Executive Officer
As of December 31, 2008, Mr. McMorrow's employment agreement provided that, in the event of his termination of employment by Kennedy-Wilson without cause (not in connection with a Change in Control of Kennedy-Wilson) or due to death or disability, he would receive salary continuation throughout the remaining term of the agreement. At December 31, 2008, Mr. McMorrow's employment agreement extended to December 31, 2014. In the event Mr. McMorrow's employment was terminated without cause in connection with a Change in Control of Kennedy-Wilson, he would be entitled to a lump sum payment equal to two times the sum of his average base salary and bonus for the most recently completed three fiscal years. Please also see above under "Employment AgreementsMr. McMorrow" for a description of the changes to the termination of employment provisions of Mr. McMorrow's employment agreement that were made effective February 1, 2009.
Termination Event
|
Severance
Payments |
|||
---|---|---|---|---|
Voluntary or Involuntary for Cause |
$ | 0 | ||
Involuntary without Cause (non-Change in Control) |
$ | 5,700,000 | ||
Death or Disability |
$ | 5,700,000 | ||
Involuntary without Cause with Change-in-Control |
$ | 14,133,333 |
Remaining Executives
Pursuant to their employment agreements, if Messrs. Lyle, Rosten, or Hart were terminated without cause on December 31, 2008, each executive would have been entitled to base salary, bonus and benefit continuation through the remainder of term of his respective agreement (December 31, 2009 for each executive). Accordingly, Messrs. Lyle, Rosten, and Hart would have received salary continuation payments of $450,000, $550,000, and $600,000, respectively, and bonus and benefit continuation payments of $6,815 each.
At December 31, 2008, neither Ms. Ricks nor Mr. Schlesinger would have been entitled to any benefits following a termination without cause or a Change in Control of Kennedy-Wilson. However, please see above under "Employment AgreementsMs. Ricks" for a description of the continued salary and benefits payable to Ms. Ricks upon certain qualifying terminations of her employment pursuant to the terms of her employment agreement entered into on February 1, 2009.
Kennedy-Wilson Director Compensation
Each non-employee director, other than Thomas Sorell, receives a fee of $25,000 per year, $1,000 for each board of directors meeting attended and $500 for each committee meeting attended. The
214
following table provides compensation information for the fiscal year ended December 31, 2008 for each non-employee member of Kennedy-Wilson's board of directors(1):
Name(2)
|
Fees Earned or
Paid in Cash ($) |
Total
($) |
|||||
---|---|---|---|---|---|---|---|
Cathy Hendrickson |
28,000 | 28,000 | |||||
Norm Creighton |
29,500 | 29,500 | |||||
Jeffrey Hudson |
29,000 | 29,000 | |||||
Gary Kasper(3) |
20,750 | 20,750 | |||||
Kent Mouton |
29,500 | 29,500 | |||||
Jerry Solomon |
28,000 | 28,000 | |||||
Thomas Sorell(4) |
0 | 0 |
Compensation Discussion and Analysis of Kennedy-Wilson Following the Merger / Post-Merger Employment Agreements and Benefits
Subsequent to the Merger, it is expected that compensation decisions with respect to the NEOs of the combined company will be made by the combined company's compensation committee. No decisions have been made at this time with respect to post-Merger compensation decisions, other than as set forth above in section " Executive CompensationExecutive Compensation Actions in Connection with the Merger. "
215
COMPARISON OF RIGHTS OF PROSPECT AND KENNEDY-WILSON HOLDERS
Prospect and Kennedy-Wilson are both incorporated under the laws of the State of Delaware. Both companies are governed by the DGCL. If the Merger is completed, Kennedy-Wilson Holders, whose rights are currently governed by Kennedy-Wilson's amended and restated certificate of incorporation and the Kennedy-Wilson's bylaws, will become stockholders of Prospect, and their rights as such will be governed by Prospect's amended and restated certificate of incorporation and Prospect's amended and restated bylaws. Prospect's stockholders, if the Merger is completed, will remain stockholders of Prospect. The material differences between the rights of Kennedy-Wilson Holders and the rights of Prospect's stockholders are summarized below. Kennedy-Wilson as a direct wholly-owned subsidiary of Prospect will have its amended and restated certificate of incorporation and bylaws amended in connection with the Merger.
This summary does not purport to be a complete statement of the rights of Prospect stockholders under Prospect's amended and restated certificate of incorporation following the consummation of the Merger or its amended and restated bylaws or Kennedy-Wilson Holders under Prospect's amended and restated certificate of incorporation or its amended and restated bylaws. In addition, this summary does not purport to be a complete description of the specific provisions referred to herein and is qualified in its entirety by reference to the governing corporate documents and the DGCL. You are urged to read those documents carefully in their entirety. A copy of Prospect's second amended and restated certificate of incorporation as will be in effect if the Charter Amendment Proposal is approved is attached as Annex D to this proxy statement/prospectus and a copy of Prospect's amended and restated bylaws is included with Prospect's Form S-1 Registration Statement filed with the SEC (SEC File No. (333-145110) on November 14, 2007.)
Capitalization: | ||||
---|---|---|---|---|
Rights under the DGCL | Rights of Prospect's Stockholders | Rights of Kennedy-Wilson's Stockholders | ||
Prospect's amended and restated certificate of incorporation authorizes it to issue 81,000,000 shares, of which 80,000,000 are common stock, par value $0.0001 per share, and 1,000,000 are preferred stock, par value $0.0001. Prospect's board of directors is expressly granted the power to issue shares of the preferred stock in one or more series and to fix the rights and preferences, including voting powers, of each series of preferred stock. | KW's certificate of incorporation, as amended authorizes it to issue 62,000,000 shares, each with par value of $0.01 per share, of which 50,000,000 shares are common stock, 5,000,000 shares are partial-voting common stock, 2,000,000 are shares of non-voting common stock and 5,000,000 are shares of preferred stock, of which 60,000 shares are designated as series A preferred stock. KW's board of directors is expressly granted the power to authorize the issuance of any or all shares of common stock, partial-voting common stock, non-voting common stock and one or more series of preferred stock. |
Voting Rights: | ||||
---|---|---|---|---|
Rights under the DGCL |
|
Rights of Prospect's Stockholders |
|
Rights of Kennedy-Wilson's Stockholders |
The DGCL permits that the holders of common stock are entitled to one vote per shares on all matters to be voted on by stockholders. | Except as otherwise required by law or as otherwise provided in the terms of any class or series of stock having a preference over the common stock, the holders of Prospect's common stock shall exclusively possess all voting power and each share of common stock shall have one vote. | Except as otherwise required by law, with respect to all matters upon which stockholders are entitled to vote, the holders of the outstanding shares of common stock shall vote together with the holders of any other outstanding shares of capital stock entitled to vote and each share of common stock shall have one vote. |
216
Voting Rights: | ||||
---|---|---|---|---|
Rights under the DGCL |
|
Rights of Prospect's Stockholders |
|
Rights of Kennedy-Wilson's Stockholders |
|
|
|
|
Except as required by law, outstanding shares of partial-voting common stock shall vote together with the holders of any other outstanding shares of capital stock and each share of partial-voting common stock shall have one-half ( 1 / 2 ) vote. |
|
|
|
|
Except as otherwise required by law, non-voting common stock shall not be entitled to vote. |
|
|
|
|
Except as otherwise required by law, series A preferred stock shall not be entitled to vote. |
Dividends: | ||||
---|---|---|---|---|
Rights under the DGCL |
|
Rights of Prospect's Stockholders |
|
Rights of Kennedy-Wilson's Stockholders |
The DGCL permits a corporation to declare and pay dividends out of "surplus" or, if there is no "surplus," out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. "Surplus" is defined as the excess of the net assets of the corporation over the amount determined to be the capital of the corporation by the board of directors. The capital of the corporation is typically calculated to be (and cannot be less than) the aggregate par value of all issued shares of capital stock. Net assets equals the fair value of the total assets minus total liabilities. The DGCL also provides that dividends may not be paid out of net profits if, after the payment of the dividend, capital is less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets. | Prospect's amended and restated bylaws provide that the board of directors may declare dividends at a regular or special meeting and dividends may be paid in cash, property or shares of Prospect's capital stock, subject to the provisions of the amended and restated certificate of incorporation. |
KW's certificate of incorporation, as amended, provides that the board of directors may declare dividends out of funds legally available to them and that the holders of common stock, partial-voting common stock and
non-voting common stock shall be entitled to receipt such dividends ratably, subject to the rights and preferences of any preferred stock. Dividends on the series A preferred stock shall accrued and be cumulative from the issuance date. For each
outstanding share of series A preferred stock, dividends shall be paid quarterly beginning June 30, 2008 and continue until such shares are converted. The payment of dividends shall be in cash.
The board of directors may also declare a dividend of securities to distribute to the holders of common stock, partial-voting common stock and non-voting common stock. |
217
Number of Directors: | ||||
---|---|---|---|---|
Rights under the DGCL |
|
Rights of Prospect's Stockholders |
|
Rights of Kennedy-Wilson's Stockholders |
Under the DGCL, the board of directors shall consist of 1 or more members, all of who are a natural person and such number of directors shall be fixed in a corporation's bylaws unless the certificate of incorporation fixes the number of directors. | Pursuant to Prospect's amended and restated certificate of incorporation and amended and restated bylaws, the board of directors shall consist of three classes and each such class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire board of directors. The number of directors shall be fixed from time to time by a vote of a majority of the entire board of directors and shall be not less than one director and no more than nine directors. | Pursuant to KW's certificate of incorporation, as amended, and bylaws, the board of directors shall consist of three classes and each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire board of directors. The number of directors shall be seven, subject to change by the board of directors. |
Removal of Directors: | ||||
---|---|---|---|---|
Rights under the DGCL |
|
Rights of Prospect's Stockholders |
|
Rights of Kennedy-Wilson's Stockholders |
Under the DGCL, unless where the board of directors is classified or the certificate of incorporation provides for cumulative voting, a director may be removed with or without cause by a majority of the shares entitled to vote at an election of directors. | Prospect's amended and restated bylaws provide that any director may be removed, from office with or without cause by a majority vote of the holders of the outstanding shares entitled to vote at an election of directors. | KW's certificate of incorporation, as amended, and bylaws are silent as to the stockholder's right to remove directors. |
218
219
Amendments to Bylaws: | ||||
---|---|---|---|---|
Rights under the DGCL |
|
Rights of Prospect's Stockholders |
|
Rights of Kennedy-Wilson's Stockholders |
Under the DGCL, the power to adopt, amend or repeal bylaws is conferred upon the stockholders. A corporation may, however, in its certificate of incorporation also confer upon the board of directors the power to adopt, amend or repeal its bylaws. | Prospect's amended and restated bylaws and amended and restated certificate of incorporation provide that the bylaws may be adopted, amended or repealed by the stockholders entitled to vote thereon at any regular or special meeting. The board of directors also has the power, without the assent or vote of the stockholders to make, alter, amend, change, add or repeal the bylaws, subject to the stockholder's right to alter or repeal any bylaw. | KW's certificate of incorporation, as amended, and bylaws provide that the bylaws may be altered, amended or repealed by the board of directors or by an affirmative vote of the stockholders holding a majority in voting power of the outstanding capital stock entitled to vote at an election of directors. |
220
221
222
223
224
Commission Position on Indemnification for Securities Act Liabilities
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling Prospect or Kennedy-Wilson pursuant to the foregoing provisions, Prospect and Kennedy-Wilson have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
225
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth information regarding the beneficial ownership of the common stock of Prospect as of September 9, 2009 and the beneficial ownership of the common stock of the post-Merger company by:
This table is based on an exchange ratio in the Merger of 3.8031 shares of Prospect common stock per share of Kennedy-Wilson common stock and 105.6412 shares of Prospect common stock per share of Kennedy-Wilson preferred stock. This table (1) assumes that no holder of Public Shares converts such shares into cash and that no Kennedy-Wilson holder of common stock exercises its appraisal rights, (2) assumes that 26.0 million shares are issued to Kennedy-Wilson Holders in the Merger, (3) assumes that 3,740,000 shares of restricted common stock will be issued to Kennedy-Wilson executive officers and management pursuant to the 2009 Plan, (4) assumes that 375,000 shares will be issued to De Guardiola Holdings, Inc. upon consummation of the Merger, and (5) gives effect to the forfeiture and cancellation of 2,575,000 shares of founders shares. Information (pre-Merger) does not reflect beneficial ownership of Prospect's outstanding warrants as these warrants are not currently exercisable. Information (post-Merger) assumes that all warrants are exercisable immediately after the
226
Merger. Except as set forth in the footnotes to this table, the persons named in the table have sole voting and dispositive power with respect to all shares shown as beneficially owned by them.
|
Prospect Pre-Merger | Prospect Post-Merger | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name of Beneficial Owner
|
Amount and
Nature of Beneficial Ownership |
Approximate
Percentage of Outstanding Common Stock(1) |
Amount and
Nature of Beneficial Ownership |
Approximate
Percentage of Outstanding Common Stock(2) |
|||||||||
Flat Ridge Investments LLC(3) |
3,271,753 | 10.5 | % | 5,073,789 | (4) | 8.2 | % | ||||||
HBK Investments L.P.(5) |
3,069,191 | 9.8 | % | 3,069,191 | 5.2 | % | |||||||
Aldebaran Investments LLC(6) |
1,916,820 | 6.1 | % | 1,916,820 | 3.3 | % | |||||||
QVT Financial LP(7) |
1,800,450 | 5.8 | % | 1,800,450 | 3.1 | % | |||||||
Hartz Capital, Inc.(8) |
1,590,016 | 5.1 | % | 1,590,016 | 2.7 | % | |||||||
David A. Minella(9) |
3,271,753 | 10.5 | % | 5,073,789 | (4) | 8.2 | % | ||||||
Patrick J. Landers(10) |
1,505,514 | 4.8 | % | 2,565,241 | (11) | 4.2 | % | ||||||
James J. Cahill |
406,250 | 1.3 | % | 238,875 | * | % | |||||||
Michael P. Castine |
138,021 | .4 | % | 81,157 | * | % | |||||||
William Cvengros(12) |
138,021 | .4 | % | 81,157 | * | % | |||||||
Michael Downey |
138,021 | .4 | % | 81,157 | * | % | |||||||
Daniel Gressel |
138,021 | .4 | % | 281,157 | (13) | * | % | ||||||
William Landman(14) |
376,378 | 1.2 | % | 641,310 | (15) | 1.1 | % | ||||||
John Merchant |
138,021 | .4 | % | 81,157 | * | % | |||||||
Arrowgrass Capital Partners (US) LP(16) |
1,719,300 | 5.5 | % | 1,719,300 | 2.9 | % | |||||||
All Prospect executive officers and directors as a group |
6,250,000 | 20.0 | % | 9,125,000 | 14.2 | % | |||||||
William J. McMorrow(18) |
0 | 0 | % | 14,571,391 | (17) | 24.8 | % | ||||||
Mary Ricks(18) |
0 | 0 | % | 1,355,704 | 2.3 | % | |||||||
Freeman A. Lyle(18) |
0 | 0 | % | 701,278 | 1.2 | % | |||||||
Barry S. Schlesinger(18) |
0 | 0 | % | 161,865 | * | % | |||||||
James A. Rosten(18) |
0 | 0 | % | 309,196 | * | % | |||||||
Robert E. Hart(18) |
0 | 0 | % | 164,510 | * | % | |||||||
Donald J. Herrema(18) |
0 | 0 | % | 900,000 | 1.5 | % | |||||||
Kent Mouton(18) |
0 | 0 | % | 130,536 | * | % | |||||||
Jerry R. Solomon(18) |
0 | 0 | % | 59,743 | * | % | |||||||
Norm Creighton(18) |
0 | 0 | % | 227,480 | * | % | |||||||
Thomas Sorell(18) |
0 | 0 | % | 0 | * | % | |||||||
Cathy Hendrickson(18) |
0 | 0 | % | 5,000 | * | % | |||||||
All executive officers and directors as a group post-Merger |
0 | 0 | % | 23,660,492 | 38.2 | % |
227
228
229
230
Prospect Transactions with Related Persons
On July 18, 2007, Prospect issued an aggregate of 4,312,500 shares of common stock to Flat Ridge Investments LLC, LLM Structured Equity Fund L.P. and LLM Investors L.P., an entity affiliated with David A. Minella, Prospect's Chairman and Chief Executive Officer, in exchange for an aggregate purchase price of $25,000 in cash. Subsequent to the purchase of these shares (i) Flat Ridge Investments LLC transferred at cost an aggregate of 431,252 of these shares to SJC Capital LLC, an entity affiliated with William Cvengros, one of Prospect's directors, and Michael P. Castine, Michael Downey and Daniel Gressel, each of whom is a director, (ii) LLM Structured Equity Fund L.P. and LLM Investors L.P. transferred at cost an aggregate of 345,000 of these shares to CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), a corporation affiliated with William Landman, a Prospect director (iii) LLM Structured Equity Fund L.P., LLM Investors L.P. and CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.) transferred at cost an aggregate of 215,625 of these shares to James J. Cahill, Prospect's Chief Financial Officer and Secretary, (iv) LLM Structured Equity Fund L.P. transferred at cost an aggregate of 64,688 of these shares to James J. Cahill and (v) SJC Capital LLC, LLM Structured Equity Fund L.P., LLM Investors L.P., Michael P. Castine, Michael Downey, Daniel Gressel and CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.) transferred at cost an aggregate of 161,721 of these shares to Flat Ridge Investments LLC. In October, 2007, the aggregate outstanding 4,312,500 shares of common stock were increased to 7,187,500 shares of common stock as a result of a 5-for-3 stock split declared by Prospect's board of directors. Subsequent to the stock split, Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P. and CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.) transferred at cost an aggregate of 158,724 of these shares to John Merchant, one of Prospect's directors.
On December 21, 2007, upon the expiration of the underwriters' over-allotment option granted in connection with Prospect's IPO, Prospect repurchased an aggregate of 937,500 founder shares from its initial stockholders at a price equal to $0.0001 per share. In connection with such repurchase, Prospect recorded the aggregate fair value of the shares purchased to treasury stock and a corresponding credit to additional paid-in capital based on the difference between the fair market value of the shares of common stock repurchased and the price equal to $0.0001 per share (which was an aggregate total of $93.75 for all 937,500 shares). Upon receipt, the repurchased shares were immediately cancelled, which resulted in the retirement of the treasury stock and a corresponding charge to additional paid-in capital.
The initial stockholders holding a majority of such shares are entitled to make up to three demands that Prospect register these shares pursuant to an agreement signed on November 14, 2007. The holders of the majority of these shares may elect to exercise these registration rights at any time generally commencing nine months after the consummation of Prospect's initial business combination. In addition, these stockholders have certain "piggy-back" registration rights with respect to registration statements filed by Prospect subsequent to the date on which these shares of common stock are released from escrow. Prospect will bear the expenses of registering these securities.
On November 14, 2007, Prospect issued 5,250,000 Sponsors Warrants (exercisable at $7.50 per warrant), to Flat Ridge Investments LLC, an entity affiliated with David A. Minella, Prospect's Chairman and Chief Executive Officer, LLM Structured Equity Fund L.P. and LLM Investors L.P., entities affiliated with Patrick J. Landers, Prospect's President and a director, and CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), a corporation affiliated with William Landman, one of Prospect's directors, for an aggregate purchase price of $5,250,000. All of the proceeds Prospect received from these purchases were placed in the Trust Account. The Sponsors Warrants are identical to the Public Warrants underlying the units sold in Prospect's IPO except that
231
(i) the Sponsors Warrants are non-redeemable so long as of they are held by any of the sponsors or their permitted transferees, (ii) they are non-transferable, other than to permitted transferees, until the date that is 30 days after the date on which Prospect consummates the initial business combination, (iii) for so long as the Sponsors Warrants are subject to the transfer restrictions described in clause (ii), the Sponsors Warrants are not exercisable and (iv) the Sponsors Warrants are exercisable on a cashless basis at the holders' option so long as the Sponsors Warrants are held by the sponsors or their affiliates. Prospect has agreed to register the shares underlying the Sponsors Warrants at any time after Prospect has consummated its initial business combination, but the purchasers of the Sponsors Warrants have agreed that the Sponsors Warrants will not be sold or, subject to certain limited exceptions, transferred by them and they may not exercise the Sponsors Warrants until 30 days after Prospect has completed a business combination. Accordingly, the Sponsors Warrants have been placed in escrow and will not be released until 30 days after the completion of a business combination. Such Sponsors Warrants are not publicly traded and have an exercise price of $7.50 per warrant. All of the Sponsors Warrants will become worthless if the Merger is not consummated by November 14, 2009 (as will the remainder of the Public Warrants).
The holders of the majority of these Sponsors Warrants (or underlying shares) are entitled to make up to three demands that Prospect register these securities pursuant to the registration rights agreement referred to above. The holders of the majority of these securities may elect to exercise these registration rights with respect to such securities at any time after Prospect consummates the initial business combination. In addition, these holders will have certain "piggy-back" registration rights with respect to registration statements filed subsequent to such date. Prospect will bear the expenses incurred in connection with the filing of any such registration statement.
Each of Teleos Management, L.L.C., an entity affiliated with Daniel Gressel, one of Prospect's directors, and LLM Capital Partners LLC, an entity affiliated with Patrick J. Landers, Prospect's President and a director, LLM Structured Equity Fund L.P. and LLM Investors L.P., has agreed that, commencing on November 14, 2007 through the acquisition of Kennedy-Wilson, it will make available to Prospect office space and certain office and secretarial services, as Prospect may require from time to time. Prospect has agreed to pay Teleos Management, L.L.C., $4,500 per month and LLM Capital Partners LLC, $3,000 per month for these services (amended December 31, 2008 to $4,083.15 and $2,722.10, respectively). This arrangement is solely for Prospect's benefit and is not intended to provide Mr. Gressel or Mr. Landers compensation in lieu of a salary. Prospect believes, based on rents and fees for similar services in the Naples, Florida and Boston, Massachusetts metropolitan areas, that the fee charged by each of Teleos Management, L.L.C. and LLM Capital Partners LLC, is at least as favorable as Prospect could have obtained from an unaffiliated person.
To fund pre-offering expenses associated with Prospect's IPO, Flat Ridge Investments LLC, LLM Structured Equity Fund L.P. and LLM Investors L.P. advanced an aggregate of $200,000 to Prospect in exchange for a promissory note, without interest, which was repaid from the proceeds of Prospect's IPO.
Prospect will reimburse its officers and directors for any reasonable out-of-pocket business expenses incurred by them in connection with certain activities on its behalf such as identifying and investigating possible target businesses and business combinations. There is no limit on the amount of out-of-pocket expenses that could be incurred; provided, however, that to the extent such out-of-pocket expenses exceed the available proceeds not deposited in the Trust Account and interest income of up to $2.75 million on the balance in the Trust Account (subject to the holdback of a sufficient amount of interest income to pay any due and unpaid taxes on such $2.75 million), such out-of-pocket expenses would not be reimbursed by Prospect unless Prospect consummates the initial business combination. Prospect's audit committee will review and approve all payments made to its initial stockholders, sponsors, officers and directors, and any payments made to members of Prospect's audit committee will
232
be reviewed and approved by its board of directors, with the interested director or directors abstaining from such review and approval.
Prospect has entered into a business opportunity right of first review agreement with David A. Minella, its Chairman and Chief Executive Officer, who is affiliated with Flat Ridge Investments LLC, one of Prospect's sponsors, Patrick J. Landers, Prospect's President and a director, who is affiliated with LLM Structured Equity Fund L.P. and LLM Investors L.P., two of Prospect's sponsors, James J. Cahill, Prospect's Chief Financial Officer and Secretary, William Landman, a Prospect directors, who is affiliated with CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), one of Prospect's sponsors, and Michael P. Castine, William Cvengros, Michael Downey, Daniel Gressel and John Merchant, each of whom is a director, and each a Prospect sponsor, which provides that from November 14, 2007 until the earlier of the consummation of the initial business combination or Prospect's liquidation, Prospect will have a right of first review with respect to business combination opportunities of which Messrs. Minella, Landers, Cahill, Landman, Castine, Cvengros, Downey, Gressel, Merchant and each of its sponsors, and companies or other entities that they manage or control become aware, in the financial services industry with an enterprise value of $195 million or more.
Other than the $7,500 per month administrative fee (amended December 31, 2008 to $6,805.25 per month) and reimbursable out-of-pocket expenses payable to its officers and directors, no compensation or fees of any kind, including finder's fees, consulting fees or other similar compensation, will be paid to awarded to or earned by any of Prospect's initial stockholders, sponsors, officers or directors, or to any of their respective affiliates, prior to or with respect to the initial business combination (regardless of the type of transaction that it is).
After the Merger, members of Prospect's management team who remain may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to stockholders. As information about executive and director compensation post-Merger becomes known it will be publicly disclosed at the time of its determination in a Current Report on Form 8-K, as required by the SEC.
All ongoing and future transactions between Prospect and any director or member of its management team, initial stockholders, sponsors, or their respective affiliates, including financing, will be on terms believed by Prospect at that time, based upon other similar arrangements known to it, to be no less favorable than are available from unaffiliated third parties. Such transactions will require prior approval in each instance by its audit committee. Prospect will not enter into the initial business combination with an entity that is affiliated with any of its officers, directors, sponsors or initial stockholders. All affiliated transactions will be on terms no less favorable to it than could be obtained from independent parties. All affiliated transactions must be approved by a majority of its independent and disinterested directors.
In connection with the Merger, Prospect entered into a forfeiture agreement with De Guardiola Advisors, Inc., De Guardiola Holdings, Inc., Kennedy-Wilson, Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P., CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), SJC Capital LLC, Michael P. Castine, Michael Downey, Daniel Gressel, James J. Cahill and John Merchant, whereby immediately prior to and subject to consummation of the Merger, 2,575,000 founder shares will be cancelled and forfeited. As a result of this forfeiture, at the consummation of the Merger, the founders will own 3,675,000 shares of Prospect common stock.
Code of Ethics and Related Person Policy
Prospect has adopted a code of ethics, which establishes standards of ethical conduct applicable to all of its officers, directors and employees. You will be able to review Prospect's code of ethics by accessing its public filings at the SEC's web site at http://www.sec.gov or visiting Prospect's website at
233
http://www.prospectac.com , under the caption "Investors Relations/Corporate Governance." In addition, a copy of the code of ethics will be provided without charge upon request. Prospect intends to disclose any amendments to or waivers of certain provisions of Prospect's code of ethics in a Current Report on Form 8-K.
Conflicts of Interest
Prospect's stockholders should also be aware of the following other potential conflicts of interest:
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
Accordingly, as a result of multiple business affiliations, Prospect's officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. In addition, conflicts of interest may arise when Prospect's board of directors evaluate a particular business opportunity with respect to the above-listed criteria. Prospect cannot assure you that any of the above mentioned conflicts will be resolved in its favor.
234
In order to minimize potential conflicts of interest which may arise from multiple corporate affiliations, Prospect has entered into a business opportunity right of first review agreement with David A. Minella, its Chairman and Chief Executive Officer, who is affiliated with Flat Ridge Investments LLC, a Prospect sponsor, Patrick J. Landers, its President and a director, who is affiliated with LLM Structured Equity Fund L.P. and LLM Investors L.P., two of Prospect's sponsors, James J. Cahill, its Chief Financial Officer and Secretary, William Landman, a Prospect director, who is affiliated with CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), a Prospect sponsors, and Michael P. Castine, William Cvengros, Michael Downey, Daniel Gressel and John Merchant, each of whom is a director, and each a sponsor, which provides that from November 14, 2007 until the earlier of the consummation of the initial business combination or Prospect's liquidation in the event its does not consummate the initial business combination, Prospect has a right of first review with respect to business combination opportunities of which Messrs. Minella, Landers, Cahill, Landman, Castine, Cvengros, Downey, Gressel, Merchant and each of its sponsors, and companies or other entities that they manage or control become aware, in the financial services industry with an enterprise value of $195 million or more.
In connection with the vote required for the initial business combination, all of the initial stockholders, have agreed to vote the founders shares in accordance with the vote of the public stockholders owning a majority of the shares of Prospect's common stock sold in its IPO. In addition, they have agreed to waive their respective rights to participate in any liquidation distribution with respect to the founders shares. If they purchased shares of common stock as part of Prospect's IPO or if they purchase shares in the open market, however, they would be entitled to vote such shares as they choose on a proposal to approve an initial business combination, however, in no event could they exercise conversion rights and convert their shares into a portion of the Trust Account.
To further minimize potential conflicts of interest, Prospect has agreed not to consummate an initial business combination with an entity that is affiliated with any of its officers, directors, sponsors or initial stockholders, including any businesses that are either portfolio companies of its initial stockholders or sponsors or any entity affiliated with its officers, directors, initial stockholders or sponsors. Furthermore, in no event will any of Prospect's initial stockholders, sponsors, officers or directors, or any of their respective affiliates, be paid any finder's fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate the consummation of the initial business combination.
Promoters
Each of Flat Ridge Investments LLC and David A. Minella may be deemed Prospect's "promoters" as that term is defined under United States federal securities laws.
Kennedy-Wilson Transactions With Related Persons
You should be aware that certain members of the Kennedy-Wilson board and certain executive officers of Kennedy-Wilson have agreements or arrangements with Kennedy-Wilson and with Prospect after the Merger.
If the Merger is consummated, William J. McMorrow and Mary Ricks will be potentially entitled to receive certain cash bonus payments of up to $11.7 million and $4.0 million, respectively. The cash bonus payments will be payable as follows: (i) Mr. McMorrow and Ms. Ricks will be entitled to receive $4.85 million and $2.0 million, respectively, on October 15, 2009, provided, however, that such payments will be repaid to Kennedy-Wilson in the event the Merger is not consummated by November 15, 2009 or the executive is not employed by Kennedy-Wilson on the effective date of the Merger (these employment requirements will not apply, however, in the case of a termination of employment due to death or disability); (ii) Mr. McMorrow and Ms. Ricks will receive "performance
235
unit awards" under the 2009 Plan which will entitle them to receive $2.425 million and $1.0 million, respectively, on April 1, 2010, provided that the Performance Target is met as of March 31, 2010 (in the event that the Performance Target is not met as of March 31, 2010, the bonus otherwise due April 1, 2010 shall, nevertheless, be paid on July 1, 2010, October 1, 2010, or January 1, 2011, respectively, if the Performance Target is satisfied as of the earliest of June 30, 2010, September 30, 2010, or December 31, 2010, respectively), and the executive remains employed through the date on which the Performance Target is satisfied; and (iii) Mr. McMorrow and Ms. Ricks will receive additional "performance unit awards" under the 2009 Plan which will entitle them to receive cash payments in the amounts of $4.425 and $1.0 million, respectively, on January 1, 2011, provided that the Performance Target is met as of December 31, 2010 and he or she, as applicable, remains employed by the post-Merger company through January 1, 2011. Notwithstanding the foregoing, in the event that the Merger is consummated and the employment of Mr. McMorrow or Ms. Ricks is terminated by the post-Merger company without cause or he or she, as applicable, resigns from his or her, as applicable, employment with the post-Merger company for good reason, the payments referred to in clauses (ii) and (iii) above will still be payable on the applicable payment dates if the Performance Target is met. The Performance Target was established by an independent committee of Prospect and is subject to the approval of the compensation committee of the post-Merger company following the consummation of the Merger.
On April 10, 2006, William J. McMorrow borrowed $3,543,127 from Kennedy-Wilson evidenced by a Promissory Note bearing simple interest at a rate of 7.5% per annum and scheduled to mature on April 9, 2011. Mr. McMorrow's employment agreement has been amended to provide that the McMorrow Note will be forgiven if the Merger is consummated.
If the Merger is consummated, certain of Kennedy-Wilson's executive officers will continue to be employed with the post-Merger company, including William J. McMorrow, Freeman A. Lyle, Barry S. Schlesinger, Mary Ricks, James A. Rosten, Robert E. Hart and Donald J. Herrema. In addition, it is proposed that six members of the board of directors of Kennedy-Wilson will be elected to serve as directors of the post-Merger company. To reward and incentivize Kennedy-Wilson's key employees and management after the Merger, up to 4,000,000 shares of Prospect common stock will be reserved for issuance under the 2009 Plan. If the Merger is consummated, certain Kennedy-Wilson officers, directors and key employees will be issued an aggregate of 3,740,000 restricted shares of Prospect common stock under the 2009 Plan upon the closing of the Merger as set forth in the table below:
Name of Group
|
Dollar ($) |
Number of Shares
of Restricted Stock |
|||||
---|---|---|---|---|---|---|---|
William McMorrow, Chief Executive Officer |
$ | | 900,000 | ||||
Freeman Lyle, Chief Financial Officer |
$ | | 50,000 | ||||
Mary Ricks, Co-CEO of KW Commercial Investment Group |
$ | | 900,000 | ||||
Barry Schlesinger, Co-CEO of KW Commercial Investment Group |
$ | | 125,000 | ||||
Robert Hart, President of KW Multi-Family Management Group |
$ | | 125,000 | ||||
James Rosten, President of Kennedy-Wilson Properties |
$ | | 125,000 | ||||
All executive officers, as a group |
$ | | 3,495,000 | ||||
All directors who are not executive officers, as a group |
$ | | 25,000 | ||||
All employees, including all current officers who are not executive officers, as a group |
$ | | 220,000 |
In the event that the recipient of the restricted shares remains employed by (or continues to perform services as a director for) the post-Merger company through the relevant vesting date, 1 / 5 of the restricted shares will vest on each of the first five anniversaries of the date of issuance, provided that the Performance Target is met as of the September 30 immediately preceding the applicable anniversary date (in the case of the installments vesting on the fourth and fifth anniversary dates, the Performance Target must be met as of the September 30 immediately preceding the third anniversary
236
date). The Performance Target was established by an independent committee of Prospect and is subject to the approval of the compensation committee of the post-Merger company following the consummation of the Merger. Notwithstanding the foregoing, in the event the employment with the post-Merger company of an employee who has been granted restricted shares is terminated without cause or if the employee resigns from his employment with the post-Merger company for good reason, the restricted shares will continue to vest on the applicable anniversary dates (subject to the satisfaction of the Performance Target), subject to certain limitations. In addition, in the event of a "Change of Control" as defined in the 2009 Plan (see "The Equity Participation Plan Proposal"Change of Control") , any unvested restricted shares of Prospect common stock that have not previously been forfeited will become vested, subject to certain limitations. See section "The Equity Participation Plan ProposalAwards to Particular Officers, Directors and Employees" for additional information.
In connection with the Merger, Mr. McMorrow and Ms. Ricks have entered into amendments to their employment agreements which provide for, among other things, (i) the removal of certain benefits in the event of a change in control; (ii) the addition of certain severance benefits if the executive resigns on account of a change in location or a material reduction in duties; (iii) the grant to each executive of 900,000 shares of restricted stock of Prospect pursuant to the 2009 Plan and upon the terms and conditions set forth above; (iv) the cash bonus payments set forth above and (v) in the case of Mr. McMorrow, the McMorrow Note forgiveness described above. Mr. Herrema has also entered into an amendment to his employment agreement which provides for the extension of his employment term from December 31, 2010 to January 31, 2014 as well as clauses (ii)(iii) above. In addition, each of the employment agreements for Messrs. McMorrow and Herrema and Ms. Ricks have been amended to include language intended (i) to provide for a reduction in the amount of payments or benefits payable or provided to them under their respective employment agreements or otherwise to ensure that no payment or benefit is subject to the excise tax imposed by Section 4999 of the Code (certain golden parachute payments) which reduction may, in certain circumstances, result in the repayment of certain previously paid amounts (plus earnings) to the post-Merger company, and (ii) to achieve compliance with Section 409A of the Code.
In November 2008, Kennedy-Wilson issued a convertible subordinated note with a principal amount of $30 million to Guardian. Thomas Sorell, a director of Kennedy-Wilson, is the Executive Vice President and Chief Investment Officer of Guardian. The Guardian Note bears interest at a fixed rate of 7%, payable quarterly, and the outstanding principal is due on November 3, 2018. Guardian may convert the Guardian Note, in whole or in part, into common stock of Kennedy-Wilson at a conversion price of $10.52 per share of common stock at any time prior to the tenth anniversary of the original issue date of the note. At any time on or after the ninth anniversary of the original issue date of the note and prior to the due date, Kennedy-Wilson may demand that the holder of the note convert the note in accordance with the terms of the note. In addition, Guardian has from time to time entered into various loan and investment transactions involving Kennedy-Wilson and its subsidiaries and affiliates relating to real estate investments.
In November 2008, Kennedy-Wilson issued a convertible subordinated note with a principal amount of $30 million to Guardian. In connection with the issuance, Guardian entered into a shareholders agreement with Kennedy-Wilson, William McMorrow, Mary Ricks and Lyle Freeman pursuant to which the parties agreed to appoint one person designated by Guardian as a member of the board of directors of Kennedy-Wilson. Thomas Sorell currently serves as the director designee of Guardian.
Kulik, Gottesman, Mouton & Siegel LLP serves as general legal counsel to Kennedy-Wilson and received approximately $832,000 in legal fees for the year ended December 31, 2008 and $ in legal fees as of the record date in connection with this transaction. Kent Mouton, a director of Kennedy-Wilson, is a partner with Kulik, Gottesman, Mouton & Siegel LLP and holds an approximately 25% interest in the firm.
237
Solomon, Winnett & Rosenfield, Certified Public Accountants, Inc. provides certain tax consulting, preparation and general advice to Kennedy-Wilson and received approximately $300,000 in fees for the year ended December 31, 2008 and $ in fees as of the record date in connection with this transaction. Jerry Solomon, a director of Kennedy-Wilson, is a principal of Solomon, Winnett & Rosenfield, Certified Public Accountants, Inc. and holds an approximately 25% interest in the firm.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Prospect's officers, directors and persons who own more than 10% of a registered class of its equity securities to file reports of ownership and changes in ownership with the SEC. Officers, directors and 10% stockholders are required by regulation to furnish Prospect with copies of all Section 16(a) forms they file. Based solely on copies of such forms received, Prospect believes that, during the fiscal year ended December 31, 2008, all Section 16(a) filing requirements applicable to Prospect's officers, directors and greater than 10% beneficial owners were met in a timely manner.
238
DESCRIPTION OF PROSPECT SECURITIES
The following discussion summarizes the material terms of Prospect's securities. This discussion does not purport to be complete and is qualified in its entirety by reference to Prospect's amended and restated certificate of incorporation and Prospect's amended and restated bylaws, that will be in effect as of the closing of the Merger. The form of Prospect's second amended and restated certificate of incorporation that will be in effect at the consummation of the Merger is attached to this proxy statement/prospectus as Annex D. Prospect's amended and restated bylaws can be obtained by following the instructions under "Where You Can Find Additional Information."
General
On November 20, 2007, Prospect issued and sold 25,000,000 units in its IPO. Each of Prospect's units consist of one share of common stock, $0.0001 par value per share, and one warrant. Each warrant sold in the IPO entitles the holder to purchase one share of common stock at an exercise price of $7.50. Prospect's units began publicly trading on November 15, 2007. Prospect's Warrants and common stock have traded separately since December 3, 2007. The public offering price of each unit was $10.00, and the IPO raised gross proceeds of $250,000,000. Of the gross proceeds: (i) Prospect deposited $241,750,000 into a Trust Account at JP Morgan Chase Bank, NA, maintained by Continental Stock Transfer & Trust Company, as trustee, which included $10,000,000 of contingent underwriting discount (the underwriters have agreed to forgo $4,000,000 of deferred underwriting compensation otherwise payable to them in connection with, and in accordance with the terms of, the underwriting agreement for the IPO); (ii) the underwriters received $7,500,000 as underwriting discount (excluding the contingent underwriting discount); and (iii) Prospect retained $700,000 for offering expenses, plus $50,000 for working capital. In addition, Prospect deposited into the Trust Account $5,250,000 that it received from the private placement of 5,250,000 Sponsors Warrants to Flat Ridge Investments LLC, an entity affiliated with David A. Minella, Prospect's Chairman and Chief Executive Officer, LLM Structured Equity Fund L.P. and LLM Investors L.P., entities affiliated, with Patrick J. Landers, Prospect's President and a director, and CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), a corporation affiliated with William Landman, one of Prospect's directors.
The amended and restated certificate of incorporation of Prospect authorizes the issuance 72,000,000 shares of common stock, par value $.0001, and 1,000,000 shares of preferred stock, par value $.0001. As of the record date, shares of common stock are outstanding, held by stockholders of record and no shares of preferred stock were outstanding. The number of authorized shares of common stock will be increased to 80,000,000 upon approval of the Merger Proposal, the Charter Amendment Proposal and the filing of an amended and restated certificate of incorporation with the Secretary of State of the State of Delaware.
Units
Each Unit consists of one share of common stock and one warrant. Each warrant entitles the holder to purchase one share of common stock. The Units began trading on AMEX on November 15, 2007 and the common stock and Public Warrants comprising the units began separate trading on December 3, 2007.
Common Stock
As of the date of this proxy statement/prospectus, there were 31,250,000 shares of Prospect common stock outstanding. Holders of common stock have exclusive voting rights for the election of Prospect's directors and all other matters requiring stockholder action, except with respect to amendments to its amended and restated certificate of incorporation that alter or change the powers, preferences, rights or other terms of any outstanding preferred stock if the holders of such affected
239
series of preferred stock are entitled to vote on such an amendment. Holders of common stock are entitled to one vote per share on matters to be voted on by stockholders and also are entitled to receive such dividends, if any, as may be declared from time to time by Prospect's board of directors in its discretion out of funds legally available therefor.
Prospect's board of directors is divided into three classes, each of which are generally serve for a term of three years with only one class of directors being elected in each year. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors.
In connection with the vote required for Prospect's initial business combination, all Prospect's founders have agreed to vote the founders shares in accordance with the majority of the Public Shares. This voting arrangement does not apply to shares included in Units purchased in the IPO or shares purchased following the IPO in the open market. However, Prospect's founders, sponsors, officers and directors have waived any conversion rights with respect to such shares. Additionally, Prospect's founders will vote all of their shares in any manner they determine, in their sole discretion, with respect to any other items that come before a vote of Prospect's stockholders.
Prospect will proceed with its initial business combination only if (i) a majority of the Public Shares voted by the public stockholders present in person or by proxy at a duly held stockholders meeting are voted in favor of the Merger Proposal, (ii) a majority of the Public Shares are voted in favor of the Charter Amendment Proposal and (iii) public stockholders holding no more than 30% of the Public Shares (minus one Public Share) exercise their conversion rights. Voting against the Merger Proposal alone will not result in conversion of a stockholder's shares into a pro rata share of the Trust Account. A stockholder must have also exercised the conversion rights described below for a conversion to be effective. The actual per-share conversion price will be equal to the aggregate amount then on deposit in the Trust Account, before payment of deferred underwriting discounts and commissions and including accrued interest, net of any income taxes on such interest, and net of interest income of $2.75 million previously released to fund Prospect's working capital requirements (calculated as of two business days prior to the consummation of the proposed initial business combination), divided by the number of shares sold in this offering. The initial per-share conversion price would be approximately $ .
Pursuant to Prospect's amended and restated certificate of incorporation, if Prospect does not consummate an initial business combination within 24 months after the date the prospectus, corporate existence will cease except for the purposes of winding up its affairs and liquidating. If Prospect is related to its IPO, or November 14, 2009, its forced to liquidate prior to its initial business combination, its public stockholders are entitled to share ratably in the trust account, inclusive of any interest not previously released to Prospect to fund working capital requirements and net of any income taxes due on such interest, which income taxes, if any, shall be paid from the trust account, and any assets remaining available for distribution to them. If Prospect does not complete its initial business combination and the trustee must distribute the balance of the Trust Account, the underwriters have agreed that: (i) they will forfeit any rights or claims to their deferred underwriting discounts and commissions, including any accrued interest thereon, then in the Trust Account, and (ii) the deferred underwriters' discounts and commission will be distributed on a pro rata basis among the public stockholders, together with any accrued interest thereon, net of income taxes payable on such interest. Prospect's founders have agreed to waive their respective rights to participate in any liquidation distribution occurring upon Prospect's failure to consummate an initial business combination with respect to the founders shares. Prospect' founders will therefore not participate in any liquidation distribution with respect to such founders shares. They will, however, participate in any liquidation distribution with respect to any shares of common stock acquired in connection with or following this offering.
240
Prospect stockholders have no conversion, preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to the common stock, except that public stockholders have the right to have their shares of common stock converted to cash equal to their pro rata share of the trust account plus any interest earned thereon, net of income taxes payable on such interest and net of interest income of $2.75 million on the trust account balance previously released to Prospect to fund its working capital requirements (subject to the tax holdback), if they vote against the initial business combination and the initial business combination is approved and completed. Public stockholders who convert their common stock into their pro rata share of the Trust Account will retain any Public Warrants they own if they previously purchased units or Public Warrants.
The payment of dividends, if ever, on the common stock will be subject to the prior payment of dividends on any outstanding shares of preferred stock, of which there presently are none.
Founders Shares
In transactions occurring in July, August, September and October 2007, Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P., CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), a corporation affiliated with William Landman, a Prospect director, James J. Cahill, Prospect's Chief Financial Officer and Secretary, SJC Capital LLC, an entity affiliated with William Cvengros, one of Prospect's directors, and Michael P. Castine, Michael Downey and Daniel Gressel, each of whom is a director, purchased 4,312,500 shares of Prospect's common stock for an aggregate purchase price of $25,000. In October 2007, the aggregate outstanding 4,312,500 shares of common stock were increased to 7,187,500 shares of common stock as a result of a 5-for-3 stock split declared by Prospect's board of directors. Subsequent to the stock split, Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P. and CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.) transferred at cost an aggregate of 158,724 of these shares to John Merchant, one of Prospect's directors. On December 21, 2007 Prospect repurchased 937,500 shares of common stock at a price equal to $0.0001 per share from the founders. The founders shares are identical to the Public Shares, except that:
The founders have agreed not to transfer, assign or sell any of the founders shares should until one year after the date of the completion of Prospect's initial business combination or earlier if, subsequent to Prospect's initial business combination, (i) the closing price of Prospect's common stock equals or exceeds $14.50 per share for any 20 trading days within any 30 trading day period or (ii) Prospect consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of Prospect's stockholders having the right to exchange their shares of common stock for cash, securities or other property; provided, however, that transfers can be made to permitted transferees who agree in writing to be bound to the foregoing transfer restrictions, agree to vote in the same manner as a majority of the public stockholders who vote at the special or annual meeting called for the purpose of approving Prospect's initial business combination and to vote in favor of the amendment to Prospect's amended and restated certificate of incorporation providing for Prospect's
241
perpetual existence and waive any rights to participate in any liquidation distribution if Prospect fails to consummate its initial business combination. For so long as the Sponsors Warrants are subject to such transfer restrictions they will be held in an escrow account maintained by Continental Stock Transfer & Trust Company.
In addition, the founders or their permitted transferees are entitled to registration rights with respect to founders shares under an agreement to be signed on or before the date of this proxy statement/prospectus.
In connection with the Merger, Prospect entered into a forfeiture agreement with Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P., CMS Platinum Fund, L.P. (formerly Capital Management Systems, Inc.), SJC Capital LLC, Michael P. Castine, Michael Downey, Daniel Gressel, James J. Cahill and John Merchant, whereby immediately prior to and subject to consummation of the Merger, 2,575,000 founder shares will be cancelled and forfeited. As a result of this forfeiture, at the consummation of the Merger, the founders will own 3,675,000 shares of Prospect common stock.
Preferred Stock
Prospect's amended and restated certificate of incorporation, provides that shares of preferred stock may be issued from time to time in one or more series. Prospect's board of directors is authorized to fix the voting rights, if any, the designations, powers, and preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions, applicable to the shares of each series of preferred stock. Prospect's board of directors is able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of Prospect's board of directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control or the removal of existing management by diluting the stock ownership or voting rights of a person seeking to obtain control of the company or remove existing management. Prospect's amended and restated certificate of incorporation, prohibits Prospect, prior to its initial business combination, from issuing Prospect capital stock, including preferred stock, which participates in any manner in the proceeds of the Trust Account, or which votes as a class with the common stock on an initial business combination. Prospect may issue some or all of the preferred stock to effect an initial business combination. Prospect has no preferred stock outstanding at the date hereof. Although Prospect does not currently intend to issue any shares of preferred stock, Prospect cannot assure you that it will not do so in the future. No shares of preferred stock are being issued or registered in this offering.
Warrants
Public Stockholders' Warrants
Each Public Warrant entitles the registered holder to purchase one share of Prospect's common stock at a price of $12.50 per share, subject to adjustment as discussed below, at any before November 14, 2013.
However, the Public Warrants are exercisable only if a registration statement relating to the common stock issuable upon exercise of the Public Warrants is effective and current. The Public Warrants will expire on November 14, 2013 or earlier upon redemption.
At any time while the Public Warrants are exercisable and there is an effective registration statement covering the shares of common stock issuable upon exercise of the Public Warrants available
242
and current throughout the 30 day redemption period, Prospect may call the outstanding Public Warrants (except as described below with respect to the Sponsors Warrants) for redemption:
The Public Warrants are issued in registered form under a Warrant Agreement, as amended by the Warrant Amendment, between Continental Stock Transfer & Trust Company, as warrant agent, and Prospect. You should review a copy of the Warrant Agreement, which has been filed as an exhibit to the registration statement relating to Prospect's IPO, for a complete description of the terms and conditions of the Public Warrants and a copy of the Warrant Amendment attached to this proxy statement/prospectus as Annex B. The form of Amended and Restated Warrant Agreement, which will be in effect upon consummation of the Merger, is attached to this proxy statement/prospectus as Annex C.
Prospect established these redemption criteria to provide warrant holders with a significant premium to the initial warrant exercise price as well as a sufficient degree of liquidity to cushion the market reaction, if any, to Prospect's redemption call. If the foregoing conditions are satisfied and Prospect issues notice of redemption of the Public Warrants, each warrant holder shall be entitled to exercise his or her warrant prior to the scheduled redemption date. However, there can be no assurance that the price of common stock will exceed the redemption trigger price or the warrant exercise price after the redemption notice is issued.
If Prospect calls the Public Warrants for redemption as described above, Prospect's management will have the option to require any holder that wishes to exercise his, her or its warrant (including the Sponsors Warrants) to do so on a "cashless basis." If Prospect's management takes advantage of this option, all holders of Public Warrants would pay the exercise price by surrendering his, her or its Public Warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the Public Warrants, multiplied by the difference between the exercise price of the Public Warrants and the "fair market value" (defined below) by (y) the fair market value. The "fair market value" shall mean the average reported last sale price of the common stock for the ten trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Public Warrants. If Prospect's management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of common stock to be received upon exercise of the Public Warrants, including the "fair market value" in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. If Prospect calls its Public Warrants for redemption and Prospect's management does not take advantage of this option, Prospect's sponsors and their respective transferees would still be entitled to exercise their Sponsor Warrants for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their Public Warrants on a cashless basis.
The exercise price and number of shares of common stock issuable on exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, or Prospect's recapitalization, reorganization, merger or consolidation. However, the exercise price and number of shares of common stock issuable on exercise of the Public Warrants will not be adjusted for issuances of common stock at a price below the warrant exercise price except in certain circumstances.
The Public Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the
243
warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified check payable to Prospect, for the number of Public Warrants being exercised. On the exercise of any warrant, the warrant exercise price will be paid directly to Prospect and not placed in the Trust Account. In no event may the Public Warrants be net cash settled. Warrant holders do not have the rights or privileges of holders of common stock, including voting rights, until they exercise their Public Warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of the Public Warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
No Public Warrants will be exercisable and Prospect will not be obligated to issue shares of common stock unless at the time a holder seeks to exercise such warrant, a prospectus relating to the common stock issuable upon exercise of the Public Warrants is current and the common stock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the Public Warrants. Under the terms of the Warrant Agreement, as amended, Prospect has agreed to use its best efforts to meet these conditions and to maintain a current prospectus relating to the common stock issuable upon exercise of the Public Warrants until the expiration of the Public Warrants. However, Prospect cannot assure you that it will be able to do so and, if it does not maintain a current prospectus relating to these shares of common stock issuable upon exercise of the Public Warrants, holders will be unable to exercise their Public Warrants and Prospect will not be required to settle any such warrant exercise. If the prospectus relating to these shares of common stock issuable upon the exercise of the Public Warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the Public Warrants reside, the Public Warrants may have no value, the market for the Public Warrants may be limited and the Public Warrants may expire worthless.
No fractional shares will be issued upon exercise of the Public Warrants. If a holder exercises Public Warrants and would be entitled to receive a fractional interest of a share, Prospect will round up the number of shares of common stock to be issued to the warrant holder to the nearest whole number of shares.
Sponsors Warrants
The Sponsors Warrants are identical to the Public Warrants, except that the Sponsors Warrants:
Although the shares of common stock issuable pursuant to the Sponsors Warrants will not be issued pursuant to a registration statement so long as they are held by the sponsors and their permitted transferees, the Warrant Agreement, as amended, provides that the Sponsors Warrants may not be exercised unless Prospect has an effective registration statement relating to the common stock issuable upon exercise of the Sponsors Warrants and a related current prospectus is available.
If holders of the Sponsors Warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering his, her or its Sponsor Warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the Sponsor Warrants, multiplied by the difference between the exercise price of the Sponsor Warrants and the "fair market value" (defined below) by (y) the fair market value. The "fair market value" shall mean the average reported last sale price of the common stock for the ten trading
244
days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Sponsor Warrants. The reason that Prospect agreed that these Sponsor Warrants will be exercisable on a cashless basis so long as they are held by the sponsors and their affiliates and permitted transferees is because it is not known at this time whether they will be affiliated with Prospect following a business combination. If they remain affiliated with Prospects, their ability to sell securities in the open market will be significantly limited.
The sponsors have agreed not to transfer, assign or sell any of the Sponsors Warrants until the date that is 30 days after the date Prospect completes its initial business combination; provided, however, that transfers can be made to permitted transferees who agree in writing to be bound by such transfer restrictions. For so long as the Sponsors Warrants are subject to such transfer restrictions they will be held in an escrow account maintained by Continental Stock Transfer & Trust Company.
In addition, the sponsors or their permitted transferees are entitled to registration rights with respect to the Sponsors Warrants under an agreement signed with Prospect.
Transfer Agent, Warrant Agent and Registrar
The transfer agent for Prospect's securities and the warrant agent for Prospect warrants is Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New York 10004; telephone (212) 509-4000.
245
PRICE RANGE OF SECURITIES AND DIVIDENDS
Prospect
NYSE Euronext completed its acquisition of AMEX on October 1, 2008. Prospect's units, which consist of one share of its common stock, par value $0.0001 per share, and one warrant to purchase one share of its common stock, trade on AMEX under the symbol "PAX.U." Prospect's Warrants and common stock have traded separately on AMEX under the symbols "PAX.WS" and "PAX," respectively, since December 3, 2007. Assuming approval of the Warrant Amendment Proposal, each warrant entitles the holder to purchase one share of its common stock at an exercise price of $12.50 commencing on the later of the consummation of the initial business combination or November 14, 2009. Prospect's Warrants will expire at 5:00 p.m., New York City time, on November 14, 2013, or earlier upon redemption.
Price Range of Securities
The following table sets forth, for the calendar quarter indicated, the high and low closing sales prices per unit, warrant and share of common stock, respectively, as reported on AMEX. The quotations listed below reflect interdealer prices, without retail markup, markdown or commission and may not necessarily represent actual transactions.
|
Units | Warrants | Common Stock | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Quarter ended
|
High | Low | High | Low | High | Low | |||||||||||||
2009 |
|||||||||||||||||||
First Quarter |
$ | 9.55 | $ | 9.07 | $ | 0.07 | $ | 0.03 | $ | 9.46 | $ | 9.20 | |||||||
Second Quarter |
$ | 9.74 | $ | 9.45 | $ | 0.17 | $ | 0.03 | $ | 9.67 | $ | 9.49 | |||||||
2008 |
|||||||||||||||||||
First Quarter |
$ | 9.91 | $ | 9.44 | $ | 0.85 | $ | 0.38 | $ | 9.20 | $ | 8.97 | |||||||
Second Quarter |
$ | 9.75 | $ | 9.20 | $ | 0.45 | $ | 0.30 | $ | 9.31 | $ | 9.05 | |||||||
Third Quarter |
$ | 9.80 | $ | 9.11 | $ | 0.41 | $ | 0.20 | $ | 9.50 | $ | 9.01 | |||||||
Fourth Quarter |
$ | 9.30 | $ | 8.40 | $ | 0.25 | $ | 0.05 | $ | 9.15 | $ | 8.56 | |||||||
2007 |
|||||||||||||||||||
First Quarter* |
| | | | | | |||||||||||||
Second Quarter* |
| | | | | | |||||||||||||
Third Quarter * |
| | | | | | |||||||||||||
Fourth Quarter (November 15, 2007 to December 31, 2007) |
$ | 9.95 | (1) | $ | 9.67 | (1) | $ | 0.90 | (2) | $ | 0.65 | (2) | $ | 9.10 | (3) | $ | 8.91 | (3) |
The closing price for each share of common stock, Public Warrant and unit of Prospect on September 8, 2009, the last trading day before announcement of the execution of the Merger Agreement, was $9.79, $0.28 and $9.82, respectively. As of , 2009, the last practicable date
246
before the date of this proxy statement/prospectus, the closing price for each share of common stock, Public Warrant and unit of Prospect was $ , $ and $ , respectively.
Holders of Prospect common stock, Public Warrants and units should obtain current market quotations for their securities. The market price of Prospect common stock, Public Warrants and units could vary at any time before the Merger.
Holders
As of , 2009 (the record date), Prospect had holders of record of its units, holders of record of its common stock and holders of record of its Public Warrants.
Dividends
Prospect has not paid any dividends on its common stock to date and does not intend to pay dividends prior to the completion of the Merger. The payment of dividends in the future will be contingent upon revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of the initial business combination. The payment of any dividends subsequent to the initial business combination will be within the discretion of Prospect's board of directors. It is the present intention of its board of directors to retain all earnings, if any, for use in its business operations and, accordingly, Prospect's board of directors does not anticipate declaring any dividends in the foreseeable future. If, after Prospect consummates the Merger, it becomes a holding company with a risk-bearing operating company subsidiary, the ability of that subsidiary to pay dividends to stockholders, either directly or through Prospect may be limited by statute or regulation.
Kennedy-Wilson
Price Range of Securities
The following table sets forth, for the calendar quarter indicated, the high and low closing sales prices per share of common stock of Kennedy-Wilson as reported on the Pink Sheets Electronic OTC. The quotations listed below reflect interdealer prices, without retail markup, markdown or commission and may not necessarily represent actual transactions.
|
Common Stock | ||||||
---|---|---|---|---|---|---|---|
Quarter Ended
|
High | Low | |||||
2009 |
|||||||
First Quarter |
$ | 36.50 | $ | 25.00 | |||
Second Quarter |
$ | 40.00 | $ | 30.00 | |||
2008 |
|||||||
First Quarter |
$ | 42.50 | $ | 37.48 | |||
Second Quarter |
$ | 46.50 | $ | 38.50 | |||
Third Quarter |
$ | 43.50 | $ | 36.00 | |||
Fourth Quarter |
$ | 44.00 | $ | 25.00 | |||
2007 |
|||||||
First Quarter |
$ | 30.00 | $ | 24.00 | |||
Second Quarter |
$ | 38.00 | $ | 30.50 | |||
Third Quarter |
$ | 44.00 | $ | 36.00 | |||
Fourth Quarter |
$ | 47.93 | $ | 39.40 |
247
The closing price for each share of Kennedy-Wilson common stock on September 8, 2009, the last trading day before announcement of the execution of the Merger Agreement, was $33.50. As of , 2009, the last practicable date before the date of this proxy statement/prospectus, the closing price for each share of Kennedy-Wilson common stock was $ .
Holders
As of , 2009 (the record date), there were 22 holders of record of Kennedy-Wilson common stock and 35 holders of record of Kennedy-Wilson preferred stock.
Dividends
Kennedy-Wilson has not paid any dividends on its common stock to date. Kennedy-Wilson paid the following dividends on its preferred stock:
Date of Payment
|
Aggregate Amount | |||
---|---|---|---|---|
06/30/08 |
$ | 393,501 | ||
09/30/08 |
$ | 930,222 | ||
12/30/08 |
$ | 940,340 | ||
03/31/09 |
$ | 927,480 | ||
06/22/09 |
$ | 118,475 | ||
07/01/09 |
$ | 809,025 |
Kennedy-Wilson does not currently intend to pay any cash dividends in the foreseeable future. Kennedy-Wilson's board of directors will determine the payment of future cash dividends, if any.
248
Prospect
Prospect stockholders do not have appraisal rights under the DGCL in connection with the Merger.
Kennedy-Wilson
In connection with the Merger, holders of record of Kennedy-Wilson common stock and preferred stock who do not vote in favor of adopting the Merger are entitled to appraisal rights under Section 262 provided that they comply with the conditions established by Section 262. Prospect is not required to effect the Merger in the event that either (i) holders of more than 10% of the outstanding shares of Kennedy-Wilson common stock or (ii) the holders of more than 10% of the outstanding shares of Kennedy-Wilson preferred stock exercise their appraisal rights. Prospect shall not waive this condition if the number of outstanding shares of Kennedy-Wilson common stock or preferred stock for which holders exercise appraisal rights is such that, pursuant to the transactions contemplated by the Merger Agreement, Prospect will not be acquiring "control" of Kennedy-Wilson as defined in Section 368(c) of the Code, solely in exchange for Prospect common stock. See the section entitled "Appraisal Rights" for additional information.
Kennedy-Wilson's holders of common stock may also have appraisal rights under Chapter 13 of the CGCL. Any stockholder who does not vote in favor of the Merger and remains a holder of Kennedy-Wilson common stock at the effective time of the Merger may, by complying with the procedures set forth in Chapter 13 of the CGCL and sending Kennedy-Wilson a written demand for appraisal, be entitled to seek appraisal of the fair value of their shares as determined by the proper California superior court. These dissenter's rights are contingent upon consummation of the Merger.
Except as set forth herein, stockholders of Kennedy-Wilson will not be entitled to appraisal rights in connection with the Merger.
Appraisal Rights under the DGCL
The discussion below is not a complete summary regarding an Kennedy-Wilson stockholder's appraisal rights under the DGCL and is qualified in its entirety by reference to the text of the relevant provisions of the DGCL, which are attached to this proxy statement/prospectus as Annex G. Stockholders intending to exercise appraisal rights should carefully review Annex G. Failure to follow precisely any of the statutory procedures set forth in Annex G may result in a termination or waiver of these rights. All references in this summary of appraisal rights to a "stockholder" or "holders of shares of Kennedy-Wilson's common stock" are to the record holder or holders of shares of Kennedy-Wilson's common stock and preferred stock.
A record holder of shares of Kennedy-Wilson's common stock and preferred stock who has made the demand described below with respect to such shares, who continuously is the record holder of such shares through the effective time of the Merger, who otherwise complies with the statutory requirements of Section 262 and who neither voted in favor of the Merger nor consented thereto in writing will be entitled to an appraisal by the Delaware Court of Chancery (the "Delaware Court") of the fair value of his, her or its shares of Kennedy-Wilson's common stock in lieu of the consideration that such stockholder would otherwise be entitled to receive pursuant to the Merger Agreement.
Under Section 262, where a merger is to be submitted for approval at a meeting of stockholders, not less than 20 days prior to the meeting, a constituent corporation must notify each of the holders of its stock for whom appraisal rights are available that such appraisal rights are available and include in each such notice a copy of Section 262.
249
Stockholders who desire to exercise their appraisal rights must satisfy all of the conditions of Section 262. Those conditions include the following:
Within ten days after the effective time of the Merger, Kennedy-Wilson must provide notice of the effective time of the Merger to all Kennedy-Wilson stockholders who have complied with Section 262 and have not voted in favor of the adoption of the Merger Agreement.
Within 120 days after the effective time of the Merger, either Kennedy-Wilson or any stockholder who has complied with the required conditions of Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court, with a copy served on Kennedy-Wilson in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares of all dissenting stockholders. There is no present intent on the part of Kennedy-Wilson to file an appraisal petition and stockholders seeking to exercise appraisal rights should not assume that Kennedy-Wilson will file such a petition or that Kennedy-Wilson will initiate any negotiations with respect to the fair value of such shares. Accordingly, holders of Kennedy-Wilson's common stock who desire to have their shares appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262.
Within 120 days after the effective time of the Merger, any stockholder who has satisfied the requirements of Section 262 will be entitled, upon written request, to receive from Kennedy-Wilson a statement setting forth the aggregate number of shares of Kennedy-Wilson's common stock not voting in favor of the adoption of the Merger Agreement and with respect to which demands for appraisal were received by Kennedy-Wilson and the aggregate number of holders of such shares. Such statement must be mailed within 10 days after the stockholder's request has been received by Kennedy-Wilson or within 10 days after the expiration of the period for the delivery of demands as described above, whichever is later. Notwithstanding the foregoing, a person who is the beneficial owner of shares of Kennedy-Wilson's common stock held either in a voting trust or by a nominee on behalf of such person may, in such person's own name, file a petition or request from the surviving corporation the statement described in this paragraph.
250
If a petition for an appraisal is timely filed and a copy thereof is served upon Kennedy-Wilson, Kennedy-Wilson will then be obligated, within 20 days after service, to file with the Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached. After notice to stockholders, as required by the Delaware Court, at the hearing on such petition, the Delaware Court will determine which stockholders are entitled to appraisal rights. The appraisal proceeding shall be conducted in accordance with the rules of the Delaware Court, including any rules specifically governing appraisal proceedings. The Delaware Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Delaware Court may dismiss the proceedings as to such stockholder. Where proceedings are not dismissed, the Delaware Court will appraise the shares of Kennedy-Wilson's common stock owned by such stockholders, determining the fair value of such shares exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. Unless the Delaware Court in its discretion determines otherwise for good cause shown, interest from the effective date of the Merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the Merger and the date of payment of the judgment.
Although the board of directors of Kennedy-Wilson believes that the merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the consideration they would receive pursuant to the Merger Agreement. Moreover, Kennedy-Wilson does not anticipate offering more than the merger consideration to any stockholder exercising appraisal rights and reserves the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the "fair value" of a share of Kennedy-Wilson's common stock is less than the merger consideration. In determining "fair value", the Delaware Court is required to take into account all relevant factors. The cost of the appraisal proceeding, which does not include attorneys' or experts' fees, may be determined by the Delaware Court and taxed against the dissenting stockholder and/or Kennedy-Wilson as the Delaware Court deems equitable in the circumstances. Each dissenting stockholder is responsible for his, her or its attorneys' and expert witness expenses, although, upon application of a dissenting stockholder, the Delaware Court may order that all or a portion of the expenses incurred by any dissenting stockholder in connection with the appraisal proceeding, including without limitation, reasonable attorneys' fees and the fees and expenses of experts, be charged pro rata against the value of all shares of stock entitled to appraisal.
Any stockholder who has duly demanded appraisal in compliance with Section 262 will not, after the effective time of the Merger, be entitled to vote for any purpose any shares subject to such demand or to receive payment of dividends or other distributions on such shares, except for dividends or distributions payable to stockholders of record at a date prior to the effective time of the Merger.
At any time within 60 days after the effective time of the Merger, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party will have the right to withdraw his, her or its demand for appraisal and to accept the terms offered in the Merger Agreement. After this period, a stockholder may withdraw his, her or its demand for appraisal and receive payment for his, her or its shares as provided in the Merger Agreement only with the consent of Kennedy-Wilson. If no petition for appraisal is filed with the court within 120 days after the effective time of the Merger, stockholders' rights to appraisal, if available, will cease. Inasmuch as Kennedy-Wilson has no obligation to file such a petition, any stockholder who desires a petition to be filed is
251
advised to file it on a timely basis. Any stockholder may withdraw such stockholder's demand for appraisal by delivering to Kennedy-Wilson a written withdrawal of his, her or its demand for appraisal and acceptance of the merger consideration, except (i) that any such attempt to withdraw made more than 60 days after the effective time of the Merger will require written approval of Kennedy-Wilson and (ii) that no appraisal proceeding in the Delaware Court shall be dismissed as to any stockholder without the approval of the Delaware Court, and such approval may be conditioned upon such terms as the Delaware Court deems just; provided, however, that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the merger consideration offered pursuant to the Merger Agreement within 60 days after the effective date of the Merger.
Failure by any Kennedy-Wilson stockholder to comply fully with the procedures described above and set forth in Section 262 on Annex G to this proxy statement/prospectus may result in termination of such stockholder's appraisal rights. In view of the complexity of exercising appraisal rights under the DGCL, any Kennedy-Wilson stockholder considering exercising these rights should consult with legal counsel.
Appraisal Rights under the CGCL
Kennedy-Wilson's stockholders may also have appraisal rights under Chapter 13 of the CGCL. The discussion below is not a complete summary regarding an Kennedy-Wilson stockholder's appraisal rights under the CGCL and is qualified in its entirety by reference to the text of the relevant provisions of the CGCL, which are attached to this proxy statement/prospectus as Annex H. Stockholders intending to exercise appraisal rights should carefully review Annex H, which sets forth the procedures for Kennedy-Wilson's stockholders to dissent from the Merger and to demand statutory dissenters' rights under the CGCL. Failure to follow precisely any of the statutory procedures set forth in Annex H may result in a termination or waiver of these rights. Shares of Kennedy-Wilson common stock held by stockholders who have perfected their dissenters' rights in accordance with Chapter 13 of the CGCL and have not withdrawn their demands or otherwise lost their rights are referred to in this summary as "dissenting shares."
Under Sections 181 and 1201 of the CGCL, the Merger constitutes a "reorganization." Chapter 13 of the CGCL provides dissenters' rights for stockholders dissenting from reorganizations in certain circumstances. For a Kennedy-Wilson stockholder to exercise dissenters' rights as to any shares of Kennedy-Wilson' common stock in connection with the Merger, the stockholder must not vote in favor of the Merger and must make a written demand to Kennedy-Wilson that it purchase the shares at their fair market value. Thus, if a stockholder wishes to dissent, the stockholder must vote "AGAINST" the Merger or "ABSTAIN" from voting. If the stockholder votes "FOR" the Merger, he will lose his dissenters' rights.
The stockholder's written demand must:
252
In addition, within 30 days after notice of the approval of the Merger is mailed to stockholders, the stockholder must also submit to Kennedy-Wilson, for endorsement as dissenting shares, the stock certificates representing the Kennedy-Wilson shares as to which the stockholder is exercising dissenters' rights. A holder of dissenting shares may not withdraw a demand for payment unless Kennedy-Wilson consents to the withdrawal.
Simply failing to vote for or against, or voting against, the proposed Merger will not be sufficient to constitute the demand described above.
If the Merger is approved by Kennedy-Wilson's stockholders, Kennedy-Wilson will have 10 days after the approval to send to those stockholders who did not vote in favor of the Merger and who could potentially exercise dissenters' rights in accordance with the CGCL, a written notice of such approval accompanied by:
If Kennedy-Wilson and a dissenting stockholder agree that the shares are dissenting shares and agree on the price of the shares, the dissenting stockholder is entitled to receive the agreed-upon price with interest from the date of such agreement. The applicable interest rate will be the rate then set by law for the accrual of interest on judgments for money. Payment for the dissenting shares must be made within 30 days after the later of the date of that agreement or the date on which all statutory and contractual conditions to the Merger are satisfied. Payments are also conditioned on the surrender to Kennedy-Wilson of the certificates representing the dissenting shares.
If Kennedy-Wilson denies that shares are dissenting shares or the stockholder fails to agree with Kennedy-Wilson as to the fair market value of the shares, then, within six months after the notice of approval is mailed, any stockholder demanding purchase of such shares as dissenting shares or any interested corporation may file a complaint in the superior court in the proper California county requesting a determination as to whether the shares are dissenting shares or as to the fair market value of the holder's shares, or both, or may intervene in any action pending on such a complaint. If the complaint is not filed or intervention in a pending action is not made within the specified six-month period, the dissenters' rights are lost. If the status of the shares as dissenting shares is at issue, the court will first determine that issue. If the fair market value of the dissenting shares is at issue, the court will determine, or will appoint one or more impartial appraisers to determine, such fair market value.
If the court appoints an appraiser or appraisers, they will proceed to determine the fair market value per share. Within the time fixed by the court, the appraisers, or a majority of the appraisers, will make and file a report in the office of the clerk of the court. Thereafter, on the motion of any party, the report is submitted to the court and considered on such evidence as the court considers relevant. If the court finds the report reasonable, the court may confirm it.
253
If a majority of the appraisers fails to make and file a report within 10 days after the date of their appointment or within such further time as the court allows, or if the court does not confirm the report, the court will determine the fair market value of the dissenting shares. Subject to Section 1306 of Chapter 13 of the CGCL, judgment is rendered against Kennedy-Wilson for payment of an amount equal to the fair market value of each dissenting share multiplied by the number of dissenting shares that any dissenting stockholder who is a party, or who has intervened, is entitled to require Kennedy-Wilson to purchase, with interest at the legal rate from the date on which the judgment is entered.
The costs of the action, including reasonable compensation to the appraisers to be fixed by the court, is assessed or apportioned as the court considers equitable. However, if the price determined by the court is more than the price offered by Kennedy-Wilson, it will pay the costs (including, in the discretion of the court, attorneys' fees, fees of expert witnesses and interest at the legal rate on judgments from the date of compliance with Sections 1300, 1301 and 1302 of the CGCL if the price determined by the court is more than 125% of the price offered by Kennedy-Wilson).
Except as expressly limited by Chapter 13, holders of dissenting shares continue to have all of the rights and privileges incident to their shares until the fair market value of their shares is agreed upon or determined.
Dissenting shares lose their status as dissenting shares, and dissenting stockholders cease to be entitled to require Kennedy-Wilson to purchase their shares, if:
To the extent that the provisions of Chapter 5 of the CGCL (which places conditions on the power of a California corporation to make distributions to its stockholders) prevent the payment to any holders of dissenting shares of the fair market value of the dissenting shares, the dissenting stockholders will become creditors of Kennedy-Wilson for the amount that they otherwise would have received in the repurchase of their dissenting shares, plus interest at the legal rate on judgments until the date of payment, but subordinate to all other creditors of Kennedy-Wilson in any liquidation proceeding, with the debt to be payable when permissible under the provisions of Chapter 5 of the CGCL.
For U.S. federal income tax purposes, stockholders who receive cash for their shares of Kennedy-Wilson's stock pursuant to the exercise of dissenters' rights will generally recognize taxable gain or loss. Each holder should consult its own tax advisor as to the particular tax consequences of the exercise of dissenters' rights to such holder.
CHAPTER 13 OF THE CGCL PROVIDES THAT THE VALUE OF KENNEDY-WILSON COMMON STOCK FOR PURPOSES OF THE EXERCISE OF DISSENTERS' RIGHTS IS THE "FAIR MARKET VALUE" ON THE DAY PRIOR TO ANNOUNCEMENT OF THE TRANSACTION. AS A RESULT, THE KENNEDY-WILSON BOARD INTENDS TO FIX THE VALUE FOR PURPOSES OF ANY STOCKHOLDER EXERCISING DISSENTERS' RIGHTS AT $33.50 PER SHARE, THE PRICE OF OUR COMMON STOCK ON SEPTEMBER 8, 2009, AND AN AMOUNT SUBSTANTIALLY LESS THAN THE MERGER CONSIDERATION.
254
If the Merger is consummated, Kennedy-Wilson will be a wholly-owned subsidiary of Prospect. If the Merger is not consummated prior to November 14, 2009, Prospect will be required to dissolve and liquidate and will conduct no annual meetings thereafter. Prospect's next annual meeting of stockholders will be held on or about June 15, 2010 unless the date is changed by Prospect's board of directors. Proposals to be included in the proxy statement for the 2010 annual meeting must be provided to Prospect in a reasonable time before it begins to print and deliver proxy materials. You should direct any proposals to Prospect's secretary at Prospect's principal executive offices. Applicable SEC rules and regulations govern the submission of stockholder proposals and Prospect's consideration of them for inclusion in next year's proxy statement for the 2010 annual meeting.
Bingham McCutchen LLP will pass upon the validity of the common stock issued in connection with the Merger and certain other legal matters related to this proxy statement/prospectus. Bingham McCutchen LLP, as counsel to Prospect, has provided an opinion to Prospect related to the statements made in the sections of this proxy statement/prospectus captioned "Material United States Federal Income Tax ConsequencesTax Consequences of the Merger to Prospect and United States Holders of Prospect Common Stock" and "Material United States Federal Income Tax ConsequencesTax Consequences of the Warrant Amendment to United States Holders of Prospect Warrants." Loeb & Loeb LLP, as counsel to Kennedy-Wilson, has provided an opinion to Kennedy-Wilson related to the statements made in the section of this proxy statement/prospectus captioned "Material United States Federal Income Tax ConsequencesTax Consequences of the Merger to United States Holders of Kennedy-Wilson Stock."
The consolidated financial statements of Kennedy-Wilson as of December 31, 2008 and 2007, and for each of the years in the three-year period ended December 31, 2008, have been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The audit report covering the December 31, 2008 financial statements refers to the adoption of Statement of Financial Accounting Standards No. 160, Noncontrolling Interest in Consolidated Financial Statementsan Amendment of ARB No. 51.
The financial statements of Prospect as of December 31, 2008 and 2007 and for the year ended December 31, 2008 and the periods from July 9, 2007 (inception) to December 31, 2007 and July 9, 2007 (inception) to December 31, 2008 included in this proxy statement/prospectus have been so included in the reliance on a report of McGladrey & Pullen LLP, an independent registered public accounting firm, appearing elsewhere herein given on the authority of said firm, as experts in auditing and accounting.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS
Pursuant to the rules of the SEC, Prospect and services that it employs to deliver communications to its stockholders are permitted to deliver to two or more stockholders sharing the same address a single copy of this proxy statement/prospectus. Upon written or oral request, Prospect will deliver a separate copy of this proxy statement/prospectus to any stockholder at a shared address to which a single copy of this proxy statement/prospectus was delivered and who wishes to receive separate copies of such documents in the future. Stockholders receiving multiple copies of this proxy statement/prospectus may likewise request that Prospect deliver single copies of such documents in the future.
255
Stockholders may notify Prospect of their requests by calling or writing Prospect at its principal executive offices at 9130 Galleria Court, Suite 318, Naples, FL 34109, telephone (239) 254-4481.
WHERE YOU CAN FIND MORE INFORMATION
Prospect files reports, proxy statements and other information with the SEC as required by the Exchange Act.
You may read and copy reports, proxy statements and other information filed by Prospect with the SEC at its public reference room located at 100 F Street, N.E., Washington, D.C. 20549-1004.
You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain copies of the materials described above at prescribed rates by writing to the SEC, Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549-1004.
Prospect files its reports, proxy statements and other information electronically with the SEC. You may access information on Prospect at the SEC web site containing reports, proxy statements and other information at http://www.sec.gov .
This proxy statement/prospectus describes the material elements of relevant contracts, exhibits and other information described in this proxy statement/prospectus.
All information contained or incorporated by reference in this proxy statement/prospectus relating to Prospect has been supplied by Prospect.
If you would like additional copies of this proxy statement/prospectus you should contact:
James
J. Cahill
Chief Financial Officer and Secretary, Prospect Acquisition Corp.
9130 Galleria Court, Suite 318
Naples, Florida 34109
(239) 254-4481
DIRECTIONS TO THE SPECIAL MEETING OF STOCKHOLDERS AND THE SPECIAL MEETING OF WARRANTHOLDERS
You can obtain directions to the special meeting of Prospect stockholders and the special meeting of Prospect warrantholders by visiting http://www.professionalsuitesnaples.com and clicking on the "location" tab.
256
Prospect Acquisition Corp.
F-1
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of
Prospect Acquisition Corp.
We have audited the accompanying balance sheets of Prospect Acquisition Corp. (a development stage company) as of December 31, 2008 and 2007, and the related statements of operations, stockholders' equity, and cash flows for the year ended December 31, 2008, the period from July 9, 2007 (date of inception) through December 31, 2007, and the cumulative period from July 9, 2007 (date of inception) through December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Prospect Acquisition Corp. as of December 31, 2008 and 2007 and the results of its operations and its cash flows for the year ended December 31, 2008, the period from July 9, 2007 (date of inception) through December 31, 2007, and the cumulative period from July 9, 2007 (date of inception) through December 31, 2008, in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Prospect Acquisition Corp. will continue as a going concern. As discussed in Note 1 to the financial statements, the Company will face mandatory liquidation on November 14, 2009 if a business combination is not consummated, which raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ McGladrey & Pullen, LLP
McGLADREY & PULLEN, LLP
New York, New York
March 13, 2009
F-3
(a development stage company)
Balance Sheets
|
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | |||||||
Assets |
|||||||||
Current assets: |
|||||||||
Cash |
$ | 28,678 | $ | 58,075 | |||||
Investments held in Trust Account |
248,924,201 | 247,340,887 | |||||||
Accrued interest income on Trust Account |
59,219 | 739,654 | |||||||
Prepaid expenses |
60,716 | 22,605 | |||||||
Prepaid taxes |
203,588 | | |||||||
Total current assets |
249,276,402 | 248,161,221 | |||||||
Deferred tax asset |
173,158 | | |||||||
Total assets |
$ | 249,449,560 | $ | 248,161,221 | |||||
Liabilities and Stockholders' Equity |
|||||||||
Current liabilities: |
|||||||||
Accrued expenses |
$ | 186,097 | $ | 45,407 | |||||
Accrued offering costs |
| 38,216 | |||||||
Income taxes payable |
| 392,498 | |||||||
Deferred interest income |
67,148 | | |||||||
Deferred underwriting commission |
10,000,000 | 10,000,000 | |||||||
Total liabilities |
10,253,245 | 10,476,121 | |||||||
Common stock, subject to possible conversion, 7,499,999 shares |
74,099,990 | 74,099,990 | |||||||
Commitments and contingencies |
|||||||||
Stockholders' equity |
|||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding |
| | |||||||
Common stock, $0.0001 par value; 72,000,000 shares authorized; 31,250,000 shares (including 7,499,999 subject to possible conversion) issued and outstanding |
3,125 | 3,125 | |||||||
Additional paid-in capital |
162,966,787 | 162,966,787 | |||||||
Earnings accumulated during the development stage |
2,126,413 | 615,198 | |||||||
Total stockholders' equity |
165,096,325 | 163,585,110 | |||||||
Total liabilities and stockholders' equity |
$ | 249,449,560 | $ | 248,161,221 | |||||
See notes to financial statements.
F-4
(a development stage company)
Statements of Operations
|
For the year
ended December 31, 2008 |
For the period
from July 9, 2007 (date of inception) through December 31, 2007 |
For the period
from July 9, 2007 (date of inception) through December 31, 2008 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest income |
$ | 3,875,836 | $ | 1,080,541 | $ | 4,956,377 | ||||||
Deferred interest income |
67,148 | | 67,148 | |||||||||
Net interest income |
3,808,688 | 1,080,541 | 4,889,229 | |||||||||
Operating expenses: |
||||||||||||
Capital & franchise taxes |
886,646 | 94,763 | 981,409 | |||||||||
Professional fees |
250,457 | 24,996 | 275,453 | |||||||||
Formation and operating costs |
193,232 | 16,913 | 210,145 | |||||||||
Rent and office expenses |
90,050 | 11,750 | 101,800 | |||||||||
|
1,420,385 | 148,422 | 1,568,807 | |||||||||
Net income before provision for income taxes |
2,388,303 | 932,119 | 3,320,422 | |||||||||
Provision for income taxes |
877,088 | 316,921 | 1,194,009 | |||||||||
Net income |
$ | 1,511,215 | $ | 615,198 | $ | 2,126,413 | ||||||
Weighted average number of common shares outstanding: |
||||||||||||
Basic and diluted |
31,250,000 | 13,155,357 | 25,396,835 | |||||||||
Net income per share: |
||||||||||||
Basic and diluted |
$ | 0.05 | $ | 0.05 | $ | 0.08 |
See notes to financial statements.
F-5
(a development stage company)
Statements of Stockholders' Equity
|
|
|
|
Retained
Earnings Accumulated During the Development Stage |
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Common Stock |
|
|
|||||||||||||
|
Additional
Paid-in Capital |
Total
Stockholders' Equity |
||||||||||||||
|
Shares | Amount | ||||||||||||||
Common shares issued to initial stockholders on July 18, 2007 at approximately $.003 per share |
7,187,500 | $ | 719 | $ | 24,281 | $ | | $ | 25,000 | |||||||
Sale of 25,000,000 units, net of underwriters' discount and offering expenses of $18,205,004 (includes 7,499,999 shares subject to possible conversion) |
25,000,000 | 2,500 | 231,792,496 | | 231,794,996 | |||||||||||
Proceeds subject to possible conversion of 7,499,999 shares |
| | (74,099,990 | ) | | (74,099,990 | ) | |||||||||
Proceeds from issuance of Sponsors' Warrants |
| | 5,250,000 | | 5,250,000 | |||||||||||
Repurchase of 937,500 common shares issued to initial stockholders |
(937,500 | ) | (94 | ) | | | (94 | ) | ||||||||
Net income |
| | | 615,198 | 615,198 | |||||||||||
Balance at December 31, 2007 |
31,250,000 | 3,125 | 162,966,787 | 615,198 | 163,585,110 | |||||||||||
Net income |
| | | 1,511,215 | 1,511,215 | |||||||||||
Balance at December 31, 2008 |
31,250,000 | $ | 3,125 | $ | 162,966,787 | $ | 2,126,413 | $ | 165,096,325 | |||||||
See notes to financial statements.
F-6
(a development stage company)
Statements of Cash Flows
|
For the year
ended December 31, 2008 |
For the period
from July 9, 2007 (date of inception) through December 31, 2007 |
For the period
from July 9, 2007 (date of inception) through December 31, 2008 |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash flows from operating activities |
|||||||||||||
Net income |
$ | 1,511,215 | $ | 615,198 | $ | 2,126,413 | |||||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|||||||||||||
Interest income earned on Trust Account |
(3,875,836 | ) | (1,080,541 | ) | (4,956,377 | ) | |||||||
Changes in assets and liabilities: |
|||||||||||||
Increase in prepaid expenses |
(241,699 | ) | (22,605 | ) | (264,304 | ) | |||||||
Increase in deferred tax asset |
(173,158 | ) | | (173,158 | ) | ||||||||
Increase in accrued expenses |
140,690 | 45,407 | 186,097 | ||||||||||
Increase in deferred interest income |
67,148 | | 67,148 | ||||||||||
(Decrease) increase in income taxes payable |
(392,498 | ) | 392,498 | | |||||||||
Net cash used in operating activities |
(2,964,138 | ) | (50,043 | ) | (3,014,181 | ) | |||||||
Cash flows from investing activities |
|||||||||||||
Cash placed in Trust Account |
| (247,000,000 | ) | (247,000,000 | ) | ||||||||
Cash withdrawn from Trust Account |
2,972,957 | | 2,972,957 | ||||||||||
Net cash provided by (used in) investing activities |
2,972,957 | (247,000,000 | ) | (244,027,043 | ) | ||||||||
Cash flows from financing activities |
|||||||||||||
Gross proceeds from initial public offering |
| 250,000,000 | 250,000,000 | ||||||||||
Proceeds from issuance of Sponsors' Warrants |
| 5,250,000 | 5,250,000 | ||||||||||
Proceeds from sale of shares of common stock to initial stockholders |
| 25,000 | 25,000 | ||||||||||
Proceeds from notes payable to stockholders |
| 200,000 | 200,000 | ||||||||||
Repayment of notes payable to stockholders |
| (200,000 | ) | (200,000 | ) | ||||||||
Repurchase of common shares from initial stockholders |
| (94 | ) | (94 | ) | ||||||||
Payment of deferred offering costs |
| | | ||||||||||
Payment of offering costs |
(38,216 | ) | (8,166,788 | ) | (8,205,004 | ) | |||||||
Net cash (used in) provided by financing activities |
(38,216 | ) | 247,108,118 | 247,069,902 | |||||||||
Net (decrease) increase in cash |
(29,397 | ) | 58,075 | 28,678 | |||||||||
Cash at beginning of period |
58,075 |
|
|
||||||||||
Cash at end of period |
$ | 28,678 | $ | 58,075 | $ | 28,678 | |||||||
Supplemental disclosure of non-cash financing activities |
|||||||||||||
Accrual of deferred offering costs |
| $ | 38,216 | | |||||||||
Deferred underwriting commission |
| $ | 10,000,000 | $ | 10,000,000 | ||||||||
Supplemental disclosure of cash flow information |
|||||||||||||
Cash paid during the period for income taxes |
$ | 1,646,332 | $ | | $ | 1,646,332 | |||||||
See notes to financial statements.
F-7
Prospect Acquisition Corp.
(a development stage company)
Notes to Financial Statements
1. Organization, Business Operations and Significant Accounting Policies
Prospect Acquisition Corp. (the "Company") was incorporated in Delaware on July 9, 2007 as a blank check company formed for the purpose of acquiring control of, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination, one or more operating businesses or assets in the financial services industry (a "Business Combination").
At December 31, 2008, the Company's operations related to the Company's formation and the initial public offering described below.
The registration statement for the Company's initial public offering (the "Offering") was declared effective November 14, 2007. The Company consummated the Offering on November 20, 2007 and received gross proceeds of $250,000,000 and $5,250,000 from the sale of Sponsors' Warrants on a private placement basis (see Note 2). The Company's management has broad discretion with respect to the specific application of the net proceeds of the Offering, although substantially all of the net proceeds of the Offering are intended to be generally applied toward consummating a Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination. An amount of $247,000,000 (or approximately $9.88 per unit) of the net proceeds of the Offering and the sale of the Sponsors' Warrants (see Note 2) was deposited in a trust account (the "Trust Account") and invested in United States "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a maturity of 180 days or less, or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940 until the earlier of (i) the consummation of its initial Business Combination or (ii) liquidation of the Company. At December 31, 2008, the Trust Account was invested in United States government securities and has been accounted for as a trading security. The placing of funds in the Trust Account may not protect those funds from third-party claims against the Company. Although the Company has sought and will seek to have all vendors, prospective target businesses or other entities it engages, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account, there is no guarantee that they will execute such agreements. A Company officer and two initial stockholders have agreed that they will be personally liable under certain circumstances to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by the Company for services rendered, contracted for or products sold to the Company, subject to limited exceptions. However, there can be no assurance that they will be able to satisfy those obligations. The remaining net proceeds (not held in the Trust Account) are being used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. Until the consummation of the initial Business Combination or the liquidation of the Company, proceeds held in the Trust Account will not be available for the Company's use for any purpose, except there can be released to the Company from the Trust Account (i) interest income earned on the Trust Account balance to pay any taxes on such interest and (ii) interest income earned of up to $2.75 million on the Trust Account balance to fund the Company's working capital requirements, provided that after such release there remains in the Trust Account a sufficient amount
F-8
Prospect Acquisition Corp.
(a development stage company)
Notes to Financial Statements (Continued)
1. Organization, Business Operations and Significant Accounting Policies (Continued)
of interest income previously earned on the Trust Account balance to pay any due and unpaid taxes on income generated by the Trust Account.
Amounts placed in Trust Account |
$ | 247,000,000 | ||
Interest income received |
4,897,158 | |||
Amounts withdrawn for payment of federal & state taxes |
(2,387,057 | ) | ||
Amounts withdrawn for working capital |
(585,900 | ) | ||
Total |
$ | 248,924,201 | ||
The Company, after signing a definitive agreement for a Business Combination with a target business or businesses, is required to submit such transaction for stockholder approval. In the event that those persons that purchase securities in the Offering or thereafter ("Public Stockholders") owning 30% or more of the shares sold in the Offering vote against the Business Combination and exercise their conversion rights described below, the Business Combination will not be consummated. All of the Company's stockholders prior to the Offering, including all of the directors of the Company (the "Initial Stockholders"), have agreed to vote all of their founding shares of common stock in accordance with the majority of the shares of common stock voted by the Public Stockholders with respect to any Business Combination.
After consummation of a Business Combination, these voting safeguards will no longer apply.
With respect to a Business Combination which is approved and consummated, any Public Stockholder who voted against the Business Combination may demand that the Company convert his or her shares into cash from the Trust Account. The per share conversion price will equal the aggregate amount then on deposit in the Trust Account, before payment of deferred underwriting discounts and commissions and including accrued interest, net of income taxes on such interest and net of interest income on the Trust Account balance released to the Company as described above, calculated as of two business days prior to the proposed consummation of the initial Business Combination, divided by the number of shares of common stock sold in the Offering. Accordingly, Public Stockholders holding not more than 30% of the shares (minus one share) sold in the Offering may seek conversion of their shares in the event of a Business Combination. Such Public Stockholders are entitled to receive their per share interest in the Trust Account (net of the tax and working capital items described above) computed without regard to the shares held by Initial Stockholders.
Accordingly, a portion of the net proceeds from the Offering (29.99% of the amount placed in the Trust Account) has been classified as common stock subject to possible conversion and a portion (29.99%) of the interest earned on the Trust Account, after deducting the amounts permitted to be utilized for tax obligations and working capital purposes, has been recorded as deferred interest in the accompanying financial statements.
The Company's Certificate of Incorporation was amended on November 14, 2007 to provide that the Company will continue in existence only until 24 months from the effective date of the registration statement relating to the Offering (the "Effective Date"), or November 14, 2009. If the Company has not completed a Business Combination by such date, its corporate existence will cease except for the purposes of liquidating and winding up its affairs. In the event of liquidation, it is possible that the per
F-9
Prospect Acquisition Corp.
(a development stage company)
Notes to Financial Statements (Continued)
1. Organization, Business Operations and Significant Accounting Policies (Continued)
share value of the residual assets remaining available for distribution (including assets in the Trust Account) will be less than the initial public offering price per Unit in the Offering (assuming no value is attributed to the Warrants contained in the Units offered in the Offering discussed in Note 2) because of the expenses of the Offering, the Company's general and administrative expenses and the anticipated costs of seeking an initial Business Combination. This raises substantial doubt about the Company's ability to continue as a going concern beyond November 14, 2009. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Deferred Income Taxes:
Deferred income tax assets and liabilities are computed for differences between the financial statements and tax basis of assets and liabilities that will result in future taxable or deductible amounts and are based on enacted tax laws and rates applicable to the periods in which the differences are expected to effect taxable income. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.
Net Income per Share:
The Company complies with Statement of Financial Accounting Standards ("SFAS") No. 128, " Earnings Per Share, " which requires dual presentation of basic and diluted earnings per share on the face of the statement of operations. Basic net income per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income per share gives effect to dilutive options, warrants, and other potential common stock outstanding during the period. The effect of the 30,250,000 outstanding Warrants issued in connection with the Offering and the private placement described in Note 2 has not been considered in the diluted earnings per share calculation since the Warrants are contingent upon the occurrence of future events, and therefore, is not includable in the calculation of diluted earnings per share in accordance with SFAS 128.
Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications:
Certain prior year balances have been reclassified to conform with the current year presentation.
Cash and Cash Equivalents:
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
F-10
Prospect Acquisition Corp.
(a development stage company)
Notes to Financial Statements (Continued)
1. Organization, Business Operations and Significant Accounting Policies (Continued)
Concentration of Credit Risk:
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments with Concentration of Credit Risk," requires disclosure of significant concentrations of credit risk regardless of the degree of risk. At December 31, 2007, financial instruments that potentially expose the Company to credit risk consist of cash and investments held in the Trust Account. The Company maintains its cash balances in various financial institutions. The Federal Deposit Insurance Corporation insures balances in bank accounts up to $100,000 and the Securities Investor Protection Corporation insures balances up to $500,000 in brokerage accounts. The Company maintains cash in accounts which, at times, exceeds such limits. The Company has not experienced any losses on this account and management believes the risk of loss to be minimal since it invests through major financial institutions.
Fair value of financial instruments:
The fair values of the Company's assets and liabilities that are defined as financial instruments under Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosures about Fair Value of Financial Instrument, approximate their carrying amounts presented in the balance sheets at December 31, 2008 and December 31, 2007.
New Accounting Pronouncements:
In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles ("GAAP") and expands disclosures about fair value measurements. SFAS 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. Under SFAS 157, fair value measurements are disclosed by level within that hierarchy. In February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157 , which permits a one-year deferral for the implementation of SFAS 157 with regard to non-financial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis. The Company adopted SFAS 157 for the fiscal year beginning January 1, 2008, except for the non-financial assets and non-financial liabilities for which delayed application is permitted until our fiscal year beginning January 1, 2009. The adoption of the remaining provisions of SFAS 157 is not expected to have a material impact on the Company's financial position, results of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an Amendment of FASB No. 115 ("SFAS 159"). SFAS 159 allows a company to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and financial liabilities on a contract-by-contract basis, with changes in fair value recognized in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007 and will be applied prospectively. The adoption of SFAS 159 did not have a significant impact on the Company's financial statements.
In December 2007, the FASB issued SFAS No. 141(R) , Business Combinations ("SFAS 141R") which establishes principles and requirements for how the acquirer of a business recognizes and
F-11
Prospect Acquisition Corp.
(a development stage company)
Notes to Financial Statements (Continued)
1. Organization, Business Operations and Significant Accounting Policies (Continued)
measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R will have an impact to the Company for any acquisitions consummated on or after January 1, 2009.
In December 2007, the FASB released SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51 ("SFAS 160"), which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent and for the deconsolidation of a subsidiary. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interest of the parent and the interests of the non-controlling owners. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. SFAS 160 may have a material impact to the Company with respect to any acquisitions consummated on or after January 1, 2009.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.
2. Initial Public Offering
On November 20, 2007, the Company sold 25,000,000 units (the "Units") at an offering price of $10.00 per Unit. The Company granted the underwriters an option to purchase up to an additional 3,750,000 Units solely to cover over-allotments. Said option could have been exercised in whole or in part at any time before the 30th day after the Effective Date, and has expired without having been exercised by the underwriters.
Each Unit consists of one share of the Company's common stock and one warrant exercisable for one share of common stock at an exercise price of $7.50 per share (a "Warrant"). Each Warrant will be exercisable on the later of the completion of the initial Business Combination and fifteen months from the Effective Date, provided in each case that the Company has an effective registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available. The Warrants will expire five years from the Effective Date, unless earlier redeemed. The Company may call the Warrants for redemption, in whole and not in part, at any time after the Warrants become exercisable and there is an effective registration statement covering the shares of common stock issuable upon exercise of the warrants available and current throughout the 30-day Redemption Period defined hereafter, upon a minimum of 30 days' prior written notice of redemption (the "30-day Redemption Period") at a price of $0.01 per Warrant, only in the event that the last sale price of the common stock equals or exceeds $14.50 per share for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which the notice of redemption is sent to the Warrant holder. In accordance with the warrant agreement relating to the Warrants sold and issued in the Offering, the Company is only required to use its best efforts to maintain the effectiveness of the registration statement covering the Warrants from the date the warrants become exercisable until the warrants expire or are redeemed. The Company will not be obligated to deliver securities, and there are no contractual penalties for failure to deliver securities, if a registration statement is not effective at the time of exercise. Additionally, in the event that a
F-12
Prospect Acquisition Corp.
(a development stage company)
Notes to Financial Statements (Continued)
2. Initial Public Offering (Continued)
registration statement is not effective at the time of exercise, the holder of such Warrant shall not be entitled to exercise such Warrant and in no event (whether in the case of a registration statement not being effective or otherwise) will the Company be required to settle the warrant exercise, whether by net cash settlement or otherwise. Consequently, the Warrants may expire unexercised and unredeemed (and therefore worthless), and, as a result, an investor in the Offering may effectively pay the full Unit price solely for the shares of common stock included in the Units.
The Company entered into an agreement with the underwriters of the Offering (the "Underwriting Agreement"). The Underwriting Agreement requires the Company to pay 3% of the gross proceeds of the Offering as an underwriting discount plus an additional 4% of the gross proceeds of the Offering only upon consummation of a Business Combination. The Company paid an underwriting discount of 3% of the gross proceeds of the Offering ($7.5 million) in connection with the consummation of the Offering and has placed 4% of the gross proceeds of the Offering ($10 million) in the Trust Account. The $10 million amount due to the underwriters has been classified as deferred underwriting commission on the accompanying balance sheets. The Company did not have to pay any discount related to the Sponsors' Warrants sold on a private placement basis. The underwriters have waived their right to receive payment of the 4% of the gross proceeds for the Offering upon the Company's liquidation if the Company is unable to complete a Business Combination.
Pursuant to purchase agreements dated November 14, 2007, certain of the Initial Stockholders have purchased from the Company, in the aggregate, 5,250,000 warrants for $5,250,000 (the "Sponsors' Warrants"). The purchase and issuance of the Sponsors' Warrants occurred simultaneously with the consummation of the Offering on a private placement basis. All of the proceeds the Company received from these purchases were placed in the Trust Account. The Sponsors' Warrants are identical to the Warrants included in the Units offered in the Offering except that the Sponsors' Warrants (i) are non-redeemable so long as they are held by the original purchasers or their permitted transferees, (ii) are subject to certain transfer restrictions and will not be exercisable while they are subject to these transfer restrictions and (iii) may be exercised for cash or on a cashless basis. The purchase price of the Sponsors' Warrants has been determined to be the fair value of such warrants as of the purchase date.
The Initial Stockholders have waived their right to receive a liquidation distribution with respect to their founding shares upon the Company's liquidation if it is unable to complete a Business Combination.
3. Fair Value Measurement
As discussed in Note 1, effective January 1, 2008 the Company adopted the required portions of SFAS 157. SFAS 157 requires new disclosure that establishes a framework for measuring fair value in GAAP, and expands disclosure about fair value measurements. This statement enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The
F-13
Prospect Acquisition Corp.
(a development stage company)
Notes to Financial Statements (Continued)
3. Fair Value Measurement (Continued)
statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1: | Quoted market prices in active markets for identical assets or liabilities. | |||
Level 2: | Observable market based inputs or unobservable inputs that are corroborated by market data. | |||
Level 3: | Unobservable inputs that are not corroborated by market data. |
In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to SFAS 157. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.
The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy.
|
Fair Value
As of December 31, 2008 |
Quoted Prices
in Active Markets (Level 1) |
Significant
other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Investments held in Trust Account plus Accrued Interest Income on Trust Account |
$ | 248,983,420 | $ | 248,983,420 | | | |||||||
Total |
$ | 248,983,420 | $ | 248,983,420 | | | |||||||
4. Accrued Offering Costs
Accrued offering costs consisted of road show and printing fees related to the Offering that were incurred through the balance sheet date and were charged to additional paid-in capital upon the consummation of the Offering.
5. Notes Payable to Stockholders
The Company issued three unsecured promissory notes for $120,000, $78,400 and $1,600 (a total of $200,000) to three Initial Stockholders. The notes were non-interest bearing and were repaid upon the consummation of the Offering.
F-14
Prospect Acquisition Corp.
(a development stage company)
Notes to Financial Statements (Continued)
6. Income Taxes
Income tax expense in the accompanying statements of operations consists of the current and deferred provisions as follows:
|
2008 | 2007 | |||||
---|---|---|---|---|---|---|---|
Current: |
|||||||
Federal |
$ | 1,050,246 | $ | 316,921 | |||
State |
| | |||||
|
1,050,246 | 316,921 | |||||
Deferred: |
|||||||
Federal |
(173,158 | ) | | ||||
State |
| | |||||
|
(173,158 | ) | | ||||
Total income tax expense |
$ | 877,088 | $ | 316,921 | |||
The components of the deferred tax asset are as follows:
|
December 31, 2008 | December 31, 2007 | |||||
---|---|---|---|---|---|---|---|
Expenses deferred for income tax purposes |
$ | 198,368 | $ | | |||
Interest income deferred for book purposes |
26,154 | ||||||
Valuation allowance |
(51,364 | ) | | ||||
|
$ | 173,158 | $ | | |||
The effective tax rate differs from the statutory rate of 34% due to the following:
|
2008 | 2007 | |||||
---|---|---|---|---|---|---|---|
Statutory rate |
34.0 | % | 34.0 | % | |||
State income taxes, net of current federal benefit |
(1.2 | ) | | ||||
Change in valuation allowance |
2.2 | | |||||
Other |
1.7 | | |||||
|
36.7 | % | 34.0 | % | |||
7. Related Party Transactions
The Company presently occupies office space provided by affiliates of certain of the Company's officers and directors. Such affiliates have agreed that until the Company consummates a Business Combination, they will make such office space, as well as certain general and administrative services including utilities and administrative support, available to the Company, as may be required by the Company from time to time. The Company has agreed to pay such affiliates a total of $7,500 per month for such services commencing on the Effective Date (amended December 31, 2008 to $6,805.25 per month). For the periods ended December 31, 2008 and 2007, the Company has incurred $90,050
F-15
Prospect Acquisition Corp.
(a development stage company)
Notes to Financial Statements (Continued)
7. Related Party Transactions (Continued)
and $11,750, respectively, of expense relating to these agreements, which is reflected in rent and office expenses in the accompanying statements of operations.
8. Commitments
The Initial Stockholders and holders of the Sponsors' Warrants (or underlying securities) will be entitled to registration rights with respect to their founding shares or Sponsors' Warrants (or underlying securities), as the case may be, pursuant to an agreement dated November 14, 2007. In addition, the Initial Stockholders have certain "piggy-back" registration rights with respect to registration statements filed by the Company generally commencing nine months after the consummation of the Company's initial Business Combination, and the holders of the Sponsors' Warrants (or underlying securities) have certain "piggy-back" registration rights on registration statements filed after the Company's consummation of a Business Combination.
9. Capital Stock
The Company's original Certificate of Incorporation authorized the Company to issue 6,000,000 shares of common stock with a par value of $0.0001 per share. In October, 2007, the Company's certificate of incorporation was amended to increase the authorized shares of common stock from 6,000,000 shares to 8,000,000 shares. The Company's Certificate of Incorporation was amended on November 14, 2007 to increase the number of authorized shares of common stock to 72,000,000. In addition, the Company is authorized to issue 1,000,000 shares of preferred stock.
On July 18, 2007, the Company issued 4,312,500 shares of common stock to the founders for an aggregate of $25,000 in cash, at a purchase price of approximately $0.006 per share. In October, 2007, the aggregate outstanding 4,312,500 shares of common stock were increased to 7,187,500 shares of common stock as a result of a 5-for-3 stock split declared by our board of directors. All references in the accompanying financial statements to the number of shares of stock have been retroactively restated to reflect these transactions.
In accordance with the terms of the Offering, with the expiration of the underwriters' option to purchase up to an additional 3,750,000 Units solely to cover over-allotments, the Company repurchased 937,500 shares of common stock from the Initial Stockholders at a price of $0.0001 per share.
10. Legal
There is no material litigation currently pending against the Company of any member of its management team in their capacity as such.
F-16
Prospect Acquisition Corp.
(a development stage company)
Notes to Financial Statements (Continued)
11. Quarterly Results of Operations (Unaudited)
The following table presents summarized unaudited quarterly results of operations for the Company for fiscal years ended December 31, 2008 and 2007. We believe all necessary adjustments have been included in the amounts stated below to present fairly the following selected information when read in conjunction with the Financial Statements and Notes thereto included elsewhere herein. Future quarterly operating results may fluctuate depending on a number of factors.
|
Fiscal Year Ended December 31, 2008 | Fiscal Year Ended December 31, 2007 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
1 st Quarter | 2 nd Quarter | 3 rd Quarter | 4 th Quarter |
For the Period
from July 9, 2007 (date of inception) through September 30, 2007 |
4 th Quarter | |||||||||||||
Net Interest Income |
$ | 1,621,880 | $ | 906,706 | $ | 951,016 | $ | 329,086 | $ | | $ | 1,080,541 | |||||||
Operating Expenses |
$ | 215,488 | $ | 167,647 | $ | 437,378 | $ | 599,872 | $ | 1,213 | $ | 147,209 | |||||||
Provision for Income Taxes |
$ | 581,931 | $ | 295,335 | $ | 235,427 | $ | (235,605 | ) | $ | | $ | 316,921 | ||||||
Net Income (Loss) |
$ | 824,461 | $ | 443,724 | $ | 278,211 | $ | (35,181 | ) | $ | (1,213 | ) | $ | 616,411 | |||||
Basic and diluted earnings per share |
$ | 0.03 | $ | 0.01 | $ | 0.01 | $ | (0.00 | ) | $ | (0.00 | ) | $ | 0.03 |
F-17
(a development stage company)
Condensed Balance Sheets
|
June 30, 2009
(Unaudited) |
December 31,
2008 |
|||||||
---|---|---|---|---|---|---|---|---|---|
Assets |
|||||||||
Current assets: |
|||||||||
Cash |
$ | 9,425 | $ | 28,678 | |||||
Investments held in Trust Account |
248,535,987 | 248,924,201 | |||||||
Accrued interest income on Trust Account |
2,616 | 59,219 | |||||||
Prepaid expenses |
40,122 | 60,716 | |||||||
Prepaid taxes |
212,270 | 203,588 | |||||||
Total current assets |
248,800,420 | 249,276,402 | |||||||
Deferred tax asset |
315,649 | 173,158 | |||||||
Total assets |
$ | 249,116,069 | $ | 249,449,560 | |||||
Liabilities and Stockholders' Equity |
|||||||||
Current liabilities: |
|||||||||
Accrued expenses |
$ | 100,957 | $ | 186,097 | |||||
Deferred interest income |
76,181 | 67,148 | |||||||
Deferred underwriting commission |
10,000,000 | 10,000,000 | |||||||
Total liabilities |
10,177,138 | 10,253,245 | |||||||
Common stock, subject to possible conversion, 7,499,999 shares |
74,099,990 | 74,099,990 | |||||||
Commitments and contingencies |
|||||||||
Stockholders' equity |
|||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding |
| | |||||||
Common stock, $0.0001 par value; 72,000,000 shares authorized; 31,250,000 shares (including 7,499,999 subject to possible conversion) issued and outstanding |
3,125 | 3,125 | |||||||
Additional paid-in capital |
162,966,787 | 162,966,787 | |||||||
Retained earnings accumulated during the development stage |
1,869,029 | 2,126,413 | |||||||
Total stockholders' equity |
164,838,941 | 165,096,325 | |||||||
Total liabilities and stockholders' equity |
$ | 249,116,069 | $ | 249,449,560 | |||||
See notes to unaudited condensed financial statements.
F-18
(a development stage company)
Condensed Statements of Operations
(Unaudited)
|
For the six
months ended June 30, 2009 |
For the six
months ended June 30, 2008 |
For the period
from July 9, 2007 (date of inception) through June 30, 2009 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest income |
$ | 50,183 | $ | 2,528,586 | $ | 5,006,560 | ||||||
Deferred interest income |
9,033 | | 76,181 | |||||||||
Net interest income |
41,150 | 2,528,586 | 4,930,379 | |||||||||
Operating expenses: |
||||||||||||
Capital & franchise taxes |
73,254 | 257,329 | 1,054,663 | |||||||||
Professional fees |
242,409 | 161,039 | 517,862 | |||||||||
Formation and operating costs |
89,428 | 103,923 | 299,573 | |||||||||
Rent and office expenses |
44,616 | 45,000 | 146,416 | |||||||||
|
449,707 | 567,291 | 2,018,514 | |||||||||
Net (loss) income before income taxes |
(408,557 | ) | 1,961,295 | 2,911,865 | ||||||||
Income tax (benefit) provision |
(151,173 | ) | 693,110 | 1,042,836 | ||||||||
Net (loss) income |
$ | (257,384 | ) | $ | 1,268,185 | $ | 1,869,029 | |||||
Weighted average number of common shares outstanding: |
||||||||||||
Basic and diluted |
31,250,000 | 31,250,000 | 26,864,179 | |||||||||
Net income per share: |
||||||||||||
Basic and diluted |
$ | (0.01 | ) | $ | 0.04 | $ | 0.07 |
See notes to unaudited condensed financial statements.
F-19
(a development stage company)
Condensed Statements of Stockholders' Equity
|
|
|
|
Retained
Earnings Accumulated During the Development Stage |
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Common Stock |
|
|
|||||||||||||
|
Additional
Paid-in Capital |
Total
Stockholders' Equity |
||||||||||||||
|
Shares | Amount | ||||||||||||||
Common shares issued to initial stockholders on July 18, 2007 at approximately $.003 per share |
7,187,500 | $ | 719 | $ | 24,281 | $ | | $ | 25,000 | |||||||
Sale of 25,000,000 units, net of underwriters' discount and offering expenses of $18,205,004 (includes 7,499,999 shares subject to possible conversion) |
25,000,000 | 2,500 | 231,792,496 | | 231,794,996 | |||||||||||
Proceeds subject to possible conversion of 7,499,999 shares |
| | (74,099,990 | ) | | (74,099,990 | ) | |||||||||
Proceeds from issuance of Sponsors' Warrants |
| | 5,250,000 | | 5,250,000 | |||||||||||
Repurchase of 937,500 common shares issued to initial stockholders |
(937,500 | ) | (94 | ) | | | (94 | ) | ||||||||
Net income |
| | | 615,198 | 615,198 | |||||||||||
Balance at December 31, 2007 |
31,250,000 | 3,125 | 162,966,787 | 615,198 | 163,585,110 | |||||||||||
Net income |
| | | 1,511,215 | 1,511,215 | |||||||||||
Balance at December 31, 2008 |
31,250,000 | 3,125 | 162,966,787 | 2,126,413 | 165,096,325 | |||||||||||
Unaudited: |
||||||||||||||||
Net loss |
| | | (257,384 | ) | (257,384 | ) | |||||||||
Balance at June 30, 2009 |
31,250,000 | $ | 3,125 | $ | 162,966,787 | $ | 1,869,029 | $ | 164,838,941 | |||||||
See notes to unaudited condensed financial statements.
F-20
(a development stage company)
Condensed Statements of Cash Flows
(Unaudited)
|
For the six
months ended June 30, 2009 |
For the six
months ended June 30, 2008 |
For the period
from July 9, 2007 (date of inception) through June 30, 2009 |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash flows from operating activities |
|||||||||||||
Net (loss) income |
$ | (257,384 | ) | $ | 1,268,185 | $ | 1,869,029 | ||||||
Adjustments to reconcile net (loss) income to net cash used in operating activities: |
|||||||||||||
Interest income earned on Trust Account |
(50,183 | ) | (2,528,586 | ) | (5,006,560 | ) | |||||||
Changes in assets and liabilities: |
|||||||||||||
Decrease (increase) in prepaid expenses |
11,912 | (228,560 | ) | (252,392 | ) | ||||||||
Increase in deferred tax asset |
(142,491 | ) | (100,200 | ) | (315,649 | ) | |||||||
(Decrease) increase in accrued expenses |
(85,140 | ) | 2,535 | 100,957 | |||||||||
Increase in deferred interest income |
9,033 | | 76,181 | ||||||||||
Increase in income taxes payable |
| (392,498 | ) | | |||||||||
Net cash used in operating activities |
(514,253 | ) | (1,979,124 | ) | (3,528,434 | ) | |||||||
Cash flows from investing activities |
|||||||||||||
Cash placed in Trust Account |
| | (247,000,000 | ) | |||||||||
Cash withdrawn from Trust Account |
495,000 | 1,964,265 | 3,467,957 | ||||||||||
Net cash provided by (used in) investing activities |
495,000 | 1,964,265 | (243,532,043 | ) | |||||||||
Cash flows from financing activities |
|||||||||||||
Gross proceeds from initial public offering |
| | 250,000,000 | ||||||||||
Proceeds from issuance of Sponsors' Warrants |
| | 5,250,000 | ||||||||||
Proceeds from sale of shares of common stock to initial stockholders |
| | 25,000 | ||||||||||
Proceeds from notes payable to stockholders |
| | 200,000 | ||||||||||
Repayment of notes payable to stockholders |
| | (200,000 | ) | |||||||||
Repurchase of common shares from initial stockholders |
| | (94 | ) | |||||||||
Payment of offering costs |
| (38,216 | ) | (8,205,004 | ) | ||||||||
Net cash (used in) provided by financing activities |
| (38,216 | ) | 247,069,902 | |||||||||
Net (decrease) increase in cash |
(19,253 | ) | (53,075 | ) | 9,425 | ||||||||
Cash at beginning of period |
28,678 |
58,075 |
|
||||||||||
Cash at end of period |
$ | 9,425 | $ | 5,000 | $ | 9,425 | |||||||
Supplemental disclosure of non-cash financing activities |
|||||||||||||
Deferred underwriting commission |
| | $ | 10,000,000 | |||||||||
Supplemental disclosure of cash flow information |
|||||||||||||
Cash paid during the period for income taxes |
$ | | $ | 1,508,580 | $ | 1,646,332 | |||||||
See notes to unaudited condensed financial statements.
F-21
Prospect Acquisition Corp.
(a development stage company)
Notes to Unaudited Condensed Financial Statements
1. Interim Financial Information
Prospect Acquisition Corp.'s (the "Company") unaudited condensed interim financial statements as of June 30, 2009, for the six month periods ended June 30, 2009 and 2008, and for the period from July 9, 2007 (date of inception) through June 30, 2009, have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the interim period presented are not necessarily indicative of the results to be expected for any other interim period or for the full year. The Company has evaluated subsequent events through the filing date, August 7, 2009 and updated its evaluation through September 24, 2009.
These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the period ended December 31, 2008 included in the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 16, 2009. The December 31, 2008 balance sheet and the changes in stockholders' equity through December 31, 2008 have been derived from those audited financial statements. The accounting policies used in preparing these unaudited financial statements are consistent with those described in the December 31, 2008 audited financial statements. Certain prior year balances have been reclassified to conform with the current year presentation.
If we are unable to complete a business combination by November 14, 2009 we will be forced to liquidate. Currently, we are rigorously evaluating several opportunities for potential targets, however have not yet entered into any definitive agreements toward a transaction. There is no assurance that we will successfully complete a Business Combination by November 14, 2009. These factors, among others, raise substantial doubt about the Company's ability to continue operations as a going concern. The accompanying financial statements do not include any adjustments that may result from the outcome of this uncertainty.
2. Organization, Business Operations and Significant Accounting Policies
The Company was incorporated in Delaware on July 9, 2007, and is a blank check company formed for the purpose of acquiring control of, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination, one or more operating businesses or assets in the financial services industry (a "Business Combination"). At June 30, 2009, the Company's operations related to the Company's formation and the initial public offering described below.
The registration statement for the Company's initial public offering (the "Offering") was declared effective November 14, 2007. The Company consummated the Offering on November 20, 2007 and received gross proceeds of $250,000,000 and $5,250,000 from the sale of Sponsors' Warrants on a private placement basis (see Note 3). The Company's management has broad discretion with respect to the specific application of the net proceeds of the Offering, although substantially all of the net proceeds of the Offering are intended to be generally applied toward consummating a Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect a
F-22
Prospect Acquisition Corp.
(a development stage company)
Notes to Unaudited Condensed Financial Statements (Continued)
2. Organization, Business Operations and Significant Accounting Policies (Continued)
Business Combination. An amount of $247,000,000 (or approximately $9.88 per unit) of the net proceeds of the Offering and the sale of the Sponsors' Warrants (see Note 3) was deposited in a trust account (the "Trust Account") and invested in United States "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a maturity of 180 days or less, or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940 until the earlier of (i) the consummation of its initial Business Combination or (ii) liquidation of the Company. At June 30, 2009, the Trust Account was invested in United States government securities and has been accounted for as a trading security. The placing of funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company has sought and will seek to have all vendors, prospective target businesses or other entities it engages, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account, there is no guarantee that they will execute such agreements. A Company officer and two initial stockholders have agreed that they will be personally liable under certain circumstances to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by the Company for services rendered, contracted for or products sold to the Company, subject to limited exceptions. However, there can be no assurance that they will be able to satisfy those obligations. The remaining net proceeds (not held in the Trust Account) have been and will continue to be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. Until the consummation of the initial Business Combination or the liquidation of the Company, proceeds held in the Trust Account will not be available for the Company's use for any purpose, except there can be released to the Company from the Trust Account (i) interest income earned on the Trust Account balance to pay any taxes on such interest and (ii) interest income earned of up to $2.75 million on the Trust Account balance to fund the Company's working capital requirements, provided that after such release there remains in the Trust Account a sufficient amount of interest income previously earned on the Trust Account balance to pay any due and unpaid taxes on income generated by the Trust Account.
Amounts placed in Trust |
$ | 247,000,000 | ||
Interest income received |
5,003,944 | |||
Amounts withdrawn for payment of federal & state taxes |
(2,387,057 | ) | ||
Amounts withdrawn for working capital |
(1,080,900 | ) | ||
Total |
$ | 248,535,987 | ||
The Company, after signing a definitive agreement for a Business Combination with a target business or businesses, is required to submit such transaction for stockholder approval. In the event that those persons that purchase securities in the Offering or thereafter ("Public Stockholders") owning 30% or more of the shares sold in the Offering vote against the Business Combination and exercise their conversion rights described below, the Business Combination will not be consummated. All of the Company's stockholders prior to the Offering, including all of the directors of the Company (the "Initial Stockholders"), have agreed to vote all of their founding shares of common stock in accordance with the majority of the shares of common stock voted by the Public Stockholders with respect to any Business Combination.
F-23
Prospect Acquisition Corp.
(a development stage company)
Notes to Unaudited Condensed Financial Statements (Continued)
2. Organization, Business Operations and Significant Accounting Policies (Continued)
After consummation of a Business Combination, these voting safeguards will no longer apply.
With respect to a Business Combination which is approved and consummated, any Public Stockholder who voted against the Business Combination may demand that the Company convert his or her shares into cash from the Trust Account. The per share conversion price will equal the aggregate amount then on deposit in the Trust Account, before payment of deferred underwriting discounts and commissions and including accrued interest, net of taxes on such interest and net of interest income on the Trust Account balance released to the Company as described above, calculated as of two business days prior to the proposed consummation of the initial Business Combination, divided by the number of shares of common stock sold in the Offering. Accordingly, Public Stockholders holding not more than 30% of the shares (minus one share) sold in the Offering may seek conversion of their shares in the event of a Business Combination. Such Public Stockholders are entitled to receive their per share interest in the Trust Account (net of the tax and working capital items described above) computed without regard to the shares held by Initial Stockholders.
Accordingly, a portion of the net proceeds from the Offering (29.99% of the amount placed in the Trust Account) has been classified as common stock subject to possible conversion and a portion of the interest earned on the Trust Account (29.99%), after deducting the amounts permitted to be utilized for tax obligations and working capital purposes, has been recorded as deferred interest in the accompanying financial statements.
The Company's Certificate of Incorporation was amended on November 14, 2007 to provide that the Company will continue in existence only until 24 months from the effective date of the registration statement relating to the Offering (the "Effective Date"), or November 14, 2009. If the Company has not completed a Business Combination by such date, its corporate existence will cease except for the purposes of liquidating and winding up its affairs. In the event of liquidation, it is possible that the per share value of the residual assets remaining available for distribution (including assets in the Trust Account) will be less than the initial public offering price per Unit in the Offering (assuming no value is attributed to the Warrants contained in the Units offered in the Offering discussed in Note 3) because of the expenses of the Offering, the Company's general and administrative expenses and the anticipated costs of seeking an initial Business Combination.
Fair Value of Financial Instruments:
The fair values of the Company's assets and liabilities that qualify as financial instruments under Statement of Financial Accounting Standard ("SFAS") No. 107, Disclosures about Fair Value of Financial Instrument , approximate their carrying amounts presented in the balance sheet based upon the short-term nature of the account at June 30, 2009.
New Accounting Pronouncements:
In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles ("GAAP") and expands disclosures about fair value measurements. SFAS 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest
F-24
Prospect Acquisition Corp.
(a development stage company)
Notes to Unaudited Condensed Financial Statements (Continued)
2. Organization, Business Operations and Significant Accounting Policies (Continued)
priority being quoted prices in active markets. Under SFAS 157, fair value measurements are disclosed by level within that hierarchy. In February 2008, the FASB issued FASB Staff Position ("FSP") No. 157-2, Effective Date of FASB Statement No. 157 , which permits a one-year deferral for the implementation of SFAS 157 with regard to non-financial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis. The Company adopted SFAS 157 for the fiscal year beginning January 1, 2008, except for the non-financial assets and non-financial liabilities, which was adopted effective January 1, 2009. The adoption of the provisions of SFAS 157 did not have a material impact on the Company's financial position or results of operations.
In April 2009, the FASB issued three FSP's to provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities. FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, provides guidelines for making fair value measurements more consistent with the principles presented in SFAS 157. FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, enhances consistency in financial reporting by increasing the frequency of fair value disclosures. FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities. These three FSP's are effective for interim and annual periods ending after June 15, 2009. The adoption of the provisions of these FSP's did not have a material impact on the Company's financial position or results of operations
In June 2008, the FASB's Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue No. 07-5 , Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock ("EITF 07-5"). EITF 07-5 provides a new two-step model to be applied in determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity's own stock. EITF 07-5 was effective for the quarter ended March 31, 2009. There was no impact on the financial position or results of operations as a result of the adoption of this new guidance.
In December 2007, the FASB issued SFAS No. 141(R) , Business Combinations ("SFAS 141R") which establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R will have an impact to the Company for any acquisitions consummated by the Company.
In December 2007, the FASB released SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51 ("SFAS 160"), which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent and for the deconsolidation of a subsidiary. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interest of the parent and the interests of the non-controlling owners. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. SFAS 160 may have a material impact to the Company with respect to any acquisitions consummated by the Company.
F-25
Prospect Acquisition Corp.
(a development stage company)
Notes to Unaudited Condensed Financial Statements (Continued)
2. Organization, Business Operations and Significant Accounting Policies (Continued)
In May 2009, the FASB issued SFAS No. 165, Subsequent Events ("SFAS 165"). SFAS 165 is intended to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, and is effective for interim and annual periods ending after June 15, 2009. The adoption of SFAS No. 165 has not materially impacted the Company's financial position or results of operations.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles SFAS 162. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in preparation of the financial statements of non governmental entities that are presented in conformity with U.S. GAAP (the GAAP hierarchy). In July 2009, the FASB issued SFAS No. 168, The FASB Accounting Codification and the Hierarchy of Generally Accepted Accounting Principles ("SFAS 168"). SFAS 168 supersedes SFAS 162. SFAS 168 will become the source of authoritative U.S. generally accepted accounting principles ("GAAP") recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of SFAS 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of SFAS 168 is not expected to materially impact the Company's financial position or results of operations.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.
3. Initial Public Offering
On November 20, 2007, the Company sold 25,000,000 units (the "Units") at an offering price of $10.00 per Unit. The Company granted the underwriters an option to purchase up to an additional 3,750,000 Units solely to cover over- allotments. Said option could have been exercised in whole or in part at any time before the 30 th day after the Effective Date, and has expired without having been exercised by the underwriters.
Each Unit consists of one share of the Company's common stock and one warrant exercisable for one share of common stock at an exercise price of $7.50 per share (a "Warrant"). Each Warrant will be exercisable on the later of the completion of the initial Business Combination and fifteen months from the Effective Date, provided in each case that the Company has an effective registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available. The Warrants will expire five years from the Effective Date, unless earlier redeemed. The Company may call the Warrants for redemption, in whole and not in part, at any time after the Warrants become exercisable and there is an effective registration statement covering the shares of common stock issuable upon exercise of the warrants available and current throughout the 30-day Redemption Period defined hereafter, upon a minimum of 30 days' prior written notice of redemption (the "30-day Redemption Period") at a price of $0.01 per Warrant, only in the event that the last sale price of the common stock equals or exceeds $14.50 per share for any 20 trading days
F-26
Prospect Acquisition Corp.
(a development stage company)
Notes to Unaudited Condensed Financial Statements (Continued)
3. Initial Public Offering (Continued)
within a 30-trading day period ending on the third business day prior to the date on which the notice of redemption is sent to the Warrant holder. In accordance with the warrant agreement relating to the Warrants sold and issued in the Offering, the Company is only required to use its best efforts to maintain the effectiveness of the registration statement covering the Warrants from the date the warrants become exercisable until the warrants expire or are redeemed. The Company will not be obligated to deliver securities, and there are no contractual penalties for failure to deliver securities, if a registration statement is not effective at the time of exercise. Additionally, in the event that a registration statement is not effective at the time of exercise, the holder of such Warrant shall not be entitled to exercise such Warrant and in no event (whether in the case of a registration statement not being effective or otherwise) will the Company be required to settle the warrant exercise, whether by net cash settlement or otherwise. Consequently, the Warrants may expire unexercised and unredeemed (and therefore worthless), and, as a result, an investor in the Offering may effectively pay the full Unit price solely for the shares of common stock included in the Units.
The Company entered into an agreement with the underwriters of the Offering (the "Underwriting Agreement"). The Underwriting Agreement requires the Company to pay 3% of the gross proceeds of the Offering as an underwriting discount plus an additional 4% of the gross proceeds of the Offering only upon consummation of a Business Combination. The Company paid an underwriting discount of 3% of the gross proceeds of the Offering ($7.5 million) in connection with the consummation of the Offering and has placed 4% of the gross proceeds of the Offering ($10 million) in the Trust Account. The $10 million amount due to the underwriters has been classified as deferred underwriting commission on the accompanying balance sheets. The Company did not have to pay any discount related to the Sponsors' Warrants sold on a private placement basis. The underwriters have waived their right to receive payment of the 4% of the gross proceeds of the Offering upon the Company's liquidation if the Company is unable to complete a Business Combination.
Pursuant to purchase agreements dated November 14, 2007, certain of the Initial Stockholders have purchased from the Company, in the aggregate, 5,250,000 warrants for $5,250,000 (the "Sponsors' Warrants"). The purchase and issuance of the Sponsors' Warrants occurred simultaneously with the consummation of the Offering on a private placement basis. All of the proceeds the Company received from these purchases were placed in the Trust Account. The Sponsors' Warrants are identical to the Warrants included in the Units offered in the Offering except that the Sponsors' Warrants (i) are non-redeemable so long as they are held by the original purchasers or their permitted transferees, (ii) are subject to certain transfer restrictions and will not be exercisable while they are subject to these transfer restrictions and (iii) may be exercised for cash or on a cashless basis. The purchase price of the Sponsors' Warrants has been determined to be the fair value of such warrants as of the purchase date.
The Initial Stockholders have waived their right to receive a liquidation distribution with respect to their founding shares upon the Company's liquidation if it is unable to complete a Business Combination.
4. Fair Value Measurement
As discussed in Note 2, the Company adopted SFAS 157. SFAS 157 requires new disclosure that establishes a framework for measuring fair value in GAAP, and expands disclosure about fair value measurements. SFAS 157 enables the reader of the financial statements to assess the inputs used to
F-27
Prospect Acquisition Corp.
(a development stage company)
Notes to Unaudited Condensed Financial Statements (Continued)
4. Fair Value Measurement (Continued)
develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values.
SFAS 157 also requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1: | Quoted market prices in active markets for identical assets or liabilities. | |||
Level 2: | Observable market based inputs or unobservable inputs that are corroborated by market data. | |||
Level 3: | Unobservable inputs that are not corroborated by market data. |
In determining the appropriate levels in which to categorize its assets and liabilities, the Company performs a detailed analysis of the assets and liabilities that are subject to SFAS 157. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.
The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy.
|
Fair Value
As of June 30, 2009 |
Quoted Prices
In Active Markets (Level 1) |
Significant
other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Investments held in Trust Account plus Accrued Interest Income on Trust Account |
$ | 248,538,603 | $ | 248,538,603 | | | |||||||
Total |
$ | 248,538,603 | $ | 248,538,603 | | | |||||||
The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.
5. Related Party Transactions
On December 31, 2008, the Company entered into an amendment to its Administrative Services Agreement (the "Amendment") with LLM Capital Partners (an entity affiliated with Patrick Landers, the Company's President and one of its directors) and Teleos Management, L.L.C. (an entity affiliated with Daniel Gressel, one of the Company's directors). Pursuant to the terms of the Amendment, the Company will continue to receive certain general and administrative services from LLM Capital Partners and Teleos Management, L.L.C., until November 14, 2009. The Amendment also provides that the Company will no longer require (i) the use of the office space situated at 695 East Main Street, Stamford, Connecticut or (ii) certain of the general and administrative services previously provided to the Company pursuant to the terms of the Administrative Services Agreement. As a result of the Amendment, the Company's total monthly payment was reduced from $7,500 to $6,805 ($4,083.15 per month for Teleos Management, L.L.C. and $2,722.10 per month for LLM Capital Partners). The accompanying statements of operations for the six months ended June 30, 2009, the six months ended June 30, 2008 and for the period from July 9, 2007 (date of inception) through June 30, 2009 includes
F-28
Prospect Acquisition Corp.
(a development stage company)
Notes to Unaudited Condensed Financial Statements (Continued)
5. Related Party Transactions (Continued)
$40,832, $45,000 and $142,582, respectively, of expense relating to the Amendment and the Administrative Services Agreement.
6. Commitments
The Initial Stockholders and holders of the Sponsors' Warrants (or underlying securities) will be entitled to registration rights with respect to their founding shares or Sponsors' Warrants (or underlying securities), as the case may be, pursuant to an agreement dated November 14, 2007. In addition, the Initial Stockholders have certain "piggy-back" registration rights with respect to registration statements filed by the Company generally commencing nine months after the consummation of the Company's initial Business Combination, and the holders of the Sponsors' Warrants (or underlying securities) have certain "piggy-back" registration rights on registration statements filed after the Company's consummation of a Business Combination.
7. Capital Stock
The Company's original Certificate of Incorporation authorized the Company to issue 6,000,000 shares of common stock with a par value of $0.0001 per share. In October, 2007, the Company's certificate of incorporation was amended to increase the authorized shares of common stock from 6,000,000 shares to 8,000,000 shares. The Company's Certificate of Incorporation was amended on November 14, 2007 to increase the number of authorized shares of common stock to 72,000,000. In addition, the Company is authorized to issue 1,000,000 shares of preferred stock.
On July 18, 2007, the Company issued 4,312,500 shares of common stock to the founders for an aggregate of $25,000 in cash, at a purchase price of approximately $0.006 per share. In October, 2007, the aggregate outstanding 4,312,500 shares of common stock were increased to 7,187,500 shares of common stock as a result of a 5-for-3 stock split declared by our board of directors. All references in the accompanying financial statements to the number of shares of stock have been retroactively restated to reflect these transactions.
In accordance with the terms of the Offering, with the expiration of the underwriters' option to purchase up to an additional 3,750,000 Units solely to cover over-allotments, in December 2007, the Company repurchased 937,500 shares of common stock from the Initial Stockholders at a price of $0.0001 per share.
8. Legal
There is no material litigation currently pending against the Company or any member of its management team in their capacity as such.
9. Subsequent Events
On September 8, 2009, Prospect entered into an Agreement and Plan of Merger (the "Merger Agreement") by and among Prospect, KW Merger Sub Corp., a newly formed and wholly-owned subsidiary of Prospect ("Merger Sub") and Kennedy-Wilson, Inc. ("Kennedy-Wilson"), pursuant to which Merger Sub will merge (the "Merger") with and into Kennedy-Wilson, with Kennedy-Wilson continuing as the surviving corporation and a wholly-owned subsidiary of Prospect.
F-29
Prospect Acquisition Corp.
(a development stage company)
Notes to Unaudited Condensed Financial Statements (Continued)
9. Subsequent Events (Continued)
Pursuant to the Merger Agreement, common stockholders of Kennedy-Wilson will receive as consideration 3.8031 shares of Prospect common stock for each share of Kennedy-Wilson common stock outstanding and preferred stockholders of Kennedy-Wilson will receive as consideration 105.6412 shares of Prospect's common stock for each share of preferred outstanding, for an aggregate consideration of 26 million shares of Prospect common stock. In addition, 4.0 million shares of Prospect common stock will be reserved for issuance to employees, nonemployees and management of Kennedy-Wilson pursuant to an equity compensation plan adopted by Prospect's board of directors and submitted to Prospect's stockholders for approval.
Upon consummation of the Merger, the Initial Stockholders will forfeit 2,575,000 of their founders shares. Following the transaction, assuming 29.99% in interest of Prospect stockholders exercise their conversion rights, the current stockholders of Prospect will own approximately 41% of the outstanding common stock of Prospect and the stockholders and management of Kennedy-Wilson will own approximately 58% of the outstanding common stock of Prospect.
As a condition to the closing of the Merger, holders of warrants must approve an amendment (the "Warrant Amendment") to the current warrant agreement that governs all of the warrants, each of which is exercisable for one share of Prospect common stock. The Warrant Amendment will provide that, at the closing of the Merger, each holder of a warrant sold and issued in the IPO (the "Public Warrants") must elect either: (i) to have the warrant redeemed and retired by Prospect for $.55 in cash per warrant, or (ii) to amend the terms of the warrant to extend the warrant termination date to November 14, 2013, increase the exercise price to $12.50 from $7.50 and increase the redemption trigger price to $19.50 from $14.50. At least one-half of the Public Warrants must be redeemed for cash. In addition, the Warrant Amendment will amend and restate the terms of the Sponsors' Warrants to extend the warrant termination date to November 14, 2013, increase the exercise price to $12.50 from $7.50 and increase the redemption trigger price to $19.50 from $14.50. If the Merger is consummated, any holder of Public Warrants who votes against the approval of the Warrant Amendment or who makes no election, will receive $0.55 for each of its Public Warrants.
F-30
Report of Independent Registered Public Accounting Firm
The
Board of Directors and Shareholders
Kennedy-Wilson, Inc.:
We have audited the accompanying consolidated balance sheets of Kennedy-Wilson, Inc. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of income and comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2008. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kennedy Wilson, Inc. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements, the Company adopted the presentation and disclosure requirements of Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statementsan Amendment of ARB No. 51 for all periods presented.
/s/ KPMG, LLP
Los
Angeles, California
March 20, 2009, except for notes 4, 22, and 23, as to which the date is September 24, 2009.
F-31
Kennedy-Wilson, Inc. and Subsidiaries
Consolidated Balance Sheets
|
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | |||||||
Assets |
|||||||||
Cash and cash equivalents |
$ | 25,831,000 | $ | 24,248,000 | |||||
Accounts receivable |
1,091,000 | 4,235,000 | |||||||
Accounts receivable from related parties |
4,659,000 | 1,138,000 | |||||||
Income tax receivable |
1,414,000 | | |||||||
Notes receivable |
43,000 | 69,000 | |||||||
Notes receivable from related parties |
3,755,000 | 8,866,000 | |||||||
Investments in real estate, net |
48,727,000 | 13,112,000 | |||||||
Investments in joint ventures ($15,088,000 carried at fair value as of December 31, 2008) |
142,188,000 | 66,914,000 | |||||||
Other assets |
4,210,000 | 3,267,000 | |||||||
Goodwill |
23,965,000 | 23,965,000 | |||||||
Total assets |
$ | 255,883,000 | $ | 145,814,000 | |||||
Liabilities and equity |
|||||||||
Liabilities |
|||||||||
Accounts payable |
$ | 359,000 | $ | 733,000 | |||||
Accrued expenses and other liabilities |
7,008,000 | 5,192,000 | |||||||
Accrued salaries and benefits |
2,775,000 | 7,225,000 | |||||||
Income tax payable |
| 4,406,000 | |||||||
Deferred tax liability |
8,516,000 | 6,098,000 | |||||||
Notes payable |
21,188,000 | 10,000,000 | |||||||
Borrowings under line of credit |
13,500,000 | 5,000,000 | |||||||
Mortgage loans payable |
29,548,000 | 10,084,000 | |||||||
Convertible subordinated debt |
27,187,000 | | |||||||
Junior subordinated debentures |
40,000,000 | 40,000,000 | |||||||
Total liabilities |
150,081,000 | 88,738,000 | |||||||
Equity |
|||||||||
Convertible preferred stock, $0.01 par value: 5,000,000 shares authorized, 53,000 shares issued and outstanding as of December 31, 2008. The preferred stock is mandatorily convertible to common stock on the third anniversary from issue date of September 2008. |
1,000 | | |||||||
Common stock, $0.01 par value: 50,000,000 shares authorized; 5,466,150 and 5,619,224 shares issued as of December 31, 2008 and 2007, respectively |
55,000 | 56,000 | |||||||
Additional paid-in capital |
60,026,000 | 9,921,000 | |||||||
Retained earnings |
45,467,000 | 47,118,000 | |||||||
Accumulated other comprehensive income (loss) |
2,000 | (238,000 | ) | ||||||
Total Kennedy-Wilson, Inc. stockholders' equity |
105,551,000 | 56,857,000 | |||||||
Noncontrolling interests |
251,000 | 219,000 | |||||||
Total equity |
105,802,000 | 57,076,000 | |||||||
Total liabilities and equity |
$ | 255,883,000 | $ | 145,814,000 | |||||
See accompanying notes to consolidated financial statements.
F-32
Kennedy-Wilson, Inc. and Subsidiaries
Consolidated Statements of Income and
Comprehensive Income
|
Year ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | 2006 | |||||||||
Revenue |
||||||||||||
Management and leasing fees |
$ | 10,671,000 | $ | 9,836,000 | $ | 8,415,000 | ||||||
Management and leasing feesrelated party |
8,380,000 | 10,306,000 | 8,163,000 | |||||||||
Commissions |
5,906,000 | 4,257,000 | 2,037,000 | |||||||||
Commissionsrelated party |
4,295,000 | 8,896,000 | 7,883,000 | |||||||||
Rental income |
2,409,000 | 98,000 | | |||||||||
Interest and other income |
1,126,000 | 865,000 | 646,000 | |||||||||
Total revenue |
32,787,000 | 34,258,000 | 27,144,000 | |||||||||
Operating Expenses |
||||||||||||
Commission and marketing expenses |
2,827,000 | 2,097,000 | 1,824,000 | |||||||||
Rental operating expense |
1,458,000 | 34,000 | | |||||||||
Compensation and related expenses |
21,292,000 | 34,151,000 | 24,892,000 | |||||||||
General and administrative |
6,074,000 | 6,393,000 | 7,202,000 | |||||||||
Depreciation and amortization |
920,000 | 505,000 | 688,000 | |||||||||
Total operating expense |
32,571,000 | 43,180,000 | 34,606,000 | |||||||||
Equity in joint venture income |
10,097,000 |
27,433,000 |
14,689,000 |
|||||||||
Total operating income |
10,313,000 | 18,511,000 | 7,227,000 | |||||||||
Non-operating income (expense) |
||||||||||||
Gain on sale of asset |
| | 7,060,000 | |||||||||
Interest expense |
(8,596,000 | ) | (5,090,000 | ) | (3,183,000 | ) | ||||||
Other than temporary impairment on available-for-sale security |
(445,000 | ) | | | ||||||||
Income before provision for income taxes |
1,272,000 | 13,421,000 | 11,104,000 | |||||||||
Provision for income taxes |
(605,000 | ) | (4,384,000 | ) | (4,563,000 | ) | ||||||
Income from continuing operations |
667,000 | 9,037,000 | 6,541,000 | |||||||||
Income from discontinued operations, net of tax |
| 2,797,000 | | |||||||||
Net income |
667,000 | 11,834,000 | 6,541,000 | |||||||||
Net income attributable to the noncontrolling interests |
(54,000 | ) | (2,441,000 | ) | (586,000 | ) | ||||||
Preferred stock dividends |
(2,264,000 | ) | | | ||||||||
Net (loss) income attributable to Kennedy-Wilson, Inc. common shareholders |
(1,651,000 | ) | 9,393,000 | 5,955,000 | ||||||||
Other comprehensive income (loss), net of tax |
240,000 | (238,000 | ) | | ||||||||
Total comprehensive (loss) income attributable to Kennedy-Wilson, Inc. common shareholders |
$ | (1,411,000 | ) | $ | 9,155,000 | $ | 5,955,000 | |||||
Basic (loss) earnings per share: |
||||||||||||
(Loss) income from continuing operations |
$ | (0.32 | ) | $ | 1.30 | $ | 1.23 | |||||
Income from discontinued operations |
| 0.55 | | |||||||||
Net (loss) income attributable to Kennedy-Wilson, Inc. common shareholders |
$ | (0.32 | ) | $ | 1.85 | $ | 1.23 | |||||
Weighted average number of common shares outstandingbasic |
5,119,684 |
5,063,949 |
4,840,963 |
|||||||||
Diluted (loss) earnings per share: |
||||||||||||
(Loss) income from continuing operations |
$ | (0.32 | ) | $ | 1.17 | $ | 1.07 | |||||
Income from discontinued operations |
| 0.50 | | |||||||||
Net income (loss) attributable to Kennedy-Wilson, Inc. common shareholders |
$ | (0.32 | ) | $ | 1.67 | $ | 1.07 | |||||
Weighted average number of common shares outstandingdiluted |
5,119,684 |
5,621,802 |
5,558,087 |
See accompanying notes to consolidated financial statements.
F-33
Kennedy-Wilson, Inc. and Subsidiaries
Consolidated Statement of Equity
|
Preferred Stock | Common Stock |
|
|
Accumulated
Other Comprehensive Loss |
|
|
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Additional
Paid-in Capital |
Retained
Earnings |
Noncontrolling
Interests |
|
||||||||||||||||||||||||||
|
Shares | Amount | Shares | Amount | Total | |||||||||||||||||||||||||
Balance, January 1, 2006 |
| $ | | 5,477,706 | $ | 55,000 | $ | 10,295,000 | $ | 31,770,000 | $ | | $ | | $ | 42,120,000 | ||||||||||||||
Issuance of common stockexercise of stock options |
| | 245,040 | 2,000 | 1,006,000 | | | | 1,008,000 | |||||||||||||||||||||
Repurchase of common stock |
(37,641 | ) | | (651,000 | ) | | | | (651,000 | ) | ||||||||||||||||||||
Amortization of equity compensation |
| | | | 1,015,000 | | | | 1,015,000 | |||||||||||||||||||||
Net income |
| | | | | 5,955,000 | | 586,000 | 6,541,000 | |||||||||||||||||||||
Distribution to noncontrolling interest |
(430,000 | ) | (430,000 | ) | ||||||||||||||||||||||||||
Balance, December 31, 2006 |
| | 5,685,105 | 57,000 | 11,665,000 | 37,725,000 | | 156,000 | 49,603,000 | |||||||||||||||||||||
Issuance of common stockexercise of stock options |
|
|
55,000 |
1,000 |
235,000 |
|
|
|
236,000 |
|||||||||||||||||||||
Repurchase of common stock |
(120,881 | ) | (2,000 | ) | (2,994,000 | ) | | | | (2,996,000 | ) | |||||||||||||||||||
Amortization of equity compensation |
| | | | 1,015,000 | | | | 1,015,000 | |||||||||||||||||||||
Other comprehensive loss: |
||||||||||||||||||||||||||||||
Foreign currency translation |
| | | | | | (44,000 | ) | | (44,000 | ) | |||||||||||||||||||
Unrealized loss on marketable security, net of tax |
| | | | | | (194,000 | ) | | (194,000 | ) | |||||||||||||||||||
Net income |
| | | | | 9,393,000 | | 2,441,000 | 11,834,000 | |||||||||||||||||||||
Contribution from noncontrolling interest |
1,615,000 | 1,615,000 | ||||||||||||||||||||||||||||
Distribution to noncontrolling interest |
(3,993,000 | ) | (3,993,000 | ) | ||||||||||||||||||||||||||
Balance, December 31, 2007 |
| | 5,619,224 | 56,000 | 9,921,000 | 47,118,000 | (238,000 | ) | 219,000 | 57,076,000 | ||||||||||||||||||||
Issuance of preferred stock |
53,000 |
1,000 |
|
|
52,353,000 |
|
|
|
52,354,000 |
|||||||||||||||||||||
Issuance of common stockexercise of stock options |
| | 11,250 | 1,000 | 92,000 | | | | 93,000 | |||||||||||||||||||||
Repurchase of common stock |
| | (164,324 | ) | (2,000 | ) | (6,168,000 | ) | | | | (6,170,000 | ) | |||||||||||||||||
Amortization of equity compensation |
| | | | 1,015,000 | | | | 1,015,000 | |||||||||||||||||||||
Discount on convertible subordinated debt |
| | | | 2,813,000 | | | | 2,813,000 | |||||||||||||||||||||
Other comprehensive loss: |
||||||||||||||||||||||||||||||
Foreign currency translation |
| | | | | | 240,000 | | 240,000 | |||||||||||||||||||||
Dividend paidpreferred stock |
| | | | | (2,264,000 | ) | | | (2,264,000 | ) | |||||||||||||||||||
Net income |
| | | | | 613,000 | | 54,000 | 667,000 | |||||||||||||||||||||
Contribution from noncontrolling interest |
482,000 | 482,000 | ||||||||||||||||||||||||||||
Distribution to noncontrolling interest |
(504,000 | ) | (504,000 | ) | ||||||||||||||||||||||||||
Balance, December 31, 2008 |
53,000 | $ | 1,000 | 5,466,150 | $ | 55,000 | $ | 60,026,000 | $ | 45,467,000 | $ | 2,000 | $ | 251,000 | $ | 105,802,000 | ||||||||||||||
See accompanying notes to consolidated financial statements.
F-34
Kennedy-Wilson, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
|
Year ended December 31, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | 2006 | |||||||||||
Cash flows from operating activities: |
||||||||||||||
Net income |
$ | 667,000 | $ | 11,834,000 | $ | 6,541,000 | ||||||||
Adjustments to reconcile net income to net cash used in operating activities: |
||||||||||||||
Gain from sale of commercial real estate |
| (5,269,000 | ) | | ||||||||||
Depreciation and amortization |
920,000 | 1,242,000 | 688,000 | |||||||||||
Provision for deferred income taxes |
2,418,000 | 918,000 | 2,284,000 | |||||||||||
Amortization of deferred loan costs |
658,000 | 296,000 | 237,000 | |||||||||||
Equity in joint venture income |
(10,097,000 | ) | (27,433,000 | ) | (14,689,000 | ) | ||||||||
Provision for notes receivable |
| 159,000 | 210,000 | |||||||||||
Amortization of deferred compensation |
1,015,000 | 1,015,000 | 1,015,000 | |||||||||||
Change in assets and liabilities: |
||||||||||||||
Accounts receivable |
3,144,000 | (2,335,000 | ) | (235,000 | ) | |||||||||
Accounts receivablerelated party |
(3,521,000 | ) | 1,442,000 | (683,000 | ) | |||||||||
Income tax receivable |
(1,414,000 | ) | | | ||||||||||
Operating distributions from joint ventures |
294,000 | 885,000 | 45,000 | |||||||||||
Other assets |
(1,339,000 | ) | (979,000 | ) | (186,000 | ) | ||||||||
Accounts payable |
(374,000 | ) | 337,000 | 64,000 | ||||||||||
Accrued expenses and other liabilities |
1,816,000 | 344,000 | 2,065,000 | |||||||||||
Accrued salaries and benefits |
(4,450,000 | ) | 2,830,000 | 126,000 | ||||||||||
Income taxes payable |
(4,406,000 | ) | (95,000 | ) | (4,508,000 | ) | ||||||||
Net cash flow from operating activities |
(14,669,000 | ) | (14,809,000 | ) | (7,026,000 | ) | ||||||||
Cash flows from investing activities: |
||||||||||||||
Settlements of notes receivable |
26,000 | 2,667,000 | 6,369,000 | |||||||||||
Additions to notes receivable |
| (144,000 | ) | (1,992,000 | ) | |||||||||
Settlements of notes receivablerelated party |
6,000 | | | |||||||||||
Additions to notes receivablerelated party |
(300,000 | ) | (7,128,000 | ) | (1,738,000 | ) | ||||||||
Net proceeds from sale of real estate |
5,181,000 | 37,705,000 | | |||||||||||
Purchases of and additions to real estate |
(41,460,000 | ) | (38,458,000 | ) | (7,637,000 | ) | ||||||||
Return of capital distributions from joint ventures |
12,903,000 | 39,390,000 | 32,359,000 | |||||||||||
Contributions to joint ventures |
(72,729,000 | ) | (28,193,000 | ) | (30,975,000 | ) | ||||||||
Net cash flow from investing activities |
(96,373,000 | ) | 5,839,000 | (3,614,000 | ) | |||||||||
Cash flow from financing activities: |
||||||||||||||
Borrowings under notes payable |
20,161,000 | 10,000,000 | 11,131,000 | |||||||||||
Repayment of notes payable |
(8,973,000 | ) | (12,810,000 | ) | (11,453,000 | ) | ||||||||
Borrowings under lines of credit |
47,957,000 | 27,582,000 | 11,758,000 | |||||||||||
Repayment of lines of credit |
(39,457,000 | ) | (44,289,000 | ) | (8,998,000 | ) | ||||||||
Borrowings under mortgage loans payable |
30,316,000 | 36,934,000 | 6,000,000 | |||||||||||
Repayment of mortgage loans payable |
(10,852,000 | ) | (32,850,000 | ) | | |||||||||
Issuance of convertible subordinated debt |
30,000,000 | | | |||||||||||
Issuance of junior subordinated debentures |
| 40,000,000 | | |||||||||||
Repayment of senior unsecured notes |
| | (1,667,000 | ) | ||||||||||
Debt issue costs |
(518,000 | ) | (1,543,000 | ) | (150,000 | ) | ||||||||
Issuance of preferred stock |
52,354,000 | | | |||||||||||
Issuance of common stock |
93,000 | 236,000 | 1,008,000 | |||||||||||
Repurchase of common stock |
(6,170,000 | ) | (2,996,000 | ) | (651,000 | ) | ||||||||
Dividend paidpreferred stock |
(2,264,000 | ) | | | ||||||||||
Contributions from noncontrolling interests |
482,000 | 1,615,000 | | |||||||||||
Distributions to noncontrolling interests |
(504,000 | ) | (3,993,000 | ) | (430,000 | ) | ||||||||
Net cash flow from financing activities |
112,625,000 | 17,886,000 | 6,548,000 | |||||||||||
Net change in cash and cash equivalents |
1,583,000 | 8,916,000 | (4,092,000 | ) | ||||||||||
Cash and cash equivalents, beginning of year |
24,248,000 | 15,332,000 | 19,424,000 | |||||||||||
Cash and cash equivalents, end of year |
$ | 25,831,000 | $ | 24,248,000 | $ | 15,332,000 | ||||||||
Supplemental disclosure of non-cash investing activities: |
||||||||||||||
Unrealized loss on marketable security, net of tax |
$ | | $ | (194,000 | ) | $ | | |||||||
Foreign currency translation |
240,000 | (44,000 | ) | | ||||||||||
Beneficial conversion of convertible subordinated debt |
2,813,000 | | |
F-35
Kennedy-Wilson, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
In 2008, Kennedy-Wilson converted a note receivable from a joint venture investment into equity in the joint venture resulting in an increase of investments in joint ventures of $1,008,000 and a decrease in notes receivable of $1,008,000.
In 2008, Kennedy-Wilson converted notes receivable from various executives and directors of Kennedy-Wilson related to KW Residential, LLC into equity in that joint venture resulting in an increase in investments in joint ventures of $4,397,000 and a decrease in notes receivable of $4,397,000.
|
Year ended December 31, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | 2006 | ||||||||||
Supplemental cash flow information: |
|||||||||||||
Cash paid during the year for: |
|||||||||||||
Interest |
$ | 6,945,000 | $ | 6,067,000 | $ | 2,733,000 | |||||||
Interest capitalized |
999,000 | 519,000 | 509,000 | ||||||||||
Income taxes |
4,000,000 | 5,310,000 | 6,787,000 |
See accompanying notes to consolidated financial statements.
F-36
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
NOTE 1ORGANIZATION
Kennedy-Wilson, Inc., a Delaware corporation, and its subsidiaries provide various commercial and residential real estate services including property management, asset management, brokerage and marketing in the U.S. and Japan primarily to institutional investors, financial institutions, pension funds, and developers. Kennedy-Wilson, principally through joint venture investments, also acquires, renovates and resells commercial and residential real estate, and invests in discounted loan portfolios.
NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATIONThe consolidated financial statements include the accounts of Kennedy-Wilson and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In addition, Kennedy-Wilson evaluates its relationships with other entities to identify whether they are variable interest entities as defined by FASB Interpretation No. 46 (revised December 2003) Consolidation of Variable Interest Entities ("FIN 46R") and to assess whether it is the primary beneficiary of such entities. If the determination is made that Kennedy-Wilson is the primary beneficiary, then that entity is included in the consolidated financial statements in accordance with FIN 46R.
USE OF ESTIMATESThe preparation of the accompanying consolidated financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosure about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the value of accounts and notes receivable, long-lived assets, debt, goodwill, investment in joint ventures, and legal contingencies. These estimates and assumptions are based on management's best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Kennedy-Wilson adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile energy markets, and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
REVENUE RECOGNITIONManagement and leasing fees and commissions revenues are accounted for in accordance with the provisions of SEC Staff Accounting Bulletin 104. Management fees for property and asset management are recognized over time as earned based upon the terms of the management agreement. Leasing fees that are payable upon tenant occupancy, payment of rent or other events beyond Kennedy-Wilson's control are recognized upon the occurrence of such events. In the case of real estate sales commissions, this generally occurs when escrow closes. In accordance with EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent , Kennedy-Wilson records commission revenues and expenses on a gross basis. Of the criteria listed in the EITF, Kennedy-Wilson is the primary obligor in the transaction, does not have inventory risk, performs all, or part, of the service, has credit risk, and has wide latitude in establishing the price of services rendered and discretion in selection of agents and determination of service specifications.
F-37
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Sales of real estate are recognized at the close of escrow when title to the real property passes to the buyer. Kennedy-Wilson follows the requirements for profit recognition as set forth by Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate .
In accordance with SEC Staff Accounting Bulletin No. 51 ("SAB 51"), Kennedy-Wilson records gains as a result of equity transactions by its subsidiaries in the consolidated statements of operations.
INVESTMENTS IN JOINT VENTURESKennedy-Wilson has a number of joint venture interests, generally ranging from 5% to 50%, that were formed to acquire, manage, develop and/or sell real estate. Investments in joint ventures which Kennedy-Wilson does not control are accounted for under the equity method of accounting as Kennedy-Wilson can exercise significant influence, but does not have the ability to control the joint venture. An investment in joint ventures is recorded at its initial investment plus or minus Kennedy-Wilson's share of undistributed net income or loss and less distributions. Declines in value of Kennedy-Wilson's investment in joint ventures that are other than temporary are recognized when evidence indicates that such a decline has occurred.
Profit on the sales of real estate held by joint ventures that have continuing involvement are deferred until such time that the continuing involvement has been resolved and all the risks and rewards of ownership have passed to the buyer. Profit on sales to joint ventures in which Kennedy-Wilson retains an equity ownership interest results in partial sales treatment in accordance with the provisions of SFAS 66 and Statement of Position 78-9, thus deferring a portion of the gain on Kennedy-Wilson's continuing ownership percentage in the joint ventures.
One of Kennedy-Wilson's investments in joint ventures, KW Property Fund III, L.P. (the "Fund") is, for GAAP purposes, an investment company under the AICPA Audit and Accounting Guide Investment Companies . Thus, the Fund reflects its investments at fair value, with unrealized gains and losses resulting from changes in fair value reflected in earnings. Kennedy-Wilson has retained the specialized accounting for the Fund pursuant to EITF Issue No. 85-12, Retention of Specialized Accounting for Investments in Consolidation in recording its equity in joint venture income from the Fund.
FAIR VALUE MEASUREMENTSOn January 1, 2008, Kennedy-Wilson adopted the provisions FASB Statement No. 157, Fair Value Measurements, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Statement 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Statement 157 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.
GOODWILLGoodwill results from the difference between the purchase price and the fair value of net assets acquired based upon the purchase method of accounting for business combinations. In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), goodwill is no longer amortized, but instead is reviewed for impairment at least annually by Company management.
In testing for impairment in accordance with SFAS 142, goodwill is assigned to the reporting unit based upon the amount of goodwill generated at the time of acquisition of the businesses by the
F-38
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
reporting unit. An earnings multiple appropriate to the respective reporting unit was applied to the cash basis net operating income of the reporting unit. This process enables a fair approximation of the reporting unit's value, which is then compared to the net book value of the reporting unit. As a result of the evaluation performed of its goodwill as described above, Kennedy-Wilson has determined that there was no goodwill impairment as of December 31, 2008.
CASH AND CASH EQUIVALENTSCash and cash equivalents consist of cash and all highly liquid investments purchased with maturities of three months or less.
LONG-LIVED ASSETSKennedy-Wilson reviews its long-lived assets (excluding goodwill) whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with Statement of Financial Accounting Standards No. 144 Accounting for Impairment or Disposal of Long-Lived Assets . Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.
DISCONTINUED OPERATIONSKennedy-Wilson presents components as discontinued operations if the operations and cash flows of the component have been or will be eliminated from the ongoing operations in a disposal transaction where Kennedy-Wilson will not have any significant continuing involvement in the operations of the component after the disposal transaction. A component comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of Kennedy-Wilson. Because each of our real estate assets generally constitutes a discrete subsidiary, many assets that we hold for sale in the ordinary course of business must be reported as a discontinued operation unless we have significant continuing involvement in the operations of the asset after its disposition. Furthermore, operating profits and losses on such assets are required to be recognized and reported as operating profits and losses on discontinued operations in the periods in which they occur. Interest expense is only allocated to discontinued operations to the extent that the interest is specific to the component.
NOTES RECEIVABLEKennedy-Wilson accounts for any impairment to the basis of notes receivable in accordance with Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan , as amended by Statement of Financial Accounting Standards No. 118, Accounting by Creditors for Impairment of a LoanIncome Recognition and Disclosures . Accordingly, an impaired loan is measured based upon the present value of expected future cash flows, discounted at the loan's effective interest rate or, if readily determinable, the loan's observable market price or the fair value of the collateral if the loan is collateral dependant.
FAIR VALUE OF FINANCIAL INSTRUMENTSThe estimated fair value of Kennedy-Wilson's financial instruments is determined using available market information and appropriate valuation methodologies. Considerable judgement, however, is necessary to interpret market data and develop the related estimates of fair value. Accordingly, the estimates presented herein are not necessarily
F-39
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
indicative of the amounts that could be realized upon disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material impact on the estimated fair value amounts. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other liabilities, accrued salaries and benefits, and deferred and accrued income taxes approximate fair value due to their short-term maturities. The carrying value of notes receivable (excluding related party notes receivable as it is presumed not to be an arm's length transaction) approximate fair value as they are negotiated based upon the fair value of loans with similar characteristics. Bank lines of credit and debt approximate fair value as the terms are comparable to the terms currently being offered to Kennedy-Wilson.
CAPITALIZED INTERESTKennedy-Wilson capitalizes interest in accordance with Statement of Financial Accounting Standards No. 34, Capitalization of Interest Cost for assets that are undergoing development or entitlement activities in preparation for their planned principal operations. For qualifying equity investments, interest is capitalized in accordance with Statement of Financial Accounting Standards No. 58, Capitalization of Interest Cost in Financial Statements That Include Investments Accounted for Under the Equity Method (an amendment of FASB Statement No. 34) . An appropriate interest rate is applied to Kennedy-Wilson's cash investment in the qualifying asset. The interest is credited against interest expense and added to the basis in the investment. Interest is capitalized when the development or entitlement activity commences and ceases when the investment has begun its planned principal operations.
GUARANTEESKennedy-Wilson has certain guarantees associated with loans secured by assets held in various joint venture partnerships. The maximum potential amount of future payments (undiscounted) Kennedy-Wilson could be required to make under the guarantees was approximately $46 million and $44 million at December 31, 2008 and 2007, respectively. The guarantees expire through 2011 and Kennedy-Wilson's performance under the guarantees would be required to the extent there is a shortfall in liquidation between the principal amount of the loan and the net sales proceeds of the property. Based upon Kennedy-Wilson's evaluation of guarantees under FIN 45, the estimated fair value of guarantees made as of December 31, 2008 is immaterial.
CONCENTRATION OF CREDIT RISKFinancial instruments that subject Kennedy-Wilson to credit risk consist primarily of accounts and notes receivable and cash equivalents. Credit risk is generally diversified due to the large number of entities composing Kennedy-Wilson's customer base and their geographic dispersion throughout the U.S. Kennedy-Wilson performs ongoing credit evaluations of its customers and debtors. Cash and cash equivalents are invested in institutions insured by government agencies. Certain accounts contain balances in excess of the insured limits.
EARNINGS PER SHAREBasic earnings per share is computed based upon the weighted average number of shares of common stock outstanding during the periods presented. Diluted earnings per share is computed based upon the weighted average number of shares of common stock and potentially dilutive securities outstanding during the periods presented. The weighted average number of shares outstanding for the diluted earnings per share computation also includes the dilutive impact of options to purchase common stock which were outstanding during the period calculated by the "treasury stock" method.
F-40
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
SHARE-BASED PAYMENT ARRANGEMENTSKennedy-Wilson accounts for its share-based payment arrangements under the provisions of FASB Statement No. 123(R), Share-Based Payments. The statement requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the share-based award. The cost of employee services is recognized over the period during which an employee provides service in exchange for the share-based payment award.
FAIR VALUE OPTIONEffective January 1, 2008, Kennedy-Wilson adopted the provisions of FASB Statement No.159, The Fair Value Option for Financial Assets and Financial Liabilities . Statement 159 gives Kennedy-Wilson the irrevocable option to report most financial assets and financial liabilities at fair value on an instrument-by-instrument basis, with changes in fair value reported in earnings. See Note 6 for the impact of adopting Statement 159 on Kennedy-Wilson's financial position and results of operations.
INCOME TAXESIncome taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Beginning with the adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes as of January 1, 2007, Kennedy-Wilson recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Prior to the adoption of FIN 48, Kennedy-Wilson recognized the effect of income tax positions only if such positions were probable of being sustained. There was no impact upon adoption.
Kennedy-Wilson records interest related to unrecognized tax benefits in interest expense and penalties in selling, general, and administrative expenses.
RECENT ACCOUNTING PRONOUNCEMENTSIn December 2007, the FASB issued FASB Statement No. 141(R), Business Combinations . Statement 141(R) requires most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at "full fair value" and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. Statement 141(R) is effective for periods beginning on or after December 15, 2008, and earlier adoption is prohibited.
In April 2008, the FASB issued FASB Staff Position FAS 142-3, "Determination of the Useful Life of Intangible Assets." FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under Statement 142. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. Kennedy-Wilson is currently evaluating the impact, if any, of adopting FSP FAS 142-3 on its financial position and results of operations.
F-41
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In November 2008, the FASB's Emerging Issues Task Force reached a consensus on EITF Issue No. 08-6, "Equity Method Investment Accounting Considerations." EITF 08-6 continues to follow the accounting for the initial carrying value of equity method investments in APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, which is based on a cost accumulation model and generally excludes contingent consideration. EITF 08-6 also specifies that other-than-temporary impairment testing by the investor should be performed at the investment level and that a separate impairment assessment of the underlying assets is not required. An impairment charge by the investee should result in an adjustment of the investor's basis of the impaired asset for the investor's pro-rata share of such impairment. In addition, EITF 08-6 reached a consensus on how to account for an issuance of shares by an investee that reduces the investor's ownership share of the investee. An investor should account for such transactions as if it had sold a proportionate share of its investment with any gains or losses recorded through earnings. EITF 08-6 also addresses the accounting for a change in an investment from the equity method to the cost method after adoption of Statement 160. EITF 08-6 affirms the existing guidance in APB 18, which requires cessation of the equity method of accounting and application of FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, or the cost method under APB 18, as appropriate. EITF 08-6 is effective for transactions occurring on or after December 15, 2008. Kennedy-Wilson does not anticipate that the adoption of EITF 08-6 will materially impact Kennedy-Wilson's financial position or results of operations.
NOTE 3NOTES RECEIVABLE
Notes receivable consists of the following:
|
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | |||||||
Note receivable pools with various interest rates and maturity dates, secured by real estate, personal property or guarantees |
$ | 43,000 | $ | 69,000 | |||||
Total notes receivable from third parties |
43,000 | 69,000 | |||||||
Note receivable from the CEO of Kennedy-Wilson, fixed interest rate of 7.5% per annum, principal and accrued interest due April 2011, unsecured |
3,455,000 | 3,455,000 | |||||||
Note receivable, fixed interest rate of 7%, interest only, repaid in 2009, secured by preferred stock shares that were acquired from Kennedy-Wilson |
300,000 | | |||||||
Note receivable from a joint venture investment, fixed interest rate of 18%, principal and accrued interest due October 2012, unsecured, converted to equity in the joint venture investment |
| 1,008,000 | |||||||
Notes receivable from various executives and directors of Kennedy-Wilson, variable interest rate based on the 30-day LIBOR plus 3.70%, secured by their ownership interest in a joint venture investment in Japan |
| 4,403,000 | |||||||
Total notes receivable from related parties |
3,755,000 | 8,866,000 | |||||||
|
$ | 3,798,000 | $ | 8,935,000 | |||||
F-42
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 4NONCONTROLLING INTERESTS
In December 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statementsan Amendment of ARB No. 51 . Statement 160 establishes accounting and reporting standards for a parent company's noncontrolling interest in a subsidiary. Statement 160 is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008. Kennedy-Wilson adopted Statement 160 effective January 1, 2009. The financial statements and related notes contained herein reflect the retrospective application of Statement 160 as though it was adopted as of January 1, 2006. Kennedy-Wilson has presented noncontrolling interests of $251,000 and $219,000 at December 31, 2008 and 2007, respectively, as equity in the accompanying consolidated balance sheets. Additionally, in the accompanying consolidated statements of income and comprehensive, Kennedy-Wilson separately presented net income attributable to noncontrolling interests of $54,000, $2,441,000, and $586,000 for the years ended December 31, 2008, 2007, and 2006, respectively. Other than these presentation changes, the adoption of Statement 160 had no impact on our consolidated financial position or results of operations.
NOTE 5INVESTMENT IN REAL ESTATE
Kennedy-Wilson's investment in real estate includes the following:
|
December 31, | |||||||
---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | ||||||
Residential lot, Kona, Hawaii |
$ | | $ | 8,061,000 | ||||
Office building, Glendora, California |
| 5,069,000 | ||||||
Office building in Japan |
8,428,000 | | ||||||
Residential land in Landcaster and Victorville,
|
7,724,000 | | ||||||
House in Kona, Hawaii |
8,361,000 | | ||||||
204-unit residential apartment complex in Lompoc, California |
25,637,000 | | ||||||
Residential land in Kent, Washington |
733,000 | | ||||||
|
50,883,000 | 13,130,000 | ||||||
Less: Accumulated depreciation |
(2,156,000 | ) | (18,000 | ) | ||||
Total |
$ | 48,727,000 | $ | 13,112,000 | ||||
Kennedy-Wilson capitalized $219,000 and $519,000 of interest to investments in real estate for the years ended December 31, 2008 and 2007, respectively.
Discontinued operations for the year ended December 31, 2007:
Rental revenue |
$ | 2,931,000 | |||
Rental operating expense |
(980,000 | ) | |||
Depreciation and amortization |
(737,000 | ) | |||
Interest expense |
(1,826,000 | ) | |||
Gain on sale |
5,269,000 | ||||
Income tax expense |
(1,860,000 | ) | |||
Total |
$ | 2,797,000 | |||
F-43
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 6INVESTMENTS IN JOINT VENTURES
Kennedy-Wilson has a number of joint venture interests, generally ranging from 5% to 50%, which were formed to acquire, manage, develop and/or sell real estate. Kennedy-Wilson has significant influence over these entities, but not voting or other control and accordingly, these investments are accounted for under the equity method.
Summarized financial data of the joint ventures are as follows:
|
December 31, | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | ||||||||||||||||||
|
KW
Residential LLC |
Other | Total |
KW
Residential LLC |
Other | Total | ||||||||||||||
Balance sheets for equity method investees: |
||||||||||||||||||||
Assets |
||||||||||||||||||||
Cash |
$ | 26,658,000 | $ | 25,665,000 | $ | 52,323,000 | $ | 10,053,000 | $ | 19,796,000 | $ | 29,849,000 | ||||||||
Real estate |
544,033,000 | 1,582,148,000 | 2,126,181,000 | 453,138,000 | 1,233,183,000 | 1,686,321,000 | ||||||||||||||
Other |
50,008,000 | 251,099,000 | 301,107,000 | 41,994,000 | 105,652,000 | 147,646,000 | ||||||||||||||
Total assets |
$ | 620,699,000 | $ | 1,858,912,000 | $ | 2,479,611,000 | $ | 505,185,000 | $ | 1,358,631,000 | $ | 1,863,816,000 | ||||||||
Liabilities |
||||||||||||||||||||
Debt |
$ | 377,280,000 | $ | 1,046,514,000 | $ | 1,423,794,000 | $ | 453,739,000 | $ | 763,447,000 | $ | 1,217,186,000 | ||||||||
Other |
39,347,000 | 24,377,000 | 63,724,000 | 11,277,000 | 36,852,000 | 48,129,000 | ||||||||||||||
Total liabilities |
416,627,000 | 1,070,891,000 | 1,487,518,000 | 465,016,000 | 800,299,000 | 1,265,315,000 | ||||||||||||||
Partners' capital |
||||||||||||||||||||
Kennedy-Wilson |
62,379,000 | 73,644,000 | 136,023,000 | 12,781,000 | 53,361,000 | 66,142,000 | ||||||||||||||
Other partners |
141,693,000 | 714,377,000 | 856,070,000 | 27,388,000 | 504,971,000 | 532,359,000 | ||||||||||||||
Total partners' capital |
204,072,000 | 788,021,000 | 992,093,000 | 40,169,000 | 558,332,000 | 598,501,000 | ||||||||||||||
Total liabilities and partners' capital |
$ |
620,699,000 |
$ |
1,858,912,000 |
$ |
2,479,611,000 |
$ |
505,185,000 |
$ |
1,358,631,000 |
$ |
1,863,816,000 |
||||||||
Total investments are comprised of the following:
|
December 31, 2008 | December 31, 2007 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
KW
Residential LLC |
Other | Total |
KW
Residential LLC |
Other | Total | ||||||||||||||
Equity method |
$ | 62,379,000 | $ | 73,644,000 | $ | 136,023,000 | $ | 12,781,000 | $ | 53,361,000 | $ | 66,142,000 | ||||||||
Unrealized gain on fair value option |
| 5,856,000 | 5,856,000 | | | | ||||||||||||||
|
62,379,000 | 79,500,000 | 141,879,000 | 12,781,000 | 53,361,000 | 66,142,000 | ||||||||||||||
Cost method |
| 309,000 | 309,000 | | 772,000 | 772,000 | ||||||||||||||
Total Investments |
$ | 62,379,000 | $ | 79,809,000 | $ | 142,188,000 | $ | 12,781,000 | $ | 54,133,000 | $ | 66,914,000 | ||||||||
F-44
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 6INVESTMENTS IN JOINT VENTURES (Continued)
|
Year ended December 31, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | |||||||||||||||||||
|
KW
Residential LLC |
Other | Total |
KW
Residential LLC |
Other | Total | |||||||||||||||
Statements of income for equity method investees: |
|||||||||||||||||||||
Revenues |
$ | 36,721,000 | $ | 164,748,000 | $ | 201,469,000 | $ | 15,830,000 | $ | 211,520,000 | $ | 227,350,000 | |||||||||
Depreciation |
10,029,000 | 35,539,000 | 45,568,000 | 1,823,000 | 38,713,000 | 40,536,000 | |||||||||||||||
Interest |
14,112,000 | 50,513,000 | 64,625,000 | 5,907,000 | 49,083,000 | 54,990,000 | |||||||||||||||
Other expenses |
16,949,000 | 59,064,000 | 76,013,000 | 5,976,000 | 59,596,000 | 65,572,000 | |||||||||||||||
Total expenses |
41,090,000 | 145,116,000 | 186,206,000 | 13,706,000 | 147,392,000 | 161,098,000 | |||||||||||||||
Net (loss) income |
$ | (4,369,000 | ) | $ | 19,632,000 | $ | 15,263,000 | $ | 2,124,000 | $ | 64,128,000 | $ | 66,252,000 | ||||||||
Net (loss) income allocation: |
|||||||||||||||||||||
Kennedy-Wilson |
$ | (694,000 | ) | $ | 642,000 | $ | (52,000 | ) | $ | 646,000 | $ | 26,787,000 | $ | 27,433,000 | |||||||
Other partners |
(3,675,000 | ) | 18,990,000 | 15,315,000 | 1,478,000 | 37,341,000 | 38,819,000 | ||||||||||||||
Net (loss) income |
$ | (4,369,000 | ) | $ | 19,632,000 | $ | 15,263,000 | $ | 2,124,000 | $ | 64,128,000 | $ | 66,252,000 | ||||||||
|
Year ended December 31, 2006 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
|
KW
Residential LLC |
Other | Total | |||||||||
Statements of income: |
||||||||||||
Revenues |
$ | 3,197,000 | $ | 152,925,000 | $ | 156,122,000 | ||||||
Depreciation |
368,000 | 26,743,000 | 27,111,000 | |||||||||
Interest |
1,193,000 | 12,732,000 | 13,925,000 | |||||||||
Other expenses |
2,157,000 | 63,779,000 | 65,936,000 | |||||||||
Total expenses |
3,718,000 | 103,254,000 | 106,972,000 | |||||||||
Net (loss) Income |
$ | (521,000 | ) | $ | 49,671,000 | $ | 49,150,000 | |||||
Net income allocation: |
||||||||||||
Kennedy-Wilson |
(106,000 | ) | 14,795,000 | 14,689,000 | ||||||||
Other partners |
(415,000 | ) | 34,876,000 | 34,461,000 | ||||||||
Net (loss) income |
$ | (521,000 | ) | $ | 49,671,000 | $ | 49,150,000 | |||||
Equity in joint venture income for the year ended December 31, 2008:
Net income allocation |
$ | (52,000 | ) | |
Unrealized gain on fair value option |
5,856,000 | |||
|
$ | 5,804,000 | ||
Kennedy-Wilson has determined that as of December 31, 2008 and 2007, it has investments in two variable interest entities and based on its evaluation under FIN 46R has concluded that Kennedy-Wilson is not the primary beneficiary. As of December 31, 2008 and 2007, the variable interest entities had assets totaling $132 million and $125 million, respectively. As of December 31, 2008 and 2007, Kennedy-Wilson's exposure to loss as a result of its interests in these variable interest entities was $7.8 million and $5.4 million, respectively, related to its equity contributions. In addition, Kennedy-
F-45
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 6INVESTMENTS IN JOINT VENTURES (Continued)
Wilson has $16 million in the form of loan guarantees that represent 20% of the mortgage loans of the underlying variable interest entities.
Investments in which Kennedy-Wilson does not have significant influence are accounted for under the cost method of accounting. At December 31, 2008 and 2007, Kennedy-Wilson had three investments accounted for under the cost method with a carrying value totaling $309,000 and $772,000, respectively.
Distributions in excess of the Kennedy-Wilson's basis in investments in joint ventures totaling $56,000, $1,694,000, and $230,000 were deferred for the years ended December 31, 2008, 2007, and 2006, respectively, due to continuing involvement in the real estate sold by the joint venture. Total deferred revenues and gains on sale of investments in joint ventures included in accrued expenses and other liabilities were $3,450,000 and $1,856,000 at December 31, 2008 and 2007, respectively.
NOTE 7FAIR VALUE MEASUREMENTS AND THE FAIR VALUE OPTION
FAIR VALUE MEASUREMENTSStatement 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1Valuations based on unadjusted quoted market prices in active markets for identical securities. Level 2Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets and quoted prices in markets that are not active. Level 3Valuations based on inputs that are unobservable and significant to the overall fair value measurement, and involve management judgment.
The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
The following table presents fair value measurements (including items that are required to be measured at fair value and items for which the fair value option has been elected) as of December 31, 2008 classified according to the Statement 157 valuation hierarchy:
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Available-for-sale security |
$ | 28,000 | $ | | $ | | $ | 28,000 | |||||
Investment in joint ventures |
| | 14,910,000 | 14,910,000 | |||||||||
|
$ | 28,000 | $ | | $ | 14,910,000 | $ | 14,938,000 | |||||
F-46
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 7FAIR VALUE MEASUREMENTS AND THE FAIR VALUE OPTION (Continued)
The following table presents changes in Level 3 investments for the year ended December 31, 2008:
|
December 31,
2007 |
Net
Purchases or sales |
Realized
gains or losses |
Unrealized
appreciation or (depreciation) |
Net transfers
in or out of Level 3 |
Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Investment in joint ventures |
$ | 22,000 | $ | 8,019,000 | $ | | $ | 7,047,000 | $ | | $ | 15,088,000 | |||||||
Kennedy-Wilson's records its investment in the Fund based on the amount of net assets that would be allocated to its interests in the Fund assuming the Fund was to liquidate its investments at fair value. The Fund reports its investments in real estate at fair value based on valuations of the underlying real estate holdings and indebtedness securing the real estate. The valuations of real estate were, in part, based on third party appraisals of the real estate assets using an income approach. The indebtedness securing the real estate and the investments in debt securities were valued, in part, by a third party valuation firm also using an income approach. Kennedy-Wilson's investment balance in the Fund was $2,332,000 at December 31, 2008.
FAIR VALUE OPTIONKennedy-Wilson has elected the fair value option for two investments in joint venture entities that were acquired during 2008. Kennedy-Wilson elected to record these investments at fair value to more accurately reflect the timing of the value created in the underlying investments and report those results in current operations. The change in fair value for these investments of $5,856,000 is recorded in equity in joint venture income in the consolidated statements of income and comprehensive income. Kennedy-Wilson determines the fair value of these investments based upon the income approach, utilizing estimates of future cash flows, discount rates and liquidity risks.
NOTE 8OTHER ASSETS
Office furniture and equipment and leaseholds improvements are carried at cost. The office furniture and equipment are depreciated over a period of three to ten years and the leasehold
F-47
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 8OTHER ASSETS (Continued)
improvements are amortized over their estimated useful lives or the lease term, whichever is shorter. Other assets consists of the following:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2008 | 2007 | |||||
Office furniture and equipment |
$ | 1,439,000 | $ | 1,316,000 | |||
Leasehold improvements |
57,000 | 57,000 | |||||
|
1,496,000 | 1,373,000 | |||||
Less: Accumulated depreciation and amortization |
(1,049,000 | ) | (822,000 | ) | |||
|
447,000 | 551,000 | |||||
Prepaid expenses |
1,740,000 | 970,000 | |||||
Loan fees, net of accumulated amortization of $1,522,000 and $501,000 at December 31, 2008 and 2007, respectively |
1,367,000 | 1,506,000 | |||||
Deposits and other, net of accumulated amortization of $7,000 and $274,000 at December 31, 2008 and 2007, respectively |
656,000 | 240,000 | |||||
|
$ | 4,210,000 | $ | 3,267,000 | |||
Depreciation and amortization expense related to the above depreciable assets was $256,000, $695,000 and $470,000 for the years ended December 31, 2008, 2007 and 2006, respectively.
F-48
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 9NOTES PAYABLE
Notes payable were incurred primarily in connection with the acquisition of joint venture investments and stock repurchases, and includes the following:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2008 | 2007 | |||||
Note payable, variable interest rate based on prime, 4% and 7.25% at December 31, 2008 and 2007, respectively, due August 2009, which the Company expects to refinance with similar terms and conditions prior to maturity |
$ | 5,000,000 | $ | 10,000,000 | |||
Note payable, variable interest rate of 8% plus the greater of 4% or the 1-month LIBOR rate, 12% at December 31, 2008, interest payable monthly, secured by the company's ownership interest in two joint ventures, repaid in 2009 |
12,000,000 | | |||||
Loan payable to related party for $4,255,000, $3,700,000 funded at close, $555,000 held back as interest reserve, $221,000 available to fund interest payments at December 31, 2008, fixed interest rate of 14%, 10% payable monthly and 4% deferred until repayment of the loan or maturity, $154,000 deferred at December 31, 2008, secured by the company's ownership interest in a multi-family property, repaid in 2009 |
4,188,000 | | |||||
|
$ | 21,188,000 | $ | 10,000,000 | |||
NOTE 10BORROWINGS UNDER LINES OF CREDIT
Kennedy-Wilson has entered into a loan agreement with US Bank and East-West Bank that provides Kennedy-Wilson with an unsecured revolving credit facility for use in acquisitions and for working capital purposes in the amount of $30 million. The loan bears interest at a range of rates from prime to prime plus 0.50%, or, at the borrower's option, LIBOR plus 2.50% to LIBOR plus 3.00%. During 2008, the average outstanding borrowings under the line of credit was $3,413,000 with the high and low outstanding balances being $18,457,000 and $0, respectively. The borrowings under this loan had interest rates ranging from 3.75% to 5.50% and 7.74% to 8.819% at December 31, 2008 and 2007, respectively. The principal amount outstanding under this loan was $13,500,000 at December 31, 2008 and $5,000,000 at December 31, 2007. The loan matures in June 2011.
Kennedy-Wilson's ability to borrow under this facility is subject to compliance with certain financial covenants, including maximum balance sheet leverage and fixed charge coverage ratios. As of December 31, 2008 and 2007, Kennedy-Wilson was in compliance with the covenants.
F-49
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 11MORTGAGE LOANS PAYABLE
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2008 | 2007 | |||||
Mortgage loan payable, variable interest rate based on 1-month LIBOR plus 1.50%, 6.47% at December 31, 2007, interest only payable monthly, repaid in 2008 |
$ | | $ | 4,084,000 | |||
Mortgage loan payable, variable interest rate of prime plus 0.50%, 7.75% at December 31, 2007, interest only payable monthly, repaid in 2008 |
| 6,000,000 | |||||
Mortgage loan payable, fixed interest rate on initial advance ($18,600,000), 6.16% at December 31, 2008, variable interest rate on subsequent advances of 1-month LIBOR plus 1.25% (2.6875% at December 31, 2008), due January 2010, secured by multi-family property |
20,740,000 | | |||||
Mortgage loan payable, fixed interest rate of 10%, interest paid quarterly with periodic principal repayments, secured by residential land, repaid in 2009 |
2,025,000 | | |||||
Mortgage loan payable, fixed interest rate of 2.175%, interest only with partial principal repayment, $262,000 repaid in 2008, $275,000 due April 2009, balance due July 2009, secured by office building |
6,333,000 | | |||||
Mortgage loan payable, variable interest rate of prime, 4.00% at December 31, 2008, interest paid monthly, balance due June 2009, secured by property |
450,000 | | |||||
|
$ | 29,548,000 | $ | 10,084,000 | |||
During 2007, Kennedy-Wilson entered into two mortgage loans payable for the purchase of an office building located in Los Angeles, California. The first loan was in the amount of $29,200,000 and carried a fixed interest rate of 6.03%, interest only payable monthly. The second loan was in the amount of $3,650,000 and carried a fixed interest rate of 10.26%, interest only payable monthly. Both notes were collateralized by the office building and were repaid in 2007 upon the sale of the property.
Also during 2007, Kennedy-Wilson entered into a mortgage loan agreement for a total commitment of $4,512,000 for the purchase of an industrial property located in Glendora, California. The loan had a variable interest rate based on the 1-month LIBOR plus 1.50% (6.47% at December 31, 2007), with interest only payable monthly. The loan is collateralized by the property and matures in September 2010. At closing, $3,976,000 was advanced with $536,000 available to fund capital improvements. As of December 31, 2007, $108,000 had been drawn for capital improvements. The loan was assumed by the buyer of the related property.
The aggregate maturities of mortgage loans payable subsequent to December 31, 2008 are: $8,808,000 in 2009 and $20,740,000 in 2010.
NOTE 12JUNIOR SUBORDINATED DEBENTURES
In 2007, Kennedy-Wilson issued junior subordinated debentures in the amount of $40 million. The debentures were issued to a trust established by Kennedy-Wilson, which contemporaneously issued $40 million of trust preferred securities to Merrill Lynch International. The interest rate on the
F-50
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 12JUNIOR SUBORDINATED DEBENTURES (Continued)
debentures is fixed for the first ten years at 9.06%, and variable thereafter at LIBOR plus 3.70%. Interest is payable quarterly with the principal due in 2037.
Prior to April 30, 2012, Kennedy-Wilson may redeem the debentures, upon a Special Event, as defined, at a redemption price equal to 107.5% of the outstanding principal amount. After April 30, 2012, Kennedy-Wilson may redeem the debentures, in whole or in part, on any interest payment date at par.
Kennedy-Wilson is subject to be in compliance with certain financial covenants, including maximum balance sheet leverage and fixed charge coverage ratios. As of December 31, 2008, Kennedy-Wilson was in compliance with the covenants.
NOTE 13CONVERTIBLE SUBORDINATED NOTE
In November 2008, Kennedy-Wilson issued a convertible subordinated note in the amount of $30 million. The note bears interest at a fixed rate of 7%. Interest is payable quarterly with the outstanding principal due in November 2018. The holder of the note may convert the note, in whole or in part, into common stock of Kennedy-Wilson at a conversion price of $40 per share of common stock at any time prior to the 10 th anniversary of the note. At any time on or after the ninth anniversary of the date of the note and prior to the due date, Kennedy-Wilson may demand that the holder of the note convert the note in accordance with the terms of the note.
The convertible subordinated note was issued with a beneficial conversion feature as the share price on the commitment date was $43.75. The beneficial conversion feature totaled $2,813,000 and is being amortized over ten years from issue date using the effective interest method.
NOTE 14RELATED PARTY TRANSACTIONS
In 2008, the firm of Kulik, Gottesman & Mouton Ltd. was paid $286,000 for legal services provided by the firm and $30,000 for director's fees for Kent Mouton, a partner in the firm and a member of Kennedy-Wilson's board of directors, respectively. For 2007 the amounts were $138,000 and $28,000, respectively. For 2006 the amounts were $220,000 and $28,000, respectively.
The firm of Solomon, Winnett & Rosenfield was paid $194,000, $174,000, and $195,000 for income tax services provided by the firm during the years ended December 31, 2008, 2007, and 2006, respectively. Jerry Solomon is a partner in the firm and a member of Kennedy-Wilson's board of directors. For the years ended December 31, 2008, 2007, and 2006, Mr. Solomon was paid director's fees in the amounts of $29,000, $29,000, and $29,000, respectively. Kennedy-Wilson received fees and other income from affiliates and entities in which Kennedy-Wilson holds ownership interests in the following amounts:
|
Year ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | 2006 | |||||||
Property management and leasing fees |
$ | 8,380,000 | $ | 10,306,000 | $ | 8,163,000 | ||||
Commissions |
4,295,000 | 8,896,000 | 7,883,000 | |||||||
Total related party revenue |
$ | 12,675,000 | $ | 19,202,000 | $ | 16,046,000 | ||||
F-51
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 14RELATED PARTY TRANSACTIONS (Continued)
In 2008, Kennedy-Wilson sold its ownership interest in three joint venture investments to three funds in which it also has ownership interests ranging from 4.40% - 5.00%. The gains recognized on the sale of these three ownership interests totaled $1,409,000 and are included in equity in income of joint ventures in the accompanying consolidated statements of income and comprehensive income. Gains on the sale of the joint venture interests were deferred in the amount of $56,000 and are included in accrued expenses and other liabilities in the accompanying consolidated balance sheets.
In 2008, Kennedy-Wilson entered into a note payable in the amount of $4,255,000 with a joint venture in which it owns a 4.42% interest. The terms of the note are discussed in Note 9.
NOTE 15INCOME TAXES
The provision for income taxes consists of the following:
|
Year ended December 31, | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | 2006 | ||||||||
Current |
|||||||||||
Federal |
$ | (1,583,000 | ) | $ | 4,637,000 | $ | 2,037,000 | ||||
State |
(230,000 | ) | 689,000 | 242,000 | |||||||
|
(1,813,000 | ) | 5,326,000 | 2,279,000 | |||||||
Deferred |
|||||||||||
Federal |
2,083,000 | 759,000 | 2,041,000 | ||||||||
State |
335,000 | 159,000 | 243,000 | ||||||||
|
2,418,000 | 918,000 | 2,284,000 | ||||||||
Total |
$ | 605,000 | $ | 6,244,000 | $ | 4,563,000 | |||||
The provision for income taxes is allocated as follows:
|
Year ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | 2006 | |||||||
Continuing operations |
$ | 605,000 | $ | 4,384,000 | $ | 4,563,000 | ||||
Discontinued operations |
| 1,860,000 | | |||||||
|
$ | 605,000 | $ | 6,244,000 | $ | 4,563,000 | ||||
F-52
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 15INCOME TAXES (Continued)
A reconciliation of the statutory federal income tax rate with Kennedy-Wilson's effective income tax rate is as follows:
|
Year ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | 2006 | |||||||
Tax computed at statutory rate |
$ | 414,000 | $ | 5,473,000 | $ | 3,682,000 | ||||
State income taxes, net of federal benefit |
69,000 | 551,000 | 273,000 | |||||||
Non-vested stock expense |
375,000 | 384,000 | 362,000 | |||||||
Other |
(253,000 | ) | (164,000 | ) | 246,000 | |||||
Provision for income taxes |
$ | 605,000 | $ | 6,244,000 | $ | 4,563,000 | ||||
The following summarizes the effect of deferred income tax items and the impact of "temporary differences" between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. Temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as follows:
|
Year ended December 31, | |||||||
---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | ||||||
Deferred tax assets: |
||||||||
Accrued reserves |
$ | 223,000 | $ | 243,000 | ||||
Investment basis |
175,000 | | ||||||
Marketable securities |
291,000 | 129,000 | ||||||
Total deferred tax assets |
689,000 | 372,000 | ||||||
Deferred tax liabilities: |
||||||||
Depreciation and amortization |
(4,738,000 | ) | (3,934,000 | ) | ||||
Prepaid expenses and other |
(254,000 | ) | (284,000 | ) | ||||
Investment basis and reserve differences |
| (385,000 | ) | |||||
Accrued payroll |
(138,000 | ) | (217,000 | ) | ||||
Unrealized gain on fair value option |
(2,364,000 | ) | | |||||
Capitalized interest |
(1,711,000 | ) | (1,650,000 | ) | ||||
Total deferred tax liabilities |
(9,205,000 | ) | (6,470,000 | ) | ||||
Net deferred tax liability |
$ | (8,516,000 | ) | $ | (6,098,000 | ) | ||
Based upon the level of historical taxable income and projections for future taxable income over the periods which Kennedy-Wilson's gross deferred tax assets are deductible, management believes it is more likely than not Kennedy-Wilson will realize the benefits of these deductible differences at December 31, 2008.
Management has considered the likelihood and significance of possible penalties associated with its current and intended filing positions and has determined, based on their assessment, that such penalties, if any, would not be expected to be material.
F-53
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 15INCOME TAXES (Continued)
Kennedy-Wilson's federal income tax returns remain open to examination for the tax years 2006 through 2008.
NOTE 16COMMITMENTS AND CONTINGENCIES
Future minimum lease payments under scheduled operating leases, net of minor subleases, that have initial or remaining noncancelable terms in excess of one year are as follows:
Year
|
Operating
Leases |
|||
---|---|---|---|---|
2009 |
$ | 1,340,000 | ||
2010 |
885,000 | |||
2011 |
276,000 | |||
2012 |
48,000 | |||
Total minimum payments |
$ | 2,549,000 | ||
Net rental expense amounted to $1,586,000, $1,517,000, and $1,510,000 for the years ended December 31, 2008, 2007, and 2006, respectively, and is included in general and administrative expense in the accompanying consolidated statements of income and comprehensive income.
EMPLOYMENT AGREEMENTSKennedy-Wilson has entered into an employment agreement with one of its principal officers, which provides for annual base compensation in the aggregate amount of $950,000 and expires in December 2014. The employment agreement provides for the payment of an annual discretionary bonus in an amount determined in the sole and absolute discretion of the Compensation and Stock Option Committees of the board of directors. Kennedy-Wilson also has employment agreements with other non-officer employees which provide for aggregate minimum annual compensation of $3,405,000 and expire in 2009.
LITIGATIONKennedy-Wilson is currently a defendant in certain routine litigation arising in the ordinary course of business. It is the opinion of management and legal counsel that the outcome of these actions will not have a material effect on the financial position or results of operations of Kennedy-Wilson.
NOTE 17STOCK OPTION PLANS
Kennedy-Wilson currently has the 1992 Incentive and Non-statutory Stock Option Plan, which includes a Plan A and a Plan B and the 1992 Non-Employee Director Stock Option Plan ("Plan C"). An aggregate of 1,700,000 shares of common stock are reserved for issuance under Plan A and B. The Company has 81,000 shares of common stock reserved for issuance under Plan C.
Plan A permits the granting of Incentive Stock Options to employees, including employee-directors. Plan B permits the granting of nonstatutory stock options to employees, including employee-directors and consultants. Plan C permits the granting of options to non-employee-directors. Options granted under the Plans have an option price of 100% of the fair value of the common stock on the date of grant.
F-54
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 17STOCK OPTION PLANS (Continued)
Options granted under Plan A vest over a period of three years and may be exercised for a period of up to five years from the grant date; options granted under Plan B vest over a period of three years and may be exercised for a period of up to 10 years from the grant date. Options granted under Plan C vest and become exercisable on the first anniversary of the date of the initial grant provided that the optionee continues to serve as a director for at least one year from the date of such initial grant. Under Plan C, options expire on the earlier of the tenth anniversary of the date of grant and 90 days after the individual ceases to be a director of Kennedy-Wilson.
The following table sets forth activity under the plans:
|
Options |
Range of
Exercise Prices |
Weighted
Average Exercise Price |
||||||
---|---|---|---|---|---|---|---|---|---|
Outstanding, January 1, 2006 |
325,870 | $0.93 - $8.81 | $ | 4.29 | |||||
Exercised |
(245,040 | ) | $0.93 - $7.00 | $ | 4.12 | ||||
Balance, December 31, 2006 |
80,830 | $3.81 - $8.81 | $ | 4.80 | |||||
Exercised |
(55,000 | ) | $4.23 - $4.35 | $ | 4.30 | ||||
Balance, December 31, 2007 |
25,830 | $3.81 - $8.81 | $ | 5.88 | |||||
Exercised |
(11,250 | ) | $8.25 | $ | 8.25 | ||||
Balance, December 31, 2008 |
14,580 | $3.81 - $8.81 | $ | 4.06 | |||||
|
Options Outstanding | Options Exercisable | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Range of
Exercise Prices |
Number
Outstanding at 12/31/08 |
Weighted
Average Remaining Contractual Life (in years) |
Weighted
Average Exercise Price |
Number
Exercisable at 12/31/08 |
Weighted
Average Exercise Price |
|||||||||||
$3.81 |
13,500 | 2.24 | $ | 3.81 | 13,500 | $ | 3.81 | |||||||||
$5.45 |
540 | 3.45 | $ | 5.45 | 540 | $ | 5.45 | |||||||||
$8.81 |
540 | 0.48 | $ | 8.81 | 540 | $ | 8.81 |
The number of options exercisable at December 31, 2008, 2007, and 2006, were 14,580, 25,830, and 80,830, respectively.
NOTE 18CAPITAL STOCK TRANSACTIONS
During 2008, Kennedy-Wilson issued 53,000 shares of Series A Preferred Stock (the "preferred stock"). The holders of the preferred stock are entitled to receive dividends quarterly at a per annum rate equal to 7% of the liquidation value of $1,000 per share. The preferred stock will be senior to all other existing classes and series of shares of stock of the company upon dissolution, liquidation, or winding up, to the extent of the aggregate liquidation value and all accrued but unpaid dividends. The preferred stock must be converted into shares of Kennedy-Wilson's common stock at any time on or prior to the third annual anniversary, May 2011 through September 2011, of the latest date of the original issuance of any preferred stock at a conversion price of $42 per share of common stock for a total of approximately 1,262,000 shares of common stock. Additionally, the preferred stock
F-55
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 18CAPITAL STOCK TRANSACTIONS (Continued)
automatically shall be converted into shares of common stock no later than 10 days after Kennedy-Wilson delivers notice to the holders of the preferred stock advising such holder that Kennedy-Wilson shall sell all or substantially all of its assets or shall be acquired by or reorganized into or with another entity. The proceeds from the issuance of the preferred stock was $52,354,000, net of expenses related to the offering totaling $646,000.
During 2008, 2007, and 2006, Kennedy-Wilson acquired approximately 164,000, 121,000, and 38,000 shares, respectively, of its common stock for total consideration of $6,170,000, $2,996,000, and $651,000, respectively.
During 2001 and 2002, Kennedy-Wilson's Chairman was granted a total of 1,700,000 shares of non-vested stock that vest over a period of eight to ten years. For the years ended December 31, 2008, 2007, and 2006, compensation expense for the non-vested stock grants was $1,015,000, $1,015,000, and $1,015,000, respectively, and is included in compensation and related expenses in the accompanying consolidated statements of income and comprehensive income. At December 31, 2008, 2007, and 2006, the amount of non-vested shares deducted from additional paid-in capital was $1,543,000, $2,558,000, and $3,573,000, respectively. The vesting of the remaining non-vested shares and the related compensation expense is as follows:
|
Non-Vested
Shares |
Compensation
Expense |
|||||
---|---|---|---|---|---|---|---|
2009 |
195,000 | $ | 1,015,000 | ||||
2010 |
109,000 | 528,000 | |||||
|
304,000 | $ | 1,543,000 | ||||
NOTE 19EMPLOYEE BENEFIT ARRANGEMENTS
Kennedy-Wilson has a qualified plan under the provisions of Section 401(k) of the Internal Revenue Code. Under this plan, participants are able to make salary deferral contributions of up to 15% of their total compensation, up to a specified maximum. The 401(k) plan also includes provisions which authorize Kennedy-Wilson to make discretionary contributions. During 2008, 2007, and 2006, Kennedy-Wilson made matching contributions of $6,000, $100,000, and $71,000, respectively, to this plan and is included in compensation and related expenses in the accompanying consolidated statements of income and comprehensive income.
NOTE 20SALE OF MINORITY INTEREST
In 2006, Kennedy-Wilson sold a 20% interest in its wholly-owned apartment management division to Kenedix, Inc., a Japanese real estate company, for $9 million. A gain on the sale in the amount of $7,060,000 was recognized after deduction of related expenses.
F-56
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 21EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
|
Year ended December 31, | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
2008 | 2007 | 2006 | ||||||||
Income from continuing operations |
$ | 613,000 | $ | 6,596,000 | $ | 5,955,000 | |||||
Income from discontinued operations, net of tax |
| 2,797,000 | | ||||||||
Less: Preferred stock dividend |
(2,264,000 | ) | | | |||||||
Net (loss) income available to common shareholders |
$ | (1,651,000 | ) | $ | 9,393,000 | $ | 5,955,000 | ||||
Basic (loss) earnings per share: |
|||||||||||
(Loss) income from continuing operations |
$ | (0.32 | ) | $ | 1.30 | $ | 1.23 | ||||
Income from discontinued operations, net of tax |
| 0.55 | | ||||||||
|
$ | (0.32 | ) | $ | 1.85 | $ | 1.23 | ||||
Weighted average common shares |
5,119,684 |
5,063,949 |
4,840,963 |
||||||||
Diluted earnings per share: |
|||||||||||
(Loss) income from continuing operations |
$ | (0.32 | ) | $ | 1.17 | $ | 1.07 | ||||
Income from discontinued operations, net of tax |
| 0.50 | | ||||||||
|
$ | (0.32 | ) | $ | 1.67 | $ | 1.07 | ||||
Weighted average common shares |
5,119,684 |
5,063,949 |
4,840,963 |
||||||||
Options and warrants |
| 10,243 | 100,333 | ||||||||
Non-vested stock |
| 547,610 | 616,791 | ||||||||
Total diluted shares |
5,119,684 | 5,621,802 | 5,558,087 | ||||||||
The dilutive shares from convertible preferred stock, convertible subordinated debt, options and non-vested stock have not been included in the diluted weighted average shares as Kennedy-Wilson has a net loss available to common stockholders. There were a total of 1,281,070 dilutive securities as of December 31, 2008.
NOTE 22SEGMENT INFORMATION
Kennedy-Wilson's business activities currently consist of services and various types of real estate investments. Kennedy-Wilson's segment disclosure with respect to the determination of segment profit or loss and segment assets is based on these services and its various investments.
SERVICES Kennedy-Wilson provides a full range of commercial and residential real estate services. These services include property management, leasing, brokerage, asset management, and various other specialized commercial and residential real estate services.
F-57
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 22SEGMENT INFORMATION (Continued)
INVESTMENTS With joint venture partners and on its own, Kennedy-Wilson invests in commercial and residential real estate which Kennedy-Wilson believes value may be added through Kennedy-Wilson's expertise or opportunistic investing. Kennedy-Wilson's current real estate portfolio focuses on commercial buildings and multiple-family residences.
Substantially all of the management fees and commissionsrelated party revenues were generated via intersegment activity for the years ended December 31, 2008, 2007 and 2006. The amounts representing investments with related parties and non-affiliates are included in the investment segment. No single external customer provided Kennedy-Wilson with 10% or more of its revenues during any period presented in these financial statements."
The following tables summarize the income and expense activity by segment for the year ended December 31, 2008 and total assets as of December 31, 2008.
|
Services | Investments | Corporate | Consolidated | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Management fees and commissions |
$ | 16,577,000 | $ | | $ | | $ | 16,577,000 | ||||||
Management fees and commissionsrelated party |
12,675,000 | | | 12,675,000 | ||||||||||
Rental and sales revenue |
| 2,409,000 | | 2,409,000 | ||||||||||
Interest and other income |
| 564,000 | 562,000 | 1,126,000 | ||||||||||
Total revenue |
29,252,000 | 2,973,000 | 562,000 | 32,787,000 | ||||||||||
Depreciation |
|
(664,000 |
) |
(256,000 |
) |
(920,000 |
) |
|||||||
Operating expenses |
(23,910,000 | ) | (2,195,000 | ) | (5,546,000 | ) | (31,651,000 | ) | ||||||
Total operating expenses |
(23,910,000 | ) | (2,859,000 | ) | (5,802,000 | ) | (32,571,000 | ) | ||||||
Equity in joint venture income |
|
10,097,000 |
|
10,097,000 |
||||||||||
Total operating income (loss) |
5,342,000 |
10,211,000 |
(5,240,000 |
) |
10,313,000 |
|||||||||
Gain on sale of asset |
|
|
|
|
||||||||||
Interest expense |
(2,149,000 | ) | (5,890,000 | ) | (557,000 | ) | (8,596,000 | ) | ||||||
Other than temporary impairment on available for sale security |
| | (445,000 | ) | (445,000 | ) | ||||||||
Income (loss) before provision for income taxes |
$ | 3,193,000 | $ | 4,321,000 | (6,242,000 | ) | 1,272,000 | |||||||
Provision for income taxes |
(605,000 | ) | (605,000 | ) | ||||||||||
Income (loss) from continuing operations |
(6,847,000 | ) | 667,000 | |||||||||||
Income from discontinued operations, net of tax |
| | ||||||||||||
Net income |
$ | (6,847,000 | ) | $ | 667,000 | |||||||||
Total assets |
$ | 39,791,000 | $ | 175,368,000 | $ | 40,724,000 | $ | 255,883,000 | ||||||
Expenditures for long lived assets |
$ | | $ | 41,460,000 | $ | | $ | 41,460,000 | ||||||
F-58
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 22SEGMENT INFORMATION (Continued)
The following tables summarize the income and expense activity by segment for the year ended December 31, 2007 and total assets as of December 31, 2007.
|
Services | Investments | Corporate | Consolidated | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Management fees and commissions |
$ | 14,093,000 | $ | | $ | | $ | 14,093,000 | ||||||
Management fees and commissionsrelated party |
19,202,000 | | | 19,202,000 | ||||||||||
Rental and sales revenue |
| 98,000 | | 98,000 | ||||||||||
Interest and other income |
| | 865,000 | 865,000 | ||||||||||
Total revenue |
33,295,000 | 98,000 | 865,000 | 34,258,000 | ||||||||||
Depreciation |
|
|
(505,000 |
) |
(505,000 |
) |
||||||||
Operating expenses |
(22,663,000 | ) | (481,000 | ) | (19,531,000 | ) | (42,675,000 | ) | ||||||
Total operating expenses |
(22,663,000 | ) | (481,000 | ) | (20,036,000 | ) | (43,180,000 | ) | ||||||
Equity in joint venture income |
|
27,433,000 |
|
27,433,000 |
||||||||||
Total operating income (loss) |
10,632,000 |
27,050,000 |
(19,171,000 |
) |
18,511,000 |
|||||||||
Gain on sale of asset |
|
|
|
|
||||||||||
Interest expense |
(3,851,000 | ) | (1,454,000 | ) | 215,000 | (5,090,000 | ) | |||||||
Other than temporary impairment on available for sale security |
| | | | ||||||||||
Income (loss) before provision for income taxes |
$ | 6,781,000 | 25,596,000 | (18,956,000 | ) | 13,421,000 | ||||||||
Provision for income taxes |
(4,384,000 | ) | (4,384,000 | ) | ||||||||||
Income (loss) from continuing operations |
(23,340,000 | ) | 9,037,000 | |||||||||||
Income from discontinued operations, net of tax |
2,797,000 | | 2,797,000 | |||||||||||
Net income |
$ | 28,393,000 | $ | (23,340,000 | ) | $ | 11,834,000 | |||||||
Total assets |
$ | 45,053,000 | $ | 66,552,000 | $ | 34,209,000 | $ | 145,814,000 | ||||||
Expenditures for long lived assets |
$ | | $ | 38,458,000 | $ | | $ | 38,458,000 | ||||||
F-59
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 22SEGMENT INFORMATION (Continued)
The following tables summarize the income and expense activity by segment for the year ended December 31, 2006 and total assets as of December 31, 2006.
|
Services | Investments | Corporate | Consolidated | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Management fees and commissions |
$ | 10,452,000 | $ | | $ | | $ | 10,452,000 | ||||||
Management fees and commissionsrelated party |
16,046,000 | | | 16,046,000 | ||||||||||
Rental and sales revenue |
| | | | ||||||||||
Interest and other income |
| 369,000 | 277,000 | 646,000 | ||||||||||
Total revenue |
26,498,000 | 369,000 | 277,000 | 27,144,000 | ||||||||||
Depreciation |
|
|
(688,000 |
) |
(688,000 |
) |
||||||||
Operating expenses |
(18,604,000 | ) | (1,482,000 | ) | (13,832,000 | ) | (33,918,000 | ) | ||||||
Total Operating Expenses |
(18,604,000 | ) | (1,482,000 | ) | (14,520,000 | ) | (34,606,000 | ) | ||||||
Equity in joint venture income |
| 14,689,000 | | 14,689,000 | ||||||||||
Total operating income (loss) |
7,894,000 |
13,576,000 |
(14,243,000 |
) |
7,227,000 |
|||||||||
Gain on sale of asset |
|
|
7,060,000 |
7,060,000 |
||||||||||
Interest expense |
(1,428,000 | ) | (2,946,000 | ) | 1,191,000 | (3,183,000 | ) | |||||||
Other than temporary impairment on available for sale security |
| | | | ||||||||||
Income (loss) before provision for income taxes |
$ | 6,466,000 | $ | 10,630,000 | (5,992,000 | ) | 11,104,000 | |||||||
Provision for income taxes |
(4,563,000 | ) | (4,563,000 | ) | ||||||||||
Income (loss) from continuing operations |
(10,555,000 | ) | 6,541,000 | |||||||||||
Income from discontinued operations, net of tax |
| | ||||||||||||
Net income |
$ | (10,555,000 | ) | $ | 6,541,000 | |||||||||
Total assets |
$ | 37,748,000 | $ | 51,825,000 | $ | 18,173,000 | $ | 107,746,000 | ||||||
Expenditures for long lived assets |
$ | | $ | 7,637,000 | $ | | $ | 7,637,000 | ||||||
F-60
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 23UNAUDITED QUARTERLY INFORMATION
Year ended December 31, 2008
|
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues |
$ | 6,938,000 | $ | 10,077,000 | $ | 8,154,000 | $ | 11,911,000 | |||||
Operating expenses |
6,357,000 | 8,366,000 | 7,995,000 | 9,853,000 | |||||||||
Equity in joint venture income (loss) |
1,317,000 | 216,000 | 4,130,000 | 141,000 | |||||||||
Operating income |
1,898,000 | 1,927,000 | 4,289,000 | 2,199,000 | |||||||||
Non-operating income (expense) |
(1,500,000 |
) |
(1,903,000 |
) |
(2,250,000 |
) |
(3,388,000 |
) |
|||||
Income (loss) before provision for income taxes |
398,000 | 24,000 | 2,039,000 | (1,189,000 | ) | ||||||||
(Provision for) benefit from income taxes |
(177,000 |
) |
(11,000 |
) |
(738,000 |
) |
321,000 |
||||||
Income from continuing operations |
221,000 | 13,000 | 1,301,000 | (868,000 | ) | ||||||||
Income from discontinued operations, net of tax |
|
|
|
|
|||||||||
Net income (loss) |
$ | 221,000 | $ | 13,000 | $ | 1,301,000 | $ | (868,000 | ) | ||||
Basic earnings (loss) per share |
$ | 0.04 | $ | (0.07 | ) | $ | 0.07 | $ | (0.15 | ) | |||
Diluted earnings (loss) per share |
$ | 0.04 | $ | (0.07 | ) | $ | 0.07 | $ | (0.15 | ) |
F-61
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2007 and 2006
NOTE 23UNAUDITED QUARTERLY INFORMATION (Continued)
Year ended December 31, 2007
|
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues |
$ | 6,655,000 | $ | 10,963,000 | $ | 8,661,000 | $ | 7,905,000 | ||||||
Operating expenses |
6,612,000 | 8,147,000 | 8,156,000 | 20,265,000 | ||||||||||
Equity in joint venture (loss) income |
(86,000 | ) | 3,575,000 | 2,256,000 | 21,688,000 | |||||||||
Operating (loss) income |
(43,000 | ) | 6,391,000 | 2,761,000 | 9,328,000 | |||||||||
Non-operating expense |
(1,029,000 |
) |
(1,247,000 |
) |
(1,368,000 |
) |
(1,446,000 |
) |
||||||
(Loss) income before provision for income taxes |
(1,072,000 | ) | 5,144,000 | 1,393,000 | 7,882,000 | |||||||||
(Provision for) benefit from income taxes |
560,000 |
(2,028,000 |
) |
(479,000 |
) |
(3,078,000 |
) |
|||||||
(Loss) income from continuing operations |
(512,000 | ) | 3,116,000 | 914,000 | 4,804,000 | |||||||||
(Loss) income from discontinued operations, net of tax |
(86,000 | ) | (180,000 | ) | 1,000 | 3,777,000 | ||||||||
Net (loss) income |
$ | (598,000 | ) | $ | 2,936,000 | $ | 915,000 | $ | 8,581,000 | |||||
Basic (loss) earnings per share: |
||||||||||||||
(Loss) income from continuing operations |
$ | (0.17 | ) | $ | 0.60 | $ | 0.14 | $ | 1.28 | |||||
(Loss) income from discontinued operations |
||||||||||||||
|
$ | (0.17 | ) | $ | 0.60 | $ | 0.14 | $ | 1.28 | |||||
Diluted (loss) earnings per share: |
||||||||||||||
(Loss) income from continuing operations |
$ | (0.17 | ) | $ | 0.54 | $ | 0.13 | $ | 1.16 | |||||
(Loss) income from discontinued operations |
||||||||||||||
|
$ | (0.17 | ) | $ | 0.54 | $ | 0.13 | $ | 1.16 | |||||
F-62
Kennedy-Wilson, Inc. and Subsidiaries
Consolidated Balance Sheets
|
June 30,
2009 |
December 31,
2008 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
(unaudited)
|
|
||||||||
Assets |
||||||||||
Cash and cash equivalents |
$ | 16,206,000 | $ | 25,831,000 | ||||||
Accounts and notes receivable |
14,358,000 | 9,548,000 | ||||||||
Income tax receivable |
| 1,414,000 | ||||||||
Investment in real estate available for sale |
34,260,000 | | ||||||||
Investments in real estate, net |
40,618,000 | 48,727,000 | ||||||||
Investments in joint ventures ($15,263,000 and $15,088,000 carried at |
||||||||||
fair value as of June 30, 2009 and December 31, 2008, respectively) |
147,581,000 | 142,188,000 | ||||||||
Goodwill and other assets |
30,393,000 | 28,175,000 | ||||||||
Total assets |
$ | 283,416,000 | $ | 255,883,000 | ||||||
Liabilities and equity |
||||||||||
Liabilities |
||||||||||
Accounts payable and other liabilities |
$ | 19,050,000 | $ | 18,658,000 | ||||||
Mortgage loans payable on real estate held for sale |
26,115,000 | | ||||||||
Line of credit, notes payable, mortgages and other long-term debt |
134,285,000 | 131,423,000 | ||||||||
Total liabilities |
179,450,000 | 150,081,000 | ||||||||
Equity |
||||||||||
Convertible preferred stock, $0.01 par value: 5,000,000 shares authorized, 53,000 shares issued and outstanding as of December 31, 2008. The preferred stock is mandatorily convertible to common stock on the third anniversary from issue date of September 2008 |
1,000 | 1,000 | ||||||||
Common stock, $0.01 par value: 50,000,000 shares authorized; 5,387,997 and 5,466,150 shares issued as of June 30, 2009 and December 31, 2008, respectively |
54,000 | 55,000 | ||||||||
Other stockholders' equity |
98,042,000 | 105,495,000 | ||||||||
Total Kennedy-Wilson stockholders' equity |
98,097,000 | 105,551,000 | ||||||||
Noncontrolling interests |
5,869,000 | 251,000 | ||||||||
Total equity |
103,966,000 | 105,802,000 | ||||||||
Total liabilities and equity |
$ | 283,416,000 | $ | 255,883,000 | ||||||
See accompanying notes to consolidated financial statements.
F-63
Kennedy-Wilson, Inc. and Subsidiaries
Consolidated Statements of Income and
Comprehensive Income
(unaudited)
|
Six months ended June 30, | ||||||||
---|---|---|---|---|---|---|---|---|---|
|
2009 | 2008 | |||||||
Revenue |
|||||||||
Gross revenues |
$ | 19,482,000 | $ | 17,015,000 | |||||
Operating expenses |
|||||||||
Costs and expenses related to revenue |
17,918,000 | 11,096,000 | |||||||
General, administrative, depreciation and amortization |
2,684,000 | 3,627,000 | |||||||
Total operating expense |
20,602,000 | 14,723,000 | |||||||
Equity in joint venture (loss) income |
(461,000 |
) |
1,533,000 |
||||||
Total operating income |
(1,581,000 | ) | 3,825,000 | ||||||
Non-operating expense |
|||||||||
Interest expense |
(5,061,000 | ) | (3,403,000 | ) | |||||
Other than temporary impairment on available-for-sale security |
(323,000 | ) | | ||||||
(Loss) income before provision for income taxes |
(6,965,000 | ) | 422,000 | ||||||
Benefit from (provision for) income taxes |
2,215,000 | (188,000 | ) | ||||||
Net income |
(4,750,000 | ) | 234,000 | ||||||
Net loss (income) attributable to the noncontrolling interest |
267,000 | (50,000 | ) | ||||||
Preferred stock dividends and accretion of beneficial conversion feature |
(1,964,000 | ) | (394,000 | ) | |||||
Net (loss) income attributable to Kennedy-Wilson common stockholders |
(6,447,000 | ) | (210,000 | ) | |||||
Other comprehensive income (loss), net of tax |
117,000 | | |||||||
Total comprehensive income attributable to Kennedy-Wilson common stockholders |
$ | (6,330,000 | ) | $ | (210,000 | ) | |||
Basic (loss) earnings per share: |
|||||||||
Net (loss) income attributable to Kennedy-Wilson common stockholders |
$ | (1.24 | ) | $ | (0.04 | ) | |||
Weighted average number of common shares outstandingbasic |
5,195,273 | 5,098,855 | |||||||
Diluted (loss) earnings per share: |
|||||||||
Net (loss) income attributable to Kennedy-Wilson common stockholders |
$ | (1.24 | ) | $ | (0.04 | ) | |||
Weighted average number of common shares outstandingdiluted |
5,195,273 | 5,098,855 |
See accompanying notes to consolidated financial statements.
F-64
Kennedy-Wilson, Inc. and Subsidiaries
Consolidated Statement of Equity
(Unaudited)
|
Preferred Stock | Common Stock |
|
|
Accumulated
Other Comprehensive Loss |
|
|
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Additional
Paid-in Capital |
Retained
Earnings |
Noncontrolling
Interests |
|
||||||||||||||||||||||||||
|
Shares | Amount | Shares | Amount | Total | |||||||||||||||||||||||||
Balance, January 1, 2008 |
| $ | | 5,619,224 | $ | 56,000 | $ | 9,921,000 | $ | 47,118,000 | $ | (238,000 | ) | $ | 219,000 | $ | 57,076,000 | |||||||||||||
Issuance of preferred stock |
53,000 | 1,000 | | | 52,353,000 | | | | 52,354,000 | |||||||||||||||||||||
Issuance of common stockexercise of stock options |
| | 11,250 | 1,000 | 92,000 | | | | 93,000 | |||||||||||||||||||||
Repurchase of common stock |
| | (164,324 | ) | (2,000 | ) | (6,168,000 | ) | | | | (6,170,000 | ) | |||||||||||||||||
Amortization of equity compensation |
| | | | 1,015,000 | | | | 1,015,000 | |||||||||||||||||||||
Discount on convertible subordinated debt |
| | | | 2,813,000 | | | | 2,813,000 | |||||||||||||||||||||
Other comprehensive loss: |
||||||||||||||||||||||||||||||
Foreign currency translation |
| | | | | | 240,000 | | 240,000 | |||||||||||||||||||||
Dividends paidpreferred stock |
| | | | | (2,264,000 | ) | | | (2,264,000 | ) | |||||||||||||||||||
Net income |
| | | | | 613,000 | | 54,000 | 667,000 | |||||||||||||||||||||
Contributions from noncontrolling interests |
| | | | | | | 482,000 | 482,000 | |||||||||||||||||||||
Distributions to noncontrolling interests |
| | | | | | | (504,000 | ) | (504,000 | ) | |||||||||||||||||||
Balance, December 31, 2008 |
53,000 | 1,000 | 5,466,150 | 55,000 | 60,026,000 | 45,467,000 | 2,000 | 251,000 | 105,802,000 | |||||||||||||||||||||
Issuance of common stockexercise of stock options |
|
|
540 |
|
5,000 |
|
|
|
5,000 |
|||||||||||||||||||||
Repurchase of common stock |
(78,693 | ) | (1,000 | ) | (2,393,000 | ) | | | | (2,394,000 | ) | |||||||||||||||||||
Amortization of equity compensation |
| | | | 507,000 | | | | 507,000 | |||||||||||||||||||||
Stock compensation expense |
| | | | 650,000 | | | | 650,000 | |||||||||||||||||||||
Other comprehensive loss: |
||||||||||||||||||||||||||||||
Foreign currency translation |
| | | | | | (77,000 | ) | | (77,000 | ) | |||||||||||||||||||
Unrealized loss on marketable security, net of tax |
| | | | | | 194,000 | | 194,000 | |||||||||||||||||||||
Dividends paid and accruedpreferred stock |
| | | | | (1,856,000 | ) | | (1,856,000 | ) | ||||||||||||||||||||
Accretion of preferred stock beneficial conversion |
| | | | 108,000 | (108,000 | ) | | | | ||||||||||||||||||||
Net income (loss) |
| | | | | (4,483,000 | ) | | (267,000 | ) | (4,750,000 | ) | ||||||||||||||||||
Contributions from noncontrolling interests |
| | | | | | | 5,885,000 | 5,885,000 | |||||||||||||||||||||
Distributions to noncontrolling interests |
| | | | | | | | | |||||||||||||||||||||
Balance, June 30, 2009 (unaudited) |
53,000 | $ | 1,000 | 5,387,997 | $ | 54,000 | $ | 58,903,000 | $ | 39,020,000 | $ | 119,000 | $ | 5,869,000 | $ | 103,966,000 | ||||||||||||||
See accompanying notes to consolidated financial statements.
F-65
Kennedy-Wilson, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Six months ended June 30, 2009 and 2008
(Unaudited)
|
Six months ended
June 30, |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
2009 | 2008 | |||||||||
Net cash used in operating activities |
$ | (3,009,000 | ) | $ | (13,021,000 | ) | |||||
Cash flows from investing activities: |
|||||||||||
Additions to notes receivablerelated party |
(2,663,000 | ) | | ||||||||
Net proceeds from sale of real estate |
6,368,000 | | |||||||||
Purchases of and additions to real estate |
(34,869,000 | ) | (27,976,000 | ) | |||||||
Capital distributions from joint ventures |
404,000 | 8,136,000 | |||||||||
Contributions to joint ventures |
(7,533,000 | ) | (55,187,000 | ) | |||||||
Other |
(198,000 | ) | 28,000 | ||||||||
Net cash used in investing activities |
(38,491,000 | ) | (74,999,000 | ) | |||||||
Cash flow from financing activities: |
|||||||||||
Borrowings under notes payable |
9,000,000 | 20,450,000 | |||||||||
Repayment of notes payable |
(16,188,000 | ) | (5,973,000 | ) | |||||||
Borrowings under lines of credit |
12,500,000 | 13,000,000 | |||||||||
Repayment of lines of credit |
| (18,000,000 | ) | ||||||||
Borrowings under mortgage loans payable |
30,286,000 | 23,290,000 | |||||||||
Repayment of mortgage loans payable |
(4,738,000 | ) | (2,911,000 | ) | |||||||
Debt issue costs |
(625,000 | ) | (1,009,000 | ) | |||||||
Issuance of preferred stock |
| 51,951,000 | |||||||||
Issuance of common stock |
5,000 | | |||||||||
Repurchase of common stock |
(2,394,000 | ) | (2,909,000 | ) | |||||||
Dividends paidpreferred stock |
(1,856,000 | ) | (394,000 | ) | |||||||
Contributions from (distributions to) noncontrolling interests |
5,885,000 | (200,000 | ) | ||||||||
Net cash provided by financing activities |
31,875,000 | 77,295,000 | |||||||||
Net decrease in cash and cash equivalents |
(9,625,000 | ) | (10,725,000 | ) | |||||||
Cash and cash equivalents, beginning of year |
25,831,000 | 24,248,000 | |||||||||
Cash and cash equivalents, end of year |
$ | 16,206,000 | $ | 13,523,000 | |||||||
Non-Cash Items
In 2008, Kennedy-Wilson converted notes receivable from various executives and directors of Kennedy-Wilson related to a joint venture investment in Japan into equity in the Japanese joint venture resulting in an increase in investments in joint ventures of $4,397,000 and a decrease in notes receivable of $4,397,000.
In 2009, the debt on a piece of land that was sold was assumed by the buyer resulting in a decrease of proceeds from the sale of real estate of $2,025,000 and reduction of repayment of mortgage loans payable of $2,025,000.
At June 30, 2009, $809,000 of preferred dividends were declared and not paid resulting in an increase in accured expenses and other liabilities.
See accompanying notes to consolidated financial statements.
F-66
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2009 and 2008
(Unaudited)
NOTE 1BASIS OF PRESENTATION
Kennedy-Wilson's unaudited interim consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles used in the preparation of its annual financial statements. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of Kennedy-Wilson, all adjustments, consisting of only normal and recurring items, necessary for a fair presentation of the results of operations for the six-month periods ended June 30, 2009 and 2008 have been included. The results of operations for six months ended June 30, 2009 are not necessarily indicative of results that might be expected for the full year ended December 31, 2009. For further information, your attention is directed to the footnote disclosures found in Kennedy-Wilson's 2008 Financial Statements.
The consolidated financial statements include the accounts of Kennedy-Wilson and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In addition, Kennedy-Wilson evaluates its relationships with other entities to identify whether they are variable interest entities as defined by FASB Interpretation No. 46 (revised December 2003) Consolidation of Variable Interest Entities ("FIN 46R") and to assess whether it is the primary beneficiary of such entities. If the determination is made that Kennedy-Wilson is the primary beneficiary, then that entity is included in the consolidated financial statements in accordance with FIN 46R.
The ownership of the other interest holders of consolidated subsidiaries is reflected as noncontrolling interests. The preparation of the accompanying consolidated financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosure about contingent assets and liabilities, and reported amounts of revenues and expenses. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.
Kennedy-Wilson acquired a condominium project located in Los Angeles, California. The Project was purchased for the purposes of resale and was classified as held for sale at the date of acquisition. Management having the authority has committed to a plan of disposal and is actively marketing the property and expects to dispose of all of the condominium units within one year.
Kennedy-Wilson has evaluated all subsequent events through the date of the filing of this form S-4.
NOTE 2RECENT ACCOUNTING PRONOUNCEMENTS
In December 2007, the FASB issued FASB Statement No. 141(R), Business Combinations . Statement 141(R) requires most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at "full fair value" and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. Statement 141(R) is effective for periods beginning on or after December 15, 2008, and earlier adoption is prohibited. FASB No. 141(R) was adopted on January 1, 2009, and there was no material impact to the accompanying consolidated financial statements.
F-67
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
June 30, 2009 and 2008
(Unaudited)
NOTE 2RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
In April 2008, the FASB issued FASB Staff Position FAS 142-3, "Determination of the Useful Life of Intangible Assets." FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under Statement 142. FSP FAS 142-3 was adopted on January 1, 2009, and there is no material impact to the accompanying consolidated financial statements.
In November 2008, the FASB's Emerging Issues Task Force reached a consensus on EITF Issue No. 08-6, "Equity Method Investment Accounting Considerations". EITF 08-6 continues to follow the accounting for the initial carrying value of equity method investments in APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, which is based on a cost accumulation model and generally excludes contingent consideration. EITF 08-6 also specifies that other-than-temporary impairment testing by the investor should be performed at the investment level and that a separate impairment assessment of the underlying assets is not required. An impairment charge by the investee should result in an adjustment of the investor's basis of the impaired asset for the investor's pro-rata share of such impairment. In addition, EITF 08-6 reached a consensus on how to account for an issuance of shares by an investee that reduces the investor's ownership share of the investee. An investor should account for such transactions as if it had sold a proportionate share of its investment with any gains or losses recorded through earnings. EITF 08-6 also addresses the accounting for a change in an investment from the equity method to the cost method after adoption of Statement 160. EITF 08-6 affirms the existing guidance in APB 18, which requires cessation of the equity method of accounting and application of FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, or the cost method under APB 18, as appropriate. EITF 08-6 was adopted on January 1, 2009, and did not materially impact Kennedy-Wilson's financial position or results of operations.
NOTE 3GUARANTEES
Kennedy-Wilson has certain guarantees associated with loans secured by assets held in various joint venture partnerships. The maximum potential amount of future payments (undiscounted) Kennedy-Wilson could be required to make under the guarantees was approximately $69 million and $46 million at June 30, 2009 and December 31, 2008, respectively. The guarantees expire through 2011 and Kennedy-Wilson's performance under the guarantees would be required to the extent there is a shortfall in liquidation between the principal amount of the loan and the net sales proceeds of the property. Based upon Kennedy-Wilson's evaluation of guarantees under FIN 45, the estimated fair value of guarantees made as of June 30, 2009 is immaterial.
NOTE 4INVESTMENT IN REAL ESTATE
Kennedy-Wilson disposed of residential land with a historical cost basis of $5.7 million during the six month period ended June 30, 2009 for a gain of $0.5 million. Kennedy-Wilson has continuing involvement with the property and as a result has not included this transaction in discontinued operations. Additionally, a condominium project was acquired for $33 million and is presented as real estate held for sale.
F-68
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
June 30, 2009 and 2008
(Unaudited)
NOTE 5INVESTMENTS IN JOINT VENTURES
Kennedy-Wilson has a number of joint venture interests, with ownership generally ranging from 5% to 50%, which were formed to acquire, manage, develop and/or sell real estate. Kennedy-Wilson has significant influence over these entities, but not voting or other control and accordingly, these investments are accounted for under the equity method.
During the six months ended June 30, 2009, Kennedy-Wilson made contributions to joint ventures totalling $6.7 million, received distributions from joint ventures of $0.9 million, and recorded equity in joint ventures losses of $0.5 million.
NOTE 6FAIR VALUE MEASUREMENTS AND THE FAIR VALUE OPTION
FAIR VALUE MEASUREMENTS
The following table presents fair value measurements (including items that are required to be measured at fair value and items for which the fair value option has been elected) as of June 30, 2009 classified according to the Statement 157 valuation hierarchy:
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Available-for-sale security |
$ | 28,000 | $ | | $ | | $ | 28,000 | |||||
Investment in joint ventures |
| | 15,235,000 | 15,235,000 | |||||||||
|
$ | 28,000 | $ | | $ | 15,235,000 | $ | 15,263,000 | |||||
The following table presents changes in Level 3 investments for the six months ended June 30, 2009:
|
December 31,
2008 |
Net
Purchases or sales |
Realized
gains or losses |
Unrealized
appreciation or (depreciation) |
Net transfers
in or out of Level 3 |
Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Investment in joint ventures |
$ | 15,088,00 | $ | 75,000 | $ | | $ | 72,000 | $ | | $ | 15,235,000 | |||||||
Kennedy-Wilson has an investment in an investment company (the "Fund") and records its investment based on the amount of net assets that would be allocated to its interests in the Fund assuming the Fund was to liquidate its investments at fair value. The investment company reports its investments in real estate at fair value based on valuations of the underlying real estate holdings and indebtedness securing the real estate. The indebtedness securing the real estate and the investments in debt securities were valued, in part, by a third party valuation firm also using an income approach. During the six months ended June 30, 2009, Kennedy-Wilson made contributions to the joint venture of $0.2 million, received distributions from the joint venture of $0.1 million, and recorded equity in the joint venture's income of $0.1 million. Kennedy-Wilson's investment balance in the Fund was $2,569,000 at June 30, 2009.
FAIR VALUE OPTIONKennedy-Wilson has elected the fair value option for two investments in joint venture entities that were acquired during 2008. Kennedy-Wilson elected to record these investments at fair value to more accurately reflect the timing of the value created in the underlying investments and report those results in current operations. Kennedy-Wilson does not believe the other investments in joint ventures will demonstrate these characteristics. Kennedy-Wilson determines the fair
F-69
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
June 30, 2009 and 2008
(Unaudited)
NOTE 6FAIR VALUE MEASUREMENTS AND THE FAIR VALUE OPTION (Continued)
value of these investments based upon the income approach, utilizing estimates of future cash flows, discount rates and liquidity risks. As of June 30, 2009, investments for which fair value treatment was elected under SFAS 159 totaled $12,665,000.
NOTE 7MORTGAGE LOANS PAYABLE ON REAL ESTATE HELD FOR SALE
During the six month period ended June 30, 2009 Kennedy-Wilson entered into two mortgage loans payable totaling $26.1 million that bear interest at 9% and 15%. The mortgage loans are secured by 149 condominium units. Kennedy-Wilson also repaid two mortgage loans totaling $6.0 million.
NOTE 8LINE OF CREDIT, MORTGAGE AND OTHER LONG-TERM DEBT
During the six month period ended June 30, 2009 Kennedy-Wilson borrowed an additional $12.5 million from its line of credit which bears interest from prime to prime plus 0.50% or, at the borrower's option, LIBOR plus 2.50% to LIBOR plus 3.00%, bringing the outstanding balance to $26.0 million as of June 30, 2009.
During the six month period ended June 30, 2009, two loans totaling $16.2 million, which bore interest at 12% and 14% as of December 31, 2008 were repaid. Two new loans totaling $9.0 million were placed with Pacific Western bank and both bear interest at the lender's base lending rate, which was 4% at June 30, 2009.
NOTE 9RELATED PARTY TRANSACTIONS
For the six months ended June 30, 2009, the firm of Kulik, Gottesman & Mouton Ltd. was paid $112,000 for legal services provided by the firm and $9,000 for director's fees for Kent Mouton, a partner in the firm and a member of Kennedy-Wilson's board of directors, respectively. For the six months ended June 30, 2008 the amounts were $143,000 and $15,000, respectively.
The firm of Solomon, Winnett & Rosenfield was paid $52,000 and $97,000 for income tax services provided by the firm during the six months ended June 30, 2009 and 2008, respectively. Jerry Solomon is a partner in the firm and a member of Kennedy-Wilson's board of directors. For the six months ended June 30, 2009 and 2008, Mr. Solomon was paid director's fees in the amounts of $7,000 and $14,500, respectively.
NOTE 10CAPITAL STOCK TRANSACTIONS
During the six month period ended June 30, 2009 Kennedy-Wilson repurchased approximately 79,000 of its common shares for total consideration of approximately $2.4 million.
NOTE 11EMPLOYEE BENEFIT ARRANGEMENTS
During 2009, Kennedy-Wilson adopted the 2009 Equity Participation Plan (the "Plan") which allows for the grant of up to 750,000 shares of common stock. On March 25, 2009, Kennedy-Wilson granted 375,000 performance awards and 375,000 service awards with an exercise price of $30 that was equal to the fair value on the date of grant. The performance and service awards vest ratably over a seven year period and are settled in shares of common stock of Kennedy-Wilson. The option awards
F-70
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
June 30, 2009 and 2008
(Unaudited)
NOTE 11EMPLOYEE BENEFIT ARRANGEMENTS (Continued)
expire at the end of ten year. The Plan allows participates to settle vested awards with cash, a full recourse note, or net share settlement. Kennedy-Wilson has determined the compensation expense to be recorded under the Plan using the Black-Scholes-Merton option pricing model. The option pricing model inputs used to determine grant date fair value were, expected stock option term of 7 years, expected volatility of 43.5%, expected risk free rate of 2.5%, and no expected dividends.
Kennedy-Wilson has elected to recognize the compensation expense for the service awards on a straight-line basis over the vesting period and is grade vesting the performance awards over the vesting period. The total compensation expense recorded for the six months ended June 30, 2009 was $650,000.
NOTE 12EARNINGS PER SHARE
The dilutive shares from convertible preferred stock, convertible subordinated debt, options and non-vested stock have not been included in the diluted weighted average shares as Kennedy-Wilson has a net loss available to common stockholders. There were a total of 2,634,033 and 696,019 dilutive securities as of June 30, 2009 and 2008, respectively. See accompanying consolidated statement of income and comprehensive income.
NOTE 13COMPREHENSIVE INCOME
Comprehensive income consists of net income and other comprehensive income. Accumulated other comprehensive income consists of foreign currency translation adjustments.
NOTE 14SEGMENT INFORMATION
Kennedy-Wilson's business activities currently consist of services and various types of real estate investments. Kennedy-Wilson's segment disclosure with respect to the determination of segment profit or loss and segment assets is based on these services and its various investments.
SERVICES Kennedy-Wilson provides a full range of commercial and residential real estate services. These services include property management, leasing, brokerage, asset management, and various other specialized commercial and residential real estate services.
INVESTMENTS With joint venture partners and on its own, Kennedy-Wilson invests in commercial and residential real estate which Kennedy-Wilson believes value may be added through Company expertise or opportunistic investing. Kennedy-Wilson's current real estate portfolio focuses on commercial buildings and multiple-family residences.
Substantially all of the gross revenuerelated party revenues were generated via intersegment activity for the six months ended June 30, 2009 and 2008. The amounts representing investments with related parties and non-affiliates are included in the investment segment. No single external customer provided Kennedy-Wilson with 10% or more of its revenues during any period presented in these financial statements.
There have been no changes in the basis of segmentation or in the basis of measurement of segment profit or loss since the December 31, 2008 financial statements.
F-71
Kennedy-Wilson, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
June 30, 2009 and 2008
(Unaudited)
NOTE 14SEGMENT INFORMATION (Continued)
The following tables summarize Kennedy-Wilson's income activity by segment for the six-month period ended June 30, 2009 and balance sheet data as of June 30, 2009:
|
Services | Investments | Corporate | Consolidated | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gross revenue |
$ | 8,756,000 | $ | 7,546,000 | $ | 208,000 | $ | 16,510,000 | ||||||
Gross revenuerelated party |
2,972,000 | | | 2,972,000 | ||||||||||
Total revenue |
$ | 11,728,000 | $ | 7,546,000 | $ | 208,000 | $ | 19,482,000 | ||||||
Net Loss |
$ |
(152,000 |
) |
$ |
(3,780,000 |
) |
$ |
(818,000 |
) |
$ |
(4,750,000 |
) |
||
Total assets |
$ |
29,831,000 |
$ |
210,659,000 |
$ |
42,926,000 |
$ |
283,416,000 |
||||||
The following tables summarize Kennedy-Wilson's income activity by segment for the six-month period ended June 30, 2008 and balance sheet data as of December 31, 2008.
|
Services | Investments | Corporate | Consolidated | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gross revenue |
$ | 8,634,000 | $ | 1,046,000 | $ | 508,000 | $ | 10,188,000 | ||||||
Gross revenuerelated party |
6,827,000 | | | 6,827,000 | ||||||||||
Total revenue |
$ | 15,461,000 | $ | 1,046,000 | $ | 508,000 | $ | 17,015,000 | ||||||
Net Loss |
$ |
2,621,000 |
$ |
(532,000 |
) |
$ |
(2,299,000 |
) |
$ |
(210,000 |
) |
|||
Total assets |
$ |
39,791,000 |
$ |
175,368,000 |
$ |
40,724,000 |
$ |
255,883,000 |
||||||
NOTE 15INCOME TAXES
Kennedy-Wilson's effective tax rates for the six months ended June 30, 2009 and 2008 were 31.8% and 44.5%, respectively. Permanent items that impacted Kennedy-Wilson's effective tax rates as compared to the U.S. federal statutory rate of 35% were not materially different in amount during both periods.
NOTE 16SUBSEQUENT EVENTS
On September 8, 2009, Kennedy-Wilson entered into an Agreement and Plan of Merger (the "Merger Agreement") by and among Kennedy-Wilson, Prospect and Merger Sub, a newly formed and wholly-owned subsidiary of Prospect, pursuant to which Merger Sub will merge with and into Kennedy-Wilson, with Kennedy-Wilson continuing as the surviving corporation and a wholly-owned subsidiary of Prospect.
Pursuant to the Merger Agreement, common stockholders of Kennedy-Wilson will receive as consideration 3.8031 shares of Prospect common stock for each share of Kennedy-Wilson's common stock outstanding and preferred stockholders will receive as consideration 105.6412 shares of Prospect's common stock for each share of preferred stock outstanding, for an aggregate consideration of 26 million shares of Prospect common stock. In addition, 4.0 million shares of Prospect common stock will be reserved for issuance to employees, nonemployees and management of Kennedy-Wilson pursuant to an equity compensation plan adopted by Prospect's board of directors and submitted to Prospect's stockholders for approval.
F-72
Annex A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PROSPECT ACQUISITION CORP.,
KW MERGER SUB CORP.
AND
KENNEDY-WILSON, INC.
Dated as of September 8, 2009
AGREEMENT AND PLAN OF MERGER dated as of September 8, 2009 (this " Agreement "), by and among PROSPECT ACQUISITION CORP., a company incorporated under the laws of Delaware (" Prospect "), KW MERGER SUB CORP., a company incorporated under the laws of Delaware and a wholly owned subsidiary of Prospect (" Merger Sub ") and KENNEDY-WILSON, INC., a company incorporated under the laws of Delaware (" KW "). Each of the Parties to this Agreement is individually referred to herein as a " Party " and collectively as the " Parties ." Capitalized terms used herein that are not otherwise defined herein shall have the meanings ascribed to them in Annex A hereto.
Prospect has formed a wholly owned subsidiary, Merger Sub, solely for the purposes of the merger of Merger Sub with and into KW pursuant to Section 251 of the General Corporation Law of the State of Delaware (the " DGCL "), in which KW will be the surviving corporation (the " Merger " ).
The board of directors of KW has declared this Agreement advisable and fair to, and in the best interests of, KW.
The Merger requires the affirmative vote of the holders of a majority of the issued and outstanding shares of common stock, par value $0.01 per share of KW (the " KW Common Stock ") and (ii) the affirmative vote of the holders of a majority of the shares of common stock of Prospect, par value $0.0001 per share (the " Prospect Common Stock ") sold in the Prospect Public Offering voted at the Prospect Stockholders' Meeting, provided , that the Merger will only proceed if holders of fewer than 30% of the shares of the Prospect Common Stock sold in the Prospect Public Offering exercise their conversion rights. Prior to the Closing, the holders of the convertible preferred stock of KW (the " KW Preferred Stock " and collectively with the KW Common Stock, the " KW Securities "), will agree to amend the Certificate of Designation of the KW Preferred Stock to provide that, upon the Closing, each share of KW Preferred Stock will be converted into the right to receive shares of Prospect Common Stock at the Preferred Stock Exchange Ratio.
Concurrently with the execution of this Agreement, Prospect, the Prospect Founders, De Guardiola Advisors, Inc. (" DGA "), De Guardiola Advisors Holdings, Inc. (" DGAH ") and KW are entering into a letter agreement, of even date herewith (the " Forfeiture Agreement "), in the form attached hereto as Exhibit A , pursuant to which, subject to the terms and conditions set forth therein (i) the Prospect Founders have agreed to the forfeiture and cancellation of 2.575 million shares of Prospect Common Stock and (ii) Prospect has agreed to issue to DGAH an aggregate of 375,000 shares of Prospect Common Stock upon the closing of the transactions contemplated by this Agreement in satisfaction of an obligation of Prospect under its engagement letter with DGA.
The parties intend that the Merger contemplated herein constitute a tax-free reorganization with the meaning of Section 368(a) of the Code and hereby adopt this Agreement as a plan of reorganization within the meaning of the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and intending to be legally bound hereby, the Parties agree as follows:
Section 1.1 The Merger. At the Merger Effective Time (as defined in Section 1.2), Merger Sub will be merged with and into KW in accordance with Section 251 of the DGCL and this Agreement, and the separate corporate existence of Merger Sub will thereupon cease. KW (sometimes hereinafter
A-1
referred to as the " Surviving Corporation ") will be the surviving corporation in the Merger. The Merger will have the effects specified in the DGCL. The name of the Surviving Corporation will be Kennedy-Wilson, Inc.
Section 1.2 Merger Effective Time. As soon as practicable following the satisfaction or, to the extent permitted by applicable Law, waiver of the conditions to the Closing set forth in Article VIII, if this Agreement shall not have been terminated prior thereto as provided in Article X, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the " Certificate of Merger ") meeting the requirements of Section 251 of the DGCL to be properly executed and filed in accordance with the applicable requirements of the DGCL. The Merger shall become effective at the time designated in the Certificate of Merger as the effective time of the Merger that the Parties shall have agreed upon and designated, or if no such time has been designated, on filing (the " Merger Effective Time ").
Section 1.3 Effect of the Merger. At the Merger Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Merger Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of Merger Sub and KW shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.4 Certificate of Incorporation; By-Laws. The Certificate of Incorporation of KW in effect immediately prior to the Merger Effective Time shall be the Certificate of Incorporation of the Surviving Corporation, until duly amended in accordance with applicable Law. The bylaws of KW in effect immediately prior to the Merger Effective Time shall be the bylaws of the Surviving Corporation, until duly amended in accordance with applicable Law.
Section 1.5 Directors of Surviving Corporation. Immediately prior to the Merger Effective Time, one of the directors of KW shall resign. The remaining directors of KW immediately prior to the Merger Effective Time shall be the directors of the Surviving Corporation along with one additional director to be appointed by Prospect, until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualified, as the case may be.
Section 1.6 Officers of Surviving Corporation. The officers of KW immediately prior to the Merger Effective Time shall be the officers of the Surviving Corporation, until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualified, as the case may be.
Section 1.7 Conversion of Stock in the Merger. At the Merger Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares:
(a) Conversion of KW Securities . Subject to Section 1.7(f), each share of KW Common Stock issued and outstanding immediately prior to the Merger Effective Time shall be automatically converted into the right to receive 3.8031 shares of Prospect Common Stock (" Common Stock Exchange Ratio "). Each share of KW Preferred Stock issued and outstanding immediately prior to the Merger Effective Time shall be automatically converted into the right to receive 105.6412 shares of Prospect Common Stock (" Preferred Stock Exchange Ratio ," and together with the Common Stock Exchange Ratio, the " Exchange Ratio "). The total number of shares of Prospect Common Stock issued in the Merger as a result of the conversion of the KW Securities into shares of Prospect Common Stock (" Conversion Shares ") shall equal 26 million shares, minus any shares of Prospect Common Stock that would otherwise have been issuable to holders of Dissenting Shares had such holders not exercised Dissent Rights, plus the aggregate number of additional shares paid pursuant to Section 1.7(g).
A-2
(b) Conversion of Merger Sub Shares . Each issued and outstanding share of the capital stock of Merger Sub shall be converted into and become one fully-paid and nonassessable common share, no par value, of the Surviving Corporation.
(c) KW Stock Rights Become Prospect Stock Rights . All KW Stock Rights then outstanding shall remain outstanding and shall be assumed by Prospect and thereafter become Prospect Stock Rights. Each KW Stock Right by virtue of becoming a Prospect Stock Right shall be exercisable upon the same terms and conditions as in effect immediately prior to the Merger, except that upon the exercise of such Prospect Stock Rights, shares of Prospect Common Stock shall be issuable in lieu of KW Common Stock. The number of shares of Prospect Common Stock issuable upon the exercise of a Prospect Stock Right immediately after the Merger Effective Time and the exercise price of each such Prospect Stock Right shall be equal to the number of shares and price as in effect immediately prior to the Merger Effective Time multiplied by the Common Stock Exchange Ratio (in the case of the number of shares) and the inverse of the Common Stock Exchange Ratio (in the case of the exercise price).
(d) KW Securities Become Rights for Prospect Common Stock . From and after the Merger Effective Time, all of the certificates which immediately prior to that time represented outstanding KW Securities (the " KW Certificates ") shall be deemed for all purposes to evidence ownership of, and to represent, the shares of Prospect Common Stock into which such KW Securities have been converted as herein provided. The registered owner on the books and records of the Surviving Corporation or its transfer agent of any such KW Certificate shall have and be entitled to exercise any voting and other rights with respect to and to receive any dividend and other distributions upon the shares of Prospect Common Stock evidenced by such KW Certificate as above provided.
(e) No Transfers of Pre-Merger KW Securities . At or after the Merger Effective Time, there shall be no transfers on the stock transfer books of KW of the KW Securities which were outstanding immediately prior to the Merger Effective Time. If, after the Merger Effective Time, KW Certificates are presented to Prospect, the Surviving Corporation or their respective transfer agent or the Exchange Agent (defined in Section 1.8), the presented KW Certificates shall be cancelled and exchanged for certificates for shares of Prospect Common Stock deliverable in respect thereof pursuant to this Agreement in accordance with the procedures set forth herein.
(f) KW Dissenting Shares . Notwithstanding any other provisions of this Agreement to the contrary, KW Securities that are outstanding immediately prior to the Merger Effective Time and that are held by stockholders who shall not have voted in favor of the Merger or consented thereto in writing and who shall have demanded properly in writing appraisal (" Dissent Rights ") for such shares (collectively, the " Dissenting Shares ") in accordance with Section 262 of the DGCL or, if applicable, pursuant to Chapter 13 of the California General Corporation Law (the (" CGCL "), shall not be converted into or represent the right to receive shares of Prospect Common Stock. Such stockholders shall be entitled to receive payment of the appraised value of the Dissenting Shares held by them in accordance with the provisions of said Section 262 or, if applicable, said Chapter 13, except that all Dissenting Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such Dissenting Shares under such Section 262 or, if applicable, such Chapter 13, shall thereupon be deemed to have been converted into and to have become exchangeable, as of the Merger Effective Time, for the right to receive, without any interest thereon, the shares of Prospect Common Stock in the manner provided in subparagraph (a) above.
(g) Fractional Shares . No certificates or scrip representing fractional shares of Prospect Common Stock will be issued in the Merger, but in lieu thereof, the number of shares of Prospect Common Stock to be delivered to each holder of shares of KW Securities shall be rounded up to the nearest whole share.
A-3
(h) Lost, Stolen or Destroyed Certificates . In the event any KW Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed certificates upon the making of an affidavit of that fact by the holder thereof, the shares of Prospect Common Stock contemplated to be paid and transferred to the holder of KW Securities represented by such KW Certificates; provided, however, that Prospect may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Prospect with respect to the certificates alleged to have been lost, stolen or destroyed.
(i) Withholding Rights . Each of Prospect, the Surviving Corporation and the Exchange Agent shall be entitled to deduct and withhold from the number of shares of Prospect Common Stock otherwise deliverable under this Agreement (or any payments made in respect of any Dissenting Shares), such amounts as Prospect, the Surviving Corporation and the Exchange Agent may reasonably determine are required to be deducted and withheld with respect to such delivery and payment under the Code or any provision of state, local, provincial or foreign tax law. To the extent that any amounts are so withheld all appropriate evidence of such deduction and withholding, including any receipts or forms required in order for the Person with respect to whom such deduction and withholding occurred to establish the deduction and withholding and payment to the appropriate authority as being for its account with the appropriate authorities, shall be delivered to the Person with respect to whom such deduction and withholding has occurred, and such withheld amounts shall be treated for all purposes as having been delivered and paid to the Person otherwise entitled to the consideration in respect of which such deduction and withholding was made. Notwithstanding the foregoing, Prospect or the Exchange Agent, at its option, may require any such amounts required to be deducted and withheld from any Prospect Common Stock or payments made in respect of any Dissenting Shares deliverable hereunder to be reimbursed in cash to Prospect or the Exchange Agent, as the case may be, prior to the issuance of such Prospect Common Stock hereunder.
Section 1.8 Exchange Agent. As of the Merger Effective Time, Prospect shall enter into an agreement with the transfer agent of Prospect Common Stock (the " Exchange Agent ") authorizing such Exchange Agent to act as exchange agent in connection with the Merger. The Exchange Agent shall, pursuant to irrevocable instructions, deliver the Prospect Common Stock contemplated to be paid and transferred to the holders of KW Securities hereunder upon surrender of a KW Certificate. Each KW Certificate representing shares of KW Common Stock or KW Preferred Stock shall be deemed at any time after the Merger Effective Time to evidence only the right to receive upon such surrender the consideration described in Section 1.7(a).
Section 1.9 Closing. The Closing (the " Closing ") of the Merger and the other transactions contemplated hereby shall take place on or prior to November 13, 2009 at the offices of Loeb & Loeb LLP in New York, New York commencing at 9:00 a.m. local time on the third business day following the satisfaction or waiver of all conditions and obligations of the Parties to consummate the transactions contemplated hereby (other than conditions and obligations with respect to the actions that the respective Parties will take at Closing) on such date and at such time as the Parties may mutually determine (the " Closing Date ").
Section 1.10 Further Assurances. Subject to the terms and conditions of this Agreement, at any time or from time to time after the Closing, each of the Parties shall execute and deliver such other documents and instruments, provide such materials and information and take such other actions as may be commercially reasonable, to the extent permitted by law, to fulfill its obligations under this Agreement and to effectuate and consummate the transactions contemplated hereby.
A-4
Representations and Warranties of KW
Subject to the exceptions set forth in the Disclosure Schedule of KW attached hereto as Schedule II (the " KW Disclosure Schedule "), KW represents and warrants to Prospect as of the date hereof and as of the Closing as follows:
Section 2.1 Corporate Existence and Power.
(a) Corporate Existence and Power . Each of KW and its Subsidiaries is duly organized, validly existing and in good standing (or such analogous concept as shall be applicable in the relevant jurisdiction) under the laws of its jurisdiction of incorporation. Each of KW and its Subsidiaries is duly qualified to do business in each of the jurisdictions in which property owned, leased or operated by it or the nature of the business which it conducts requires qualification, except where the failure to so qualify would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. Each of KW and its Subsidiaries has all requisite power and authority to own, lease and operate its assets and properties and to carry on its business as now being conducted and, subject to necessary approvals of the relevant Governmental Authorities, as presently contemplated to be conducted. KW has delivered to Prospect true and complete copies of KW Constituent Instruments.
(b) Capital Structure . The registered capital of KW and the total number of shares and type of all authorized, issued and outstanding capital stock of KW and all shares of capital stock of KW reserved for issuance under KW's various option and incentive plans, are set forth in Section 2.1(b) of the KW Disclosure Schedule and included therein is a list of the record holders of the outstanding shares of capital stock of KW prepared by Mellon Investor Services, LLC, transfer agent for KW, which list indicates the number of KW Securities held by each such record holder. Except as set forth in Section 2.1(b) of the KW Disclosure Schedule: (i) no shares of capital stock or other voting securities of KW are issued, reserved for issuance or outstanding; (ii) all outstanding shares of the capital stock of KW are duly authorized, validly issued, fully paid and nonassessable and are not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of KW Constituent Instruments or any Contract to which KW is a party or otherwise bound; (iii) there are no bonds, debentures, notes or other indebtedness of KW having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of the shares of capital stock of KW may vote (" Voting KW Debt "); (iv) there are no options, warrants, rights, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which KW is a party or is bound (A) obligating KW to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, KW or any Voting KW Debt, (B) obligating KW to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (C) giving any Person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of KW; (v) as of the date of this Agreement, there are no outstanding contractual obligations of KW to repurchase, redeem or otherwise acquire any shares of KW capital stock; and (vi) there are no arbitrations or litigation proceedings involving KW with respect to the share capital of KW or its Subsidiaries.
Section 2.2 Authority; Execution and Delivery; Enforceability. KW has all requisite corporate power and authority to execute and deliver this Agreement and the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and
A-5
delivery by KW of this Agreement and the consummation by it of the transactions contemplated hereby have been duly authorized and approved by the board of directors of KW and no other corporate proceedings on the part of it are necessary to authorize this Agreement and the transactions contemplated hereby (other than the approval of the KW stockholders). All action, corporate and otherwise, necessary to be taken by KW to authorize the execution, delivery and performance of this Agreement, the Transaction Documents and all other agreements and instruments delivered by KW in connection with the transactions contemplated hereby has been duly and validly taken. Each of this Agreement and the Transaction Documents to which KW is a party has been duly executed and delivered by it and constitutes the valid, binding, and enforceable obligation of it, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general application now or hereafter in effect affecting the rights and remedies of creditors and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 2.3 Subsidiaries. Section 2.3 of the KW Disclosure Schedule lists, as of the date hereof, all Subsidiaries of KW and indicates as to each the type of entity, its jurisdiction of organization and, its stockholders or other equity holders. Except as set forth in Section 2.3 of the KW Disclosure Schedule, KW does not directly or indirectly own any other equity or similar interest in, or any interest convertible or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity. Except as set forth in Section 2.3 of the KW Disclosure Schedule, KW is the direct or indirect owner of all outstanding shares of capital stock of its Subsidiaries, and all such shares are duly authorized, validly issued, fully paid and nonassessable and are owned by KW free and clear of all Liens (except for Permitted Liens). There are no outstanding subscriptions, options, warrants, puts, calls, rights, exchangeable or convertible securities or other commitments or agreements of any character relating to the issued or unissued capital stock or other securities of any Subsidiaries of KW or otherwise obligating any Subsidiaries of KW to issue, transfer, sell, purchase, redeem or otherwise acquire any such securities.
Section 2.4 No Conflicts. The execution and delivery of this Agreement or any of the Transaction Documents by KW and the consummation of the transactions contemplated hereby and compliance with the terms hereof and thereof will not, (a) except as set forth in Section 2.4(a) of the KW Disclosure Schedule, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien (other than a Permitted Lien) upon any of the assets and properties of KW and its Subsidiaries under, any provision of: (i) any KW Constituent Instrument; or (ii) any Material Contract to which KW or any of its Subsidiaries is a party or to or by which it (or any of its assets and properties) is subject or bound; (b) subject to the filings and other matters referred to in Section 2.5, conflict with any material Judgment or Law applicable to KW and its Subsidiaries, or their respective properties or assets, (c) result in any suspension, revocation, impairment, forfeiture or nonrenewal of any Permit applicable to KW or its Subsidiaries; (d) terminate or modify, or give any third party the right to terminate or modify, the provisions or terms of any Contract to which KW or any of its Subsidiaries is a party; (e) cause KW or any of its Subsidiaries to become subject to, or to become liable for the payment of, any Tax; or (f) to KW's knowledge, cause any of the assets owned by KW or any of its Subsidiaries to be reassessed or revalued by any Governmental Authority, except, in the case of clauses (a)(ii), (b), (c), (d), (e) and (f) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on KW.
Section 2.5 Consents and Approvals. Except as set forth in Section 2.5 of the KW Disclosure Schedule and except for the KW Stockholder Approval, no consent, approval, license, permit, order or authorization of, or registration, declaration or filing with (each, a " Consent "), or permit from any third party or any Governmental Authority is required to be obtained or made by or with respect to KW, in
A-6
connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, including pursuant to any Material Contract, except for (a) such Consents as may be required under applicable state securities laws and the securities laws of any foreign country; and (b) such other Consents which, if not obtained or made, would not have a Material Adverse Effect on KW and would not prevent, or materially alter or delay, the consummation of any of the transactions contemplated hereby.
Section 2.6 Financial Statements.
(a) KW has delivered to Prospect its audited consolidated financial statements as of and for the fiscal years ended December 31, 2006, 2007 and 2008 and its unaudited consolidated financial statements for the six-month period ended June 30, 2009 (collectively, the " KW Financial Statements ") prepared in accordance with U.S. GAAP applied on a consistent basis throughout the periods indicated, provided that the financial statements as of and for the six months ended June 30, 2009 are subject to normal year end audit adjustments that are not expected to have a Material Adverse Effect on KW and such statements do not contain notes. The KW Financial Statements fairly present in all material respects the financial condition and operating results, change in stockholders' equity and cash flow of KW and its Subsidiaries, as of the dates, and for the periods, indicated therein, and are accompanied by an unqualified opinion of an internationally recognized and U.S. registered independent public accounting firm qualified to practice before the Public Company Accounting Oversight Board. KW does not have any material liabilities or obligations, contingent or otherwise, other than (a) liabilities incurred in the ordinary course of business subsequent to June 30, 2009, and (b) obligations under contracts and commitments incurred in the ordinary course of business and not required under U.S. GAAP to be reflected in KW Financial Statements, which, in both cases, individually or in the aggregate, would not be reasonably expected to result in a Material Adverse Effect on KW.
(b) KW does not have any Off-Balance Sheet Arrangements.
Section 2.7 Internal Accounting Controls. KW has implemented and maintains a system of internal accounting controls sufficient to provide reasonable assurance that (a) transactions are executed in accordance with management's general or specific authorizations, (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (c) access to assets is permitted only in accordance with management's general or specific authorization, and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
Section 2.8 Absence of Certain Changes or Events. Except as disclosed in the KW Financial Statements and except for changes as a result of actions taken in the ordinary course of business or pursuant to the terms of this Agreement or the Transaction Documents and the transactions contemplated hereby or thereby, from June 30, 2009 to the date of this Agreement, KW and its Subsidiaries have not taken any action which would result in:
(a) any change in the assets, liabilities, financial condition or operating results of KW or any of its Subsidiaries, except changes in the ordinary course of business that have not caused, in the aggregate, a Material Adverse Effect on KW;
(b) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;
(c) other than the cancellation of the loan in the aggregate principal amount of $3,543,127, plus accrued interest, to William McMorrow, any waiver or compromise by KW or any of its Subsidiaries of a valuable right or of a material debt owed to it;
A-7
(d) any material loan, promissory note, mortgage, pledge, transfer of a security interest in, or Lien, created by KW or any of its Subsidiaries, with respect to any of their respective material properties or assets, except for Permitted Liens;
(e) any loans or guarantees made by KW or any of its Subsidiaries to or for the benefit of its employees, officers or directors, or any members of their immediate families, in each case, other than travel advances and other advances made in the ordinary course of its business;
(f) any declaration, accrual, set aside or payment of dividend or any other distribution of cash or other property or redemption, in respect of any shares of capital stock of KW or any of its Subsidiaries, other than up to $3 million in connection with KW's stock buyback program and any dividend payments on the KW Preferred Stock required by KW's Certificate of Designation for the KW Preferred Stock;
(g) any issuance of equity securities to any officer, director or Affiliate, except pursuant to existing KW option plans;
(h) any amendment to any KW Constituent Instruments, or any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction involving KW or any of its Subsidiaries; or
(i) any negotiations, arrangement or commitment by KW or any of its Subsidiaries to do any of the things described in this Section 2.8.
Section 2.9 No Undisclosed Liabilities. Except as set forth in Section 2.9 of the KW Disclosure Schedule, neither KW nor any of its Subsidiaries has any material obligations or liabilities of any nature (matured or unmatured, fixed or contingent, including any obligations to issue capital stock or other securities of KW) due after the date hereof, other than (a) those set forth or adequately provided for in the KW Balance Sheet, (b) those incurred in the ordinary course of business and not required to be set forth in the KW Balance Sheet under U.S. GAAP, (c) those incurred in the ordinary course of business since the KW Balance Sheet date and not reasonably likely to result in a Material Adverse Effect to KW, and (d) those incurred in connection with the execution of this Agreement.
Section 2.10 Litigation. There is no private or governmental action, suit, inquiry, notice of violation, claim, arbitration, audit, proceeding (including any partial proceeding such as a deposition) or investigation (" Action ") pending or to the Knowledge of KW, threatened in writing against or affecting KW, any of its officers or directors (in their capacities as such), any of its Subsidiaries or any of their properties, before or by any Governmental Authority which (a) adversely affects or challenges the legality, validity or enforceability of this Agreement or (b) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect on KW. There is no Judgment imposed upon KW, or to the Knowledge of KW, any of its officers or directors (in their capacities as such), any of its Subsidiaries or any of their respective properties, that would prevent, enjoin, alter or materially delay any of the transactions contemplated by this Agreement, or that would reasonably be expected to have a Material Adverse Effect on KW. Neither KW nor any of its Subsidiaries nor, to the Knowledge of KW, any director or officer thereof (in his or her capacity as such), is or has been the subject of any Action involving a material claim or material violation of or material liability under the securities laws of any Governmental Authority or a material claim of breach of fiduciary duty.
Section 2.11 Licenses, Permits, Etc. KW and its Subsidiaries possess or will possess prior to the Closing all Material Permits. Such Material Permits are described or set forth on Section 2.11 of the KW Disclosure Schedule. True, complete and correct copies of the Material Permits issued to KW and its Subsidiaries have previously been delivered to Prospect. As of the date of this Agreement, all such Material Permits are in full force and effect. Unless otherwise stipulated herein, KW, its Subsidiaries and each of their respective officers, directors, employees, representatives and agents have complied
A-8
with all terms of such Material Permits, except where instances of such noncompliance, individually or in the aggregate, have not had and would not reasonably be expected to have, a Material Adverse Effect on KW.
Section 2.12 Title to Properties.
(a) Real Property . Section 2.12(a) of the KW Disclosure Schedule contains an accurate and complete list and description of all real properties with respect to which KW directly or indirectly holds a 50% or greater interest (collectively, the " Real Property "). Neither KW nor any of its Subsidiaries is in default under any of the Real Estate Leases and the officers of KW are not aware of any default by any of the lessors thereunder, except any such default that, individually or in the aggregate, have not had and would not be reasonably expected to have, a Material Adverse Effect on KW. Section 2.12(a) of the KW Disclosure Schedule also sets forth a complete list of each Real Estate Lease which involves an annual rental payment of $750,000 or more.
(b) Tangible Personal Property . Except as would not reasonably be expected to have a Material Adverse Effect on KW, KW and its Subsidiaries are in possession of and have good title to, or have valid leasehold interests in or valid contractual rights to use all material tangible personal property used in the conduct of their business, including the tangible personal property reflected in the KW Financial Statements and material tangible personal property acquired since June 30, 2009 (collectively, the " Tangible Personal Property "). All Tangible Personal Property is free and clear of all Liens, other than Permitted Liens, and is in good order and condition, ordinary wear and tear excepted, and its use complies in all material respects with all applicable Laws.
(c) Accounts Receivable . The accounts receivable of KW and each of its Subsidiaries reflected on the KW Financial Statements and created after June 30, 2009 but prior to the Closing Date are bona fide accounts receivable created in the ordinary course of business.
Section 2.13 Intellectual Property. KW and its Subsidiaries own or are validly licensing or otherwise have the right to use any patents, trademarks, trade names, service marks, domain names, copyrights, and any applications therefore, trade secrets, computer software programs, and tangible or intangible proprietary information or material which are material to the conduct of their business taken as a whole (the " Intellectual Property Rights "). No claims are pending or, to the Knowledge of KW, threatened in writing that KW or any of its Subsidiaries is infringing or otherwise adversely affecting the rights of any Person with regard to any Intellectual Property Right. To the Knowledge of KW, no Person is infringing the rights of KW or any of its Subsidiaries with respect to any Intellectual Property Right. None of KW or its Subsidiaries has received any notice regarding the infringement, misappropriation or other violation by KW or any of its Subsidiaries of any intellectual property rights of any third party. To the knowledge of KW, neither the conduct of the business of KW or any Subsidiary, nor the provision of services by KW or any Subsidiary has infringed, misappropriated or otherwise violated, or infringes, misappropriates or otherwise violates, any intellectual property rights of any third party.
Section 2.14 Taxes. Except as disclosed in Section 2.14 of the KW Disclosure Schedule:
(a) KW and its Subsidiaries have timely filed, or have caused to be timely filed on their behalf, all Tax Returns that are or were required to be filed by or with respect to any of them, either separately or as a member of a group of corporations, pursuant to applicable Legal Requirements, except to the extent any failure to timely file any Tax Returns, either individually or in the aggregate, have not and would not reasonably be expected to have a Material Adverse Effect on KW. All Tax Returns filed by (or that include on a consolidated basis) KW and its Subsidiaries are (and, as to a Tax Return not filed as of the date hereof, and filed on or before the Closing Date, will be) in all respects true, complete and accurate, except to the extent any inaccuracies in any filed Tax Returns, individually or in the aggregate, have not and would not
A-9
reasonably be expected to have a Material Adverse Effect on KW. To the Knowledge of KW, there are no unpaid Taxes claimed to be due by any Governmental Authority in charge of taxation of any jurisdiction, nor any claim for additional Taxes for any period for which Tax Returns have been filed, except to the extent any failure to file or any inaccuracies in any filed Tax returns, individually or in the aggregate, have not and would not reasonably be expected to have a Material Adverse Effect on KW.
(b) Neither KW nor any of its Subsidiaries has received any written notice that any Governmental Authority will audit or examine (except for any general audits or examinations routinely performed by such Governmental Authorities), seek information with respect to, or make material claims or assessments with respect to any Taxes for any period since January 1, 2004.
(c) The KW Financial Statements reflect an adequate reserve, established in in accordance with U.S. GAAP, for all Taxes known to be payable by KW and its Subsidiaries (in addition to any reserve for deferred Taxes to reflect timing differences between book and Tax items) for all taxable periods and portions thereof through the date of such financial statements. None of KW or its Subsidiaries is a party to or bound by any Tax indemnity, Tax sharing or similar agreement and KW and its Subsidiaries currently have no material liability, and will not have any material liabilities, for any Taxes of any other Person under any agreement or by the operation of any Law. No deficiency with respect to any Taxes has been proposed, asserted or assessed against KW or its Subsidiaries, except to the extent any such deficiency, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on KW.
(d) Neither KW nor any of its Subsidiaries has executed any outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any Taxes or Tax Returns.
(e) There are no Tax Liens upon any of the assets or properties of KW or any of its Subsidiaries, other than with respect to Taxes not yet due and payable.
(f) All Taxes required to be withheld, collected or deposited by or with respect to KW and each of its Subsidiaries have been timely withheld, collected or deposited, as the case may be, and to the extent required, have been paid to the relevant taxing authority.
Section 2.15 Employment and Employee Benefits Matters.
(a) Section 2.15 of the KW Disclosure Schedule sets forth a complete and accurate list of each bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other material plan, arrangement or understanding, including, but not limited to, each employee benefit plan as defined in ERISA Section 3(3), whether or not subject to ERISA, which is maintained by KW or any of its Subsidiaries, which is intended to provide benefits to current or former employees, directors, officers or independent contractors of KW or any of its Subsidiaries and/or their beneficiaries, or for which KW or any of its Subsidiaries has any liability, whether actual or contingent (collectively, the " KW Benefit Plans ").
(b) KW has delivered to Prospect a true and complete copy of the following documents, to the extent that they are applicable, with respect to each KW Benefit Plan:
(i) the current plan document, any related funding agreements (e.g., trust agreements or insurance contracts), and any custodial, administrative, recordkeeping, investment management and other service agreements, including all amendments thereto;
(ii) the current summary plan description and all subsequent summaries of material modifications;
A-10
(iii) the most recent Internal Revenue Service determination letter for each KW Benefit Plan that is intended to qualify for favorable income tax treatment under Code Section 401(a) or 501(c)(9);
(iv) the three (3) most recent Form 5500s (including all applicable schedules and the opinions of the independent accountants) that were filed on behalf of the KW Benefit Plan and the three most recent actuarial reports; and
(v) any governmental advisory opinions, rulings, compliance statements, closing agreements and similar materials.
(c) Except to the extent that any failure to comply would not reasonably be expected to result in material liability to KW, each KW Benefit Plan has at all times been operated in accordance with its terms, and complies currently, and has complied in the past, both in form and in operation, and whether as a matter of substantive law or in order to maintain any intended tax qualification, with all applicable Legal Requirements, including COBRA, ERISA and the Code (including, but not limited to, Section 409A of the Code). All material contributions required to be made to each KW Benefit Plan under the terms of the plan, ERISA, the Code, or any other applicable Legal Requirements have been timely made.
(d) The Internal Revenue Service has issued a favorable determination letter with respect to each KW Benefit Plan that is intended to qualify under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code (or, where such KW Benefit Plan is based upon a master and prototype or volume submitter form, the sponsor of such form has received a current opinion or advisory letter as to the form upon which KW is entitled to rely under applicable Internal Revenue Service procedures). No event has occurred and no condition has existed which could reasonably be expected to result in any KW Benefit Plan that is intended to qualify under Code Section 401(a) or Section 501(c)(9) to fail to so qualify or which requires or could reasonably be expected to require action under the compliance resolution program of the Internal Revenue Service to preserve its qualification.
(e) Other than routine claims for benefits under the KW Benefit Plans and those relating to qualified domestic relations orders, there are no (i) pending or (ii) threatened lawsuits, governmental investigations or other claims against or involving any KW Benefit Plan or any fiduciary (within the meaning of Section 3(21)(A) of ERISA) or service provider of any KW Benefit Plan, in any such case which could reasonably be expected to result in material liability of KW, nor is KW aware of any reasonable basis for any such lawsuit, investigation or claim.
(f) No KW Benefit Plan provides (or will provide) medical or other welfare benefits to one or more former employees or independent contractors (including retirees), other then benefits that are required to be provided pursuant to COBRA.
(g) No KW Benefit Plan holds any assets that include securities issued by KW or any of its Subsidiaries.
(h) KW and its Subsidiaries have not undertaken to maintain any KW Benefit Plan for any period of time and each such plan is terminable at the sole discretion of the sponsor thereof, subject only to such constraints as may imposed by applicable law.
(i) No KW Benefit Plan is, and none of KW or any of its Subsidiaries or ERISA Affiliates maintains or contributes to, or has within the last six years maintained or contributed to, or has any liability, whether actual or contingent, under, a plan subject to Title IV of ERISA or to the minimum funding requirements of Section 302 of ERISA or Section 412 of the Code. No KW Benefit Plan is or was within the last six years a multiemployer plan, as defined in Section 3(37) of ERISA, or a multiple employer plan, as described in Code Section 413(c) or ERISA Sections 4063
A-11
or 4064, and neither KW nor any of its Subsidiaries or ERISA Affiliates have within the last six years contributed to or had an obligation to contribute to any such plan. None of the KW Benefit Plans are part of, or have at any time been part of, a multiple employer welfare arrangement, as that term is defined in ERISA Section 3(40).
(j) Except as disclosed in Section 2.15(j) of the KW Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not alone trigger any severance or termination agreements or arrangements between KW or any of its Subsidiaries and any of their respective current or former employees, officers or directors. Except as disclosed in Section 2.15(j) of the KW Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will alone result in, cause the funding, accelerated vesting or delivery of, or increase the amount or value of, any payment or benefit to any employee of KW or any of its Subsidiaries. Except as disclosed in Section 2.15(j) of the KW Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will alone result in excess parachute payments (within the meaning of Code Section 280G). Since June 30, 2009, there has not been any adoption or amendment in any material respect of any KW Benefit Plan.
(k) There are no collective bargaining or other labor union agreements to which KW or any of its Subsidiaries is a party or by which it is bound; (ii) no labor dispute exists or, to the Knowledge of KW, is imminent with respect to the employees of KW or any of its Subsidiaries; (iii) there is no strike, work stoppage or other labor dispute involving KW or any of its Subsidiaries pending or, to the Knowledge of KW, threatened; (iv) no complaint, charge or Actions by or before any Governmental Authority brought by or on behalf of any employee, prospective employee, former employee, retiree, labor organization or other representative of its employees is pending or threatened in writing against KW or any of its Subsidiaries; (v) no material grievance is pending or threatened in writing against KW or any of its Subsidiaries; (vi) neither KW nor any of its Subsidiaries is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Authorities relating to employees or employment practices; and (vii) except to the extent that any such failure to comply would not reasonably be expected to result in material liability of KW, KW and its Subsidiaries have complied in all material respects with all applicable Legal Requirements relating to employment, employment termination, equal employment opportunity, nondiscrimination, nonharassment, nonretaliation, immigration, wages and other compensation, penalties, hours, benefits, workers' compensation, collective bargaining, the payment of social security and similar taxes, occupational safety and health, lay offs, and plant closings.
Section 2.16 Transactions with Affiliates and Employees. Except as disclosed in the KW Financial Statements or in Section 2.16 of the KW Disclosure Schedule, none of the officers, directors or employees of KW is presently a party, directly or indirectly, to any transaction with KW or any of its Subsidiaries that is required to be disclosed under Rule 404(a) of Regulation S-K (other than for services as employees, officers and directors), including any Contract providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director or employee or, to the Knowledge of KW, any entity in which any such officer, director, or employee has a substantial interest or is an officer, director, trustee or partner.
A-12
Section 2.17 Insurance. KW has previously made available to Prospect, prior to the date of this Agreement, true and correct schedules summarizing the terms of all contracts of insurance or indemnification to which KW or any of its Subsidiaries is a party, each of which is listed in Section 2.17 of the KW Disclosure Schedule. All such insurance policies are in full force and effect, all premiums due thereon have been paid and, to the Knowledge of KW, KW and each Subsidiary has complied with the material provisions of such policies. Neither KW nor any such Subsidiary has been advised of any defense to coverage in connection with any claim to coverage asserted or noticed by KW or any such Subsidiary under or in connection with any of their extant insurance policies. KW and its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged and in the geographic areas where any of them engages in such businesses. KW and its Subsidiaries have no reason to believe that KW or its Subsidiaries will not be able to renew their existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue their business on terms consistent with market for KW's or any of its Subsidiaries' respective lines of business.
Section 2.18 Material Contracts.
(a) KW is not in material violation of or in material default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Material Contract to which it or any of its Subsidiaries is a party or by which they or any of their respective properties or assets is bound, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on KW; and, to the Knowledge of KW, no other Person has violated or breached, or committed any default under, any Material Contract, except for violations, breaches and defaults that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on KW.
(b) Each Material Contract is listed in Section 2.18 of the KW Disclosure Schedule and was previously provided to Prospect (provided that Prospect acknowledges that KW has listed debt instruments for only five of the properties in which it has an interest) and has provided all of the guarantees by KW of debt relating to properties in which it has an interest. Assuming due authorization and execution by the other parties thereto, each Material Contract is a legal, valid and binding agreement, and is in full force and effect, and (i) neither KW nor any of its Subsidiaries is in breach or default of any Material Contract to which it is a party in any material respect; (ii) to the Knowledge of KW, no event has occurred or circumstance has existed that (with or without notice or lapse of time), will or would reasonably be expected to, (A) contravene, conflict with or result in a violation or breach of, or become a default or event of default under, any provision of any Material Contract; (B) permit KW or any other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify any Material Contract; (iii) neither KW nor any of its Subsidiaries has received written notice of any proposed cancellation, revocation or termination of any Material Contract to which it is a party; and (iv) there are no renegotiations of, or attempts to renegotiate, any material terms of any Material Contract. Since June 30, 2009, neither KW nor any of its Subsidiaries has received any written notice regarding any actual or possible violation or breach of, or default under, any Material Contract, except in each such case for defaults, acceleration rights, termination rights and other rights that have not had and would not reasonably be expected to have a Material Adverse Effect on KW.
Section 2.19 Compliance with Applicable Laws. To the Knowledge of KW, KW and its Subsidiaries are in compliance with all applicable Laws, including those relating to occupational health and safety and the environment, except for instances of noncompliance that, individually and in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on
A-13
KW. Neither KW nor any of its Subsidiaries has received any written communication during the past two (2) years from a Governmental Authority alleging that KW or any such Subsidiary is not in compliance in any material respect with any applicable Law. This Section 2.19 does not relate to matters with respect to Taxes, which are the subject of Section 2.14.
Section 2.20 Foreign Corrupt Practices. None of KW or any of its Subsidiaries, nor any of their respective Representatives, has, in the course of its actions for, or on behalf of, KW or any of its Subsidiaries, directly or indirectly, (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payment to any Governmental Authority or any foreign or domestic government official or employee from corporate funds; (c) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the " FCPA "); or (d) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment in connection with the operations of KW or any such Subsidiary to any foreign or domestic government official or employee, except, in the case of clauses (a) and (b) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on KW.
Section 2.21 Money Laundering Laws. KW and its Subsidiaries have conducted their business at all times in compliance with money laundering statutes in all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Authority (collectively, the " Money Laundering Laws ") and no proceeding involving KW with respect to the Money Laundering Laws is pending or, to the Knowledge of KW, was threatened in writing.
Section 2.22 Governmental Inquiry. Neither KW nor any of its Subsidiaries has received any material written inspection report, questionnaire, inquiry, demand or request for information from a Governmental Authority.
Section 2.23 Records. The books of account, minute books and shareholder records of KW and its Subsidiaries made available to Prospect are complete and accurate in all material respects, and there have been no material transactions involving KW or any of its Subsidiaries which are required to be set forth therein and which have not been so set forth.
Section 2.24 Brokers; Schedule of Fees and Expenses. Except as set forth in Section 2.24 of the KW Disclosure Schedule, no broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with this Agreement or the transactions based upon arrangements made by or on behalf of KW or any of its Subsidiaries.
Section 2.25 OFAC. None of KW, any director or officer of KW, or, to the Knowledge of KW, any agent, employee, affiliate or Person acting on behalf of KW is currently identified on the specially designated nationals or other blocked person list or otherwise currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (" OFAC "); and KW has not, directly or indirectly, used any funds, or loaned, contributed or otherwise made available such funds to any Subsidiary, joint venture partner or other Person, in connection with any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to, or otherwise in violation of, any U.S. sanctions administered by OFAC in the last five (5) fiscal years.
Section 2.26 Environmental Matters. To the Knowledge of KW, each of KW and its Subsidiaries is, and at all times has been, in substantial compliance with, and has not been and is not in material violation of or subject to any material liability under, any Environmental Law, and no proceeding involving KW or its Subsidiaries with respect to any Environmental Law is pending or, to the
A-14
Knowledge of KW, has been threatened in writing. Except as listed on Schedule 2.26, KW has not (i) entered into any indemnification arrangements relating to Environmental Laws, or (ii) reserved any amounts on its balance sheet for violations of Environmental Laws. KW and its Subsidiaries are in compliance with the material terms of any settlements or other accommodations relating to Environmental Laws entered into with respect to any real property owned directly or indirectly by KW or its Subsidiaries.
Section 2.27 Board Approval. The Board of Directors of KW (including any required committee or subgroup of the KW Board of Directors) has, as of the date of this Agreement, (i) adopted resolutions approving the Merger and setting forth the terms and conditions thereof, and declared the advisability of and approved this Agreement and the transactions contemplated hereby and (ii) determined that the transactions contemplated hereby are in the best interests of the stockholders of KW.
Section 2.28 Proxy Statement/Prospectus. The information to be supplied in writing by KW for inclusion in Prospect's proxy statement/prospectus (such proxy statement/prospectus as amended or supplemented is referred to herein as the " Proxy Statement/Prospectus "), which shall be included in Prospect's Registration Statement on Form S-4 (the " Registration Statement ") shall not at the time the Proxy Statement/Prospectus is first mailed, at the time of the Prospect Stockholders' Meeting and at the time of the filing with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. If at any time prior to the Closing, any event relating to KW, any of its Subsidiaries or their respective officers or directors should be discovered by KW which should be set forth in a supplement to the Proxy Statement/Prospectus, KW shall promptly inform Prospect. Notwithstanding the foregoing, KW makes no representation or warranty with respect to any information supplied by Prospect or any Person other than KW which is contained in the Proxy Statement/Prospectus.
Section 2.29 Tax Representations Regarding Tax-Free Reorganization.
(a) Immediately following the Merger, KW will hold at least seventy percent (70%) of the fair market value of its net assets and at least ninety percent (90%) of the fair market value of its gross assets that it held immediately prior to the Merger. For purposes of this representation, amounts paid by KW to dissenters, amounts paid by KW to stockholders who receive cash or other property, amounts used by KW to pay expenses incurred in connection with the Merger, and all redemptions and distributions (other than regular, normal dividends) made by KW are included as assets of KW immediately prior to the Merger.
(b) KW has no plan or intention to issue additional shares of its stock that would result in Prospect losing control of KW within the meaning of Section 368(c) of the Code. At the time of the Merger, KW will not have outstanding any warrants, options, convertible securities, or any other type of right pursuant to which any person could acquire stock in KW that, if exercised or converted, would affect Prospect's acquisition of control of KW as defined in Section 368(c) of the Code.
(c) KW is not an investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(d) KW is not under the jurisdiction of the court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
A-15
Representations and Warranties of Prospect
Except as set forth in the Disclosure Schedule of Prospect attached hereto as Schedule III (the " Prospect Disclosure Schedule "), Prospect represents and warrants to KW as follows:
Section 3.1 Capital Structure.
(a) Section 3.1(a) of the Prospect Disclosure Schedule sets forth, as of the date hereof, the share capitalization of Prospect and Merger Sub and all the outstanding options, warrants or rights to acquire any share capital of Prospect and Merger Sub. Other than as set forth in Section 3.1(a) of the Prospect Disclosure Schedule: (i) there are no options, warrants or other rights outstanding which give any Person the right to acquire any share capital of Prospect or Merger Sub or to subscribe to any increase of any share capital of Prospect or Merger Sub; and (ii) there are no disputes, arbitrations or litigation proceedings involving Prospect or Merger Sub with respect to the share capital of Prospect or Merger Sub.
(b) Except as set forth in Section 3.1(b) of the Prospect Disclosure Schedule: (i) no shares of capital stock or other voting securities of Prospect or Merger Sub were issued, reserved for issuance or outstanding and there have not been any issuances of capital securities or options, warrants or rights to acquire the capital securities of Prospect or Merger Sub; (ii) all outstanding shares of the capital stock of Prospect and Merger Sub are, and all such shares that may be issued prior to the date hereof will be when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the DGCL, Prospect Constituent Instruments (as defined in Section 3.2) or any Contract to which Prospect or Merger Sub is a party or otherwise bound; and (iii) there are no outstanding contractual obligations of Prospect or Merger Sub to repurchase, redeem or otherwise acquire any shares of capital stock of Prospect or Merger Sub.
(c) Except as set forth in Section 3.1(c) of the Prospect Disclosure Schedule, as of the date of this Agreement: (i) there are no bonds, debentures, notes or other indebtedness of Prospect or Merger Sub having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Prospect Common Stock may vote (" Voting Prospect Debt "); and (ii) there are no options, warrants, rights, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which Prospect or Merger Sub is a party or by which it is bound (A) obligating Prospect or Merger Sub to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, Prospect or Merger Sub or any Voting Prospect Debt, or (B) obligating Prospect or Merger Sub to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking.
Section 3.2 Organization and Standing. Each of Prospect and Merger Sub is duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of Prospect and Merger Sub is duly qualified to do business in each of the jurisdictions in which the property owned, leased or operated by Prospect or Merger Sub or the nature of the business which it conducts requires qualification, except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect on Prospect. Each of Prospect and Merger Sub has the requisite power and authority to own, lease and operate its tangible assets and properties and to carry on its business as now being conducted and, subject to necessary approvals of the relevant Governmental Authorities, as presently contemplated to be conducted. Prospect has delivered to KW true and complete copies of the
A-16
certificate of incorporation of Prospect and Merger Sub, as amended to the date of this Agreement and the bylaws of Prospect and Merger Sub, as amended to the date of this Agreement (the " Prospect Constituent Instruments ").
Section 3.3 Authority; Execution and Delivery; Enforceability. Each of Prospect and Merger Sub has all requisite corporate power and authority to execute and deliver this Agreement and the Transaction Documents to which it is a Party and to consummate the transactions contemplated hereby. The execution and delivery by Prospect of this Agreement and the consummation by Prospect and Merger Sub of the transactions contemplated hereby have been duly authorized and approved by the Prospect Board and no other corporate proceedings on the part of Prospect and Merger Sub are necessary to authorize this Agreement and the transactions contemplated hereby. Other than the Prospect Stockholder Approval, all action, corporate and otherwise, necessary to be taken by Prospect and Merger Sub to authorize the execution, delivery and performance of this Agreement, the Transaction Documents and all other agreements and instruments delivered by Prospect and Merger Sub in connection with the transactions contemplated hereby has been duly and validly taken. Each of this Agreement and the Transaction Documents to which Prospect and Merger Sub is a Party has been duly executed and delivered by Prospect and Merger Sub and constitutes the valid, binding, and enforceable obligation of Prospect and Merger Sub, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general application now or hereafter in effect affecting the rights and remedies of creditors and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 3.4 No Subsidiaries or Equity Interests. Neither Prospect nor Merger Sub owns, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person other than Prospect's ownership interest in Merger Sub prior to the Merger Effective Time.
Section 3.5 No Conflicts. Except as set forth in Section 3.5 of the Prospect Disclosure Schedule, the execution and delivery of this Agreement or any of the Transaction Documents by Prospect and Merger Sub and the consummation of the transactions and compliance with the terms hereof and thereof will not, (a) conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien (other than a Permitted Lien) upon any of the assets and properties of Prospect and Merger Sub under, any provision of: (i) any Prospect Constituent Instrument; (ii) any Prospect Material Contract (as defined in Section 3.21 hereof) to which Prospect or Merger Sub is a party or to or by which it (or any of its assets and properties) is subject or bound; or (iii) any Material Permit; (b) subject to the filings and other matters referred to in Section 3.6, conflict with any material Judgment or Law applicable to Prospect or Merger Sub, or its properties or assets; (c) result in any suspension, revocation, impairment, forfeiture or nonrenewal of any Permit applicable to Prospect or Merger Sub; (d) terminate or modify, or give any third party the right to terminate or modify, the provisions or terms of any Prospect Material Contract; or (e) cause any of the assets owned by Prospect or Merger Sub to be reassessed or revalued by any Governmental Authority, except, in the case of clauses (a)(ii), (a)(iii), (b), (c), (d) and (e) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on Prospect.
Section 3.6 Consents and Approvals. Except as set forth in Section 3.6 of the Prospect Disclosure Schedule, no consent of, or registration, declaration or filing with, or permit from, any Governmental Authority is required to be obtained or made by or with respect to Prospect or Merger Sub in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, other than (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware as provided in Section 1.2; (ii) the filing with, clearance and
A-17
declaration of effectiveness by the SEC of the Registration Statement and the Prospect Stockholder Approvals and the approval of the Prospect Warrant Agreement Amendment at the Prospect Warrant Holders Meeting; (iii) consents, waivers, approvals, orders, authorizations, registrations, declarations, notices and filings required under the HSR Act and other applicable antitrust or competition Laws, if any; (iv) the filing of a Form 8-K with the SEC within four (4) business days after the execution of this Agreement and of the Closing Date; (v) any filings as required under applicable securities laws of the United States and the securities laws of any foreign country; (vi) any filing required by the AMEX; and (vii) the procurement of such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not have a Material Adverse Effect on Prospect and would not prevent, or materially alter or delay, consummation of any of the transactions contemplated hereby.
Section 3.7 SEC Documents. Prospect has filed all reports, schedules, forms, statements and other documents required to be filed by Prospect with the SEC since November 13, 2007, pursuant to Sections 13(a), 14(a) and 15(d) of the Exchange Act (the " Prospect SEC Documents "). As of its respective filing date, each Prospect SEC Document complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such Prospect SEC Document, and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Prospect SEC Document has been revised or superseded by a later filed Prospect SEC Document, none of the Prospect SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of Prospect included in the Prospect SEC Documents (the " Prospect Financial Statements ") comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with U.S. GAAP (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the financial position of Prospect as of the dates thereof and the results of its operations and cash flows as at the respective dates of and for the periods referred to in such financial statements (subject, in the case of unaudited financial statements, to normal year-end audit adjustments and the omission of notes to the extent permitted by Regulation S-X of the SEC).
Section 3.8 Internal Accounting Controls. Prospect maintains a system of internal accounting controls sufficient to provide reasonable assurance that (a) transactions are executed in accordance with management's general or specific authorizations, (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (c) access to assets is permitted only in accordance with management's general or specific authorization, and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Prospect's officers have established disclosure controls and procedures for Prospect and designed such disclosure controls and procedures to ensure that material information relating to Prospect is made known to the officers by others within those entities. Prospect's officers have evaluated the effectiveness of Prospect's controls and procedures and there is no material weakness, significant deficiency or control deficiency, in each case as such term is defined in Public Company Accounting Oversight Board Auditing Std. No. 2. Since June 30, 2009, there have been no significant changes in Prospect's internal controls or, to Prospect's Knowledge, in other factors that could significantly affect Prospect's internal controls.
A-18
Section 3.9 Absence of Certain Changes or Events. Except as disclosed in Section 3.9 of the Prospect Disclosure Schedule, from the date of the most recent audited financial statements included in the filed Prospect SEC Documents to the date of this Agreement, there has not been:
(a) any change in the assets, liabilities, financial condition or operating results of Prospect, except changes in the ordinary course of business that have not caused, in the aggregate, a Material Adverse Effect on Prospect;
(b) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;
(c) any resignation or termination of employment of the Chief Executive Officer, Chief Financial Officer, President or the Secretary of Prospect;
(d) any waiver or compromise by Prospect or Merger Sub of a valuable right or material debt owed to it;
(e) any loan, promissory note, mortgage, pledge, transfer of a security interest in, or Lien, created by Prospect or Merger Sub, with respect to any of its material properties or assets, except for Permitted Liens;
(f) any loans or guarantees made by Prospect or Merger Sub to or for the benefit of its employees, officers or directors, or any members of their immediate families, or any material loans or guarantees made by Prospect or Merger Sub to or for the benefit of any of its employees or any members of their immediate families, in each case, other than travel advances and other advances made in the ordinary course of its business;
(g) any declaration, setting aside or payment of a dividend or other distribution in respect of any of Prospect or Merger Sub's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by Prospect or Merger Sub;
(h) any issuance of equity securities to any officer, director or affiliate, except pursuant to existing Prospect option plans;
(i) any amendment to the Prospect Constituent Instruments, or any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction involving Prospect or Merger Sub; or
(j) any negotiations, arrangement or commitment by Prospect to take any of the actions described in this Section 3.9.
Section 3.10 Undisclosed Liabilities. Except as set forth in Section 3.10 of the Prospect Disclosure Schedule, Prospect has no material liabilities or obligations of any nature matured or unmatured, fixed or contingent, including any obligations to issue capital stock or other securities of Prospect) due after the date hereof, other than (a) those set forth or adequately provided for in the most recent balance sheet included in the Prospect Financial Statements or (b) those not required to be set forth on a balance sheet of Prospect or in the notes thereto under U.S. GAAP.
Section 3.11 Litigation. As of the date hereof, there is no Action which (a) adversely affects or challenges the legality, validity or enforceability of this Agreement or (b) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect on Prospect. Neither Prospect, Merger Sub, nor any director or officer thereof (in his or her capacity as such) is or has been the subject of any Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.
A-19
Section 3.12 Compliance with Applicable Laws. Except as set forth in Section 3.12 of the Prospect Disclosure Schedule, each of Prospect and Merger Sub is in compliance with all applicable Laws, including those relating to occupational health and safety and the environment, except for instances of noncompliance that, individually and in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on Prospect. Except as set forth in Section 3.12 of the Prospect Disclosure Schedule, Prospect has not received any written communication during the past two (2) years from a Governmental Authority alleging that Prospect is not in compliance in any material respect with any applicable Law.
Section 3.13 Sarbanes-Oxley Act of 2002. Prospect is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 (the " Sarbanes-Oxley Act ") applicable to it as of the date hereof and as of the Closing. There has been no change in Prospect's accounting policies since inception except as described in the notes to the Prospect Financial Statements. Each required form, report and document containing financial statements that has been filed with or submitted to the SEC since inception, was accompanied by the certifications required to be filed or submitted by Prospect's chief executive officer and chief financial officer pursuant to the Sarbanes-Oxley Act, and at the time of filing or submission of each such certification, such certification was true and accurate and materially complied with the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder. Neither Prospect, nor, to the Knowledge of Prospect, any Representative of Prospect, has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Prospect or its internal accounting controls, including any complaint, allegation, assertion or claim that Prospect has engaged in questionable accounting or auditing practices, except for (a) any complaint, allegation, assertion or claim as has been resolved without any resulting change to Prospect's accounting or auditing practices, procedures methodologies or methods of Prospect or its internal accounting controls, and (b) questions regarding such matters raised and resolved in the ordinary course of business in connection with the preparation and review of Prospect's financial statements and periodic reports. To the Knowledge of Prospect, no attorney representing Prospect, whether or not employed by Prospect, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by Prospect or any of its officers, directors, employees or agents to the Prospect Board or any committee thereof or to any director or officer of Prospect. To the Knowledge of Prospect, no employee of Prospect has provided or is providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable law.
Section 3.14 Certain Registration Matters. Except as specified in Section 3.14 of the Prospect Disclosure Schedule, and except for registration rights granted in connection with the Prospect Public Offering, Prospect has not granted or agreed to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of Prospect registered with the SEC or any other Governmental Authority that have not been satisfied.
Section 3.15 Brokers' and Finders' Fees. Except as specified in Section 3.15 of the Prospect Disclosure Schedule, neither Prospect nor Merger Sub has incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar charges in connection with this Agreement or any Transaction.
Section 3.16 Records. The books of account, minute books and shareholder records of Prospect and Merger Sub are complete and accurate in all material respects, and there have been no material transactions involving Prospect or Merger Sub which are required to be set forth therein and which have not been so set forth.
Section 3.17 Board Approval. The Prospect Board (including any required committee or subgroup of the Prospect Board) has, as of the date of this Agreement, (i) adopted resolutions
A-20
approving the Merger and setting forth the terms and conditions thereof, and declared the advisability of and approved this Agreement and the transactions contemplated hereby, (ii) determined that the transactions contemplated hereby are in the best interests of the stockholders of Prospect, and (iii) determined that the fair market value of KW is equal to at least 80% of the balance in the Trust Fund (excluding deferred underwriting discounts and commissions).
Section 3.18 AMEX. The Prospect Common Stock and Warrants are quoted on the AMEX. There is no Action pending or, to the Knowledge of Prospect, threatened against Prospect by AMEX with respect to any intention by such entities to prohibit or terminate the quotation of such securities on the AMEX. The Prospect Common Stock and Prospect Warrants are registered pursuant to Section 12(b) of the Exchange Act, and Prospect has taken no action designed to, or which is likely to have the effect of, terminating the registration of such securities under the Exchange Act nor has Prospect received any notification that the SEC is contemplating terminating such registration.
Section 3.19 Trust Fund. Section 3.19 of the Prospect Disclosure Schedule sets forth as of June 30, 2009 the dollar amount (including an accrual for the earned but uncollected interest thereon) held in the trust account established in connection with Prospect's Public Offering for the benefit of its public shareholders (the " Trust Fund ") for use by Prospect in connection with a business combination as set forth in the Prospect Constituent Instruments. Section 3.19 of the Prospect Disclosure Schedule sets forth as of June 30, 2009 the dollar amount of the Trust Fund that represents deferred underwriting commissions which will be paid to the underwriters of the Prospect Public Offering at the Closing.
Section 3.20 Transactions with Affiliates and Employees. Except as set forth in Section 3.20 of the Prospect Disclosure Schedule, none of the officers or directors of Prospect and, to the Knowledge of Prospect, none of the employees of Prospect is presently a party to any transaction with Prospect that is required to be disclosed under Rule 404(a) of Regulation S-K (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the Knowledge of Prospect, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.
Section 3.21 Material Contracts.
(a) Prospect has made available to KW, prior to the date of this Agreement, true, correct and complete copies of each material contract which would be considered a material contract pursuant to Item 601(b)(10) of Regulation S-K or pursuant to which Prospect receives or pays amounts in excess of $100,000 (each a " Prospect Material Contract "). A list of each such Prospect Material Contract is set forth on Section 3.21 of the Prospect Disclosure Schedule. As of the date of this Agreement, Prospect is not in violation of or in default under (nor does there exist any condition which upon the passage of time, the giving of notice or both would cause such a violation of or default under) any Prospect Material Contract to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on Prospect; and, to the Knowledge of Prospect, as of the date of this Agreement, no other Person has violated or breached, or committed any default under, any Prospect Material Contract, except for violations, breaches and defaults that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on Prospect.
(b) Except as would not reasonably be expected to have a Material Adverse Effect on Prospect, each Prospect Material Contract is a legal, valid and binding agreement, and is in full force and effect, and (i) Prospect is not in breach or default of any Prospect Material Contract in any material respect; (ii) no event has occurred or circumstance has existed that (with or without
A-21
notice or lapse of time), will or would reasonably be expected to, (A) contravene, conflict with or result in a violation or breach of, or become a default or event of default under, any provision of any Prospect Material Contract; (B) permit Prospect or any other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify any Prospect Material Contract; or (iii) Prospect has not received notice of the pending or threatened cancellation, revocation or termination of any Prospect Material Contract to which it is a party. Since June 30, 2009, Prospect has not received any notice or other communication regarding any actual or possible violation or breach of, or default under, any Prospect Material Contract, except in each such case for defaults, acceleration rights, termination rights and other rights that have not had and would not reasonably be expected to have a Material Adverse Effect on Prospect.
Section 3.22 Taxes. Except as disclosed in Schedule 3.22 of the Prospect Disclosure Schedule:
(a) Prospect has timely filed, or has caused to be timely filed on its behalf, all Tax Returns that are or were required to be filed by it pursuant to applicable Legal Requirements, except to the extent any failure to timely file any Tax Returns, either individually or in the aggregate, have not and would not reasonably be expected to have a Material Adverse Effect on Prospect. All such Tax Returns are (and, as to a Tax Return not filed as of the date hereof, and filed on or before the Closing Date, will be) in all respects true, complete and accurate, except to the extent any inaccuracies in any filed Tax Returns, individually or in the aggregate, have not and would not reasonably be expected to have a Material Adverse Effect on Prospect. To the Knowledge of Prospect, there are no unpaid Taxes claimed to be due by any Governmental Authority in charge of taxation of any jurisdiction, nor any claim for additional Taxes for any period for which Tax Returns have been filed, except to the extent any failure to file or any inaccuracies in any filed Tax returns, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on Prospect.
(b) Prospect has not received any written notice that any Governmental Authority will audit or examine (except for any general audits or examinations routinely performed by such Governmental Authorities), seek information with respect to, or make material claims or assessments with respect to any Taxes for any period. Prospect has made available to KW copies of all Tax Returns, examination reports, and statements of deficiencies filed by, assessed against or agreed to by Prospect since its inception.
(c) The Prospect Financial Statements reflect an adequate reserve, established in accordance with U.S. GAAP, for all Taxes known to be payable by Prospect (in addition to any reserve for deferred Taxes to reflect timing differences between book and Tax items) for all taxable periods and portions thereof through the date of such financial statements. Prospect is neither a party to nor is it bound by any Tax indemnity, Tax sharing or similar agreement and Prospect currently has no material liability, and will not have any material liabilities for any Taxes of any other Person under any agreement or by the operation of any Law. No deficiency with respect to any Taxes has been proposed, asserted or assessed against Prospect, except to the extent any such deficiency, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on Prospect.
(d) Prospect has not executed any outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any Taxes or Tax Returns.
(e) There are no Tax Liens upon any of the assets or properties of Prospect, other than with respect to Taxes not yet due and payable.
A-22
(f) All Taxes required to be withheld, collected or deposited by or with respect to Prospect have been timely withheld, collected or deposited as the case may be, and to the extent required, have been paid to the relevant taxing authority.
(g) Prospect has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code.
Section 3.23 Foreign Corrupt Practices. Neither Prospect nor Merger Sub, nor, to Prospect's Knowledge, any Representative of Prospect or Merger Sub has, in the course of its actions for, or on behalf of, Prospect (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (c) violated or is in violation of any provision of the FCPA; or (d) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee, except, in the case of clauses (a) and (b) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on Prospect.
Section 3.24 Money Laundering Laws. The operations of Prospect are and have been conducted at all times in compliance with Money Laundering Laws and no proceeding involving Prospect with respect to the Money Laundering Laws is pending or, to the Knowledge of the officers of Prospect, is threatened.
Section 3.25 OFAC. None of Prospect, Merger Sub, any director or officer of Prospect or Merger Sub, or, to the Knowledge of Prospect or Merger Sub, any agent, employee, affiliate or Person acting on behalf of Prospect or Merger Sub is currently identified on the specially designated nationals or other blocked person list or otherwise currently subject to any U.S. sanctions administered by OFAC; and neither Prospect nor Merger Sub has not, directly or indirectly, used any funds, or loaned, contributed or otherwise made available such funds to any joint venture partner or other Person, in connection with any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to, or otherwise in violation of, any U.S. sanctions administered by OFAC in the last five (5) fiscal years.
Section 3.26 Proxy Statement/Prospectus. None of the information in the Proxy Statement/Prospectus or incorporated by reference therein will, at the time the Proxy Statement/Prospectus is filed with the SEC or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading (provided that Prospect shall not be responsible for the accuracy or completeness of any information relating to KW or its Subsidiaries or any information furnished by them in writing for inclusion in the Proxy Statement/Prospectus). If any information is discovered or any event occurs, or any change occurs with respect to the other information included in the Proxy Statement/Prospectus which is required to be described in an amendment of, or a supplement to, the Proxy Statement/Prospectus so that such document does not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, Prospect shall notify KW promptly of such event.
Section 3.27 Tax Representations Regarding Tax-Free Reorganization.
(a) Merger Sub was organized solely for purposes of the Merger. Merger Sub has no assets or liabilities and has not conducted any business.
(b) Merger Sub is wholly owned by Prospect and will continue to be wholly owned by Prospect through the Merger Effective Time.
A-23
(c) Prospect does not own any stock in KW and has not owned any stock in KW in the last five (5) years.
(d) Neither Prospect nor any person related to Prospect within the meaning of Treasury Regulation Section 1.368-1(e) has any plan or intention to redeem or acquire any of the Prospect Common Stock issued to KW stockholders in the Merger.
(e) Prospect has no plan or intention to liquidate KW, to merge KW with or into another corporation, to sell or otherwise dispose of the stock of KW except for transfers of stock described in Treasury Regulation Section 1.368-2(k), or to cause KW to sell or otherwise dispose of any of its assets except for dispositions made in the ordinary course of business or transfers of assets to a qualified group or qualified partnership within the meaning of and in accordance with Treasury Regulation Section 1.368-1(d)(4).
(f) Following the Merger, KW will continue its historic business or continue to use a significant portion of its historic business assets in a business within the meaning of Treasury Regulation Section 1.368-1(d).
(g) Prospect is not an investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
Section 4.1 Covenants of KW. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Closing Date, KW agrees that KW and its Subsidiaries shall (i) use commercially reasonable efforts to (except to the extent expressly contemplated by this Agreement or as consented to in writing by Prospect) carry on their businesses in the ordinary course in substantially the same manner as heretofore conducted, to pay debts and Taxes when due (subject to good faith disputes over such debts or Taxes), to pay or perform other obligations when due, and to use all reasonable efforts consistent with past practice and policies to preserve intact their present business organizations, and (ii) use their commercially reasonable efforts consistent with past practice to keep available the services of their present executive officers and directors to preserve their relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with them, in each case, to the end that there shall not be a Material Adverse Effect in their ongoing businesses as of the Closing Date. KW agrees to promptly notify Prospect of any material event or occurrence not in the ordinary course of business that would have or reasonably be expected to have a Material Adverse Effect on KW. Without limiting the generality of the foregoing, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Closing Date, except as otherwise expressly permitted by or provided for in this Agreement, KW shall not take, allow, cause or permit any of the following actions to occur with respect to KW without the prior written consent of Prospect, which consent shall not be unreasonably delayed or withheld:
(a) Charter Documents . Cause or permit any amendments to any of the KW Constituent Instruments or any other equivalent organizational documents, except for such amendments made pursuant to a Legal Requirement or as contemplated by this Agreement;
(b) Accounting Policies and Procedures . Change any material method of accounting or accounting principles or practices by KW, except for any such change made pursuant to a Legal Requirement or by a change in U.S. GAAP;
(c) Dividends; Changes in Capital Stock . Except for the payment of quarterly dividends on the KW Preferred Stock in an amount and a manner consistent with past practices, declare or pay
A-24
any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock;
(d) Material Contracts . Enter into any new Material Contract, or violate, amend or otherwise modify or waive any of the terms of any existing Material Contract, other than in the ordinary course of business consistent with past practice;
(e) Issuance of Securities . Issue, deliver or sell or authorize or propose the issuance, delivery or sale of, or purchase or propose the purchase of, any shares of its capital stock or securities convertible into, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities;
(f) Indebtedness . Except in its ordinary course of business, issue or sell any debt securities or guarantee any debt securities of others in excess of $10,000,000;
(g) Dispositions . Sell, lease, license or otherwise dispose of or encumber any of its properties or assets which are material, individually or in the aggregate, to its business, taken as a whole, except in the ordinary course of business consistent with past practice;
(h) Taxes . Make or change any Tax election, change an annual accounting period, adopt or change any accounting method with respect to Taxes, file any amended Tax Return, enter into any closing agreement, settle or compromise any proceeding with respect to any Tax claim or assessment relating to KW or any of its Subsidiaries, surrender any right to claim a refund of Taxes, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to KW or any of its Subsidiaries, or take any other similar action relating to the filing of any Tax Return or the payment of any Tax;
(i) New Line of Business . Enter into any new line of business;
(j) Liquidation . Adopt a plan or effect any complete or partial liquidation or adopt resolutions providing for or authorizing such liquidation or adopt a plan of or effect any dissolution, merger, consolidation, restructuring, recapitalization or reorganization;
(k) Officers and Employees . (1) Increase the wages, salaries, bonus, compensation or other benefits of any of its officers or employees (other than non-material increases granted to retain employees, other than officers, who have been offered employment by another Person) or enter into, establish, amend or terminate any KW Benefit Plan or, except as contemplated by this Agreement, enter into any other employment, consulting, retention, change in control, collective bargaining, bonus or incentive compensation, profit sharing, health, welfare, stock option, equity, pension, retirement, vacation, severance, termination, deferred compensation or other compensation or benefit plan, policy, agreement, trust, fund or other arrangement with, for or in respect of any officer, director or employee other than as required by applicable Law or pursuant to the terms of agreements in effect on the date of this Agreement or in the ordinary course of business consistent with past practice with its employees (other than officers), (2) hire any employees except in the ordinary course of business consistent with past practice or (3) fail to make contributions to any KW Benefit Plan in accordance with the terms thereof or with past practice;
(l) Material Adverse Effect . Take or omit to take any action, the taking or omission of which could reasonably be expected to have a Material Adverse Effect on KW; and
(m) Other . Agree in writing or otherwise to take any of the actions described in Section 4.1(a) through (l) above.
A-25
Section 4.2 Covenants of Prospect. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Closing Date, Prospect agrees that Prospect shall (i) use commercially reasonable efforts, and cause Merger Sub to use commercially reasonable efforts, to (except to the extent expressly contemplated by this Agreement or as consented to in writing by KW), carry on its business in the ordinary course in substantially the same manner as heretofore conducted, to pay debts and Taxes when due (subject to good faith disputes over such debts or taxes), to pay or perform other obligations when due, and to use all reasonable efforts consistent with past practice and policies to preserve intact its present business organizations and (ii) use its commercially reasonable efforts consistent with past practice to keep available the services of its present officers, directors and employees and to preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, in each case to the end that there shall not be a Material Adverse Effect in its ongoing business as of the Closing Date. Prospect agrees to promptly notify KW of any material event or occurrence not in the ordinary course of its business and of any event that would have a Material Adverse Effect on Prospect. Without limiting the generality of the forgoing, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Closing Date, except as listed on Section 4.2 of the Prospect Disclosure Schedule or as otherwise expressly permitted by or provided for in this Agreement, Prospect shall not do, allow, cause or permit any of the following actions to occur without the prior written consent of KW, which consent shall not be unreasonably delayed or withheld:
(a) Charter Documents . Cause or permit any amendments in any of their constituent instruments except for such amendments required by any Legal Requirement or the rules and regulations of the SEC or AMEX or as are contemplated by this Agreement (or such other applicable national securities exchange);
(b) Accounting Policies and Procedures . Change any method of accounting or accounting principles or practices by Prospect, except for any such change made pursuant to a Legal Requirement or by a change in U.S. GAAP;
(c) Dividends; Changes in Capital Stock . Declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, cancel or agree to cancel shares of its capital stock or repurchase, agree to repurchase or otherwise acquire or agree to acquire, directly or indirectly, any of its securities;
(d) Material Contracts . Enter into any new Prospect Material Contract, or violate, amend or otherwise modify or waive any of the terms of any existing Prospect Material Contract, other than in the ordinary course of business consistent with past practice;
(e) Issuance of Securities . Issue, deliver or sell or authorize or propose the issuance, delivery or sale of, or purchase or propose the purchase of, any shares of its capital stock or securities convertible into, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities;
(f) Indebtedness . Issue or sell any debt securities or guarantee any debt securities of others;
(g) Dispositions . Sell, lease, license or otherwise dispose of or encumber any of its properties or assets which are material, individually or in the aggregate, to its business, taken as a whole, except in the ordinary course of business consistent with past practice;
(h) Taxes . Make or change any Tax election, change an annual accounting period, adopt or change any accounting method with respect to Taxes, file any amended Tax Return, enter into any closing agreement, settle or compromise any proceeding with respect to any Tax claim or
A-26
assessment relating to Prospect, surrender any right to claim a refund of Taxes, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to Prospect, or take any other similar action relating to the filing of any Tax Return or the payment of any Tax.
(i) New Line of Business . Enter into any new line of business;
(j) Liquidation . Adopt a plan or effect any complete or partial liquidation or adopt resolutions providing for or authorizing such liquidation or adopt a plan of or effect any dissolution, merger, consolidation, restructuring, recapitalization or reorganization;
(k) SEC Reports . Fail to timely file or furnish to or with the SEC all reports, schedules, forms, statements and other documents required to be filed or furnished (except those filings by affiliates of Prospect required under Section 13(d) or 16(a) of the Exchange Act provided their failure to file such documents does not have a Material Adverse Effect on Prospect or the ability of Prospect to consummate the transactions contemplated hereby); and
(l) Other . Agree in writing or otherwise to take any of the actions described in Sections 4.2(a) through (k) above.
Section 4.3 No Shop; Non-Solicit.
(a) From and after the date hereof until the earlier of the (i) termination of this Agreement in accordance with its terms or (ii) the Merger Effective Time (" Exclusivity Period "): (A) Prospect shall not, and shall cause its stockholders and Representatives (collectively, with Prospect, the " Prospect Group ") not to enter into any written agreement with any other person or entity (whether or not such written agreement is absolute, contingent or conditional) regarding a Prospect Third Party Acquisition other than the transactions contemplated by this Agreement, (B) Prospect shall not and shall cause the other members of the Prospect Group not to solicit, offer, initiate, knowingly encourage, conduct or seek to engage in any discussions, investigations or negotiations or enter into any agreement with any other person or entity (whether or not such agreement or understanding is absolute, revocable, contingent or conditional) regarding a Prospect Third Party Acquisition and (C) Prospect agrees that during the Exclusivity Period it shall promptly, after obtaining knowledge thereof, advise KW of any inquiry or proposal regarding a Prospect Third Party Acquisition that is received by any member of the Prospect Group, including the terms of the proposal and the identity of the inquirer or offeror; and
(b) During the Exclusivity Period: (A) KW shall not, and shall cause its stockholders and Representatives (collectively, with KW, the " KW Group ") not to enter into any written agreement with any other person or entity (whether or not such written agreement is absolute, contingent or conditional) regarding a KW Third Party Acquisition other than the transactions contemplated by this Agreement, (B) KW shall not and shall cause the other members of the KW Group not to solicit, offer, initiate, knowingly encourage, conduct or seek to engage in any discussions, investigations or negotiations or enter into any agreement or understanding with any other person or entity (whether or not such agreement or understanding is absolute, revocable, contingent or conditional) regarding a KW Third Party Acquisition, other than the transactions contemplated in this Agreement; and (C) KW agrees that during the Exclusivity Period it shall promptly, after obtaining knowledge thereof, advise Prospect of any inquiry or proposal regarding a KW Third Party Acquisition that is received by any member of the KW Group, including the terms of the proposal and the identity of the inquirer or offeror.
A-27
Section 5.1 Access to Information. Except as required pursuant to any confidentiality agreement or similar agreement or arrangement to which KW is subject, between the date of this Agreement and the Closing Date, subject to Prospect's undertaking to use its commercially reasonable efforts to keep confidential and protect the Trade Secrets of KW and its Subsidiaries against any disclosure, KW and its Subsidiaries shall permit, upon reasonable request, Prospect and its Representatives access at dates and times agreed upon by the applicable entity and Prospect, to all of the books and records of KW and its Subsidiaries which Prospect determines are necessary for the preparation and amendment of the Proxy Statement/Prospectus and such other filings or submissions in accordance with SEC rules and regulations as are necessary to consummate the transactions contemplated hereby and as are necessary to respond to requests of the SEC staff, Prospect's accountants and relevant Governmental Authorities; provided, however, that Prospect may make a disclosure otherwise prohibited by this Section 5.1 if required by applicable law or regulation or regulatory, administrative or legal process (including, without limitation, by oral questions, interrogatories, requests for information, subpoena of documents, civil investigative demand or similar process) or the rules and regulations of the SEC or any stock exchange having jurisdiction over Prospect. In the event that Prospect or any of its Representatives is requested or required to disclose any Trade Secrets of KW or its Subsidiaries as provided in the proviso in the immediately preceding sentence, Prospect shall provide KW and its Subsidiaries with immediate written notice of any such request or requirement so that KW and is Subsidiaries may seek a protective order or other appropriate remedy.
Section 5.2 Insurance. Through the Closing Date, KW shall cause KW and its Subsidiaries to maintain insurance policies providing insurance coverage for the businesses in which KW and its Subsidiaries are engaged and the assets and properties of KW and its Subsidiaries of the kinds, in the amounts and against the risks as are commercially reasonable for such businesses and risks covered and for the geographic areas where KW and its Subsidiaries engage in such businesses.
Section 5.3 Fulfillment of Conditions. KW shall use its commercially reasonable efforts, and shall cause its Subsidiaries to use their commercially reasonable efforts, to fulfill the conditions specified in Article VIII to the extent that the fulfillment of such conditions is within their control. The foregoing obligation includes (a) executing and delivering documents necessary or desirable to consummate the transactions contemplated hereby, (b) engaging in a road show, at mutually agreed times and places, to seek the approval of the transactions, and (c) taking or refraining from such actions as may be necessary to fulfill such conditions (including using their commercially reasonable efforts to conduct their respective businesses in such manner that on the Closing Date the representations and warranties of the each of KW contained herein shall be accurate as though then made, except as contemplated by the terms hereof).
Section 5.4 Disclosure of Certain Matters. From the date hereof through the Closing Date, KW shall give Prospect prompt written notice of any event or development that occurs that (a) is of a nature that, individually or in the aggregate, would have or reasonably be expected to have a Material Adverse Effect on KW, or (b) would require any amendment or supplement to the Proxy Statement/Prospectus.
Section 5.5 Regulatory and Other Authorizations; Notices and Consents.
(a) KW shall use its commercially reasonable efforts to obtain all authorizations, consents, orders and approvals of Governmental Authorities and all material Consents that may be or become necessary for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement and the Transaction Documents including the consents set forth on Section 5.5 of the KW Disclosure Schedule (" Required Consents ") will cooperate with Prospect in promptly
A-28
seeking to obtain all such Required Consents (and in such regard use commercially reasonable efforts to cause the relevant Governmental Authorities to permit Prospect and/or its counsel to participate in the conversation and correspondence with such Governmental Authorities together with KW's counsel).
(b) KW shall give promptly such notices to third parties under any Material Contract.
(c) KW shall use its commercially reasonable efforts to obtain, prior to the date of the mailing of the Proxy Statement/Prospectus, all necessary approvals from holders of KW Securities for the Merger, including the KW Stockholder Approvals.
(d) KW shall promptly notify Prospect if KW determines that it may be unable to obtain a Required Consent prior to November 13, 2009.
Section 5.6 Related Taxes. From the date hereof through the Closing Date, each of KW and its Subsidiaries, consistent with past practice, shall (i) duly and timely file all Tax Returns and other documents required to be filed by it with applicable Governmental Authorities, the failure to file of which could have a Material Adverse Effect on KW, subject to extensions permitted by law and properly granted by the appropriate authority; provided, that KW shall (i) promptly notify Prospect that any of KW and its Subsidiaries is availing itself of such extensions, and (ii) pay all Taxes shown as due on such Tax Returns.
Section 5.7 Proxy Statement/Prospectus. KW shall use commercially reasonable efforts to provide promptly to Prospect such information concerning the business affairs and consolidated financial statements of KW and any required financial statements of its Subsidiaries as may reasonably be required for inclusion in the Proxy Statement/Prospectus and shall direct that its counsel cooperate with Prospect's counsel in the preparation of the Proxy Statement/Prospectus and shall request the cooperation of KW's auditors in the preparation of the Proxy Statement/Prospectus.
Section 5.8 Employment Agreements. KW will enter into amended employment agreements with each of William McMorrow, Mary Ricks and Donald Herrema substantially in the forms attached hereto as Exhibits B-1, B-2 and B-3 , respectively.
Section 5.9 Lock-Up Agreements. Each of those Persons listed in Section 5.9 of the KW Disclosure Schedule will enter into a lock-up agreement substantially in the form of Exhibit C attached hereto.
Section 5.10 No Claim Against Trust Fund. Notwithstanding anything else in this Agreement, KW acknowledges that it has read Prospect's final prospectus dated November 14, 2007 and understands that Prospect has established the Trust Fund for the benefit of Prospect's public stockholders and that, subject to the limited exceptions described therein, Prospect may disburse monies from the Trust Fund only (a) to Prospect's public stockholders in the event they elect to convert their shares into cash in accordance with Prospect's certificate of incorporation and/or the liquidation of Prospect or (b) to Prospect after it consummates a business combination. KW further acknowledges that, if the transactions contemplated by this Agreement, or, upon termination of this Agreement, another business combination, are not consummated by November 14, 2009, Prospect shall be obligated to return to its public stockholders the amounts being held in the Trust Fund. Accordingly, KW, for itself and each of its Subsidiaries, hereby waives all rights, title, interest or claim of any kind against Prospect to collect from the Trust Fund any monies that may be owed to them by Prospect or KW for any reason, including but not limited to a breach of this Agreement by Prospect or any negotiations, agreements or understandings with Prospect (whether in the past, present or future), and shall not seek recourse against the Trust Fund at any time for any reason other than a breach by Prospect of Section 4.3 hereof. This paragraph shall survive this Agreement and shall not expire and may not be altered in any way without the express written consent of Prospect. Notwithstanding the foregoing, KW does not waive a claim for damages, not to exceed $10 million, against Prospect if such damages arise from Prospect's breach of Section 4.3 hereof.
A-29
Additional Covenants of Prospect
Section 6.1 Proxy Statement/Prospectus Filing, SEC Filings and Special Meeting.
(a) Prospect shall cause a meeting of its stockholders (the " Prospect Stockholders' Meeting ") to be duly called and held as soon as reasonably practicable for the purpose of voting on the adoption and approval of, among others, this Agreement and the transactions contemplated hereby. Prospect shall cause a meeting of the holders of Prospect Warrants (the "Prospect Warrant Holders Meeting") to be duly called and held as soon as reasonably practicable for the purpose of voting to approve the Prospect Warrant Agreement Amendment. The board of directors of Prospect shall recommend to its stockholders and the holders of Prospect Warrants that they vote in favor of the adoption of such matters. In connection with the Prospect Stockholders' Meeting and the Prospect Warrant Holders Meeting, Prospect (a) shall use commercially reasonable efforts to file with the SEC as promptly as practicable the Proxy Statement/Prospectus, (b) upon receipt of approval from the SEC, will mail to its stockholders and the holders of Prospect Warrants the Proxy Statement/Prospectus and other proxy materials, (c) will use commercially reasonable efforts to obtain the necessary approvals by its stockholders of this Agreement and the transactions contemplated hereby, (d) will use commercially reasonable efforts to obtain the necessary approvals by the holders of Prospect Warrants of the Warrant Agreement Amendment and (e) will otherwise comply with all Legal Requirements applicable to the Prospect Stockholders' Meeting and the Prospect Warrant Holders Meeting.
(b) Prospect shall timely provide to KW all correspondence received from and to be sent to the SEC and shall not file any amendment to the filings with the SEC without (i) providing KW the opportunity to review and comment on any responses to the SEC and (ii) the prior consent of KW, which consent shall not be unreasonably delayed or withheld. In addition, Prospect shall use commercially reasonable efforts to cause the SEC to permit KW and/or its counsel to participate in the SEC conversations on issues related to Prospect's SEC filings together with Prospect's counsel.
Section 6.2 Fulfillment of Conditions. From the date hereof to the Closing Date, Prospect shall use its commercially reasonable efforts to fulfill the conditions specified in Article VIII. The foregoing obligation includes, without limitation, (a) executing and delivering documents necessary or desirable to consummate the transactions contemplated hereby, (b) engaging in a road show, at mutually agreed to times and places, to seek the approval of the transactions contemplated hereby, and (c) taking or refraining from taking such actions as may be necessary to fulfill such conditions (including using its commercially reasonable efforts to conduct the business of Prospect in such manner that on the Closing Date the representations and warranties of Prospect contained herein shall be accurate as though then made).
Section 6.3 Disclosure of Certain Matters. From the date hereof through the Closing Date, Prospect shall give KW prompt written notice of any event or development that occurs that (a) is of a nature that, individually or in the aggregate, would have or reasonably be expected to have a Material Adverse Effect on Prospect, or (b) would require any amendment or supplement to the Proxy Statement/Prospectus.
Section 6.4 Regulatory and Other Authorizations; Notices and Consents. Prospect shall use its commercially reasonable efforts to obtain all authorizations, consents, orders and approvals of all Governmental Authorities that may be or become necessary for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement and the Transaction Documents to which it is a party and shall cooperate fully with KW in promptly seeking to obtain all such authorizations, consents, orders and approvals (and in such regard use commercially reasonable efforts to cause the
A-30
relevant Government Authorities to permit KW and/or its counsel to participate in the conversation and correspondence with such Government Authorities together with Prospect's counsel). Subsequent to the Closing, Prospect shall use commercially reasonable efforts to inform former market-makers in KW Common Stock of the Closing and that trades should no longer be made in KW Common Stock.
Section 6.5 Related Taxes. From the date hereof through the Closing Date, Prospect, consistent with past practice, shall (i) duly and timely file all Tax Returns and other documents required to be filed by it with applicable Governmental Authorities, the failure to file of which could have a Material Adverse Effect on Prospect, subject to extensions permitted by law and properly granted by the appropriate authority; provided , that Prospect shall (i) promptly notify KW that Prospect is availing itself of such extensions, and (ii) pay all Taxes shown as due on such Tax Returns.
Section 6.6 Valid Issuance of Prospect Common Stock. Prospect shall ensure that the authorized share capital of Prospect be sufficient to enable Prospect to issue the Prospect Common Stock in the Merger and to meet its obligations under the Prospect Stock Rights issued and outstanding as of such time. At the Closing, the shares of Prospect Common Stock to be issued in the Merger hereunder will be duly authorized, validly issued, fully paid and nonassessable and will have been issued in compliance with all applicable federal and state securities laws.
Section 6.7 Securities Purchases. Prospect agrees, either itself or through any affiliate, that it shall not, without the prior written consent of KW, purchase, agree to purchase or otherwise acquire or agree to acquire, directly or indirectly, any of Prospect's securities other than in accordance with the terms of the Transaction Documents.
Section 6.8 Management Incentive Plan. Prior to Closing, Prospect shall adopt an equity incentive plan (" Management Incentive Plan "), for the issuance of up to 4.0 million shares of Prospect Common Stock (the " Management Incentive Shares ") and, at the Closing, Prospect shall grant awards under the Management Incentive Plan for the aggregate number of Management Incentive Shares to key employees of the Surviving Corporation in the amounts and upon terms and conditions to be mutually agreed upon between Prospect and KW.
Section 6.9 Director and Officer Liability. Prospect shall, or shall cause the Surviving Corporation, to do the following:
(a) For six years after the Merger Effective Time, the Surviving Corporation shall provide each current and former director and officer of Prospect (collectively, the " Indemnified D&Os ") with "tail" insurance (to the extent available in the market) in respect of acts or omissions occurring prior to the Merger Effective Time covering each such Person on terms with respect to coverage and amount not materially less favorable than those currently covered by Prospect's officers' and directors' liability insurance policy, provided that the premium for such coverage will not exceed $200,000 (the " Tail Coverage Amount "). Without limiting the generality of the foregoing (and not withstanding any other provision of this Agreement), prior to the Merger Effective Time, and with the prior consent of Prospect, KW and Prospect shall be entitled to obtain prepaid insurance policies providing for the coverage contemplated by this Section 6.9 with annual premiums not to exceed the Tail Coverage Amount. If such prepaid policies are obtained prior to the Merger Effective Time, Prospect shall not cancel such policies or permit such policies to be cancelled. Notwithstanding the foregoing, neither Prospect nor the Surviving Corporation shall be required to pay annual premiums for such policy in excess of the Tail Coverage Amount and, in the event any future annual premiums for such policy exceeds such amount, Prospect or the Surviving Corporation will be entitled to reduce the amount of coverage that can be obtained for an annual premium equal to the Tail Coverage Amount.
(b) For six years after the Merger Effective Time, maintain in effect the provisions in its certificate of incorporation and bylaws providing for indemnification of such Persons with respect
A-31
to the facts or circumstances occurring at or prior to the Merger Effective Time to the fullest extent permitted from time to time under the DGCL, which provisions shall not be amended except as required by changes in Law or except to make changes permitted by Law that would enlarge the scope of such Persons' indemnification rights thereunder.
(c) The provisions of this Section 6.9 (i) are intended to be for the benefit of, and will be enforceable by, each Indemnified D&O, his or her heirs and his or her representatives and (ii) are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such Person may have by contract or otherwise. The obligations of Prospect and the Surviving Corporation under this Section 6.9 shall not be terminated or modified in such a manner as to adversely affect the rights of any indemnified party to whom this Section 6.9 applies unless (x) such termination or modification is required by applicable Law or (y) the affected indemnified party shall have consented in writing to such termination or modification.
Additional Agreements and Covenants
Section 7.1 Disclosure Schedules. Each of the Parties shall, as of the Closing Date, have the obligation to supplement or amend its respective Disclosure Schedules being delivered concurrently with the execution of this Agreement and annexes and exhibits hereto with respect to any matter hereafter arising or discovered which resulted in, or could reasonably be expected to result in a Material Adverse Effect on such Party. The obligations of the Parties to amend or supplement their respective Disclosure Schedules being delivered herewith shall terminate on the Closing Date. Notwithstanding any such amendment or supplementation, the representations and warranties of the Parties shall be made with reference to the Disclosure Schedules as they exist at the time of execution of this Agreement.
Section 7.2 Confidentiality. Between the date hereof and the Closing Date, each of Prospect and KW shall hold and shall cause its Affiliates and Representatives to hold in strict confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law or by the rules and regulations of, or pursuant to any agreement, rules or regulations of, the relevant stock exchange or trading system, all documents and information concerning the other Party furnished to it by such other Party or its Representatives in connection with the transactions contemplated hereby, except to the extent that such information can be shown to have been (a) previously known by the Party to which it was furnished with no obligation of confidentiality, (b) in the public domain through no fault of such Party, or (c) later lawfully acquired by the Party to which it was furnished from other sources, which source is not an Affiliate or Representative of the other Party, and each Party shall not release or disclose such information to any other Person, except its Affiliates and Representatives in connection with this Agreement. Each Party shall be deemed to have satisfied its obligations to hold confidential information concerning or supplied by the other Party in connection with the transactions contemplated hereby, if it exercises the same care as it takes to preserve confidentiality for its own similar information. For the avoidance of doubt, any disclosure of information required to be included by Prospect or KW in their respective filings with the SEC as required by applicable Laws will not be a violation of this Section 7.2 provided that the other Party was given notice of such disclosure prior to its release and did not object to its release.
Section 7.3 Public Announcements. From the date of this Agreement until the Closing or termination of this Agreement, Prospect and KW shall cooperate in good faith to jointly prepare all press releases and public announcements pertaining to this Agreement and the transactions contemplated hereby, and neither of them shall issue or otherwise make any public announcement or communication pertaining to this Agreement or the transactions contemplated hereby without the prior consent of Prospect (in the case of KW) or KW (in the case of Prospect), except as required by
A-32
applicable Law or by the rules and regulations of, or pursuant to any agreement, rules or regulations of, the relevant stock exchange or trading system. Each Party will not unreasonably withhold approval from the other with respect to any press release or public announcement. If any Party determines with the advice of counsel that it is required to make this Agreement and the terms of the transactions contemplated hereby public or otherwise issue a press release or make public disclosure with respect thereto, it shall, at a reasonable time before making any public disclosure, consult with the other Parties regarding such disclosure, seek such confidential treatment for such terms or portions of this Agreement or the transactions contemplated hereby as may be reasonably requested by the other Parties and disclose only such information as is legally compelled to be disclosed. This provision will not apply to communications by any Party to its Representatives.
Section 7.4 HSR. If required pursuant to the HSR Act, as promptly as practicable after the date of this Agreement, Prospect and KW shall each prepare and file the notification required of it thereunder in connection with the transactions contemplated hereunder and shall promptly and in good faith respond to all information requested of it by the Federal Trade Commission and Department of Justice in connection with such notification and otherwise cooperate in good faith with each other and such Governmental Authorities. Prospect and KW shall (a) promptly inform the other of any communication to or from the Federal Trade Commission, the Department of Justice or any other Governmental Authority regarding the transactions contemplated hereunder, (b) give the other prompt notice of the commencement of any action, suit, litigation, arbitration, proceeding or investigation by or before any Governmental Authority with respect to such transactions, and (c) keep the other reasonably informed as to the status of any such action, suit, litigation, arbitration, proceeding or investigation. Each of Prospect and KW shall pay one-half of the filing fees with respect to the notifications required under the HSR Act.
Section 7.5 Fees and Expenses. Except as provided in Section 7.4, in the event that there is no Closing of the transactions contemplated by this Agreement, all fees and expenses incurred in connection with this Agreement shall be paid by the Party incurring such fees or expenses.
Section 7.6 Reporting. From and after the date of this Agreement, each of the Parties will, and will cause its Affiliates to, (i) act in a manner consistent with the treatment of the Merger contemplated by this Agreement as a reorganization under Section 368(a) of the Code and (ii) consistently take the position on all Tax Returns, before any taxing authority, and in any judicial proceeding, that the Merger contemplated by this Agreement qualifies as a reorganization under Section 368(a) of the Code.
Section 7.7 Counsel Tax Letters. Prospect and KW will each use its reasonable best efforts to cause its respective counsel to provide it with an opinion with respect to certain statements of United States federal income tax law as set forth in the Proxy Statement/Prospectus under the caption "Material United States Federal Income Tax Consequences of the Merger" (the "Proxy Statement/Prospectus Tax Section" ). In the case of the opinion provided by KW's counsel, such opinion shall be subject to the assumptions, limitations and qualifications stated in such opinion and in the Proxy Statement/Prospectus Tax Section, and shall relate to the statements made in the Proxy Statement/Prospectus Tax Section regarding the United States federal income tax consequences of the Merger to United States holders (as such term is defined in the Proxy Statement/Prospectus Tax Section) of KW Securities. In the case of the opinion provided by Prospect's counsel, such opinion shall be subject to the assumptions, limitations and qualifications stated in such opinion and in the Proxy Statement/Prospectus Tax Section, and shall relate to the statements made in the Proxy Statement/Prospectus Tax Section regarding the United States federal income tax consequences of the Merger to Prospect and to United States holders of Prospect Common Stock. Each of the Parties, to the extent reasonably requested by counsel for a Party, shall timely provide to such requesting counsel, to the extent possible, reasonable and customary tax representations in connection with the United States federal income tax consequences of the Merger that are described in the Proxy Statement/Prospectus Tax Section.
A-33
Section 8.1 KW Conditions Precedent. The obligations of KW to enter into and complete the Closing are subject, at the option of KW, to the fulfillment on or prior to the Closing Date of the following conditions by Prospect, any one or more of which may be waived by KW in writing:
(a) Representations and Covenants . The representations and warranties of Prospect contained in this Agreement shall be true on and as of the Closing Date, except where the failure of such representations or warranties to be so true and correct, individually or in the aggregate, has not had or would not reasonably be expected to have a Material Adverse Effect on Prospect (disregarding for purposes of determining a Material Adverse Effect for purposes of this Section 8.1(a) any materiality qualifier set forth in Prospect's representations and warranties), and Prospect shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by it on or prior to the Closing Date.
(b) Litigation . No action, suit or proceeding shall have been instituted before any court or governmental or regulatory body or instituted by any Governmental Authorities (i) to restrain, modify or prevent the carrying out of the transactions contemplated by this Agreement, or to seek damages or a discovery order in connection with the transactions contemplated by this Agreement, or (ii) which has or may have, in the reasonable opinion of KW, a Material Adverse Effect on Prospect.
(c) Filing of Proxy Statement/Prospectus; Effectiveness of Registration Statement . Prospect shall have filed the definitive Proxy Statement/Prospectus with the SEC and mailed it to Prospect's stockholders. The SEC shall have declared the Registration Statement effective and no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued by the SEC and no proceeding for that purpose shall have been initiated or, to the Knowledge of Prospect or KW, be threatened by the SEC.
(d) Approval by Prospect's Stockholders . (i) The Merger and this Agreement shall have been approved by the affirmative vote of the holders of a majority of the shares of Prospect Common Stock sold in the Prospect Public Offering voted at the meeting in accordance with Prospect Constituent Instruments, (ii) a majority of the issued and outstanding shares of Prospect Common Stock shall have approved an amendment to Prospect's certificate of incorporation in the form attached as Exhibit D , (iii) to the extent required, a majority of the shares of Prospect Common Stock present or represented by proxy shall have approved the issuance to the holders of KW Securities of the Prospect Common Stock to be issued hereunder, and (iv) the aggregate number of shares of Prospect Common Stock held by public stockholders of Prospect who exercise their redemption rights with respect to their Prospect Common Stock in accordance with the Prospect Constituent Instruments shall not constitute thirty percent (30%) or more of the Prospect Common Stock sold in the Prospect Public Offering (collectively, the approvals described in clauses (i)-(iv), the " Prospect Stockholder Approvals ").
(e) Approval by KW's Stockholders .
(i) The Merger shall have been approved by a majority of the issued and outstanding KW Common Stock in accordance with Section 251 of the DGCL and other applicable laws, and this Agreement shall have been approved by the affirmative vote of the holders of a majority of the shares of KW Common Stock in accordance with KW Constituent Instruments (the " KW Common Approvals ").
A-34
(ii) Prior to the Closing Date, the Certificate of Designation of the KW Preferred Stock, shall have been amended pursuant to a majority vote of the holders of the KW Preferred Stock such that each share of KW Preferred Stock issued and outstanding immediately prior to the Merger Effective Time shall be automatically converted into the right to receive shares of Prospect Common Stock at the Preferred Stock Exchange Ratio (the " KW Preferred Approval " and, collectively with the KW Common Approvals, the " KW Stockholder Approvals ").
(f) No Material Adverse Effect . Since the date of this Agreement, there shall not have been any occurrence, event, change, effect or development that, individually or in the aggregate, has had or is reasonably expected to have a Material Adverse Effect on Prospect.
(g) Amendment of Warrants . The holders of Prospect Warrants shall have approved the Prospect Warrant Agreement Amendment.
(h) Notice to Trustee . Prospect shall have delivered to the trustee of the Trust Fund instructions to disburse on the Closing Date the monies in the Trust Fund in accordance with the documents governing the Trust Fund.
(i) Transaction Documents . Prospect shall have executed and delivered each of the Transaction Documents to which it is a party.
(j) Merger Documents . Merger Sub shall have executed and delivered the Certificate of Merger to be filed in accordance with the DGCL as of the Merger Effective Time.
(k) Resignations . Effective as of the Closing, the directors and officers of Prospect who are not continuing as directors or officers of Prospect after the Closing shall have resigned and the copies of the resignation letters of such directors and officers shall have been delivered to Prospect, stating, among others, that they shall have no claim for employment compensation in any form from Prospect except for any reimbursement of outstanding expenses existing as of the date of such resignation.
(l) Opinion . KW shall have received the legal opinion of Bingham McCutchen LLP as to corporate matters which opinions shall be in form and substance reasonably satisfactory to KW.
(m) Officer's Certificate . KW shall have received a certificate from Prospect, signed by an authorized officer, certifying that the attached copies of the Prospect Constituent Instruments and resolutions of the Prospect Board approving the Agreement and the transactions contemplated hereby are all true, complete and correct and remain in full force and effect.
(n) Compliance Certificate . KW shall have received a certificate from Prospect signed by an authorized officer, certifying that the conditions specified in Section 8.1(a), (b) and (f) have been fulfilled.
(o) Certificate of Good Standing . KW shall have received a certificate of good standing under the applicable Law for Prospect.
(p) Injunctions or Restraints on Conduct of Business . No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint provision limiting or restricting Prospect's conduct or operation of the business of Prospect following the Merger shall be in effect, nor shall any proceeding brought by an administrative agency or commission or other Governmental Authority, domestic or foreign, seeking the foregoing be pending.
(q) Completion of the Merger and Conversion . The Merger shall have become effective under the DGCL.
A-35
(r) Governmental Approvals . Each of KW and Prospect shall have timely obtained from each Governmental Authority all approvals, waivers and consents, if any, necessary for consummation of or in connection with this Agreement and the transactions contemplated hereby, and the waiting period under the HSR Act shall have lapsed.
(s) SEC Reports . Each of Prospect or Merger Sub, as appropriate, shall have filed all reports and other documents required to be filed by it under the U.S. federal securities laws through the Closing Date.
(t) Transaction Documents . The Transaction Documents shall have been executed and delivered by Prospect.
(u) SEC Actions . No formal or informal SEC investigation or proceeding shall have been initiated by the SEC against Prospect or any of its officers or directors.
(v) AMEX Listing . Prospect shall have maintained its status as a company whose common stock and warrants are listed on AMEX and no reason shall exist as to why such status shall not continue immediately following the Closing.
(w) Prospect Founder Forfeited Shares . The Prospect Founders will have delivered certificates representing 2.575 million shares of Prospect Common Stock duly endorsed in blank with executed blank stock powers pursuant to the terms of the Forfeiture Agreement.
(x) Trust Fund Minimum . Upon the Closing, Prospect will have available for use by the Surviving Corporation, after taking into account all expenses and liabilities of Prospect and KW and other payments (" Trust Fund Expenses ") required to be made by Prospect and KW at or immediately after the Closing, a minimum of (i) $75,000,000, plus (ii) and amount equal to (x) the number of shares of Prospect Common Stock which would have been issuable pursuant to Dissenting Shares if such Dissenting Shares had not exercised dissenter's rights, multiplied by (y) $37.00, up to a maximum of $11,370,026. Trust Fund Expenses does not include (a) amounts paid to KW officers and directors in connection with the Merger and (b) any KW debt that is accelerated by the failure of KW to obtain a Consent.
Section 8.2 Prospect Conditions Precedent. The obligations of Prospect to enter into and complete the Closing are subject, at the option of Prospect, to the fulfillment on or prior to the Closing Date of the following conditions by KW, any one or more of which may be waived by Prospect in writing (subject to the limitation set forth in Section 8.2(r)):
(a) Representations and Covenants . The representations and warranties of KW contained in this Agreement shall be true on and as of the Closing Date, except where the failure of such representations or warranties to be so true and correct, individually or in the aggregate, has not had or would not reasonably be expected to have a Material Adverse Effect on KW (disregarding for purposes of determining a Material Adverse Effect for purposes of this Section 8.2(a) any materiality qualifier set forth in KW's representations and warranties), and KW shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with it on or prior to the Closing Date.
(b) Litigation . No action, suit or proceeding (i) shall have been instituted before any court or governmental or regulatory body or instituted by any Governmental Authorities to restrain, modify or prevent the carrying out of the transactions contemplated by this Agreement, or to seek damages or a discovery order in connection with such transactions, or (ii) has or may have, in the reasonable opinion of Prospect, a Material Adverse Effect on KW.
(c) Effectiveness of Registration Statement . The SEC shall have declared the Registration Statement effective and no stop order suspending the effectiveness of the Registration Statement
A-36
or any part thereof shall have been issued by the SEC and no proceeding for that purpose shall have been initiated or, to the Knowledge of Prospect or KW, be threatened by the SEC.
(d) Approval by Prospect's Stockholders . Prospect Stockholder Approvals shall have been obtained.
(e) Approval by KW's Stockholders . The KW Stockholder Approvals shall have been obtained.
(f) No Material Adverse Effect . Since the date of this Agreement, there shall not have been any occurrence, event, change, effect or development that, individually or in the aggregate, has had or is reasonably expected to have a Material Adverse Effect on KW.
(g) Amendment of Warrants . The holders of Prospect Warrants shall have approved the Prospect Warrant Agreement Amendment.
(h) Employment Agreements . KW and each of the employees named in Section 5.8 shall have entered into the employment agreements contemplated by Section 5.8.
(i) Transaction Documents . KW shall have executed and delivered each of the Transaction Documents to which it is a party.
(j) Merger Documents . KW shall have executed and delivered the Certificate of Merger to be filed in accordance with the DGCL as of the Merger Effective Time.
(k) Cancellation of Options and Equity Compensation . Prior to the Closing, (i) the holders of all outstanding options granted under KW's 1992 Incentive and Nonstatutory Stock Option Plan shall have exercised such options for shares of KW Common Stock, (ii) holders of all options and other equity compensation granted under KW's 2009 Equity Participation Plan shall have agreed to cancel all such options and other equity compensation owned by them, and (iii) KW shall have terminated its 1992 Incentive and Nonstatutory Stock Option Plan and 2009 Equity Participation Plan.
(l) Opinions . Prospect shall have received the legal opinion of KW's legal counsel, which opinion shall be in form and substance reasonably satisfactory to Prospect.
(m) Officer's Certificate . Prospect shall have received a certificate from KW signed by an authorized officer, certifying that the attached copies of the KW Constituent Instruments and resolutions or other authorizing documents approving the Agreement and the transactions contemplated hereby are all true, complete and correct and remain in full force and effect.
(n) Compliance Certificate . Prospect shall have received a certificate from KW signed by an authorized officer, certifying that the conditions specified in Section 8.2(a), (b) and (f) have been fulfilled.
(o) Certificate of Good Standing . Prospect shall have received a certificate of good standing or equivalent under the applicable Law of KW.
(p) Injunctions or Restraints on Conduct of Business . No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint provision limiting or restricting KW's conduct or operation of its business or the business of any of its Subsidiaries following the Merger shall be in effect, nor shall any proceeding brought by an administrative agency or commission or other Governmental Authority, domestic or foreign, seeking the foregoing be pending.
(q) Completion of the Merger . The Merger shall have become effective under the DGCL.
A-37
(r) Dissent Rights . The number of shares of KW Preferred Stock that have validly exercised their Dissent Rights shall not exceed 10% of the outstanding number of shares of KW Preferred Stock, and the number of shares of KW Common Stock that have validly exercised their Dissent Rights shall not exceed 10% of the outstanding number of shares of KW Common Stock. Prospect shall not waive this condition if the number of Dissenting Shares as of the Closing Date is such that, pursuant to the transactions contemplated by this Agreement, Prospect will not be acquiring "control" of KW as defined in Section 368(c) of the Code solely in exchange for Prospect Common Stock.
(s) Governmental Approvals . Each of KW and Prospect shall have timely obtained from each Governmental Authority all approvals, waivers and consents, if any, necessary for consummation of or in connection with this Agreement and the transactions contemplated hereby, and the waiting period under the HSR Act shall have lapsed.
(t) Required Consents . KW shall have delivered to Prospect evidence that all Required Consents have been obtained.
(u) Transaction Documents . The Transaction Documents shall have been executed and delivered by KW.
(v) SEC Actions . No formal or informal SEC investigation or proceeding shall have been initiated by the SEC against KW or any of its officers or directors.
Section 9.1 Survival. All of the representations and warranties of the Parties contained in this Agreement shall survive the Closing for a period of twelve (12) months and shall thereafter be of no further force and effect; provided, however , that the representations and warranties contained in Sections 2.14, 2.24 and 2.26 and Sections 3.15 and 3.22, shall survive the Closing for a period equal to any applicable statute of limitations (including any waivers or extensions thereof). All of the covenants and obligations of the Parties contained in this Agreement shall survive the Closing unless they expire sooner in accordance with their terms. The term during which any representation, warranty, or covenant survives hereunder is referred to as the " Survival Period ." Except as expressly provided in this paragraph, no claim for indemnification hereunder may be made after the expiration of the Survival Period.
Section 9.2 Indemnification by KW. KW shall, subject to limitations set forth in this Article IX hereof, indemnify, defend and hold harmless Prospect (which term, for the purposes of this Article IX shall include any of Prospect's successors) and permitted assigns (the " Prospect Indemnified Parties ") from and against any liabilities, loss, claims, damages, fines, penalties, expenses (including costs of investigation and defense and reasonable attorneys' fees and court costs) (collectively, " Damages ") arising from: (i) any breach of any representation or warranty made by KW in Article II hereof or in any certificate delivered by KW pursuant to this Agreement; or (ii) any breach by KW of its covenants or obligations in this Agreement to be performed or complied with by KW at or prior to the Closing.
Section 9.3 Indemnification by Prospect. Prospect shall, subject to the terms hereof, indemnify, defend and hold harmless KW (which term, for the purposes of this Article IX shall include any of KW's successors) and permitted assigns (the " KW Indemnified Parties ") from and against any Damages arising from: (i) any breach of any representation or warranty made by Prospect in Article III hereof or in any certificate delivered by Prospect pursuant to this Agreement; or (ii) any breach by Prospect of its covenants or obligations in this Agreement to be performed or complied with by Prospect at or prior to the Closing.
A-38
Section 9.4 Limitations on Indemnity. Notwithstanding any other provision in this Agreement to the contrary, the Prospect Indemnified Parties and the KW Indemnified Parties shall not be entitled to indemnification pursuant to Section 9.2 or Section 9.3, unless and until the aggregate amount of Damages under Section 9.2 or Section 9.3, as applicable, collectively exceeds $1,000,000 (the " Deductible "). The aggregate amount of Damages for which a Party may be liable under this Agreement shall not exceed $10,000,000 (the " Cap ").
Section 9.5 Defense of Third Party Claims. If any Prospect Indemnified Party or KW Indemnified Party determines to make a claim for indemnification under Section 9.2 or 9.3 (each an " Indemnitee "), such Indemnitee shall notify the indemnifying party (an " Indemnitor ") of the claim in writing promptly after receiving notice of any action, lawsuit, proceeding, investigation, demand or other claim against the Indemnitee (if by a third party), describing the claim, the amount thereof (if known and quantifiable) and the basis thereof in reasonable detail (such written notice, an " Indemnification Notice "); provided that the failure to so notify an Indemnitor shall not relieve the Indemnitor of its obligations hereunder except to the extent that (and only to the extent that) such failure shall have caused the damages for which the Indemnitor is obligated to be greater than such damages would have been had the Indemnitee given the Indemnitor prompt notice hereunder. Any Indemnitor shall be entitled to participate in the defense of such action, lawsuit, proceeding, investigation or other claim giving rise to an Indemnitee's claim for indemnification at such Indemnitor's expense, and at its option shall be entitled to assume the defense thereof by appointing a reputable counsel reasonably acceptable to the Indemnitee to be the lead counsel in connection with such defense; provided , that the Indemnitee shall be entitled to participate in the defense of such claim and to employ counsel of its choice for such purpose; provided, however , that the fees and expenses of such separate counsel shall be borne by the Indemnitee and shall not be recoverable from such Indemnitor under this Article IX. If the Indemnitor shall control the defense of any such claim, the Indemnitor shall be entitled to settle such claims; provided , that the Indemnitor shall obtain the prior written consent of the Indemnitee (which consent shall not be unreasonably withheld, conditioned or delayed) before entering into any settlement of a claim or ceasing to defend such claim if, pursuant to or as a result of such settlement or cessation, injunctive or other equitable relief will be imposed against the Indemnitee or if such settlement does not expressly and unconditionally release the Indemnitee from all liabilities and obligations with respect to such claim. If the Indemnitor assumes such defense, the Indemnitor shall not be liable for any amount required to be paid by the Indemnitee that exceeds, where the Indemnitee has unreasonably withheld or delayed consent in connection with the proposed compromise or settlement of a third party claim, the amount for which that third party claim could have been settled pursuant to that proposed compromise or settlement. In all cases, the Indemnitee shall provide its reasonable cooperation with the Indemnitor in defense of claims or litigation, including by making employees, information and documentation reasonably available. If the Indemnitor shall not assume the defense of any such action, lawsuit, proceeding, investigation or other claim, the Indemnitee may defend against such matter as it deems appropriate; provided that the Indemnitee may not settle any such matter without the written consent of the Indemnitor (which consent shall not be unreasonably withheld, conditioned or delayed) if the Indemnitee is seeking or will seek indemnification hereunder with respect to such matter.
Section 9.6 Determining Damages. The amount of Damages subject to indemnification under Section 9.2 or 9.3 shall be calculated net of (i) any Tax Benefit inuring to the Indemnitee on account of such Damages, (ii) any reserves set forth in any of KW Financial Statements relating to such Damages and (iii) any insurance proceeds or other amounts under indemnification agreements received or receivable by the Indemnitee on account of such Damages. If the Indemnitee receives a Tax Benefit on account of such Damages after an indemnification payment is made to it, the Indemnitee shall promptly pay to the Person or Persons that made such indemnification payment the amount of such Tax Benefit at such time or times as and to the extent that such Tax Benefit is realized by the Indemnitee. For purposes hereof, " Tax Benefit " shall mean any refund of Taxes to be paid or reduction
A-39
in the amount of Taxes which otherwise would be paid by the Indemnitee, in each case computed at the highest marginal tax rates applicable to the recipient of such benefit. To the extent Damages are recoverable by insurance, the Indemnitees shall take all commercially reasonable efforts to obtain maximum recovery from such insurance. In the event that an insurance or other recovery is made by any Indemnitee with respect to Damages for which any such Person has been indemnified hereunder, then a refund equal to the aggregate amount of the recovery shall be made promptly to the Person or Persons that provided such indemnity payments to such Indemnitee. The Indemnitors shall be subrogated to all rights of the Indemnitees in respect of Damages indemnified by the Indemnitors. The Indemnitees shall take all commercially reasonable efforts to mitigate all Damages upon and after becoming aware of any event which could reasonably be expected to give rise to Damages. For Tax purposes, the Parties agree to treat all payments made under this Article IX as adjustments to the consideration received for KW Securities.
Section 9.7 Right of Setoff. To the extent that any Party is obligated to indemnify any other Party after Closing under the provisions of this Article IX for Damages reduced to a monetary amount, such Party after Closing shall have the right to decrease any amount due and owing or to be due and owing under any agreement with the other Party, whether under this Agreement or any other agreement between such Parties on the one hand, and any of the other Party or any of their respective Affiliates, Subsidiaries or controlled persons or entities on the other.
Section 9.8 Limitation on Recourse; No Third Party Beneficiaries.
(a) No claim shall be brought or maintained by any Party or its respective successors or permitted assigns against any officer, director, partner, member, agent, representative, Affiliate, equity holder, successor or permitted assign of any Party which is not otherwise expressly identified as a Party, and no recourse shall be brought or granted against any of them, by virtue of or based upon any alleged misrepresentation or inaccuracy in or breach of any of the representations, warranties, covenants or obligations of any Party set forth or contained in this Agreement or any exhibit or schedule hereto or any certificate delivered hereunder.
(b) The provisions of this Article IX are for the sole benefit of the Parties and nothing in this Article IX, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Article IX.
Section 9.9 Fraud. Notwithstanding anything to the contrary in this Agreement, the limitations and thresholds set forth in this Article IX shall not apply with respect to fraud, intentional misrepresentation or willful misconduct.
Section 10.1 Methods of Termination. Unless waived by the Parties hereto in writing, the transactions contemplated by this Agreement may be terminated and/or abandoned at any time but not later than the Closing:
(a) by mutual written consent of the Parties;
(b) by either Prospect or KW, if the Closing has not occurred by November 13, 2009;
(c) by either Prospect or KW, if a Governmental Authority shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order, in each case which has become final and non-appealable, and which permanently restrains, enjoins or otherwise prohibits the transactions contemplated hereby;
A-40
(d) by KW if it is not in material breach of this Agreement, and if there has been a breach by Prospect of any representation, warranty, covenant or agreement contained in this Agreement which has prevented the satisfaction of the conditions to the obligations of KW at the Closing under Section 8.1 and such violation or breach has not been waived by KW or cured by Prospect within ten (10) business days after written notice thereof from KW;
(e) by Prospect, if it is not in material breach of this Agreement, and if (i) there has been a breach by KW of any representation, warranty, covenant or agreement contained in this Agreement which has prevented the satisfaction of the conditions to the obligations of Prospect at the Closing under Section 8.2 and such violation or breach has not been waived by Prospect or cured by KW within ten (10) business days after written notice thereof from Prospect, or (ii) KW has notified Prospect that KW will be unable to obtain a Required Consent prior to October 15, 2009;
(f) by KW, if the Prospect Board (or any committee thereof) shall have failed to recommend or shall have withdrawn or modified in a manner adverse to KW its approval or recommendation of this Agreement and the transactions contemplated hereunder;
(g) by Prospect, if the board of directors of KW (or any committee thereof) shall have failed to recommend or shall have withdrawn or modified in a manner adverse to Prospect its approval or recommendation of this Agreement and the transactions contemplated hereunder;
(h) by either Prospect or KW if, at the Prospect Stockholders' Meeting (including any adjournments thereof), the Prospect Stockholder Approvals shall not have been obtained, or the aggregate number of shares of Prospect Common Stock held by public stockholders of Prospect who exercise their redemption rights with respect to their Prospect Common Stock in accordance with the Prospect Constituent Instruments shall constitute thirty percent (30%) or more of the Prospect Common Stock sold in the Prospect Public Offering.
(i) by either Prospect or KW if the KW Common Approval shall not have been obtained on or prior to November 13, 2009.
Section 10.2 Effect of Termination.
(a) In the event of termination by either Prospect or KW, or both of them, pursuant to Section 10.1 hereof, written notice thereof shall forthwith be given to the other Party, and except as set forth in this Article X and subject to Section 5.10 hereof, all further obligations of the Parties shall terminate, no Party shall have any right against the other Party hereto, and each Party shall bear its own costs and expenses.
(b) If the transactions contemplated by this Agreement are terminated and/or abandoned as provided herein:
(i) each Party hereto shall destroy all documents, work papers and other material (and all copies thereof) of the other Party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the Party furnishing the same; and
(ii) all confidential information received by either Party hereto with respect to the business of the other Party hereto shall be treated in accordance with Section 7.2 hereof, which shall survive such termination or abandonment. The following other provisions shall survive termination of this Agreement: Section 5.10, Section 7.5, Article XI and this Section 10.2.
(c) If this Agreement is terminated by either Party pursuant to Section 10.1(i), KW shall be obligated to pay Prospect, as liquidated damages, $10,000,000 within thirty (30) days following the
A-41
date of such termination. If KW shall have failed to pay such liquidated damages on or before the thirtieth (30 th ) day following termination, interest will begin to accrue on such amount at a rate equal to 2% per month (compounded monthly), provided that in no event will such rate be higher than the highest rate permitted by law.
Section 11.1 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the Parties at the addresses set forth on the signature pages (or at such other address for a Party as shall be specified in writing to all other Parties).
Section 11.2 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed by all of the Parties hereto. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right.
Section 11.3 Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The terms "hereof," "herein," and "hereby" and words of similar import will, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.
Section 11.4 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated by this Agreement are fulfilled to the extent possible.
Section 11.5 Counterparts; Facsimile Execution. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties. Facsimile or electronic execution and delivery of this Agreement is legal, valid and binding for all purposes.
Section 11.6 Entire Agreement; Third Party Beneficiaries. This Agreement, taken together with all Exhibits, Annexes and Schedules hereto (a) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the transactions contemplated hereby and (b) are not intended to confer upon any Person other than the Parties any rights or remedies; provided that Section 6.9 of this Agreement is intended to benefit the Indemnified D&Os, each Indemnified D&O shall be deemed a third-party beneficiary of Section 6.9 of this Agreement, and Section 6.9 of this Agreement shall be enforceable by the Indemnified D&Os.
Section 11.7 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.
A-42
Section 11.8 Consent to Jurisdiction.
(a) Each of the Parties irrevocably agrees that any legal action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder brought by the other party hereto or its successors or assigns, shall be brought and determined exclusively in state or federal court within the City and State of New York. Each of the Parties hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than the aforesaid courts. Each of the Parties hereby irrevocably waives, and agrees not to assert as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (i) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to serve in accordance with this Section 11.8, (ii) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (iii) to the fullest extent permitted by applicable Law, any claim that (1) the suit, action or proceeding in such court is brought in an inconvenient forum, (2) the venue of such suit, action or proceeding is improper or (3) this Agreement, or the subject mater hereof, may not be enforced in or by such courts.
(b) EACH OF THE PARTIES IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE TRANSACTION DOCUMENTS, THE TRANSACTION OR THE ACTIONS OF THE PARTIES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Section 11.9 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the Parties without the prior written consent of the other Parties. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.
[ Signature Page Follows ]
A-43
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
PROSPECT ACQUISITION CORP. | |||||
By: |
/s/ DAVID A. MINELLA
|
||||
Name: David A. Minella | |||||
Title: Chairman & CEO | |||||
Address: 9130 Galleria Court, Suite 318
Naples, FL 34109 |
|||||
With a copy to: | |||||
Bingham McCutchen LLP
399 Park Avenue New York, NY 10022 Attention: Floyd I. Wittlin, Esq. |
|||||
KW MERGER SUB CORP. | |||||
By: |
/s/ DAVID A. MINELLA
|
||||
Name: David A. Minella | |||||
Title: President & Secretary | |||||
Address: c/o Prospect Acquisition Corp.
9130 Galleria Court, Suite 318 Naples, FL 34104 |
|||||
KENNEDY-WILSON, INC. | |||||
By: |
/s/ WILLIAM J. MCMORROW
|
||||
Name: William J. McMorrow
Title: Chief Executive Officer Address: 9601 Wilshire Blvd. Beverly Hills, CA 90210 |
A-44
" Action " has the meaning set forth in Section 2.10 of the Agreement.
" Affiliate(s) " means any Person that directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by Contract or otherwise and, in any event and without limitation of the previous sentence, any Person owning fifty percent (50%) or more of the voting securities of a second Person shall be deemed to control that second Person. For the purposes of this definition, a Person shall be deemed to control any of his or her immediate family members.
" Agreement " has the meaning set forth in the preamble to this Agreement.
" Amended Public Warrant " means an amended and restated Public Warrant (as defined in the Prospect Warrant Agreement) having the same terms as the Public Warrants except that it shall have an exercise price of $12.50 per share, a redemption price of $19.50 per share and a termination date of November 14, 2013.
" Amended Sponsor Warrant " means an amended and restated Sponsor Warrant (as defined in the Prospect Warrant Agreement) having the same terms as the Sponsor Warrants except that it shall have an exercise price of $12.50 per share, a redemption price of $19.50 per share and a termination date of November 14, 2013.
" AMEX " means the NYSE Amex LLC.
" Business Day " means a day (excluding Saturdays, Sundays and public holidays) on which commercial banks are generally open for banking business in the United States.
" Cap " has the meaning set forth in Section 9.4 of the Agreement.
" Cash Consideration " means $0.55 in cash.
" Certificate of Merger " has the meaning set forth in Section 1.2 of the Agreement.
" CGCL " has the meaning set forth in Section 1.7(f) of the Agreement.
" Closing " has the meaning set forth in Section 1.9 of the Agreement.
" Closing Date " has the meaning set forth in Section 1.9 of the Agreement.
" COBRA " means Code Section 4980B, Part 6 of Subtitle B of Title I of ERISA and any applicable state law providing for similar group health or welfare plan continuation coverage.
" Code " means the United States Internal Revenue Code of 1986, as amended.
" Common Stock Exchange Ratio " has the meaning set forth in Section 1.7(a) of the Agreement.
" Consent " has the meaning set forth in Section 2.5 of the Agreement.
" Contract " means a contract, lease, license, indenture, note, bond, agreement, permit, concession, franchise or other instrument.
" Conversion Shares " has the meaning set forth in Section 1.7(a) of the Agreement.
" Damages " has the meaning set forth in Section 9.2 of the Agreement.
" Deductible " has the meaning set forth in Section 9.4 of the Agreement.
" DGA " has the meaning set forth in the background to the Agreement.
A-45
" DGAH " has the meaning set forth in the background to the Agreement.
" DGCL " has the meaning set forth in the background to the Agreement.
" Disclosure Schedules " means the KW Disclosure Schedule and the Prospect Disclosure Schedule.
" Dissent Rights " has the meaning set forth in Section 1.7(f) of the Agreement.
" Dissenting Shares " has the meaning set forth in Section 1.7(f) of the Agreement.
" Environment " means soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource.
" Environmental Law " means any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of intended or actual releases of pollutants or hazardous substances or materials, violations of discharge limits, or other prohibitions and of the commencements of activities, such as resource extraction or construction, that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil, or other potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets.
" ERISA " means the Employee Retirement Income Security Act of 1974, as amended.
" ERISA Affiliate " means any trade or business (whether or not incorporated) which is or which has at any time in the last six (6) years been considered a single employer with KW or any of its Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.
" Exchange Act " means the Securities Exchange Act of 1934, as amended, supplemented or otherwise modified from time to time.
" Exchange Agent " has the meaning set forth in Section 1.8 of the Agreement.
" Exchange Ratio " has the meaning set forth in Section 1.7(a) of the Agreement.
" Exclusivity Period " has the meaning set forth in Section 4.3(a) of the Agreement.
" Expenses " means all out-of-pocket expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its Affiliates) incurred
A-46
by a party on its behalf in connection with or related to the authorization, preparation, diligence, negotiation, execution and performance of this Agreement and the Transaction Documents.
" Forfeiture Agreement " has the meaning set forth in the background to the Agreement.
" FCPA " has the meaning set forth in Section 2.20 of the Agreement.
" Governmental Authority " means any national, federal, state, provincial, local or foreign government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal or judicial or arbitral body of competent jurisdiction, or other governmental authority or instrumentality, domestic or foreign.
" HSR Act " means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
" Indemnitee " has the meaning set forth in Section 9.5 of the Agreement.
" Indemnitor " has the meaning set forth in Section 9.5 of the Agreement.
" Indemnification Notice " has the meaning set forth in Section 9.5 of the Agreement.
" Indemnified D&Os " has the meaning set forth in Section 6.9(a) of the Agreement.
" Intellectual Property Rights " has the meaning set forth in Section 2.13 of the Agreement.
" Judgment " means any judgment, order or decree.
" Knowledge ", (i) with respect to KW, means the actual knowledge of its executive officers and members of its board of directors, and (ii) with respect to Prospect, means the actual knowledge of its executive officers and the members of its board of directors.
" KW " has the meaning set forth in the preamble to the Agreement.
" KW Balance Sheet " means the unaudited balance sheet as of June 30, 2009 included in the KW Financial Statements.
" KW Benefit Plans " has the meaning set forth in Section 2.15(a) of the Agreement.
" KW Certificates " has the meaning set forth in Section 1.7(d) of the Agreement.
" KW Common Stock " has the meaning set forth in background to the Agreement.
" KW Common Approval " has the meaning set forth in Section 8.1(e) of the Agreement.
" KW Constituent Instruments " means the certificate of incorporation and bylaws, or other constitutive documents, of KW and each of its Subsidiaries each as amended to the date of the Agreement.
" KW Disclosure Schedule " has the meaning set forth in Article II of the Agreement.
" KW Financial Statements " has the meaning set forth in Section 2.6(a) of the Agreement.
" KW Group " has the meaning set forth in Section 4.3(b) of the Agreement.
" KW Indemnified Parties " has the meaning set forth in Section 9.3 of the Agreement.
" KW Preferred Approval " has the meaning set forth in Section 8.1(e) of the Agreement.
" KW Preferred Stock " has the meaning set forth in the background to the Agreement.
" KW Securities " has the meaning set forth in the background to the Agreement.
" KW Stock Rights " means that certain 7% convertible subordinated note due November 3, 2018 issued by KW to the Guardian Life Insurance Company of America, as the same is in effect on the date of this Agreement.
A-47
" KW Stockholder Approvals " has the meaning set forth in Section 8.1(e) of the Agreement.
" KW Third Party Acquisition " means (a) any sale of 15% or more of the consolidated assets of KW and its Subsidiaries, or 15% or more of the equity or voting securities of KW or any Subsidiary whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of KW (each, a " Material Subsidiary "), (b) any tender offer or exchange offer that, if consummated, would result in a third party beneficially owning 15% or more of the equity or voting securities of KW or of any Material Subsidiary, (c) a merger, consolidation, business combination, share exchange, sale of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving KW or any Material Subsidiary, in each such case in this clause (c) that would result in either (x) a third party beneficially owning 15% or more of any class of equity or voting securities of KW or any Material Subsidiary, or 15% or more of the consolidated assets of KW or (y) the stockholders of KW receiving securities traded in the U.S. on any nationally-recognized exchange or over-the-counter market.
" Law(s) " means any law, statute, ordinance, rule, regulation, order, writ, injunction or decree.
" Legal Requirement " means any federal, state, local, municipal, provincial, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authorities (or under the authority of any national securities exchange upon which a Party's securities are then listed or traded)
" Liens " means any liens, security interests, pledges, equities and claims of any kind, voting trusts, shareholder agreements and other encumbrances.
" Management Incentive Shares " has the meaning set forth in Section 6.8 of the Agreement.
" Management Incentive Plan " has the meaning set forth in Section 6.8 of the Agreement.
" Material Adverse Effect " means any event, change or effect that is materially adverse to the condition (financial or otherwise), properties, assets, liabilities, business, operations or results of operations of such Person and its Subsidiaries, taken as a whole. Notwithstanding the foregoing, none of the following shall be deemed, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or would be, a "Material Adverse Effect" with respect to any Person: any facts, changes, developments, events, occurrences, actions, omissions or effects (i) generally affecting (A) the economy, or financial or capital markets, in the United States or elsewhere in the world, to the extent that they do not disproportionately affect such Person in relation to other companies in the industry in which such Person primarily operates or (B) the industry in which such Person operates to the extent that they do not disproportionately affect such Person in relation to other companies in the industry in which such Person primarily operates, or (ii) arising out of, resulting from or attributable to (1) changes (after the date of this Agreement) in Law or in generally accepted accounting principles or in accounting standards or (2) any decline in the market price, or change in trading volume, of the capital stock of such Person or any failure to meet publicly announced revenue or earnings projections or internal projections, or (iii) changes related to or arising from the execution, announcement or performance of, or compliance with, this Agreement or the consummation of the transactions contemplated hereby, including the impact thereof on relationships, contractual or otherwise, governmental authorities, customers, cooperators, suppliers, distributors or employees;
" Material Contract " means a written Contract, as amended and supplemented to which KW or any of its Subsidiaries is a party or by which any of their respective assets and properties is currently bound, that is material to KW's business, properties, assets or condition (financial or otherwise), results of operations or prospects and was not executed in the ordinary course of business, including contracts
A-48
that have expired by their terms or otherwise terminated but have liabilities that continue to attach to KW or any of its Subsidiaries.
" Material Permits " means all Permits other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on any Parties.
" Merger " has the meaning set forth in the background to the Agreement.
" Merger Sub " has the meaning set forth in the preamble to the Agreement.
" Merger Effective Time " has the meaning set forth in Section 1.2 of the Agreement.
" Money Laundering Laws " has the meaning set forth in Section 2.21 of the Agreement.
" OFAC " has the meaning set forth in Section 2.25 of the Agreement.
" Off-balance Sheet Arrangement " means with respect to any Person, any securitization transaction to which that Person or its Subsidiaries is party and any other transaction, agreement or other contractual arrangement to which an entity unconsolidated with that Person is a party, under which that Person or its Subsidiaries, whether or not a party to the arrangement, has, or in the future may have: (a) any obligation under a direct or indirect guarantee or similar arrangement; (b) a retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement; or (c) derivatives to the extent that the fair value thereof is not fully reflected as a liability or asset in the financial statements.
" Party " or " Parties " has the meaning set forth in the preamble to the Agreement.
" Permits " means all governmental franchises, licenses, permits, authorizations and approvals necessary to enable a Person to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted.
" Permitted Lien " means (a) any restriction on transfer arising under applicable securities law; (b) any Liens for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with U.S. GAAP; (c) any statutory Liens arising in the ordinary course of business by operation of Law with respect to a liability that is not yet due and delinquent and which are not, individually or in the aggregate, significant; (d) minor title defects, recorded easements, and zoning, entitlement, building and other minor land use regulations imposed by governmental agencies having jurisdiction over the Real Property, which minor title defects, recorded easements, and regulations do not, individually or in the aggregate, impair the continued use, occupancy, value or marketability of title of the property to which they relate and are not violated by the current or proposed use and operation of the Real Property; (e) covenants, conditions, restrictions, easements and other similar matters of record affecting title to the Real Property which do not materially impair the occupancy or use of the Real Property for the purposes for which it is currently used or proposed to be used in connection with the such relevant Person's business; (f) Liens identified on title policies, title opinions or preliminary title reports or other documents or writings included in the public records; (g) Liens arising under worker's compensation, unemployment insurance, social security, retirement and similar legislation; (h) Liens of lessors and licensors arising under lease agreements or license arrangements; and (i) those Liens set forth in KW Disclosure Schedule.
" Person(s) " means an individual, partnership, corporation, joint venture, unincorporated organization, cooperative or a governmental entity or agency thereof.
" Preferred Stock Exchange Ratio " has the meaning set forth in Section 1.7(a) of the Agreement.
" Prospect " has the meaning set forth in the preamble to the Agreement.
A-49
" Prospect Board " means the board of directors of Prospect prior to the Merger.
" Prospect Common Stock " means the Common Stock of Prospect, $0.001 par value per share.
" Prospect Constituent Instruments " has the meaning set forth in Section 3.2 of the Agreement.
" Prospect Disclosure Schedule " has the meaning set forth in Article III of the Agreement.
" Prospect Financial Statements " has the meaning set forth in Section 3.7 of the Agreement.
" Prospect Founders " shall mean Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P., Capital Management Systems, Inc., SJC Capital LLC, Michael P. Castine, Daniel Gressel, Michael Downey, James J. Cahill and John Merchant.
" Prospect Group " has the meaning set forth in Section 4.3(a) of the Agreement.
" Prospect Indemnified Parties " has the meaning set forth in Section 9.2 of the Agreement.
" Prospect Material Contract " has the meaning set forth in Section 3.21(a) of the Agreement.
" Prospect Public Offering " means the initial public offering of Prospect completed on November 14, 2007, in which Prospect sold 25,000,000 Units at a price of $10.00 per unit.
" Prospect SEC Documents " has the meaning set forth in Section 3.7 of the Agreement.
" Prospect Stockholder Approvals " has the meaning set forth in Section 8.1(d) of the Agreement.
" Prospect Stockholders' Meeting " has the meaning set forth in Section 6.1(a) of the Agreement.
" Prospect Share(s) " has the meaning set forth in the background to the Agreement.
" Prospect Stock Right (s)" shall mean a warrant or other right to purchase a share of common stock of Prospect.
"Prospect Third Party Acquisition " means: (a) any purchase of 15% or more of the consolidated assets of a third party and its subsidiaries, or 15% or more of the equity or voting securities of a third party or a Material Subsidiary (as defined in KW Third Party Acquisition definition) thereof, (b) any tender offer or exchange offer that, if consummated, would result in Prospect beneficially owning 15% or more of a third party's equity or voting securities or any Material Subsidiary thereof, (c) a merger, consolidation, business combination, share exchange, purchase of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving Prospect and any third party, in each such case in this clause (c) that would result in Prospect beneficially owning 15% or more of any class of equity or voting securities of such third party or any Material Subsidiary thereof, or 15% or more of the consolidated assets of such third party.
" Prospect Warrant " means an outstanding warrant of Prospect which entitles the registered holder to purchase one share of Prospect Common Stock at a price of $7.50 per share, subject to adjustment at any time commencing on the completion of a business combination.
" Prospect Warrant Agreement " means the Warrant Agreement, by and between Prospect and Continental Stock Transfer & Trust Company (as Warrant Agent), dated as of November 14, 2007.
" Prospect Warrant Agreement Amendment " means an amendment to the Prospect Warrant Agreement substantially in the form attached as Exhibit E that provides that, simultaneously with the Closing: (i) each Sponsor Warrant (as defined in the Prospect Warrant Agreement) will be converted into the Amended Sponsor Warrant; and (ii) each Public Warrant (as defined in the Prospect Warrant Agreement) will be converted into either (x) the Cash Consideration or (y) the Amended Public Warrant, in each case as the holder of Public Warrants shall have elected or be deemed to have elected; provided that no more than 50% of the outstanding Public Warrants shall be converted into the right to receive the Amended Public Warrant.
A-50
" Prospect Warrant Holders Meeting " has the meaning set forth in Section 6.1(a) of the Agreement.
" Proxy Statement/Prospectus Tax Section " has the meaning set forth in Section 7.7 of the Agreement.
" Proxy Statement/Prospectus " has the meaning set forth in Section 2.28 of the Agreement.
" Real Estate Leases " means the leases for the properties located at 9601 Wilshire Blvd., Beverly Hills, CA, 90210 and 9701 Wilshire Blvd., Beverly Hills, CA, 90210.
" Real Property " has the meaning set forth in Section 2.12(a) of the Agreement.
" Registration Statement " has the meaning set forth in Section 2.28 of the Agreement.
" Regulation S-K " means Regulation S-K promulgated under the Securities Act of 1933, as amended.
" Representatives " of any Party means such Party's employees, accountants, auditors, actuaries, counsel, financial advisors, bankers, investment bankers and consultants and any other person acting on behalf of such Party.
" Required Consent " has the meaning set forth in Section 5.5(a) of the Agreement.
" Sarbanes-Oxley Act " has the meaning set forth in Section 3.13 of the Agreement.
" SEC " means the United States Securities and Exchange Commission.
" Securities Act " means the Securities Act of 1933, as amended, supplemented or otherwise modified from time to time.
" Subsidiary " means with respect to a Person an entity if (a) such Person directly or indirectly owns, beneficially or of record, an amount of voting securities or other interests in such entity that is sufficient to enable such Person to elect at least a majority of the members of such entity's board of directors or other governing body, or (b) at least 50% of the outstanding equity or financial interests of such entity such that its financial results are consolidated with such other Person.
" Survival Period " has the meaning set forth in Section 9.1 of this Agreement.
" Surviving Corporation " has the meaning set forth in Section 1.1 of the Agreement.
" Tail Coverage Amount " has the meaning set forth in Section 6.9(a) of the Agreement.
" Tangible Personal Property " has the meaning set forth in Section 2.12(b) of the Agreement.
" Taxes " means all United States federal, state, local or foreign taxes, charges, fees, levies or other assessments, including, without limitation, income, gross receipts, excise, real and personal property, profits, estimated, severance, occupation, production, capital gains, capital stock, goods and services, environmental, employment, withholding, stamp, value added, alternative or add-on minimum, sales, transfer, use, license, payroll and franchise taxes or any other tax, custom, duty or governmental fee, or other like assessment or charge of any kind whatsoever, imposed by the United States, or any state, county, local or foreign government or subdivision or agency thereof, and such term shall include any interest, penalties, fines, related liabilities or additions to tax attributable to such taxes, charges, fees, levies or other assessments.
" Tax Benefit " has the meaning set forth in Section 9.6 of the Agreement.
" Tax Return " means all federal, state, local, provincial and foreign Tax returns, declarations, statements, reports, schedules, forms and information returns and any amended Tax return relating to Taxes.
A-51
" Trade Secrets " means all trade secrets under applicable law and other rights in know-how and confidential or proprietary information, processing, manufacturing or marketing information, including new developments, inventions, processes, ideas or other proprietary information that provides advantages over competitors who do not know or use it.
" Transaction Documents " means this Agreement and any other agreement or document to be delivered by the Parties on the Closing Date.
" Trust Fund " has the meaning set forth in Section 3.19 of the Agreement.
" Trust Fund Expense " has the meaning set forth in Section 8.1(x) of the Agreement.
" U.S." or " United States " means the United States of America.
" U.S. GAAP " means generally accepted accounting principles of the United States.
" Unit " means the Unit of Prospect which entitles the registered holder to one share of Prospect Common Stock and one Warrant.
" Voting Prospect Debt " has the meaning set forth in Section 3.1(c) of the Agreement.
" Voting KW Debt " has the meaning set forth in Section 2.1(b) of the Agreement.
A-52
FORM OF
AMENDMENT NO. 1 TO WARRANT AGREEMENT
This Amendment No. 1, dated as of , 2009 (this " Amendment "), to the Warrant Agreement, dated as of November 14, 2007 (the " Warrant Agreement "), by and between Prospect Acquisition Corp., a Delaware corporation (the " Company "), and Continental Stock Transfer & Trust Company, a New York corporation (" Warrant Agent ").
WHEREAS , the Company consummated its initial public offering on November 14, 2007, pursuant to which the Company issued 25,000,000 units;
WHEREAS , each unit consisted of one share of common stock, par value $0.0001 per share, of the Company (the " Common Stock ") and one warrant to purchase one share of Common Stock at an exercise price of $7.50 per share (the " Public Warrants ");
WHEREAS , pursuant to a private placement, simultaneously with the Company's initial public offering, the Company issued to Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P. and Capital Management Systems, Inc. (the " Sponsors "), 5,250,000 warrants (the " Sponsors' Warrants "), with each Sponsors' Warrant exercisable into one share of Common Stock at $7.50;
WHEREAS , the terms of the Warrants are governed by the Warrant Agreement and capitalized terms used, but not defined, herein shall have the meaning given to such terms in the Warrant Agreement;
WHEREAS , the Company has entered into that certain Agreement and Plan of Merger (the " Merger Agreement "), by and among the Company, KW Merger Sub Corp., a Delaware corporation and newly-formed wholly-owned subsidiary of the Company (" Merger Sub "), and Kennedy-Wilson, Inc., a Delaware corporation (" KW "), which provides for the merger of Merger Sub with and into KW as a result of which KW will become a wholly-owned subsidiary of the Company (the " Merger ") and outstanding shares of KW's common stock, par value $0.01 per share, and KW's convertible preferred stock, par value $0.01 per share, will be exchanged for Common Stock;
WHEREAS , pursuant to the Merger Agreement, the Company agreed to seek the approval of the holders of its outstanding Warrants to amend the Warrant Agreement to: (i) allow each holder of Public Warrants to elect to receive upon the closing of the Merger, for each outstanding Public Warrant, either (a) the right to receive $0.55 in cash or (b) an amended and restated Public Warrant with a new exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013, subject to adjustment and proration as described below and (ii) amend and restate the terms of the Sponsor Warrants to provide for an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013 (collectively, the " Warrant Amendment Proposal "); and
WHEREAS , holders of Warrants exercisable for a majority of the Warrant Shares (as defined in the Warrant Agreement) issuable upon exercise of all outstanding Warrants have approved the Warrant Amendment Proposal at a meeting of the holders of Warrants.
NOW, THEREFORE , in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and
B-1
intending to be legally bound hereby, the parties hereto agree to amend the Warrant Agreement as set forth herein:
1. Amendment of Warrant Agreement.
(a) New Section 11A. The following shall be added as a new Section 11A of the Warrant Agreement:
"SECTION 11A. The Merger . Pursuant to the Merger (as defined below), the Warrants shall be treated as follows:
(a) Public Warrants.
(1) Each Public Warrant will be automatically (without any action on the part of the holders of Public Warrants) converted into the right to receive either (x) $0.55 in cash (the " Cash Amount ") or (y) an amended and restated Public Warrant with an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013 (the " Amended and Restated Public Warrant "), in each case as the holder of such Public Warrant shall have elected or be deemed to have elected (an " Election ") in accordance with Sections 11A(a)(2) and 11A(c) . Following the Merger, the Warrant Agreement shall be amended and restated in the form attached hereto as Exhibit C (the " Amended and Restated Warrant Agreement "). The Amended and Restated Public Warrants will contain the terms and conditions set forth in the Amended and Restated Warrant Agreement.
(2) Subject to the procedures in Section 11A(c) and the limitations in Section 11A(a)(3) , each holder of Public Warrants outstanding immediately prior to the Election Date who makes a valid Election to receive Amended and Restated Public Warrants will be entitled to receive the Amended and Restated Public Warrants in respect of such Public Warrants; provided that , notwithstanding anything in this Agreement to the contrary, a holder of a Public Warrant shall not be able to make a valid election to receive an Amended and Restated Public Warrant with respect to any Public Warrants that it voted against this Amendment. All holders of Public Warrants immediately prior to the Election Date who do not make a valid Election for Amended and Restated Public Warrants will be deemed to have elected to receive the Cash Amount in respect of their Public Warrants.
(3) Notwithstanding anything in this Agreement to the contrary:
(A) the maximum number of Public Warrants to be converted into the right to receive the Amended and Restated Public Warrants will be equal to 12,500,000 (the " Warrant Limit "); and
(B) the minimum number of Public Warrants to be converted into the right to receive the Cash Amount will be equal to (x) the number of Public Warrants outstanding immediately prior to the Effective Time less (y) the Warrant Limit.
(4) Upon the closing of the Merger:
(A) all Public Warrants for which Elections to receive the Cash Amount have been made or deemed to have been made (the " Cash Election Warrants ") will be converted into the right to receive the Cash Amount; and
(B) to the extent the aggregate number of Public Warrants making an Election to receive Amended and Restated Public Warrants (the " Warrant Election Warrants ") exceeds the
B-2
Warrant Limit, the Warrant Election Warrants will be converted into the right to receive the Cash Amount and the Amended and Restated Public Warrants in the following manner:
(x) the number of Warrant Election Warrants covered by each Form of Election (as defined below) to be converted into Amended and Restated Public Warrants will be determined by multiplying the number of Warrant Election Warrants covered by such Form of Election by a fraction, (a) the numerator of which is the Warrant Limit and (b) the denominator of which is the aggregate number of Warrant Election Warrants; and
(y) all Warrant Election Warrants not converted into Amended and Restated Public Warrants in accordance with clause (x) will be converted into the right to receive the Cash Amount in respect thereof.
(b) Sponsors' Warrants. Each Sponsors' Warrant will be amended and restated to provide for an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013 (the " Amended and Restated Sponsors' Warrants "). The Amended and Restated Sponsors' Warrants will have the terms and conditions set forth in the Amended and Restated Warrant Agreement.
(c) Election/Exchange Procedures for Public Warrants .
(1) The Company will authorize the Exchange Agent (as defined in the Merger Agreement) to receive Elections.
(2) The Company will prepare, for use by the holders of Public Warrants in surrendering Warrant Certificates, a form (the " Form of Election ") pursuant to which each holder of Public Warrants may make an Election. The Form of Election will be delivered to such Warrant holders by means and at a time upon which the Company and KW will mutually agree.
(3) An Election will have been properly made only if a Form of Election properly completed and signed and accompanied by the Warrant Certificate or Warrant Certificates to which such Form of Election relates (x) is received by the Exchange Agent prior to the date and time (the " Election Date ") of the special meeting of warrantholders being held to approve the Warrant Amendment Proposal (the " Special Meeting ") or (y) is tendered for delivery to the Exchange Agent at the Special Meeting.
(4) Any Public Warrant holder may at any time prior to the Election Date change such holder's Election if the Exchange Agent receives (x) prior to the Election Date written notice of such change accompanied by a properly completed Form of Election or (y) at the Special Meeting a new, properly completed Form of Election. The Company will have the right in its sole discretion to permit changes in Elections after the Election Date.
(5) The Company will have the right to make rules, not inconsistent with the terms of this Agreement or the Merger Agreement, governing the validity of Forms of Election, the manner and extent to which Elections are to be taken into account in making the determinations prescribed by this section, the issuance and delivery of certificates for the Amended and Restated Public Warrants, and the payment of the Cash Amount.
(6) In connection with the above procedures, (A) the holders of Warrant Certificates evidencing Public Warrants will surrender such certificates to the Exchange Agent, (B) upon surrender of a Warrant Certificate the holder thereof will be entitled to receive the Cash Amount or Amended and Restated Public Warrants, as applicable, and (C) the Warrant Certificates so surrendered will forthwith be canceled.
(d) Definitions.
(1) " Merger Agreement " means that certain Agreement and Plan of Merger, dated as of September 8, 2009, by and among the Company, KW Merger Sub Corp. (" Merger Sub ") and Kennedy-Wilson, Inc. (" KW ").
B-3
(2) " Merger " means the merger of Merger Sub with and into KW as a result of which KW will become a wholly-owned subsidiary of the Company."
(b) New Exhibit C. Exhibit A attached to this Amendment shall be added as a new Exhibit C to the Warrant Agreement.
2. Miscellaneous .
(a) Governing Law. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the internal laws of said State. The parties agree that all actions and proceedings arising out of this Agreement or any of the transactions contemplated hereby shall be brought in the United States District Court for the Southern District of New York or in a New York State Court in the County of New York and that, in connection with any such action or proceeding, submit to the jurisdiction of, and venue in, such court. Each of the parties hereto also irrevocably waives all right to trial by jury in any action, proceeding or counterclaim arising out of this Agreement or the transactions contemplated hereby.
(b) Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns.
(c) Entire Agreement. This Amendment sets forth the entire agreement and understanding between the parties as to the subject matter thereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. Except as set forth in this Amendment, provisions of the Warrant Agreement which are not inconsistent with this Amendment shall remain in full force and effect.
(d) Severability. This Amendment shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Amendment or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as part of this Amendment a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.
(e) Counterparts. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall constitute but one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
B-4
IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be duly executed as of the date first above written.
PROSPECT ACQUISITION CORP. | ||||
By: |
|
Name: Title: |
|
|
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Warrant Agent |
|
|
||
By: |
|
Name: Title: |
|
|
B-5
Amended and Restated Warrant Agreement
KENNEDY-WILSON HOLDINGS, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Warrant Agent
AMENDED AND RESTATED WARRANT AGREEMENT
Dated as of [ ], 2009
WARRANT AGREEMENT
TABLE OF CONTENTS
Section 1. |
Appointment of Warrant Agent |
1 | |||||||
Section 2. |
Warrant Certificates |
1 | |||||||
Section 3. |
Execution of Warrant Certificates |
1 | |||||||
Section 4. |
Registration and Countersignature |
1 | |||||||
Section 5. |
Registration of Transfers and Exchanges; Transfer Restrictions |
2 | |||||||
Section 6. |
Terms of Warrants |
3 | |||||||
(a) |
Exercise Price and Exercise Period |
3 | |||||||
(b) |
Redemption of Warrants |
4 | |||||||
(c) |
Exercise Procedure |
4 | |||||||
(d) |
Registration Requirement |
||||||||
Section 7. |
Payment of Taxes |
6 | |||||||
Section 8. |
Mutilated or Missing Warrant Certificates |
7 | |||||||
Section 9. |
Reservation of Warrant Shares |
7 | |||||||
Section 10. |
Obtaining Stock Exchange Listings |
7 | |||||||
Section 11. |
Adjustment of Number of Warrant Shares |
7 | |||||||
(a) |
Adjustment for Change in Capital Stock |
8 | |||||||
(b) |
Adjustment for Rights Issue |
8 | |||||||
(c) |
Adjustment for Other Distributions |
9 | |||||||
(d) |
Adjustment for Common Stock Issue |
10 | |||||||
(e) |
Adjustment for Convertible Securities Issue |
10 | |||||||
(f) |
Adjustment for Tender or Exchange Offer |
11 | |||||||
(g) |
Consideration Received |
12 | |||||||
(h) |
Defined Terms; When De Minimis Adjustment May Be Deferred |
13 | |||||||
(i) |
When No Adjustment Required |
13 | |||||||
(j) |
Notice of Adjustment |
13 | |||||||
(k) |
Notice of Certain Transactions |
14 | |||||||
(l) |
Reorganization of Company |
14 | |||||||
(m) |
Warrant Agent's Disclaimer |
15 | |||||||
(n) |
When Issuance or Payment May Be Deferred |
15 | |||||||
(o) |
Adjustment in Exercise Price |
15 | |||||||
(p) |
Form of Warrants |
16 | |||||||
(q) |
Other Dilutive Events |
16 | |||||||
Section 12. |
Fractional Interests |
16 | |||||||
Section 13. |
Notices to Warrant Holders |
16 | |||||||
Section 14. |
Merger, Consolidation or Change of Name of Warrant Agent |
17 | |||||||
Section 15. |
Warrant Agent |
18 | |||||||
Section 16. |
Change of Warrant Agent |
20 | |||||||
Section 17. |
Notices to Company and Warrant Agent |
20 | |||||||
Section 18. |
Supplements and Amendments |
21 | |||||||
Section 19. |
Successors |
21 | |||||||
Section 20. |
Termination |
21 | |||||||
Section 21. |
Governing Law |
21 | |||||||
Section 22. |
Benefits of This Agreement |
21 | |||||||
Section 23. |
Counterparts |
22 | |||||||
Section 24. |
Force Majeure |
22 | |||||||
EXHIBIT A |
Form of Warrant |
||||||||
EXHIBIT B |
LEGEND |
C-i
AMENDED AND RESTATED WARRANT AGREEMENT dated as of [ ], 2009, between Kennedy-Wilson Holdings, Inc. (formerly Prospect Acquisition Corp.), a Delaware corporation (the " Company "), and Continental Stock Transfer & Trust Company, a New York corporation, as Warrant Agent (the " Warrant Agent ").
WHEREAS, on November 14, 2007, the Company issued (i) 5,250,000 warrants in a private placement bearing the legend set forth in Exhibit B hereto (the " Sponsors' Warrants "), and (ii) 25,000,000 warrants pursuant to a registration statement filed with the Securities and Exchange Commission (the " Public Warrants " and together with the Sponsors' Warrants, the " Warrants "), which in each case entitle the holders thereof to purchase shares of common stock of the Company, $0.0001 par value per share (" Common Stock ," and the Common Stock issuable on exercise of the Warrants, the " Warrant Shares ");
WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance, transfer, exchange and exercise of Warrants and other matters as provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth hereinafter in this Agreement, and the Warrant Agent hereby accepts such appointment.
SECTION 2. Warrant Certificates. The certificates evidencing the Warrants (the " Warrant Certificates ") to be delivered pursuant to this Agreement shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto.
SECTION 3. Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of the Company by its Chairman of the Board or its President or Chief Executive Officer or a Vice President and by its Secretary or an Assistant Secretary. Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of the present or any future Chairman of the Board, President, Chief Executive Officer, Vice President, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, President, Chief Executive Officer, Vice President, Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be countersigned and delivered or disposed of he or she shall have ceased to hold such office.
In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been countersigned by the Warrant Agent, or disposed of by the Company, such Warrant Certificates nevertheless may be countersigned and delivered or disposed of as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such officer.
Warrant Certificates shall be dated the date of countersignature by the Warrant Agent.
SECTION 4. Registration and Countersignature. Warrant Certificates shall be countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. The Warrant Agent shall, upon written instructions of the Chairman of the Board, the President or Chief Executive Officer, a Vice President, the Treasurer or the Chief Financial Officer of the Company, countersign, issue and deliver Warrants as provided in this Agreement.
The Company and the Warrant Agent may deem and treat the registered holder(s) of the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other
C-1
writing thereon made by anyone), for all purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.
SECTION 5. Registration of Transfers and Exchanges; Transfer Restrictions. The Warrant Agent shall from time to time, subject to the limitations of this Section 5, register the transfer of any outstanding Warrant Certificates upon the records to be maintained by it for that purpose, upon surrender thereof duly endorsed or accompanied (if so required by the Warrant Agent) by a written instrument or instruments of transfer in form satisfactory to the Warrant Agent, duly executed by the registered holder or holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be cancelled by the Warrant Agent. Cancelled Warrant Certificates shall thereafter be disposed of by the Warrant Agent in its customary manner.
The Sponsors' Warrants may not be sold or transferred prior to [ ], 2009 (1) (such date, the " Transfer Restriction Termination Date ") except to a Permitted Transferee who agrees in writing with the Company (i) to be subject to such transfer restrictions and (ii) that such Sponsors' Warrants will be held in an escrow account established pursuant to the Escrow Agreement referred to below until the Transfer Restriction Termination Date. As used herein, " Permitted Transferee " means a transfer (i) to any officer or director of the Company, any affiliates or family members of any officer or director of the Company or any affiliates of any Sponsor (as defined herein), (ii) in the case of a natural person, by gift to a member of such person's immediate family or to a trust, the beneficiary of which is a member of such person's immediate family, an affiliate of such person or to a charitable organization, (iii) in the case of a natural person, by virtue of the laws of descent and distribution upon death of such person, (iv) with respect to any Sponsor, by virtue of the laws of Delaware or such Sponsor's organizational documents upon dissolution of such Sponsor, (v) in the case of a natural person, pursuant to a qualified domestic relations order, or (vi) in the event the Company's consummation of a liquidation, merger, stock exchange or other similar transaction which results in all of the Company's stockholders having the right to exchange their shares of common stock for cash, securities or other property. Upon issuance, the Sponsors' Warrants will be deposited with the Continental Stock Transfer & Trust Company, as escrow agent (the " Escrow Agent ") pursuant to the terms of the Escrow Agreement dated November 14, 2007 between the Company and the Escrow Agent, (the " Escrow Agreement "), where they will remain until the Transfer Restriction Termination Date.
The holders of any Sponsors' Warrants or Warrant Shares issued upon exercise of any Sponsors' Warrants further agree prior to any transfer of such securities, to give written notice to the Company expressing its desire to effect such transfer and describing briefly the proposed transfer. Upon receiving such notice, the Company shall present copies thereof to its counsel and the holder agrees not to make any disposition of all or any portion of such securities unless and until:
(a) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement, in which case the legends set forth in Exhibit B or Section 6(c) hereof, as the case may be (collectively the "Legends") with respect to such securities sold pursuant to such registration statement shall be removed; or
(b) if reasonably requested by the Company, (A) the holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such Securities under the Securities Act, (B) the Company shall have received customary representations and warranties regarding the transferee that are reasonably satisfactory to the Company signed by the proposed transferee and (C) the Company shall have received an agreement by such transferee to the restrictions contained in the Legends.
C-2
Subject to the terms of this Agreement, Warrant Certificates may be exchanged at the option of the holder(s) thereof, when surrendered to the Warrant Agent at its principal corporate trust office, which is currently located at the address listed in Section 17 hereof, for another Warrant Certificate or other Warrant Certificates of like tenor and representing in the aggregate a like number of Warrants. Any holder desiring to exchange a Warrant Certificate shall deliver a written request to the Warrant Agent, and shall surrender, duly endorsed or accompanied (if so required by the Warrant Agent) by a written instrument or instruments of transfer in form satisfactory to the Warrant Agent, the Warrant Certificate or Certificates to be so exchanged. Warrant Certificates surrendered for exchange shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then be disposed of by such Warrant Agent in its customary manner.
The Warrant Agent is hereby authorized to countersign, in accordance with the provisions of this Section 5 and of Section 4 hereof, the new Warrant Certificates required pursuant to the provisions of this Section 5.
SECTION 6. Terms of Warrants.
(a) Exercise Price and Exercise Period.
The initial exercise price per share at which Warrant Shares shall be purchasable upon the exercise of Warrants (the " Exercise Price ") shall be $12.50 per share, and each Warrant shall be initially exercisable to purchase one share of common stock of the Company, $0.0001 par value per share (" Common Stock "). The Sponsors' Warrants shall be exercisable on a cashless basis as set forth in Section 6(d) at the option of any Sponsor (as defined herein) or a Permitted Transferee.
Subject to the terms of this Agreement (including without limitation Section 6(e) below), each Warrant holder shall have the right, which may be exercised commencing at the opening of business on the first day of the applicable Warrant Exercise Period set forth below and until 5:00 p.m., New York City time, on the last day of such Warrant Exercise Period, to receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment of the Exercise Price then in effect for such Warrant Shares. No adjustments as to dividends will be made upon exercise of the Warrants.
The " Warrant Exercise Period " shall commence (subject to Section 6(d) below), on [ ], 2009 (2) and shall end on the earlier of:
(i) November 14, 2013; and
(ii) the Business Day preceding the date on which such Warrants are redeemed pursuant to Section 6(b) below or expire pursuant to Section 6(f) below;
provided that the Sponsors' Warrants may not be exercised prior to the Transfer Restriction Termination Date.
The " Closing Price " of the Common Stock on any date of determination means;
(i) the closing sale price for the regular trading session (without considering after hours or other trading outside regular trading session hours) of the Common Stock (regular way) on the American Stock Exchange on that date (or, if no closing price is reported, the last reported sale price during that regular trading session),
(ii) if the Common Stock is not listed for trading on the American Stock Exchange on that date, as reported in the composite transactions for the principal United States securities exchange on which the Common Stock is so listed,
(iii) if the Common Stock is not so reported, the last quoted bid price for the Common Stock in the over-the-counter market as reported by the OTC Bulletin Board, the National Quotation Bureau or similar organization, or
C-3
(iv) if the Common Stock is not so quoted, the average of the mid-point of the last bid and ask prices for the Common Stock from at least three nationally recognized investment banking firms that the Company selects for this purpose.
Each Warrant not exercised or redeemed prior to 5:00 p.m., New York City time, on the last day of the Warrant Exercise Period shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time.
(b) Redemption of Warrants.
The Company may call the Warrants for redemption, in whole and not in part, at a price of $.01 per Warrant, upon not less than 30 days' prior written notice of redemption to each Warrant holder, at any time after such Warrants have become exercisable pursuant to Section 6(a), if, and only if, (i) the Closing Price has equaled or exceeded $19.50 per share for any 20 trading days within a 30-trading-day period ending on the third Business Day prior to the notice of redemption to Warrant holders and (ii) at all times between the date of such notice of redemption and the redemption date a registration statement is in effect covering the Warrant Shares issuable upon exercise of the Warrants and a current prospectus relating to those Warrant Shares is available.
Upon a call for redemption of Warrants by the Company, the Company shall have the right to require all holders of Warrants subject to redemption who exercise such Warrants after the Company's call for redemption to do so on a cashless basis in accordance with the procedures set forth in Section 6(d).
Notwithstanding the foregoing, no Sponsors' Warrants shall be redeemable so long as they are held by the purchasers set forth in Schedule I hereto (the "Sponsors") or a Permitted Transferee; provided that the fact that one or more Sponsors' Warrants are non-redeemable because they are held by a Sponsor or a Permitted Transferee shall not affect the Company's right to redeem the Public Warrants and all Sponsors' Warrants that are not held by a Sponsor or a Permitted Transferee pursuant to the preceding paragraph.
(c) Exercise Procedure.
A Warrant may be exercised upon surrender to the Company at the principal stock transfer office of the Warrant Agent, which is currently located at the address listed in Section 17 hereof, of the certificate or certificates evidencing the Warrants to be exercised with the form of election to purchase on the reverse thereof duly filled in and signed and such other documentation as the Warrant Agent may reasonably request, and upon payment to the Warrant Agent for the account of the Company of the Exercise Price (adjusted as herein provided if applicable) for the number of Warrant Shares in respect of which such Warrants are then exercised. Subject to any Sponsor or Permitted Transferee's election to exercise its Sponsors' Warrants on a cashless basis as set forth in Section 6(d), payment of the aggregate Exercise Price shall be made in cash or by certified or official bank check payable to the order of the Company in New York Clearing House Funds, or the equivalent thereof. In no event will any Warrants be settled on a net cash basis.
Subject to the provisions of Sections 6(e) and 7 hereof, upon such surrender of Warrants and payment of the Exercise Price, the Company shall issue and cause to be delivered with all reasonable dispatch to and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of full Warrant Shares issuable upon the exercise of such Warrants together with cash as provided in Section 12 hereof. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price.
C-4
The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part and, in the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants will be issued, and the Warrant Agent is hereby irrevocably authorized to countersign and to deliver the required new Warrant Certificate or Certificates pursuant to the provisions of this Section 6 and of Section 4 hereof, and the Company, whenever required by the Warrant Agent, shall supply the Warrant Agent with Warrant Certificates duly executed on behalf of the Company for such purpose. The Warrant Agent may assume that any Warrant presented for exercise is permitted to be so exercised under applicable law and shall have no liability for acting in reliance on such assumption.
All Warrant Certificates surrendered upon exercise of Warrants shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall then be disposed of by the Warrant Agent in its customary manner. The Warrant Agent shall account promptly to the Company with respect to Warrants exercised and concurrently pay to the Company all monies received by the Warrant Agent for the purchase of the Warrant Shares through the exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the holders with reasonable prior written notice during normal business hours at its office. The Company shall supply the Warrant Agent from time to time with such numbers of copies of this Agreement as the Warrant Agent may request.
Certificates evidencing Warrant Shares issued upon exercise of a Sponsors' Warrants shall contain the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
SECURITIES EVIDENCED BY THIS CERTIFICATE WILL BE ENTITLED TO REGISTRATION RIGHTS UNDER A REGISTRATION RIGHTS AGREEMENT TO BE EXECUTED BY THE COMPANY.
(d) Cashless Exercise. The Sponsors' Warrants may be exercised on a cashless basis by any Sponsor or Permitted Transferee, at such Sponsor or Permitted Transferee's election (the " Cashless Exercise Election "). If any Sponsor or Permitted Transferee makes a Cashless Exercise Election with respect to any Sponsors' Warrants, then upon surrender of such Sponsors' Warrants in accordance with Section 6(c), the Company shall issue and cause to be delivered with all reasonable dispatch to and in such name or names as the Sponsors' Warrant holder may designate, a certificate or certificates for the
C-5
number of full Warrant Shares issuable upon the exercise of such Sponsor Warrants computed by using the following formula:
X | = |
(A)(Y)
(B) |
X | = | The number of Shares of common stock to be issued in connection with such exercise to the holder of the Sponsors' Warrants being exercised. | |||
|
Y |
|
= |
|
The number of shares of Common Stock purchasable under the Sponsor Warrant upon such exercise. |
|
A |
|
= |
|
The value of one Sponsors' Warrant as of the date of the exercise, which shall be determined by using the following formula: |
|
|
|
|
|
A = B - the Exercise Price |
|
B |
|
= |
|
The Fair market Value of a share of Common Stock. |
For purposes of this Section 6(d), the "Fair Market Value" of a share of Common Stock shall mean the average of the closing price of the Company's Common stock quoted on the American Stock Exchange for the ten (10) trading days ending on the trading day prior to the date of exercise. If the shares of Common Stock are traded on a securities exchange other than the American Stock Exchange, the Fair Market Value of a share of Common Stock shall mean the average of the closing prices of the Company's Common Stock quoted on such exchange for the ten (10) trading days ending on the trading day prior to the date of exercise. If the shares of Common Stock are not traded on the American Stock Exchange or any other exchange, the Fair Market Value shall be the price per share that the Company could obtain from a willing buyer for shares of Common Stock sold by the Company from authorized but unissued shares of Common Stock, as such prices shall be determined in good faith by the Company's Board of Directors.
(e) Registration Requirement. Notwithstanding anything else in this Section 6, no Warrant may be exercised unless at the time of exercise (i) a registration statement covering the Warrant Shares to be issued upon exercise is effective under the Act and (ii) a prospectus thereunder relating to the Warrant Shares is current. The Company shall use its best efforts to have a registration statement in effect covering Warrant Shares issuable upon exercise of the Warrants from the date the Warrants become exercisable and to maintain a current prospectus relating to those Warrant Shares until the Warrants expire or are redeemed. In the event that, at the end of the Warrant Exercise Period, a registration statement covering the Warrant Shares to be issued upon exercise is not effective under the Act, all the rights of holders hereunder shall terminate and all of the Warrants shall expire unexercised and worthless, and as a result purchasers of the Units will have paid the full Unit purchase price solely for the share of Common Stock included in each Unit. In no event shall the Warrants be settled on a net cash basis nor shall the Company be required to issue unregistered shares upon the exercise of any Warrant.
SECTION 7. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
C-6
SECTION 8. Mutilated or Missing Warrant Certificates. In case any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company shall issue and the Warrant Agent shall countersign, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence satisfactory to the Company and the Warrant Agent of such loss, theft or destruction of such Warrant Certificate and indemnity, also satisfactory to the Company and the Warrant Agent. Applicants for such new Warrant Certificates must pay such reasonable charges as the Company may prescribe.
SECTION 9. Reservation of Warrant Shares. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. The Warrant Agent shall have no duty to verify availability of such shares set aside by the Company.
The Company or, if appointed, the transfer agent for the Common Stock (the " Transfer Agent ") and every subsequent transfer agent for any shares of the Company's Common Stock issuable upon the exercise of any of the Warrants will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's Common Stock issuable upon the exercise of the Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from time to time from such Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this Agreement. The Company will supply such Transfer Agent with duly executed certificates for such purposes and will provide or otherwise make available any cash which may be payable as provided in Section 12 hereof. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each holder pursuant to Section 13 hereof.
Before taking any action which would cause an adjustment pursuant to Section 11 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take any commercially reasonable corporate action which may, in the opinion of its counsel (which may be counsel employed by the Company), be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants will, upon payment of the Exercise Price therefor and issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof.
SECTION 10. Obtaining Stock Exchange Listings. The Company will from time to time take all commercially reasonable actions which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants, will be listed on the principal securities exchanges and markets within the United States of America, if any, on which other shares of Common Stock are then listed.
SECTION 11. Adjustment of Number of Warrant Shares.
The number of Warrant Shares issuable upon the exercise of each Warrant is subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 11. For purposes of this Section 11, " Common Stock " means shares now or hereafter authorized of any class of common stock of the Company and any other stock of the Company, however designated, that has the right
C-7
(subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of the Company without limit as to per share amount.
(a) Adjustment for Change in Capital Stock.
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock in either case in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a greater number of shares;
(3) combines its outstanding shares of Common Stock into a smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares of its capital stock,
then the number of shares of Common Stock issuable upon exercise of each Warrant immediately prior to such action shall be proportionately adjusted so that the holder of any Warrant thereafter exercised shall receive the aggregate number and kind of shares of capital stock of the Company which he would have owned immediately following such action if such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed above shall occur.
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to all holders of its Common Stock entitling them to purchase shares of Common Stock at a price per share less than the Closing Price per share on the Business Day immediately preceding the ex-dividend date for such distribution of rights, options or warrants, the number of shares of Common Stock issuable upon exercise of each Warrant shall be adjusted in accordance with the formula:
N' | = | N | × |
O + A
O + (A × P/M) |
where:
N' | = | the adjusted number of shares of Common Stock issuable upon exercise of each Warrant. | |||
|
N |
|
= |
|
the current number of shares of Common Stock issuable upon exercise of each Warrant. |
|
O |
|
= |
|
the number of shares of Common Stock outstanding on the record date for such distribution. |
|
A |
|
= |
|
the number of additional shares of Common Stock issuable pursuant to such rights or warrants. |
|
P |
|
= |
|
the purchase price per share of the additional shares. |
|
M |
|
= |
|
the Closing Price per share of Common Stock on the record date. |
C-8
The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If at the end of the period during which such rights, options or warrants are exercisable, not all rights, options or warrants shall have been exercised, the number of shares of Common Stock issuable upon exercise of each Warrant shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares actually issued.
(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock any of its assets (including cash) or debt securities or any rights, options or warrants to purchase debt securities, assets or other securities of the Company (other than Common Stock), the number of shares of Common Stock issuable upon exercise of each Warrant shall be adjusted in accordance with the formula:
N' | = | N | × |
M
M - F |
where:
N' | = | the adjusted number of shares of Common Stock issuable upon exercise of each Warrant. | |||
|
N |
|
= |
|
the current number of shares of Common Stock issuable upon exercise of each Warrant. |
|
M |
|
= |
|
the Closing Price per share of Common Stock on the Business Day immediately preceding the ex-dividend date for such distribution. |
|
F |
|
= |
|
the fair market value on the ex-dividend date for such distribution of the assets, securities, rights or warrants distributable to one share of Common Stock after taking into account, in the case of any rights, options or warrants, the consideration required to be paid upon exercise thereof. The Board of Directors shall reasonably determine the fair market value in good faith. |
The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive such distribution.
This subsection (c) does not apply to regular quarterly cash dividends including increases thereof or rights, options or warrants referred to in subsection (b) of this Section 11. If any adjustment is made pursuant to this subsection (c) as a result of the issuance of rights, options or warrants and at the end of the period during which any such rights, options or warrants are exercisable, not all such rights, options or warrants shall have been exercised, the Warrant shall be immediately readjusted as if "F" in the above formula was the fair market value on the ex-dividend date for such distribution of the indebtedness or assets actually distributed upon exercise of such rights, options or warrants divided by the number of shares of Common Stock outstanding on the ex-dividend date for such distribution. Notwithstanding anything to the contrary contained in this subsection (c), if "M - F" in the above formula is less than $1.00, the Company may elect to, and if "M - F" or is a negative number, the Company shall, in lieu of the adjustment otherwise required by this subsection (c), distribute to the holders of the Warrants, upon exercise thereof, the evidences of indebtedness, assets, rights, options or warrants (or the proceeds thereof) which would have been distributed to such holders had such Warrants been exercised immediately prior to the record date for such distribution.
C-9
(d) Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock for a consideration per share less than the Closing Price per share on the date the Company fixes the offering price of such additional shares, the number of shares of Common Stock issuable upon exercise of each Warrant shall be adjusted in accordance with the formula:
N' | = | N | × |
A
O + P/M |
where:
N' | = | the adjusted number of shares of Common Stock issuable upon exercise of each Warrant. | |||
|
N |
|
= |
|
the current number of shares of Common Stock issuable upon exercise of each Warrant. |
|
O |
|
= |
|
the number of shares outstanding immediately prior to the issuance of such additional shares. |
|
P |
|
= |
|
the aggregate consideration received for the issuance of such additional shares. |
|
M |
|
= |
|
the Closing Price per share on the date of issuance of such additional shares. |
|
A |
|
= |
|
the number of shares outstanding immediately after the issuance of such additional shares. |
The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections (b) and (c) of this Section 11,
(2) the exercise of Warrants, or the conversion or exchange of other securities convertible or exchangeable for Common Stock, or the issuance of Common Stock upon the exercise of rights or warrants issued to the holders of Common Stock,
(3) Common Stock (and options exercisable therefor) issued to the Company's employees, officers, directors, consultants or advisors (whether or not still in such capacity on the date of exercise) under bona fide employee benefit plans or stock option plans adopted by the Board of Directors of the Company and approved by the holders of Common Stock when required by law, if such Common Stock would otherwise be covered by this subsection (d),
(4) Common Stock issued in a bona fide public offering for cash,
(5) Common Stock issued in a bona fide private placement in which at least one non-affiliate of the Company participates, including without limitation the issuance of equity as consideration or partial consideration for acquisitions from persons that are not affiliates of the Company.
(e) Adjustment for Convertible Securities Issue.
If the Company issues any securities convertible into or exchangeable for Common Stock (other than securities issued in transactions described in subsections (b) and (c) of this Section 11) for a consideration per share of Common Stock initially deliverable upon conversion or exchange of such securities less than the Closing Price per share on the date of issuance of such securities, the number of
C-10
shares of Common Stock issuable upon exercise of each Warrant shall be adjusted in accordance with this formula:
N' | = | N | × |
O + D
O + P/M |
where:
N' | = | the adjusted number of shares of Common Stock issuable upon exercise of each Warrant. | |||
|
N |
|
= |
|
the current number of shares of Common Stock issuable upon exercise of each Warrant. |
|
O |
|
= |
|
the number of shares outstanding immediately prior to the issuance of such securities. |
|
P |
|
= |
|
the aggregate consideration received for the issuance of such securities. |
|
M |
|
= |
|
the Closing Price per share on the date of issuance of such securities. |
|
D |
|
= |
|
the maximum number of shares deliverable upon conversion or in exchange for such securities at the initial conversion or exchange rate. |
The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of such securities have not been issued when such securities are no longer outstanding, then the number of shares of Common Stock issuable upon exercise of each Warrant shall promptly be readjusted to what it would have been had the adjustment upon the issuance of such securities been made on the basis of the actual number of shares of Common Stock issued upon conversion or exchange of such securities.
This subsection (e) does not apply to:
(1) convertible securities issued in a bona fide public offering for cash; or
(2) convertible securities issued in a bona fide private placement in which at least one non-affiliate of the Company participates, including the issuance of convertible securities as consideration or partial consideration for acquisitions from persons that are not affiliates of the Company.
(f) Adjustment for Tender or Exchange Offer. If the Company or any of its subsidiaries makes a payment in respect of a tender offer or exchange offer for the Common Stock, if the cash and value of any other consideration included in the payment per share of the Common Stock exceeds the Closing Price of the Common Stock on the trading day next succeeding the last date on which tenders or
C-11
exchanges may be made pursuant to such tender or exchange offer, the number of shares of Common Stock issuable upon exercise of each Warrant will be increased based on the following formula:
N' | = | N o | × |
AC + (SP' × OS')
OS o × SP' |
where:
N' | = | the adjusted number of shares of Common Stock issuable upon exercise of each Warrant; | |||
|
N o |
|
= |
|
the current number of shares of Common Stock issuable upon exercise of each warrant; |
|
AC |
|
= |
|
the aggregate value of all cash and any other consideration (as determined by the Board of Directors of the Company) paid or payable for shares purchased in such tender or exchange offer; |
|
OS o |
|
= |
|
the number of shares of Common Stock outstanding immediately prior to the date such tender or exchange offer expires; |
|
OS' |
|
= |
|
the number of shares of Common Stock outstanding immediately after the date such tender or exchange offer expires; and |
|
SP' |
|
= |
|
the Closing Price of the Common Stock on the trading day next succeeding the date such tender or exchange offer expires. |
The adjustment shall be made successively and shall become effective immediately following the date such tender or exchange offer expires.
(g) Consideration Received.
For purposes of any computation respecting consideration received pursuant to subsections (d), (e) and (f) of this Section 11, the following shall apply:
(1) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting or other sale or disposition of the issue or otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as reasonably determined by the Board of Directors of the Company (irrespective of the accounting treatment thereof) and described in a Board resolution which shall be filed with the Warrant Agent; and
(3) in the case of the issuance of securities convertible into or exchangeable for shares, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof for the maximum number of shares used to calculate the adjustment (the consideration in each case to be determined in the same manner as provided in clauses (1) and (2) of this subsection).
C-12
(h) Defined Terms; When De Minimis Adjustment May Be Deferred.
As used in this section 11:
(1) "ex-dividend date" means the first date on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance or distribution in question;
(2) "trading day" means, with respect to the Common Stock or any other security, a day during which (i) trading in the Common Stock or such other security generally occurs, (ii) there is no market disruption event (as defined below) and (iii) a Closing Price for the Common Stock or such other security (other than a Closing Price referred to in the next to last clause of such definition) is available for such day; provided that if the Common Stock or such other security is not admitted for trading or quotation on or by any exchange, bureau or other organization, "trading day" will mean any Business Day;
(3) "market disruption event" means, with respect to the Common Stock or any other security, the occurrence or existence of more than one-half hour period in the aggregate or any scheduled trading day for the Common Stock or such other security of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in the Common Stock or such other security or in any options, contract, or future contracts relating to the Common Stock or such other security, and such suspension or limitation occurs or exists at any time before 1:00 p.m. (New York time) on such day; and
(4) "Business Day" means, any day on which the American Stock Exchange is open for trading and which is not a Saturday, a Sunday or any other day on which banks in the City of New York, New York, are authorized or required by law to close.
No adjustment in the number of shares of Common Stock issuable upon exercise of each Warrant need be made unless the adjustment would require an increase or decrease of at least 1% in such number. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be.
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to in subsections (b), (c), (d), (e) or (f) of this Section 11 if Warrant holders are to participate, without requiring the Warrants to be exercised, in the transaction on a basis and with notice that the Board of Directors of the Company reasonably determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction.
No adjustment need be made for a change in the par value or no par value of the Common Stock.
To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the amount of cash into which such Warrants are exercisable. Interest will not accrue on the cash.
(j) Notice of Adjustment.
Whenever the number of shares of Common Stock issuable upon exercise of each Warrant is adjusted, the Company shall provide the notices required by Section 13 hereof.
C-13
(k) Notice of Certain Transactions.
If:
(1) the Company takes any action that would require an adjustment in the Exercise Price pursuant to subsections (a), (b), (c), (d), (e) or (f) of this Section 11 and if the Company does not arrange for Warrant holders to participate pursuant to subsection (i) of this Section 11;
(2) the Company takes any action that would require a supplemental Warrant Agreement pursuant to subsection (l) of this Section 11; or
(3) there is a liquidation or dissolution of the Company,
the Company shall mail to Warrant holders a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, transfer, lease, liquidation or dissolution. The Company shall mail the notice at least 15 days before such date. Failure to mail the notice or any defect in it shall not affect the validity of the transaction.
(l) Reorganization of Company.
If the Company consolidates or merges with or into, or transfers or leases all or substantially all its assets to, any person, upon consummation of such transaction the Warrants shall automatically become exercisable for the kind and amount of securities, cash or other assets which the holder of a Warrant would have owned immediately after the consolidation, merger, transfer or lease if such holder had exercised the Warrant immediately before the effective date of the transaction; provided that (i) if the holders of Common Stock were entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets for which each Warrant shall become exercisable shall be deemed to be the weighted average of the kind and amount received per share by the holders of Common Stock in such consolidation or merger that affirmatively make such election or (ii) if a tender or exchange offer shall have been made to and accepted by the holders of Common Stock under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the outstanding shares of Common Stock, the holder of a Warrant shall be entitled to receive the highest amount of cash, securities or other property to which such holder would actually have been entitled as a shareholder if such Warrant holder had exercised the Warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the Common Stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in this Section 11. Concurrently with the consummation of any such transaction, the corporation or other entity formed by or surviving any such consolidation or merger if other than the Company, or the person to which such sale or conveyance shall have been made, shall enter into a supplemental Warrant Agreement so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section. The successor Company shall mail to Warrant holders a notice describing the supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an affiliate of the formed, surviving, transferee or lessee corporation, that issuer shall join in the supplemental Warrant Agreement.
C-14
If this subsection (l) applies, subsections (a), (b), (c), (d), (e) and (f) of this Section 11 do not apply.
(m) Warrant Agent's Disclaimer.
The Warrant Agent has no duty to determine when an adjustment under this Section 11 should be made, how it should be made or what it should be. The Warrant Agent has no duty to determine whether any provisions of a supplemental Warrant Agreement under subsection (l) of this Section 11 are correct. The Warrant Agent makes no representation as to the validity or value of any securities or assets issued upon exercise of Warrants. The Warrant Agent shall not be responsible for the Company's failure to comply with this Section.
(n) When Issuance or Payment May Be Deferred.
In any case in which this Section 11 shall require that an adjustment in the number of shares of Common Stock issuable upon exercise of each Warrant be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise on the basis of the number of shares of Common Stock issuable upon exercise of each Warrant and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 12 hereof; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment.
(o) Adjustment in Exercise Price.
Upon each event that provides for an adjustment of the number of shares of Common Stock issuable upon exercise of each Warrant pursuant to this Section 11, each Warrant outstanding prior to the making of the adjustment shall thereafter have an adjusted Exercise Price (calculated to the nearest ten millionth) obtained from the following formula:
E' | = | E | × |
N
N' |
where:
E' | = | the adjusted Exercise Price. | |||
|
E |
|
= |
|
the Exercise Price prior to adjustment. |
|
N' |
|
= |
|
the adjusted number of Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted Exercise Price. |
|
N |
|
= |
|
the number of Warrant Shares previously issuable upon exercise of a Warrant by payment of the Exercise Price prior to adjustment. |
Following any adjustment to the Exercise Price pursuant to this Section 11, the amount payable, when adjusted and together with any consideration allocated to the issuance of the Warrants, shall never be less than the par value per Warrant Share at the time of such adjustment. Such adjustment shall be made successively whenever any event listed above shall occur.
(p) Form of Warrants.
Irrespective of any adjustments in the number or kind of shares issuable upon the exercise of the Warrants or the Exercise Price, Warrants theretofore or thereafter issued may continue to express the
C-15
same number and kind of shares and Exercise Price as are stated in the Warrants initially issuable pursuant to this Agreement.
(q) Other Dilutive Events.
In case any event shall occur affecting the Company, as to which the provisions of this Section 11 are not strictly applicable, but would impact the holders of Warrants adversely as compared to holders of Common Stock, and the failure to make any adjustment would not fairly protect the purchase rights represented by the Warrants in accordance with the essential intent and principles of this Section then, in each such case, the Company shall appoint a firm of independent public accountants, investment banking or other appraisal firm of recognized national standing which shall give their opinion upon the adjustment, if any, on a basis consistent with the essential intent and principles established in this Section 11, necessary to preserve, without dilution, the purchase rights represented by the Warrants.
SECTION 12. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 12, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the fair market value on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction.
SECTION 13. Notices to Warrant Holders. Upon any adjustment of the Exercise Price pursuant to Section 11, the Company shall promptly thereafter, and in any event within five days, (i) cause to be filed with the Warrant Agent a certificate executed by the Chief Financial Officer of the Company setting forth the number of Warrant Shares issuable upon exercise of each Warrant after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based, and () cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register written notice of such adjustments by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 13. The Warrant Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of such adjustment unless and until it shall have received such certificate.
In case:
(a) the Company shall authorize the issuance to all holders of shares of Common Stock of rights, options or warrants to subscribe for or purchase shares of Common Stock or of any other subscription rights or warrants; or
(b) the Company shall authorize the distribution to all holders of shares of Common Stock of evidences of its indebtedness or assets (other than regular cash dividends or dividends payable in shares of Common Stock or distributions referred to in subsection (b) of Section 11 hereof); or
(c) of any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required, or of the conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or
C-16
(e) the Company proposes to take any action not specified above which would require an adjustment of the Exercise Price pursuant to Section 11 hereof;
then the Company shall cause to be filed with the Warrant Agent and shall cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register, at least 10 calendar days prior to the applicable record date hereinafter specified, or as promptly as practicable under the circumstances in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, or (ii) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 13 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive notice as shareholders in respect of the meetings of shareholders or the election of Directors of the Company or any other matter, or any rights whatsoever as shareholders of the Company.
SECTION 14. Merger, Consolidation or Change of Name of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to all or substantially all the corporate trust or agency business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor warrant agent under the provisions of Section 16. In case at the time such successor to the Warrant Agent shall succeed to the agency created by this Agreement, and in case at that time any of the Warrant Certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent; and in case at that time any of the Warrant Certificates shall not have been countersigned, any successor to the Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor to the Warrant Agent; and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent whose name has been changed may adopt the countersignature under its prior name, and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name, and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement.
C-17
SECTION 15. Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement (and no implied duties or obligations shall be read into this Agreement against the Warrant Agent) upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound:
(a) The statements contained herein and in the Warrant Certificates shall be taken as statements of the Company and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrant Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Agreement or in the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel of its own selection (who may be counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. The Warrant Agent may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or through agents or attorneys and the Warrant Agent shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.
(d) The Warrant Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Warrant Agent and conforming to the requirements of this Agreement. The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate for any action taken in reliance on any Warrant Certificate, certificate of shares, notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument (whether in its original or facsimile form) believed by it to be genuine and to have been signed, sent or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent such compensation for all services rendered by the Warrant Agent in the administration and execution of this Agreement as the Company and the Warrant Agent shall agree in writing to reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Agreement (including fees and expenses of its counsel) and to indemnify the Warrant Agent (and any predecessor Warrant Agent) and save it harmless against any and all claims (whether asserted by the Company, a holder or any other person), damages, losses, expenses (including taxes other than taxes based on the income of the Warrant Agent), liabilities, including judgments, costs and counsel fees and expenses, for anything done or omitted by the Warrant Agent in the execution of this Agreement except as a result of its negligence or willful misconduct. The provisions of this Section 15(e) shall survive the expiration of the Warrants and the termination of this Agreement.
(f) The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more registered holders of Warrant Certificates shall furnish the Warrant Agent with security and indemnity satisfactory to it for any costs and expenses which may be incurred, but this provision shall not affect the power of the Warrant Agent to take such action as it may consider proper, whether with or without any such security or indemnity. All rights of action under this Agreement or under any of the Warrants may be enforced by the Warrant Agent without the possession of any of the Warrant Certificates or the production thereof at any trial or other proceeding relative
C-18
thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent and any recovery of judgment shall be for the ratable benefit of the registered holders of the Warrants, as their respective rights or interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer or employee of it, may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own negligence or willful misconduct. The Warrant Agent shall not be liable for any error of judgment made in good faith by it, unless it shall be proved that the Warrant Agent was negligent in ascertaining the pertinent facts. Notwithstanding anything in this Agreement to the contrary, in no event shall the Warrant Agent be liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Warrant Agent has been advised of the likelihood of the loss or damage and regardless of the form of the action.
(i) The Warrant Agent shall not at any time be under any duty or responsibility to any holder of any Warrant Certificate to make or cause to be made any adjustment of the Exercise Price or number of the Warrant Shares or other securities or property deliverable as provided in this Agreement, or to determine whether any facts exist which may require any of such adjustments, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the validity or value or the kind or amount of any Warrant Shares or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or with respect to whether any such Warrant Shares or other securities will when issued be validly issued and fully paid and nonassessable, and makes no representation with respect thereto.
(j) Notwithstanding anything in this Agreement to the contrary, neither the Company nor the Warrant Agent shall have any liability to any holder of a Warrant Certificate or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority prohibiting or otherwise restraining performance of such obligation; provided that (i) the Company must use its reasonable best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible and (ii) nothing in this Section 15(j) shall affect the Company's obligation under Section 6(d) to use its best efforts to have a registration statement in effect covering the Warrant Shares issuable upon exercise of the Warrants and to maintain a current prospectus relating to those Warrant Shares.
(k) Any application by the Warrant Agent for written instructions from the Company may, at the option of the Warrant Agent, set forth in writing any action proposed to be taken or omitted by the Warrant Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Warrant Agent shall not be liable for any action taken by, or omission of, the Warrant Agent in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than
C-19
three Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Warrant Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.
(l) No provision of this Agreement shall require the Warrant Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights.
(m) In addition to the foregoing, the Warrant Agent shall be protected and shall incur no liability for, or in respect of, any action taken or omitted by it in connection with its administration of this Agreement if such acts or omissions are not the result of the Warrant Agent's reckless disregard of its duty, gross negligence or willful misconduct and are in reliance upon (i) the proper execution of the certification concerning beneficial ownership appended to the form of assignment and the form of the election attached hereto unless the Warrant Agent shall have actual knowledge that, as executed, such certification is untrue, or (ii) the non-execution of such certification including, without limitation, any refusal to honor any otherwise permissible assignment or election by reason of such non-execution.
SECTION 16. Change of Warrant Agent. The Warrant Agent may at any time resign as Warrant Agent upon written notice to the Company. If the Warrant Agent shall become incapable of acting as Warrant Agent, the Company shall appoint a successor to such Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or of such incapacity by the Warrant Agent or by the registered holder of a Warrant Certificate, then the registered holder of any Warrant Certificate or the Warrant Agent may apply, at the expense of the Company, to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Pending appointment of a successor to such Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. The holders of a majority of the unexercised Warrants shall be entitled at any time to remove the Warrant Agent and appoint a successor to such Warrant Agent. If a Successor Warrant Agent shall not have been appointed within 30 days of such removal, the Warrant Agent may apply, at the expense of the Company, to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Such successor to the Warrant Agent need not be approved by the Company or the former Warrant Agent. After appointment the successor to the Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the former Warrant Agent upon payment of all fees and expenses due it and its agents and counsel shall deliver and transfer to the successor to the Warrant Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to give any notice provided for in this Section 16, however, or any defect therein, shall not affect the legality or validity of the appointment of a successor to the Warrant Agent.
SECTION 17. Notices to Company and Warrant Agent. Any notice or demand authorized by this Agreement to be given or made by the Warrant Agent or by the registered holder of any Warrant Certificate to or on the Company shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:
Kennedy-Wilson
Holdings, Inc.
9130 Galleria Court, Suite 318
Naples, FL 34109
Fax No.: (239) 254-4481
Attention: Chief Executive Officer
C-20
In case the Company shall fail to maintain such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations may be made and notices and demands may be served at the principal corporate trust office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or by the registered holder(s) of any Warrant Certificate to the Warrant Agent shall be sufficiently given when and if deposited in the mail, first-class or registered, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
Continental
Stock Transfer & Trust Company
17 Battery Place
New York, NY 10004
Fax No.: (212) 509-5150
Attention: Compliance Department
SECTION 18. Supplements and Amendments. The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any holders of Warrant Certificates in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not in any way adversely affect the interests of the holders of Warrant Certificates theretofore issued. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 18, the Warrant Agent shall execute such supplement or amendment. Notwithstanding anything in this Agreement to the contrary, the prior written consent of the Warrant Agent must be obtained in connection with any supplement or amendment which alters the rights or duties of the Warrant Agent. The Company and the Warrant Agent may amend any provision herein with the consent of the holders of Warrants exercisable for a majority of the Warrant Shares issuable on exercise of all outstanding Warrants that would be affected by such amendment.
SECTION 19. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
SECTION 20. Termination. This Agreement will terminate on any earlier date if all Warrants have been exercised or expired without exercise. The provisions of Section 15 hereof shall survive such termination.
SECTION 21. Governing Law. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the internal laws of said State. The parties agree that, all actions and proceedings arising out of this Agreement or any of the transactions contemplated hereby, shall be brought in the United States District Court for the Southern District of New York or in a New York State Court in the County of New York and that, in connection with any such action or proceeding, submit to the jurisdiction of, and venue in, such court. Each of the parties hereto also irrevocably waives all right to trial by jury in any action, proceeding or counterclaim arising out of this Agreement or the transactions contemplated hereby.
SECTION 22. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrant Agent and the registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under this Agreement, and this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the registered holders of the Warrant Certificates.
C-21
SECTION 23. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
SECTION 24. Force Majeure. In no event shall the Warrant Agent be responsible or liable for any failure or delay in the performance of its obligations under this Agreement arising out of or caused by, directly or indirectly, forces beyond its reasonable control, including without limitation strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software or hardware) services.
C-22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.
|
|
KENNEDY-WILSON HOLDINGS, INC. |
||
|
|
By: |
|
|
Name: Title: |
||||
|
|
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Warrant Agent |
||
|
|
By: |
|
|
Name: Title: |
C-23
Sponsor
|
Sponsor Warrants | |
---|---|---|
Flat Ridge Investments LLC | 3,150,000 | |
LLM Structured Equity Fund L.P. | 1,646,400 | |
LLM Investors L.P. | 33,600 | |
Capital Management Systems, Inc. | 420,000 |
C-24
[Form of Warrant Certificate]
[Face]
NUMBER | WARRANTS |
THIS WARRANT WILL BE VOID IF NOT EXERCISED PRIOR TO
5:00 P.M. NEW YORK CITY TIME, NOVEMBER 14, 2013
KENNEDY-WILSON HOLDINGS, INC.
Incorporated Under the Laws of the State of Delaware
CUSIP
WARRANT CERTIFICATE
This Warrant Certificate certifies that , or registered assigns, is the registered holder of warrants (the " Warrants ") to purchase shares of Common Stock, $.0001 par value (the " Common Stock "), of Kennedy-Wilson Holdings, Inc. (formerly Prospect Acquisition Corp.), a Delaware corporation (the " Company "). Each Warrant entitles the holder, upon exercise during the period set forth in the Warrant Agreement referred to below, to purchase from the Company that number of fully paid and non-assessable shares of Common Stock (each, a " Warrant Share ") as set forth below at the exercise price (the " Exercise Price ") as determined pursuant to the Warrant Agreement payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent, but only subject to the conditions set forth herein and in the Warrant Agreement. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.
Each Warrant is initially exercisable for one fully paid and non-assessable share of Common Stock. The number of Warrant Shares issuable upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
The initial Exercise Price per share of Common Stock for any Warrant is equal to $12.50 per share. The Exercise Price is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
Warrants may be exercised only during the Warrant Exercise Period subject to the conditions set forth in the Warrant Agreement and to the extent not exercised by the end of such Warrant Exercise Period such Warrants shall become void.
Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement.
C-25
This Warrant Certificate shall be governed and construed in accordance with the internal laws of the State of New York, without regard to conflicts of laws principles thereof.
KENNEDY-WILSON HOLDINGS, INC. | ||||
|
|
By: |
|
Patrick J. Landers President |
|
|
By: |
|
James Cahill Secretary |
Countersigned:
Dated:
, 20
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By: |
Authorized Signatory |
C-26
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants entitling the holder on exercise to receive shares of Common Stock, par value $0.0001 per share, of the Company (the " Common Stock "), and are issued or to be issued pursuant to an amended and restated Warrant Agreement dated as of [ ], 2009 (the " Warrant Agreement "), duly executed and delivered by the Company to Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (the " Warrant Agent "), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.
Warrants may be exercised at any time during the Warrant Exercise Period set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price as specified in the Warrant Agreement, at the principal corporate trust office of the Warrant Agent. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise of this Warrant.
Notwithstanding anything else in this Warrant Certificate or the Warrant Agreement, no Warrant may be exercised unless at the time of exercise (i) a registration statement covering the Warrant Shares to be issued upon exercise is effective under the Act and (ii) a prospectus thereunder relating to the Warrant Shares is current. In no event shall the Warrants be settled on a net cash basis during the Warrant Exercise Period nor shall the Company be required to issue unregistered shares upon the exercise of any Warrant.
Once the Warrants become exercisable and there is an effective registration statement covering the shares of Common Stock issuable upon exercise of the Warrants available and current throughout the 30-day redemption period defined below, the Company may redeem the outstanding Warrants (except with respect to the sponsors' Warrants held by a sponsor or its permitted transferee) in whole and not in part at a price of $0.01 per Warrant upon a minimum of 30 days' prior written notice of redemption (the " 30-day redemption period ") and if, and only if, the last sale price of the Company's Common Stock equals or exceeds $19.50 per share for any 20 trading days within a 30-trading day period ending three business days before the notice of redemption is sent. If the Company calls the Warrants for redemption, it will have the option to require all holders that wish to exercise Warrants to do so on a "cashless basis." In such event, each holder would pay the exercise price by surrendering the Warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between the exercise price of the Warrants and the "fair market value" (defined below) by (y) the fair market value. The " fair market value " shall mean the average reported last sale price of the Common Stock for the ten trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Warrants.
The Warrant Agreement provides that upon the occurrence of certain events the number of Warrant Shares set forth on the face hereof may, subject to certain conditions, be adjusted. No
C-27
fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the principal corporate trust office of the Warrant Agent by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company.
C-28
Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and herewith tenders payment for such shares to the order of Kennedy-Wilson Holdings, Inc. in the amount of $ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of , whose address is and that such shares be delivered to whose address is . If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of , whose address is , and that such Warrant Certificate be delivered to , whose address is .
In the event that the Warrant has been called for redemption by the Company pursuant to Section 6(b) of the Warrant Agreement and the Company has required cashless exercise pursuant to Section 6(d) of the Warrant Agreement, the number of shares that a Warrant is exercisable for shall be determined in accordance with Section 6(d) of the Warrant Agreement.
In the event that the Warrant is a Sponsors' Warrant (as such term is defined in the Warrant Agreement), such Warrant may be exercised, to the extent allowed by the Warrant Agreement, through cashless exercise pursuant to Section 6(d) of the Warrant Agreement, in which case, (i) the number of shares that a Sponsors' Warrant is exercisable for would be determined in accordance with Section 6(d) of the Warrant Agreement and (ii) the holder of the Sponsors' Warrant will complete the following:
The undersigned hereby irrevocably elects to exercise the right, represented by its Sponsors' Warrant Certificate, through the cashless exercise provision of Section 6(d) of the Warrant Agreement, to receive shares of Common Stock. If said number of shares is less than all of the shares of Common Stock purchasable hereunder (after giving effect to the cashless exercise), the undersigned requires that a new Sponsors' Warrant Certificate representing the balance of such shares be registered in the name of , whose address is , and that such Sponsors' Warrant Certificate be delivered to , whose address is .
Dated: |
|
|
|
(SIGNATURE) |
|
|
(ADDRESS) |
|
|
(TAX IDENTIFICATION NUMBER) |
Signatures(s) Guaranteed:
|
|
|
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).
C-29
LEGEND
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED PRIOR TO [ ], 2009 EXCEPT TO A PERMITTED TRANSFEREE (AS DEFINED IN THE WARRANT AGREEMENT) WHO AGREES IN WRITING WITH THE COMPANY TO BE SUBJECT TO SUCH TRANSFER PROVISIONS AND MAY NOT BE EXERCISED DURING SUCH PERIOD. FOR SO LONG AS THE SECURITIES ARE SUBJECT TO SUCH TRANSFER RESTRICTIONS, THEY WILL BE HELD IN AN ESCROW ACCOUNT MAINTAINED BY CONTINENTAL STOCK TRANSFER & TRUST COMPANY AS ESCROW AGENT UNDER THE ESCROW AGREEMENT (AS DEFINED IN SECTION 5 OF THE WARRANT AGREEMENT).
SECURITIES EVIDENCED BY THIS CERTIFICATE AND SHARES OF COMMON STOCK OF THE COMPANY ISSUED UPON EXERCISE OF SUCH SECURITIES WILL BE ENTITLED TO REGISTRATION RIGHTS UNDER A REGISTRATION RIGHTS AGREEMENT TO BE EXECUTED BY THE COMPANY.
No. |
|
|
Warrants |
C-30
SECOND AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
OF
PROSPECT ACQUISITION CORP.
[now known as Kennedy-Wilson Holdings, Inc.]
PROSPECT ACQUISITION CORP., a corporation existing under the laws of the State of Delaware, does hereby certify as follows:
1. The name of the Corporation is "Prospect Acquisition Corp."
2. The Corporation was originally incorporated under the name "Prospect Acquisition Corp." The original Certificate of Incorporation of the Corporation was filed in the office of the Secretary of State of the State of Delaware on July 9, 2007, which was amended by the Company by the filing of a Certificate of Amendment in the office of the Secretary of State of the State of Delaware on October 12, 2007 (the " Original Certificate ").
3. The First Amended and Restated Certificate of Incorporation was filed on March 31, 2008 (the "First Amended and Restated Certificate" ) and it amended, restated and integrated the provisions of the Original Certificate of the Corporation.
4. This Second Amended and Restated Certificate of Incorporation (this "Second Amended and Restated Certificate" ) amends, restates and integrates the provisions of the First Amended and Restated Certificate of the Corporation.
4. This Second Amended and Restated Certificate was duly approved and adopted by the board of directors and stockholders of the Corporation in accordance with the applicable provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware ( "DGCL" ).
5. The text of the Amended and Restated Certificate is hereby amended and restated to read in its entirety as follows:
FIRST: The name of the corporation is Kennedy-Wilson Holdings, Inc. (the "Corporation" ).
SECOND: The purpose of the Corporation shall be to engage in any lawful act or activity for which corporations may be organized under the DGCL.
THIRD: The address of the Corporation's registered office in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, County of New Castle, Delaware 19808. The name of the Corporation's registered agent at such address is the Corporation Service Company.
FOURTH: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 81,000,000, of which 80,000,000 shares shall be Common Stock with a par value of $.0001 per share (the "Common Stock" ) and 1,000,000 shares shall be Preferred Stock with a par value of $.0001 per share (the "Preferred Stock" ).
A. Preferred Stock. The Board of Directors (the " Board ") is expressly granted authority to issue shares of Preferred Stock, in one or more series, and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the Board providing for the issue of such series (a "Preferred Stock Designation" ) and as may be permitted by the DGCL. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting
D-1
power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation.
B. Common Stock. Except as otherwise required by law or as otherwise provided in any Preferred Stock Designation, the holders of the Common Stock shall exclusively possess all voting power and each share of Common Stock shall have one vote.
FIFTH: The Corporation's existence shall be perpetual.
SIXTH: The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
A. The Board of Directors shall consist of such number of directors as is determined from time to time by resolution adopted by the affirmative vote of a majority of the entire Board of Directors; provided, however, that in no event shall the number of directors be less than one nor more than twelve. The directors shall be divided into three classes, designated Class I, Class II and Class III. The number of directors in each class shall be as nearly equal as possible. The directors in Class I shall be elected for a term expiring at the Annual Meeting of Stockholders to be held in 2010. The directors in Class II shall be elected for a term expiring at the Annual Meeting of Stockholders to be held in 2011. The directors in Class III shall be elected for a term expiring at the Annual Meeting of Stockholders to be held in 2012. Beginning with the 2010 Annual Meeting of Stockholders, each class of directors will be elected for a term of office to expire at the third succeeding Annual Meeting of Stockholders after its election. Except as the DGCL may otherwise require, in the interim between annual meetings of stockholders or special meetings of stockholders called for the election of directors and/or the removal of one or more directors and the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board, including unfilled vacancies resulting from the removal of directors for cause, may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum (as defined in the Corporation's bylaws), or by the sole remaining director. All directors shall hold office until the expiration of their respective terms of office and until their successors shall have been elected and qualified. A director elected to fill a vacancy resulting from the death, resignation or removal of a director shall serve for the remainder of the full term of the director whose death, resignation or removal shall have created such vacancy and until his successor shall have been elected and qualified.
B. Election of directors need not be by ballot unless the bylaws of the Corporation so provide.
C. The Board shall have the power, without the assent or vote of the stockholders, to make, alter, amend, change, add to or repeal the bylaws of the Corporation as provided in the bylaws of the Corporation, subject to the power of stockholders to alter or repeal any bylaw whether adopted by them or otherwise.
D. The directors in their discretion may submit any contract or act for approval or ratification at any annual meeting of the stockholders or at any meeting of the stockholders called for the purpose of considering any such act or contract, and any contract or act that shall be approved or be ratified by the vote of the holders of a majority of the stock of the Corporation which is represented in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders be there represented in person or by proxy), unless a higher vote is required by applicable law, shall be as valid and binding upon the Corporation and upon all the stockholders as though it had been approved or ratified by every stockholder of the
D-2
Corporation, whether or not the contract or act would otherwise be open to legal attack because of directors' interests, or for any other reason.
E. In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation; subject, nevertheless, to the provisions of the statutes of Delaware, of this Second Amended and Restated Certificate, and to any bylaws from time to time made by the stockholders; provided, however, that no bylaw so made shall invalidate any prior act of the directors which would have been valid if such bylaw had not been made.
SEVENTH: The following paragraphs shall apply with respect to liability and indemnification of the Corporation's officers and directors and certain other persons:
A. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Any repeal or modification of this paragraph (A) by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation with respect to events occurring prior to the time of such repeal or modification.
B. The Corporation, to the full extent permitted by Section 145 of the DGCL, as amended from time to time, shall indemnify all persons whom it may indemnify pursuant thereto. Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit or proceeding for which such officer or director may be entitled to indemnification hereunder shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized hereby.
EIGHTH: Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.
NINTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Second Amended and Restated Certificate in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders, directors and officers are subject to this reserved power.
[Signature Page Follows]
D-3
IN WITNESS WHEREOF, the Corporation has caused this Second Amended and Restated Certificate of Incorporation to be duly executed by the undersigned as of this the day of November, 2009.
David A. Minella Chief Executive Officer |
Signature Page to Second Amended and Restated Certificate of Incorporation
D-4
KENNEDY-WILSON HOLDINGS, INC.
2009 EQUITY PARTICIPATION PLAN
KENNEDY-WILSON HOLDINGS, INC.
2009 EQUITY PARTICIPATION PLAN
The purpose of this Plan is to assist the Company in attracting, retaining and providing incentives to key management employees and nonemployee directors of, and non-employee consultants to, the Company and its Affiliates, and to align the interests of such employees, nonemployee directors and nonemployee consultants with those of the Company's stockholders. Accordingly, the Plan provides for the granting of Distribution Equivalent Rights, Incentive Stock Options, Non-Qualified Stock Options, Performance Share Awards, Performance Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards, Stock Appreciation Rights, Tandem Stock Appreciation Rights, Unrestricted Stock Awards or any combination of the foregoing, as may be best suited to the circumstances of the particular Employee, Director or Consultant, as provided herein.
The following definitions shall be applicable throughout the Plan unless the context otherwise requires:
" Affiliate " shall mean any corporation which, with respect to the Company, is a "subsidiary corporation" within the meaning of Section 424(f) of the Code.
" Award " shall mean, individually or collectively, a grant or sale pursuant to the Plan of any Distribution Equivalent Right, Option, Performance Share Award, Performance Unit Award, Restricted Stock Award, Restricted Stock Unit Award, Stock Appreciation Right or Unrestricted Stock Award.
" Award Agreement " shall mean a written agreement between the Company and the Holder setting forth the terms and conditions of the Award.
" Board " shall mean the Board of Directors of the Company.
" Cause " shall mean (i) if the Holder is a party to an employment or similar agreement with the Company or an Affiliate which agreement defines "Cause" (or a similar term) therein, " Cause " shall have the same meaning as provided for in such agreement, or (ii) for a Holder who is not a party to such an agreement, " Cause " shall mean termination by the Company or an Affiliate of the employment (or other service relationship) of the Holder by reason of the Holder's (A) intentional failure to perform reasonably assigned duties, (B) dishonesty or willful misconduct in the performance of the Holder's duties, (C) involvement in a transaction which is materially adverse to the Company or an Affiliate, (D) breach of fiduciary duty involving personal profit, (E) willful violation of any law, rule, regulation or court order (other than misdemeanor traffic violations and misdemeanors not involving misuse or misappropriation of money or property), (F) commission of an act of fraud or intentional misappropriation or conversion of any asset or opportunity of the Company or an Affiliate, or (G) material breach of any provision of the Plan or the Holder's Award Agreement or any other written agreement between the Holder and the Company or an Affiliate, in each case as determined in good faith by the Board, the determination of which shall be final, conclusive and binding on all parties.
" Change of Control " shall mean (i) for a Holder who is a party to an employment or consulting agreement with the Company or an Affiliate which agreement defines "Change of Control" (or a similar term) therein, " Change of Control " shall have the same meaning as provided for in such agreement, or (ii) for a Holder who is not a party to such an agreement, " Change of Control " shall
E-1
mean the satisfaction of any one or more of the following conditions (and the "Change of Control" shall be deemed to have occurred as of the first day that any one or more of the following conditions have been satisfied):
(a) Any person (as such term is used in paragraphs 13(d) and 14(d)(2) of the Exchange Act, hereinafter in this definition, " Person "), other than the Company or an Affiliate or an employee benefit plan of the Company or an Affiliate, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company's then outstanding securities;
(b) The closing of a merger, consolidation or other business combination (a " Business Combination ") other than (I) the Business Combination between Kennedy-Wilson, Inc. and Prospect Acquisition Corp. or (II) any Business Combination in which holders of the Common Stock immediately prior to the Business Combination (A) own more than fifty percent (50%) of the total voting power of the corporation resulting from such Business Combination (or the direct or indirect parent corporation of such surviving corporation), and (B) have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the Business Combination as immediately before;
(c) The closing of an agreement for the sale or disposition of all or substantially all of the Company's assets to any entity that is not an Affiliate;
(d) The approval by the holders of shares of Common Stock of a plan of complete liquidation of the Company other than a liquidation of the Company into any subsidiary or a liquidation a result of which persons who were stockholders of the Company immediately prior to such liquidation have substantially the same proportionate ownership of shares of common stock of the surviving corporation immediately after such liquidation as immediately before; or
(e) Within any twenty-four (24) month period, the Incumbent Directors shall cease to constitute at least a majority of the Board or the board of directors of any successor to the Company; provided , however , that any director elected to the Board, or nominated for election, by a majority of the Incumbent Directors then still in office, shall be deemed to be an Incumbent Director for purposes of this paragraph (e), but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, entity or "group" other than the Board (including, but not limited to, any such assumption that results from paragraphs (a), (b), (c), or (d) of this definition).
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to occur if the Company files for bankruptcy, liquidation or reorganization under the United States Bankruptcy Code.
" Code " shall mean the Internal Revenue Code of 1986, as amended, any successor statute thereto and any regulations issued from time to time thereunder.
" Committee " shall mean a committee comprised of not less than three (3) members of the Board who are selected by the Board as provided in Section 4.1.
" Common Stock " shall mean the common stock, par value $.0001 per share, of the Company.
" Company " shall mean Kennedy-Wilson Holdings, Inc., a Delaware corporation, and any successor thereto.
E-2
" Consultant " shall mean any non-Employee (individual or entity) advisor to the Company or an Affiliate who or which has contracted directly with the Company or an Affiliate to render bona fide consulting or advisory services thereto.
" Director " shall mean a member of the Board or a member of the board of directors of an Affiliate, in either case, who is not an Employee.
" Distribution Equivalent Right " shall mean an Award granted under Article XIII of the Plan which entitles the Holder to receive bookkeeping credits, cash payments and/or Common Stock distributions equal in amount to the distributions that would have been made to the Holder had the Holder held a specified number of shares of Common Stock during the period the Holder held the Distribution Equivalent Right.
" Distribution Equivalent Right Award Agreement " shall mean a written agreement between the Company and a Holder with respect to a Distribution Equivalent Right Award.
" Effective Date " shall mean , 2009.
" Employee " shall mean any employee, including officers, of the Company or an Affiliate.
" Exchange Act " shall mean the Securities Exchange Act of 1934, as amended.
" Fair Market Value " shall mean, as determined consistent with the applicable requirements of Sections 409A and 422 of the Code, as of any specified date, (i) the closing sales price of the Common Stock for such date (or, in the event that the Common Stock is not traded on such date, on the immediately preceding trading date) on the principal U.S. national securities exchange on which the Common Stock is listed and traded on such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported; (ii) if the Common Stock is not listed on any U.S. national securities exchange but is quoted in an inter-dealer quotation system on a last sale basis, the final ask price of the Common Stock reported on the inter-dealer quotation system for such date, or, if there is no such sale on such date, then on the last preceding date on which a sale was reported; or (iii) if the Common Stock is neither listed on a U.S. national securities exchange nor quoted on an inter-dealer quotation system on a last sale basis, the amount determined by the Committee to be the fair market value of the Common Stock as determined by the Committee in its sole discretion. If the Common Stock is not quoted or listed as set forth above, Fair Market Value shall be determined by the Committee in good faith by any fair and reasonable means (which means, with respect to a particular Award grant, may be set forth with greater specificity in the applicable Award Agreement). The Fair Market Value of property other than Common Stock shall be determined by the Committee in good faith by any fair and reasonable means, and consistent with the applicable requirements of Sections 409A and 422 of the Code.
" Family Member " shall mean any child, stepchild, grandchild, parent, stepparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any person sharing the Holder's household (other than a tenant or employee of the Holder), a trust in which such persons have more than fifty percent (50%) of the beneficial interest, a foundation in which such persons (or the Holder) control the management of assets, and any other entity in which such persons (or the Holder) own more than fifty percent (50%) of the voting interests.
" Holder " shall mean an Employee, Director or Consultant who has been granted an Award or any such individual's beneficiary, estate or representative, to the extent applicable.
" Incentive Stock Option " shall mean an Option which is intended by the Committee to constitute an "incentive stock option" under Section 422 of the Code.
E-3
" Incumbent Director " shall mean, with respect to any period of time specified under the Plan for purposes of determining whether or not a Change of Control has occurred, the individuals who were members of the Board at the beginning of such period.
" Non-Qualified Stock Option " shall mean an Option which is not an Incentive Stock Option.
" Option " shall mean an Award granted under Article VII of the Plan of an option to purchase shares of Common Stock, and includes both Incentive Stock Options and Non-Qualified Stock Options.
" Option Agreement " shall mean a written agreement between the Company and a Holder with respect to an Option.
" Performance Criteria " shall mean the criteria that the Committee selects for purposes of establishing the Performance Goal(s) for a Holder for a Performance Period.
" Performance Goals " shall mean, for a Performance Period, the written goal or goals established by the Committee for the Performance Period based upon the Performance Criteria.
" Performance Period " shall mean one or more periods of time, which may be of varying and overlapping durations, selected by the Committee, over which the attainment of one or more Performance Goals or other business objectives shall be measured for purposes of determining a Holder's right to, and the payment of, a Qualified Performance-Based Award.
" Performance Share Award " shall mean an Award granted under Article XII of the Plan under which, upon the satisfaction of predetermined individual and/or Company (and/or Affiliate) performance goals and/or objectives, shares of Common Stock are paid to the Holder.
" Performance Share Award Agreement " shall mean a written agreement between the Company and a Holder with respect to a Performance Share Award.
" Performance Unit " shall mean a Unit awarded to a Holder pursuant to a Performance Unit Award.
" Performance Unit Award " shall mean an Award granted under Article XI of the Plan under which, upon the satisfaction of predetermined individual and/or Company (and/or Affiliate) performance goals and/or objectives, a cash payment shall be made to the Holder, based on the number of Units awarded to the Holder.
" Performance Unit Award Agreement " shall mean a written agreement between the Company and a Holder with respect to a Performance Unit Award.
" Plan " shall mean this Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan, as amended from time to time.
" Qualified Performance-Based Award " shall mean Awards intended to qualify as "performance-based" compensation under Section 162(m) of the Code.
" Restricted Stock Award " shall mean an Award granted under Article VIII of the Plan of shares of Common Stock, the transferability of which by the Holder shall be subject to Restrictions.
" Restricted Stock Award Agreement " shall mean a written agreement between the Company and a Holder with respect to a Restricted Stock Award.
" Restricted Stock Unit " shall mean a Unit awarded to a Holder pursuant to a Restricted Stock Unit Award.
" Restricted Stock Unit Award " shall mean an Award granted under Article X of the Plan under which, upon the satisfaction of predetermined individual service-related vesting requirements, a
E-4
payment in cash or shares of Common Stock shall be made to the Holder, based on the number of Units awarded to the Holder.
" Restricted Stock Unit Award Agreement " shall mean a written agreement between the Company and a Holder with respect to a Restricted Stock Unit Award.
" Restriction Period " shall mean the period of time for which shares of Common Stock subject to a Restricted Stock Award shall be subject to Restrictions, as set forth in the applicable Restricted Stock Award Agreement.
" Restrictions " shall mean forfeiture, transfer and/or other restrictions applicable to shares of Common Stock awarded to an Employee, Director or Consultant under the Plan pursuant to a Restricted Stock Award and set forth in a Restricted Stock Award Agreement.
" Rule 16b-3 " shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act, as such may be amended from time to time, and any successor rule, regulation or statute fulfilling the same or a substantially similar function.
" Stock Appreciation Right " shall mean an Award granted under Article XIV of the Plan of a right, granted alone or in connection with a related Option, to receive a payment on the date of exercise.
" Stock Appreciation Right Award Agreement " shall mean a written agreement between the Company and a Holder with respect to a Stock Appreciation Right.
" Tandem Stock Appreciation Right " shall mean a Stock Appreciation Right granted in connection with a related Option, the exercise of which shall result in termination of the otherwise entitlement to purchase some or all of the shares of Common Stock under the related Option, all as set forth in Section 14.2.
" Ten Percent Stockholder " shall mean an Employee who, at the time an Incentive Stock Option is granted to him or her, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any parent corporation or subsidiary corporation thereof (both as defined in Section 424 of the Code), within the meaning of Section 422(b)(6) of the Code.
" Total and Permanent Disability " shall mean the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, all as described in Section 22(e)(3) of the Code.
" Units " shall mean bookkeeping units, each of which represents such monetary amount as shall be designated by the Committee in each Performance Unit Award Agreement, or represents one (1) share of Common Stock for purposes of each Restricted Stock Unit Award.
" Unrestricted Stock Award " shall mean an Award granted under Article IX of the Plan of shares of Common Stock which are not subject to Restrictions.
" Unrestricted Stock Award Agreement " shall mean a written agreement between the Company and a Holder with respect to an Unrestricted Stock Award.
ARTICLE III
EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the Effective Date, provided that the Plan is approved by the stockholders of the Company within twelve (12) months of such date.
E-5
Section 4.1 Composition of Committee . The Plan shall be administered by the Committee, which shall be appointed by the Board. The Committee shall consist solely of three (3) or more Directors who are each (i) "outside directors" within the meaning of Section 162(m) of the Code (" Outside Directors "), (ii) "non-employee directors" within the meaning of Rule 16b-3 and (iii) "independent" for purposes of any applicable listing requirements (" Non-Employee Directors "); provided , however , that the Board or the Committee may delegate to a committee of one or more members of the Board who are not (x) Outside Directors, the authority to grant Awards to eligible persons who are not (A) then "covered employees" within the meaning of Section 162(m) of the Code and are not expected to be "covered employees" at the time of recognition of income resulting from such Award, or (B) persons with respect to whom the Company wishes to comply with the requirements of Section 162(m) of the Code, and/or (y) Non-Employee Directors, the authority to grant Awards to eligible persons who are not then subject to the requirements of Section 16 of the Exchange Act. If a member of the Committee shall be eligible to receive an Award under the Plan, such Committee member shall have no authority hereunder with respect to his or her own Award. In addition, to the extent not inconsistent with applicable law, including Section 162(m) of the Code, or the rules and regulations of the principal U.S. national securities exchange on which the Common Stock is traded), the Committee may delegate to one or more executive officers or a committee of executive officers the right to grant Awards to Employees who are not directors or executive officers of the Company and the authority to take action on behalf of the Committee pursuant to the Plan to cancel or suspend Awards to Employees who are not directors or executive officers of the Company.
Section 4.2 Powers . Subject to the provisions of the Plan, the Committee shall have the sole authority, in its discretion, to make all determinations under the Plan, including but not limited to determining which Employees, Directors or Consultants shall receive an Award, the time or times when an Award shall be made (the date of grant of an Award shall be the date on which the Award is awarded by the Committee), what type of Award shall be granted, the term of an Award, the date or dates on which an Award vests (including any acceleration of vesting), the form of any payment to be made pursuant to an Award, the terms and conditions of an Award (including the forfeiture of the Award (and/or any financial gain) if the Holder of the Award violates any applicable restrictive covenant thereof), the Restrictions under a Restricted Stock Award and the number of shares of Common Stock which may be issued under an Award, all as applicable. In making such determinations the Committee may take into account the nature of the services rendered by the respective Employees, Directors and Consultants, their present and potential contribution to the Company's (or the Affiliate's) success and such other factors as the Committee in its discretion shall deem relevant.
Section 4.3 Additional Powers . The Committee shall have such additional powers as are delegated to it under the other provisions of the Plan. Subject to the express provisions of the Plan, the Committee is authorized to construe the Plan and the respective Award Agreements executed hereunder, to prescribe such rules and regulations relating to the Plan as it may deem advisable to carry out the intent of the Plan, and to determine the terms, restrictions and provisions of each Award, including such terms, restrictions and provisions as shall be requisite in the judgment of the Committee to cause designated Options to qualify as Incentive Stock Options, and to make all other determinations necessary or advisable for administering the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in any Award Agreement in the manner and to the extent it shall deem expedient to carry it into effect. The determinations of the Committee on the matters referred to in this Article IV shall be conclusive and binding on the Company and all Holders.
Section 4.4 Committee Action . In the absence of specific rules to the contrary, action by the Committee shall require the consent of a majority of the members of the Committee, expressed either
E-6
orally at a meeting of the Committee or in writing in the absence of a meeting. No member of the Committee shall have any liability for any good faith action, inaction or determination in connection with the Plan.
ARTICLE V
STOCK SUBJECT TO PLAN AND LIMITATIONS THEREON
Section 5.1 Stock Grant and Award Limits . The Committee may from time to time grant Awards to one or more Employees, Directors and/or Consultants determined by it to be eligible for participation in the Plan in accordance with the provisions of Article VI. Subject to Article XV, the aggregate number of shares of Common Stock that may be issued under the Plan shall not exceed Four Million (4,000,000) shares. Notwithstanding any provision in the Plan to the contrary, the maximum number of shares of Common Stock that may be subject to Awards of Options under Article VII and/or Stock Appreciation Rights under Article XIV, in either or both cases granted to any one Employee during any calendar year, shall be Two Million (2,000,000) shares (subject to adjustment in the same manner as provided in Article XV with respect to shares of Common Stock subject to Awards then outstanding). The limitation set forth in the preceding sentence shall be applied in a manner which shall permit compensation generated in connection with the exercise of Options or Stock Appreciation Rights to constitute "performance-based" compensation for purposes of Section 162(m) of the Code, including, but not limited to, counting against such maximum number of shares, to the extent required under Section 162(m) of the Code, any shares subject to Options or Stock Appreciation Rights that are canceled or repriced.
Section 5.2 Stock Offered . The stock to be offered pursuant to the grant of an Award may be authorized but unissued Common Stock, Common Stock purchased on the open market or Common Stock previously issued and outstanding and reacquired by the Company.
ARTICLE VI
ELIGIBILITY FOR AWARDS; TERMINATION OF
EMPLOYMENT, DIRECTOR STATUS OR CONSULTANT STATUS
Section 6.1 Eligibility . Awards made under the Plan may be granted solely to persons or entities who, at the time of grant, are Employees, Directors or Consultants. An Award may be granted on more than one occasion to the same Employee, Director or Consultant, and, subject to the limitations set forth in the Plan, such Award may include, a Non-Qualified Stock Option, a Restricted Stock Award, an Unrestricted Stock Award, a Restricted Stock Unit Award, a Distribution Equivalent Right Award, a Performance Stock Award, a Performance Unit Award, a Stock Appreciation Right, a Tandem Stock Appreciation Right, any combination thereof or, solely for Employees, an Incentive Stock Option.
Section 6.2 Termination of Employment or Director Status . Except to the extent inconsistent with the terms of the applicable Award Agreement (in which case the terms of the applicable Award Agreement shall control), the terms of the Holder's employment agreement with the Company or an Affiliate (in which case the terms of the applicable employment agreement shall control) and/or the provisions of Section 6.4, the following terms and conditions shall apply with respect to the termination of a Holder's employment with, or status as a Director of, the Company or an Affiliate, as applicable, for any reason, including, without limitation, Total and Permanent Disability or death:
(a) The Holder's rights, if any, to exercise any then exercisable Non-Qualified Stock Options and/or Stock Appreciation Rights shall terminate:
(1) If such termination is for a reason other than the Holder's Total and Permanent Disability or death, ninety (90) days after the date of such termination of employment or after the date of such termination of Director status;
E-7
(2) If such termination is on account of the Holder's Total and Permanent Disability, one (1) year after the date of such termination of employment or Director status; or
(3) If such termination is on account of the Holder's death, one (1) year after the date of the Holder's death.
Upon such applicable date the Holder (and such Holder's estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in or with respect to any such Non-Qualified Stock Options and Stock Appreciation Rights.
(b) The Holder's rights, if any, to exercise any then exercisable Incentive Stock Option shall terminate:
(1) If such termination is for a reason other than the Holder's Total and Permanent Disability or death, three (3) months after the date of such termination of employment;
(2) If such termination is on account of the Holder's Total and Permanent Disability, one (1) year after the date of such termination of employment; or
(3) If such termination is on account of the Holder's death, one (1) year after the date of the Holder's death.
Upon such applicable date the Holder (and such Holder's estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in or with respect to any such Incentive Stock Options.
(c) If a Holder's employment with, or status as a Director of, the Company or an Affiliate, as applicable, terminates for any reason prior to the actual or deemed satisfaction and/or lapse of the Restrictions, vesting requirements, terms and conditions applicable to a Restricted Stock Award and/or Restricted Stock Unit Award, such Restricted Stock and/or Restricted Stock Units shall immediately be canceled, and the Holder (and such Holder's estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in and with respect to any such Restricted Stock and/or Restricted Stock Units. The immediately preceding sentence to the contrary notwithstanding, the Committee, in its sole discretion, may determine, prior to or within thirty (30) days after the date of such termination of employment or Director status, that all or a portion of any such Holder's Restricted Stock and/or Restricted Stock Units shall not be so canceled and forfeited.
Section 6.3 Termination of Consultant Status . Except to the extent inconsistent with the terms of the applicable Award Agreement and/or the provisions of Section 6.4, the following terms and conditions shall apply with respect to the termination of a Holder's status as a Consultant, for any reason:
(a) The Holder's rights, if any, to exercise any then exercisable Non-Qualified Stock Options and/or Stock Appreciation Rights shall terminate:
(1) If such termination is for a reason other than the Holder's death, ninety (90) days after the date of such termination; or
(2) If such termination is on account of the Holder's death, one (1) year after the date of the Holder's death.
(b) If the status of a Holder as a Consultant terminates for any reason prior to the actual or deemed satisfaction and/or lapse of the Restrictions, vesting requirements, terms and conditions applicable to a Restricted Stock Award and/or a Restricted Stock Unit Award, such Restricted Stock and/or Restricted Stock Units shall immediately be canceled, and the Holder (and such Holder's estate, designated beneficiary or other legal representative) shall forfeit any rights or
E-8
interests in and with respect to any such Restricted Stock and/or Restricted Stock Units. The immediately preceding sentence to the contrary notwithstanding, the Committee, in its sole discretion, may determine, prior to or within thirty (30) days after the date of such termination of such a Holder's status as a Consultant, that all or a portion of any such Holder's Restricted Stock and/or Restricted Stock Units shall not be so canceled and forfeited.
Section 6.4 Special Termination Rule . Except to the extent inconsistent with the terms of the applicable Award Agreement, and notwithstanding anything to the contrary contained in this Article VI, if a Holder's employment with, or status as a Director of, the Company or an Affiliate shall terminate, and if, within ninety (90) days of such termination, such Holder shall become a Consultant, such Holder's rights with respect to any Award or portion thereof granted thereto prior to the date of such termination may be preserved, if and to the extent determined by the Committee in its sole discretion, as if such Holder had been a Consultant for the entire period during which such Award or portion thereof had been outstanding. Should the Committee effect such determination with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated as if his or her employment or Director status had terminated until such time as his or her Consultant status shall terminate, in which case his or her Award, as it may have been reduced in connection with the Holder's becoming a Consultant, shall be treated pursuant to the provisions of Section 6.3; provided , however , that any such Award which is intended to be an Incentive Stock Option shall, upon the Holder's no longer being an Employee, automatically convert to a Non-Qualified Stock Option. Should a Holder's status as a Consultant terminate, and if, within ninety (90) days of such termination, such Holder shall become an Employee or a Director, such Holder's rights with respect to any Award or portion thereof granted thereto prior to the date of such termination may be preserved, if and to the extent determined by the Committee in its sole discretion, as if such Holder had been an Employee or a Director, as applicable, for the entire period during which such Award or portion thereof had been outstanding, and, should the Committee effect such determination with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated as if his or her Consultant status had terminated until such time as his or her employment with the Company or an Affiliate, or his or her Director status, as applicable, shall terminate, in which case his or her Award shall be treated pursuant to the provisions of Section 6.2.
Section 6.5 Termination for Cause . Notwithstanding anything in this Article VI or elsewhere in the Plan to the contrary, and unless a Holder's Award Agreement specifically provides otherwise, should a Holder's employment, Director status or engagement as a Consultant with or for the Company or an Affiliate be terminated by the Company or Affiliate for Cause, all of such Holder's then outstanding Awards shall expire immediately and be forfeited in their entirety upon such termination.
Section 7.1 Option Period . The term of each Option shall be as specified in the Option Agreement; provided , however , that except as set forth in Section 7.3, no Option shall be exercisable after the expiration of ten (10) years from the date of its grant.
Section 7.2 Limitations on Exercise of Option . An Option shall be exercisable in whole or in such installments and at such times as specified in the Option Agreement.
Section 7.3 Special Limitations on Incentive Stock Options . To the extent that the aggregate Fair Market Value (determined at the time the respective Incentive Stock Option is granted) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an individual during any calendar year under all plans of the Company and any parent corporation or subsidiary corporation thereof (both as defined in Section 424 of the Code) which provide for the grant of Incentive Stock Options exceeds One Hundred Thousand Dollars ($100,000) (or such other individual
E-9
limit as may be in effect under the Code on the date of grant), the portion of such Incentive Stock Options that exceeds such threshold shall be treated as Non-Qualified Stock Options. The Committee shall determine, in accordance with applicable provisions of the Code, Treasury Regulations and other administrative pronouncements, which of a Holder's Options, which were intended by the Committee to be Incentive Stock Options when granted to the Holder, will not constitute Incentive Stock Options because of such limitation, and shall notify the Holder of such determination as soon as practicable after such determination. No Incentive Stock Option shall be granted to an Employee if, at the time the Option is granted, such Employee is a Ten Percent Stockholder, unless (i) at the time such Incentive Stock Option is granted the Option price is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock subject to the Option, and (ii) such Incentive Stock Option by its terms is not exercisable after the expiration of five (5) years from the date of grant. No Incentive Stock Option shall be granted more than ten (10) years from the date on which the Plan is approved by the Company's stockholders. The designation by the Committee of an Option as an Incentive Stock Option shall not guarantee the Holder that the Option will satisfy the applicable requirements for "incentive stock option" status under Section 422 of the Code.
Section 7.4 Option Agreement . Each Option shall be evidenced by an Option Agreement in such form and containing such provisions not inconsistent with the provisions of the Plan as the Committee from time to time shall approve, including, but not limited to, provisions intended to qualify an Option as an Incentive Stock Option. An Option Agreement may provide for the payment of the Option price, in whole or in part, by the delivery of a number of shares of Common Stock (plus cash if necessary) that have been owned by the Holder for at least six (6) months and having a Fair Market Value equal to such Option price, or such other forms or methods as the Committee may determine from time to time (including, with the consent of the Committee, by withholding shares of Common Stock otherwise issuable in connection with the exercise of the Option), in each case, subject to such rules and regulations as may be adopted by the Committee. Each Option Agreement shall, solely to the extent inconsistent with the provisions of Sections 6.2, 6.3 and 6.4, as applicable, specify the effect of termination of employment, Director status or Consultant status on the exercisability of the Option. Moreover, without limiting the generality of the foregoing, an Option Agreement may provide for a "cashless exercise" of the Option by establishing procedures whereby the Holder, by a properly-executed written notice, directs (i) an immediate market sale or margin loan respecting all or a part of the shares of Common Stock to which he is entitled upon exercise pursuant to an extension of credit by the Company to the Holder of the Option price, (ii) the delivery of the shares of Common Stock from the Company directly to a brokerage firm and (iii) the delivery of the Option price from sale or margin loan proceeds from the brokerage firm directly to the Company. Each Option Agreement shall, solely to the extent inconsistent with the provisions of Sections 6.2, 6.3 and 6.4, as applicable, specify the effect of the termination of the Holder's employment, Director status or Consultant status on the exercisability of the Option. An Option Agreement may also include provisions relating to (i) subject to the provisions hereof, accelerated vesting of Options, including but not limited to upon the occurrence of a Change of Control, (ii) tax matters (including provisions covering any applicable Employee wage withholding requirements and requiring additional "gross-up" payments to Holders to meet any excise taxes or other additional income tax liability imposed as a result of a payment made upon a Change of Control resulting from the operation of the Plan or of such Option Agreement) and (iii) any other matters not inconsistent with the terms and provisions of the Plan that the Committee shall in its sole discretion determine. The terms and conditions of the respective Option Agreements need not be identical.
E-10
Section 7.5 Option Price and Payment . The price at which a share of Common Stock may be purchased upon exercise of an Option shall be determined by the Committee; provided , however , that such Option price (i) shall not be less than the Fair Market Value of a share of Common Stock on the date such Option is granted, and (ii) shall be subject to adjustment as provided in Article XV. The Option or portion thereof may be exercised by delivery of an irrevocable notice of exercise to the Company. The Option price for the Option or portion thereof shall be paid in full in the manner prescribed by the Committee as set forth in the Plan and the applicable Option Agreement. Separate stock certificates shall be issued by the Company for those shares of Common Stock acquired pursuant to the exercise of an Incentive Stock Option and for those shares of Common Stock acquired pursuant to the exercise of a Non-Qualified Stock Option.
Section 7.6 Stockholder Rights and Privileges . The Holder of an Option shall be entitled to all the privileges and rights of a stockholder of the Company solely with respect to such shares of Common Stock as have been purchased under the Option and for which certificates of stock have been registered in the Holder's name.
Section 7.7 Options and Rights in Substitution for Stock Options Granted by Other Corporations . Options may be granted under the Plan from time to time in substitution for stock options held by individuals employed by entities who become Employees as a result of a merger or consolidation of the employing entity with the Company or any Affiliate, or the acquisition by the Company or an Affiliate of the assets of the employing entity, or the acquisition by the Company or an Affiliate of stock of the employing entity with the result that such employing entity becomes an Affiliate.
Section 7.8 Prohibition Against Repricing . Except to the extent (i) approved in advance by holders of a majority of the shares of the Company entitled to vote generally in the election of directors, or (ii) as a result of any Change of Control or any adjustment as provided in Article XV, the Committee shall not have the power or authority to reduce, whether through amendment or otherwise, the exercise price of any outstanding Option or Stock Appreciation right, or to grant any new Award or make any payment of cash in substitution for or upon the cancellation of Options and/or Stock Appreciation Rights previously granted.
ARTICLE VIII
RESTRICTED STOCK AWARDS
Section 8.1 Restriction Period to be Established by Committee . At the time a Restricted Stock Award is made, the Committee shall establish the Restriction Period applicable to such Award. Each Restricted Stock Award may have a different Restriction Period, in the discretion of the Committee. The Restriction Period applicable to a particular Restricted Stock Award shall not be changed except as permitted by Section 8.2.
Section 8.2 Other Terms and Conditions . Common Stock awarded pursuant to a Restricted Stock Award shall, unless otherwise determined by the Committee, be issued in book entry form on the books and records as kept by the Company's transfer agent and registered in the name of the Holder of such Restricted Stock Award. If provided for under the Restricted Stock Award Agreement, the Holder shall have the right to vote Common Stock subject thereto and to enjoy all other stockholder rights, including the entitlement to receive dividends on the Common Stock during the Restriction Period, except that (i) the Holder shall not be entitled to delivery of a stock certificate until the Restriction Period shall have expired, (ii) if a stock certificate is prepared before the expiration of the Restriction Period, the Company shall retain custody of the stock certificate during the Restriction Period (with a stock power endorsed by the Holder in blank), (iii) the Holder may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the Common Stock during the Restriction Period and (iv) a breach of the terms and conditions established by the Committee pursuant to the Restricted
E-11
Stock Award Agreement shall cause a forfeiture of the Restricted Stock Award. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Restricted Stock Awards, including, but not limited to, rules pertaining to the effect of termination of employment, Director status or Consultant status prior to expiration of the Restriction Period. Such additional terms, conditions or restrictions shall, to the extent inconsistent with the provisions of Sections 6.2, 6.3 and 6.4, as applicable, be set forth in a Restricted Stock Award Agreement made in conjunction with the Award. Such Restricted Stock Award Agreement may also include provisions relating to (i) subject to the provisions hereof, accelerated vesting of Awards, including but not limited to accelerated vesting upon the occurrence of a Change of Control, (ii) tax matters (including provisions covering any applicable Employee wage withholding requirements and requiring additional "gross-up" payments to Holders to meet any excise taxes or other additional income tax liability imposed as a result of a payment made in connection with a Change of Control resulting from the operation of the Plan or of such Restricted Stock Award Agreement) and (iii) any other matters not inconsistent with the terms and provisions of the Plan that the Committee shall in its sole discretion determine. The terms and conditions of the respective Restricted Stock Agreements need not be identical. All shares of Common Stock delivered to a Holder as part of a Restricted Stock Award shall be delivered and reported by the Company or the Affiliate, as applicable, to the Holder by no later than the fifteenth (15 th ) day of the third (3 rd ) calendar month next following the end of the Company's fiscal year in which the Holder's entitlement to such shares becomes vested.
Section 8.3 Payment for Restricted Stock . The Committee shall determine the amount and form of any payment from a Holder for Common Stock received pursuant to a Restricted Stock Award, if any, provided that in the absence of such a determination, a Holder shall not be required to make any payment for Common Stock received pursuant to a Restricted Stock Award, except to the extent otherwise required by law.
Section 8.4 Restricted Stock Award Agreements . At the time any Award is made under this Article VIII, the Company and the Holder shall enter into a Restricted Stock Award Agreement setting forth each of the matters contemplated hereby and such other matters as the Committee may determine to be appropriate.
ARTICLE IX
UNRESTRICTED STOCK AWARDS
Pursuant to the terms of the applicable Unrestricted Stock Award Agreement, a Holder may be awarded (or sold) shares of Common Stock which are not subject to Restrictions, in consideration for past services rendered thereby to the Company or an Affiliate or for other valid consideration.
ARTICLE X
RESTRICTED STOCK UNIT AWARDS
Section 10.1 Terms and Conditions . The Committee shall set forth in the applicable Restricted Stock Unit Award Agreement the individual service-based vesting requirement which the Holder would be required to satisfy before the Holder would become entitled to payment pursuant to Section 10.2 and the number of Units awarded to the Holder. Such payment shall be subject to a "substantial risk of forfeiture" under Section 409A of the Code. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Restricted Stock Unit Awards, including, but not limited to, rules pertaining to the effect of termination of employment, Director status or Consultant status prior to expiration of the applicable vesting period. The terms and conditions of the respective Restricted Stock Unit Award Agreements need not be identical.
Section 10.2 Payments . The Holder of a Restricted Stock Unit shall be entitled to receive a cash payment equal to the Fair Market Value of a share of Common Stock, or one (1) share of Common
E-12
Stock, as determined in the sole discretion of the Committee and as set forth in the Restricted Stock Unit Award Agreement, for each Restricted Stock Unit subject to such Restricted Stock Unit Award, if the Holder satisfies the applicable vesting requirement. Such payment shall be made no later than by the fifteenth (15 th ) day of the third (3 rd ) calendar month next following the end of the calendar year in which the Restricted Stock Unit first becomes vested.
ARTICLE XI
PERFORMANCE UNIT AWARDS
Section 11.1 Terms and Conditions . The Committee shall set forth in the applicable Performance Unit Award Agreement the performance goals and objectives (and the period of time to which such goals and objectives shall apply) which the Holder and/or the Company would be required to satisfy before the Holder would become entitled to payment pursuant to Section 11.2, the number of Units awarded to the Holder and the dollar value assigned to each such Unit. Such payment shall be subject to a "substantial risk of forfeiture" under Section 409A of the Code. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions, including, but not limited to, rules pertaining to the effect of termination of employment, Director status or Consultant status prior to expiration of the applicable performance period. The terms and conditions of the respective Performance Unit Award Agreements need not be identical.
Section 11.2 Payments . The Holder of a Performance Unit shall be entitled to receive a cash payment equal to the dollar value assigned to such Unit under the applicable Performance Unit Award Agreement if the Holder and/or the Company satisfy (or partially satisfy, if applicable under the applicable Performance Unit Award Agreement) the performance goals and objectives set forth in such Performance Unit Award Agreement. The Performance Unit Award Agreement may provide that, depending on the degree of performance achieved, different amounts of Performance Units, or no Performance Units, may be awarded. If achieved, such payment shall be made no later than by the fifteenth (15 th ) day of the third (3 rd ) calendar month next following the end of the Company's fiscal year to which such performance goals and objectives relate.
ARTICLE XII
PERFORMANCE SHARE AWARDS
Section 12.1 Terms and Conditions . The Committee shall set forth in the applicable Performance Share Award Agreement the performance goals and objectives (and the period of time to which such goals and objectives shall apply) which the Holder and/or the Company would be required to satisfy before the Holder would become entitled to the receipt of shares of Common Stock pursuant to such Holder's Performance Share Award and the number of shares of Common Stock subject to such Performance Share Award. Such payment shall be subject to a "substantial risk of forfeiture" under Section 409A of the Code and, if such goals and objectives are achieved, the distribution of such Common Shares shall be made no later than by the fifteenth (15 th ) day of the third (3 rd ) calendar month next following the end of the Company's fiscal year to which such goals and objectives relate. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Performance Share Awards, including, but not limited to, rules pertaining to the effect of termination of the Holder's employment, Director status or Consultant status prior to the expiration of the applicable performance period. The terms and conditions of the respective Performance Share Award Agreements need not be identical.
Section 12.2 Stockholder Rights and Privileges . The Holder of a Performance Share Award shall have no rights as a stockholder of the Company until such time, if any, as the Holder actually receives shares of Common Stock pursuant to the Performance Share Award.
E-13
ARTICLE XIII
DISTRIBUTION EQUIVALENT RIGHTS
Section 13.1 Terms and Conditions . The Committee shall set forth in the applicable Distribution Equivalent Rights Award Agreement the terms and conditions, if any, including whether the Holder is to receive credits currently in cash, is to have such credits reinvested (at Fair Market Value determined as of the date of reinvestment) in additional shares of Common Stock or is to be entitled to choose among such alternatives. Such receipt shall be subject to a "substantial risk of forfeiture" under Section 409A of the Code and, if such Award becomes vested, the distribution of such cash or shares of Common Stock shall be made no later than by the fifteenth (15 th ) day of the third (3 rd ) calendar month next following the end of the Company's fiscal year in which the Holder's interest in the Award vests. Distribution Equivalent Rights Awards may be settled in cash or in shares of Common Stock, as set forth in the applicable Distribution Equivalent Rights Award Agreement. A Distribution Equivalent Rights Award may, but need not be, awarded in tandem with another Award, whereby, if so awarded, such Distribution Equivalent Rights Award shall expire, terminate or be forfeited by the Holder, as applicable, under the same conditions as under such other Award.
Section 13.2 Interest Equivalents . The Distribution Equivalent Rights Award Agreement for a Distribution Equivalent Rights Award may provide for the crediting of interest on a Distribution Rights Award to be settled in cash at a future date (but in no event later than by the fifteenth (15 th ) day of the third (3 rd ) calendar month next following the end of the Company's fiscal year in which such interest was credited), at a rate set forth in the applicable Distribution Equivalent Rights Award Agreement, on the amount of cash payable thereunder.
ARTICLE XIV
STOCK APPRECIATION RIGHTS
Section 14.1 Terms and Conditions . The Committee shall set forth in the applicable Stock Appreciation Right Award Agreement the terms and conditions of the Stock Appreciation Right, including (i) the base value (the " Base Value ") for the Stock Appreciation Right, which for purposes of a Stock Appreciation which is not a Tandem Stock Appreciation Right, shall be not less than the Fair Market Value of a share of the Common Stock on the date of grant of the Stock Appreciation Right, (ii) the number of shares of Common Stock subject to the Stock Appreciation Right, (iii) the period during which the Stock Appreciation Right may be exercised; provided , however , that no Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date of its grant, and (iv) any other special rules and/or requirements which the Committee imposes upon the Stock Appreciation Right. Upon the exercise of some or all of a Stock Appreciation Right, the Holder shall receive a payment from the Company, in cash or in the form of shares of Common Stock having an equivalent Fair Market Value or in a combination of both, as determined in the sole discretion of the Committee, equal to the product of:
(a) The excess of (i) the Fair Market Value of a share of the Common Stock on the date of exercise, over (ii) the Base Value, multiplied by;
(b) The number of shares of Common Stock with respect to which the Stock Appreciation Right is exercised.
Section 14.2 Tandem Stock Appreciation Rights . If the Committee grants a Stock Appreciation Right which is intended to be a Tandem Stock Appreciation Right, the Tandem Stock Appreciation Right must be granted at the same time as the related Option, and the following special rules shall apply:
(a) The Base Value shall be equal to or greater than the per share exercise price under the related Option;
E-14
(b) The Tandem Stock Appreciation Right may be exercised for all or part of the shares of Common Stock which are subject to the related Option, but solely upon the surrender by the Holder of the Holder's right to exercise the equivalent portion of the related Option (and when a share of Common Stock is purchased under the related Option, an equivalent portion of the related Tandem Stock Appreciation Right shall be cancelled);
(c) The Tandem Stock Appreciation Right shall expire no later than the date of the expiration of the related Option;
(d) The value of the payment with respect to the Tandem Stock Appreciation Right may be no more than one hundred percent (100%) of the difference between the per share exercise price under the related Option and the Fair Market Value of the shares of Common Stock subject to the related Option at the time the Tandem Stock Appreciation Right is exercised, multiplied by the number of shares of Common Stock with respect to which the Tandem Stock Appreciation Right is exercised; and
(e) The Tandem Stock Appreciation Right may be exercised solely when the Fair Market Value of a share of Common Stock subject to the related Option exceeds the per share the exercise price under the related Option.
ARTICLE XV
RECAPITALIZATION OR REORGANIZATION
Section 15.1 Adjustments to Common Stock . The shares with respect to which Awards may be granted under the Plan are shares of Common Stock as presently constituted; provided , however , that if, and whenever, prior to the expiration or distribution to the Holder of shares of Common Stock underlying an Award theretofore granted, the Company shall effect a subdivision or consolidation of shares of Common Stock or the payment of a stock dividend on Common Stock without receipt of consideration by the Company, the number of shares of Common Stock with respect to which such Award may thereafter be exercised or satisfied, as applicable, (i) in the event of an increase in the number of outstanding shares, shall be proportionately increased, and the purchase price per share of the Common Stock shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding shares, shall be proportionately reduced, and the purchase price per share of the Common Stock shall be proportionately increased. Notwithstanding the foregoing or any other provision of this Article XV, any adjustment made with respect to an Award (x) which is an Incentive Stock Option, shall comply with the requirements of Section 424(a) of the Code, and in no event shall any adjustment be made which would render any Incentive Stock Option granted under the Plan to be other than an "incentive stock option" for purposes of Section 422 of the Code, and (y) which is a Non-Qualified Stock Option, shall comply with the requirements of Section 409A of the Code, and in no event shall any adjustment be made which would render any Non-Qualified Stock Option granted under the Plan to become subject to Section 409A of the Code.
Section 15.2 Recapitalization . If the Company recapitalizes or otherwise changes its capital structure, thereafter upon any exercise or satisfaction, as applicable, of a previously granted Award, the Holder shall be entitled to receive (or entitled to purchase, if applicable) under such Award, in lieu of the number of shares of Common Stock then covered by such Award, the number and class of shares of stock and securities to which the Holder would have been entitled pursuant to the terms of the recapitalization if, immediately prior to such recapitalization, the Holder had been the holder of record of the number of shares of Common Stock then covered by such Award.
Section 15.3 Other Events . In the event of changes to the outstanding Common Stock by reason of extraordinary cash dividend, reorganization, mergers, consolidations, combinations, split-ups, spin-offs, exchanges or other relevant changes in capitalization occurring after the date of the grant of any Award and not otherwise provided for under this Article XV, any outstanding Awards and any
E-15
Award Agreements evidencing such Awards shall be adjusted by the Board in its discretion in such manner as the Board deems equitable or appropriate taking into consideration the accounting and tax consequences, as to the number and price of shares of Common Stock or other consideration subject to such Awards. In the event of any adjustment pursuant to Sections 15.1, 15.2 or this Section 15.3, the aggregate number of shares available under the Plan under Section 5.1 (and the Code Section 162(m) limit set forth therein) shall be appropriately adjusted by the Board, the determination of which shall be conclusive. In addition, the Committee may make provision for a cash payment to a Participant or a person who has an outstanding Award. The number of shares of Common Stock subject to any Award shall be rounded to the nearest whole number.
Section 15.4 Powers Not Affected . The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Board or of the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change of the Company's capital structure or business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting Common Stock or the rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding.
Section 15.5 No Adjustment for Certain Awards . Except as hereinabove expressly provided, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect previously granted Awards, and no adjustment by reason thereof shall be made with respect to the number of shares of Common Stock subject to Awards theretofore granted or the purchase price per share, if applicable.
ARTICLE XVI
AMENDMENT AND TERMINATION OF PLAN
The Plan shall continue in effect, unless sooner terminated pursuant to this Article XVI, until the tenth (10 th ) anniversary of the date on which it is adopted by the Board (except as to Awards outstanding on that date). The Board in its discretion may terminate the Plan at any time with respect to any shares for which Awards have not theretofore been granted; provided , however , that the Plan's termination shall not materially and adversely impair the rights of a Holder with respect to any Award theretofore granted without the consent of the Holder. The Board shall have the right to alter or amend the Plan or any part hereof from time to time; provided , however , that without the approval by a majority of the votes cast at a meeting of shareholders at which a quorum representing a majority of the shares of the Company entitled to vote generally in the election of directors is present in person or by proxy, no amendment or modification of the Plan may (i) materially increase the benefits accruing to Holders, (ii) except as otherwise expressly provided in Article XV, materially increase the number of shares of Common Stock subject to the Plan or the individual Award Agreements specified in Article V, (iii) materially modify the requirements for participation in the Plan, or (iv) amend, modify or suspend Section 7.8 (repricing prohibitions) or this Article XVI. In addition, no change in any Award theretofore granted may be made which would materially and adversely impair the rights of a Holder with respect to such Award without the consent of the Holder (unless such change is required in order to cause the benefits under the Plan to qualify as "performance-based" compensation within the meaning of Section 162(m) of the Code) or to exempt the Plan or any Award from Section 409A of the Code.
E-16
Section 17.1 No Right to Award . Neither the adoption of the Plan by the Company nor any action of the Board or the Committee shall be deemed to give an Employee, Director or Consultant any right to an Award except as may be evidenced by an Award Agreement duly executed on behalf of the Company, and then solely to the extent and on the terms and conditions expressly set forth therein.
Section 17.2 No Rights Conferred . Nothing contained in the Plan shall (i) confer upon any Employee any right with respect to continuation of employment with the Company or any Affiliate, (ii) interfere in any way with any right of the Company or any Affiliate to terminate the employment of an Employee at any time, (iii) confer upon any Director any right with respect to continuation of such Director's membership on the Board, (iv) interfere in any way with any right of the Company or an Affiliate to terminate a Director's membership on the Board at any time, (v) confer upon any Consultant any right with respect to continuation of his or her consulting engagement with the Company or any Affiliate, or (vi) interfere in any way with any right of the Company or an Affiliate to terminate a Consultant's consulting engagement with the Company or an Affiliate at any time.
Section 17.3 Other Laws; No Fractional Shares; Withholding . The Company shall not be obligated by virtue of any provision of the Plan to recognize the exercise of any Award or to otherwise sell or issue shares of Common Stock in violation of any laws, rules or regulations, and any postponement of the exercise or settlement of any Award under this provision shall not extend the term of such Award. Neither the Company nor its directors or officers shall have any obligation or liability to a Holder with respect to any Award (or shares of Common Stock issuable thereunder) (i) that shall lapse because of such postponement, or (ii) for any failure to comply with the requirements of any applicable law, rules or regulations, including but not limited to any failure to comply with the requirements of Section 409A of this Code. No fractional shares of Common Stock shall be delivered, nor shall any cash in lieu of fractional shares be paid. The Company shall have the right to deduct in cash (whether under this Plan or otherwise) in connection with all Awards any taxes required by law to be withheld and to require any payments required to enable it to satisfy its withholding obligations. In the case of any Award satisfied in the form of shares of Common Stock, no shares shall be issued unless and until arrangements satisfactory to the Company shall have been made to satisfy any tax withholding obligations applicable with respect to such Award. Subject to such terms and conditions as the Committee may impose, the Company shall have the right to retain, or the Committee may, subject to such terms and conditions as it may establish from time to time, permit Holders to elect to tender, Common Stock (including Common Stock issuable in respect of an Award) to satisfy, in whole or in part, the amount required to be withheld.
Section 17.4 No Restriction on Corporate Action . Nothing contained in the Plan shall be construed to prevent the Company or any Affiliate from taking any corporate action which is deemed by the Company or such Affiliate to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any Award made under the Plan. No Employee, Director, Consultant, beneficiary or other person shall have any claim against the Company or any Affiliate as a result of any such action.
Section 17.5 Restrictions on Transfer . No Award under the Plan or any Award Agreement and no rights or interests herein or therein, shall or may be assigned, transferred, sold, exchanged, encumbered, pledged or otherwise hypothecated or disposed of by a Holder except (i) by will or by the laws of descent and distribution, or (ii) except for an Incentive Stock Option, by gift to any Family Member of the Holder. An Award may be exercisable during the lifetime of the Holder only by such Holder or by the Holder's guardian or legal representative unless it has been transferred by gift to a Family Member of the Holder, in which case it shall be exercisable solely by such transferee. Notwithstanding any such transfer, the Holder shall continue to be subject to the withholding
E-17
requirements provided for under Section 17.3 hereof. Notwithstanding the foregoing, except for Awards which are Incentive Stock Options, Awards may be transferred pursuant to the terms of any valid separation agreement or divorce decree.
Section 17.6 Beneficiary Designations . Each Holder may, from time to time, name a beneficiary or beneficiaries (who may be contingent or successive beneficiaries) for purposes of receiving any amount which is payable in connection with an Award under the Plan upon or subsequent to the Holder's death. Each such beneficiary designation shall serve to revoke all prior beneficiary designations, be in a form prescribed by the Company and be effective solely when filed by the Holder in writing with the Company during the Holder's lifetime. In the absence of any such written beneficiary designation, for purposes of the Plan, a Holder's beneficiary shall be the Holder's estate.
Section 17.7 Rule 16b-3 . It is intended that the Plan and any Award made to a person subject to Section 16 of the Exchange Act shall meet all of the requirements of Rule 16b-3. If any provision of the Plan or of any such Award would disqualify the Plan or such Award under, or would otherwise not comply with the requirements of, Rule 16b-73, such provision or Award shall be construed or deemed to have been amended as necessary to conform to the requirements of Rule 16b-3.
Section 17.8 Section 162(m) . It is intended that the Plan shall comply fully with and meet all the requirements of Section 162(m) of the Code so that Awards hereunder which are made to Holders who are "covered employees" (as defined in Section 162(m) of the Code) shall constitute "performance-based" compensation within the meaning of Section 162(m) of the Code. Any Performance Goal(s) applicable to Qualified Performance-Based Awards shall be objective, shall be established not later than ninety (90) days after the beginning of any applicable Performance Period (or at such other date as may be required or permitted for "performance-based" compensation under Section 162(m) of the Code) and shall otherwise meet the requirements of Section 162(m) of the Code, including the requirement that the outcome of the Performance Goal or Goals be substantially uncertain (as defined in the regulations under Section 162(m) of the Code) at the time established. The Performance Criteria to be utilized under the Plan to establish Performance Goals shall consist of objective tests based on one or more of the following: net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income (before or after allocation of corporate overhead and bonus); earnings per share; net income (before or after taxes); return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the shares of Common Stock or any other publicly-traded securities of the Company; market share; gross profits; earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; expense levels; working capital levels, including cash, inventory and accounts receivable; operating margins, gross margins or cash margin; year-end cash; debt reduction; stockholder equity; operating efficiencies; strategic partnerships or transactions; co-development, co-marketing, profit sharing, joint venture or other similar arrangements); financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital; assets under management; financing and other capital raising transactions (including sales of the Company's equity or debt securities; sales or licenses of the Company's assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions). Performance Goals may be established on a Company-wide basis or with respect to one or more Company business units, divisions, subsidiaries or individuals; and measured either quarterly, annually or over a period of years, in absolute terms, relative to a pre-established target, to the performance of one or more similarly situated companies, or to the performance of an index covering a peer group of companies, in each case as specified by the Committee. When establishing Performance Goals for the applicable Performance Period, the Committee may exclude any or all "extraordinary items" as determined under
E-18
U.S. generally accepted accounting principles including, without limitation, the charges or costs associated with restructurings of the Company, discontinued operations, other unusual or non-recurring items, and the cumulative effects of accounting changes, and as identified in the Company's financial statements, notes to the Company's financial statements or management's discussion and analysis of financial condition and results of operations contained in the Company's most recent annual report filed with the U.S. Securities and Exchange Commission pursuant to the Exchange Act. Holders who are "covered employees" (as defined in Section 162(m) of the Code) shall be eligible to receive payment under a Qualified Performance-Based Award which is subject to achievement of a Performance Goal or Goals only if the applicable Performance Goal or Goals are achieved within the applicable Performance Period, as determined by the Committee. If any provision of the Plan would disqualify the Plan or would not otherwise permit the Plan to comply with Section 162(m) of the Code as so intended, such provision shall be construed or deemed amended to conform to the requirements or provisions of Section 162(m) of the Code. The Committee may postpone the exercising of Awards, the issuance or delivery of Common Stock under any Award or any action permitted under the Plan to prevent the Company or any subsidiary from being denied a federal income tax deduction with respect to any Award other than an Incentive Stock Option, provided that such deferral satisfies the requirements of Section 409A of the Code. For purposes of the requirements of Treasury Regulation Section 1.162-27(e)(4)(i), the maximum amount of compensation that may be paid to any Employee under the Plan for a calendar year shall be Ten Million Dollars ($10,000,000).
Section 17.9 Section 409A . Notwithstanding any other provision of the Plan, the Committee shall have no authority to issue an Award under the Plan with terms and/or conditions which would cause such Award to constitute non-qualified "deferred compensation" under Section 409A of the Code. Accordingly, by way of example but not limitation, no Option shall be granted under the Plan with a per share Option exercise price which is less than the Fair Market Value of a share of Common Stock on the date of grant of the Option. Notwithstanding anything herein to the contrary and except as provided in the following sentence, no Award Agreement shall provide for any deferral feature with respect to an Award which constitutes a deferral of compensation under Section 409A of the Code. The Plan and all Award Agreements are intended to comply with the requirements of Section 409A of the Code (so as to be exempt therefrom) and shall be so interpreted and construed. In the event that the Board determines that Awards should in the future be subject to deferral, it shall have the authority to make appropriate amendments to this Section 17.8 and other sections of this Plan to authorize deferrals of compensation under Section 409A of the Code.
Section 17.10 Indemnification . Each person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred thereby in connection with or resulting from any claim, action, suit, or proceeding to which such person may be made a party or may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid thereby in settlement thereof, with the Company's approval, or paid thereby in satisfaction of any judgment in any such action, suit, or proceeding against such person; provided , however , that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive and shall be independent of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or By-laws, by contract, as a matter of law, or otherwise.
Section 17.11 Other Plans . No Award, payment or amount received hereunder shall be taken into account in computing an Employee's salary or compensation for the purposes of determining any benefits under any pension, retirement, life insurance or other benefit plan of the Company or any Affiliate, unless such other plan specifically provides for the inclusion of such Award, payment or amount received. Nothing in the Plan shall be construed to limit the right of the Company to establish
E-19
other plans or to pay compensation to its employees, in cash or property, in a manner which is not expressly authorized under the Plan.
Section 17.12 Limits of Liability . Any liability of the Company with respect to an Award shall be based solely upon the contractual obligations created under the Plan and the Award Agreement. None of the Company, any member of the Board nor any member of the Committee shall have any liability to any party for any action taken or not taken, in good faith, in connection with or under the Plan.
Section 17.13 Governing Law . Except as otherwise provided herein, the Plan shall be construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of law.
Section 17.14 Severability of Provisions . If any provision of the Plan is held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision of the Plan, and the Plan shall be construed and enforced as if such invalid or unenforceable provision had not been included in the Plan.
Section 17.15 No Funding . The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of funds or assets to ensure the payment of any Award.
Section 17.16 Headings . Headings used throughout the Plan are for convenience only and shall not be given legal significance.
Section 17.17 Terms of Award Agreements . Each Award shall be evidenced by an Award Agreement, which Award Agreement, if it provides for the issuance of Common Stock, shall require the Holder to enter into and be bound by the terms of the Company's Stockholders' Agreement, if any. The terms of the Award Agreements utilized under the Plan need not be the same.
Section 17.18 California Information Requirements . To the extent applicable, the Company shall comply with the information requirements applicable to the Plan pursuant to Section 260.140.46 of the California Code of Regulations.
E-20
September 5, 2009
CONFIDENTIAL
Mr. James J. Cahill
Chief Financial Officer
Prospect Acquisition Corp.
9130 Galleria Court
Naples, FL 34109
Re: Fairness OpinionOpinion to the Board of Directors of Prospect Acquisition Corp.
Dear Mr. Cahill:
Houlihan Smith & Company, Inc. ("Houlihan") has been advised that Prospect Acquisition Corp. ("PAC" or the "Acquirer") executed a letter of intent dated July 13, 2009 to acquire all of the capital stock of Kennedy Wilson, Inc. ("Kennedy Wilson" or the "Target") through a merger with the Acquirer or its affiliate (the "Merger"). We understand that on the effective date of the Merger, each outstanding share of the common stock of the Target ("Target Common Stock") and all of its $52.4 million of convertible preferred stock ("Target Preferred Stock") will be converted into a number of shares of the common stock, par value $.0001 per share, of PAC ("PAC Common Stock") such that, in the aggregate, holders of Target Common Stock and Target Preferred Stock prior to the Merger would own 26.0 million shares of PAC Common Stock, representing approximately 52% of the 50.4 million issued and outstanding shares of PAC Common Stock at the effective time of the Merger (assuming 20% of all publicly-traded shares of PAC Common Stock are voted against the Merger and all holders of such shares elect to convert their shares into cash). We further understand that this would result in approximately $182 million of PAC's cash, after all expenses, being contributed to the merged entity as of closing (collectively, "Merger Consideration").
PAC has formed a wholly owned subsidiary, Merger Sub, solely for the purposes of the merger of Merger Sub with and into Kennedy Wilson pursuant to Section 251 of the General Corporation Law of the State of Delaware (the "DGCL"), in which Kennedy Wilson will be the surviving corporation.
Houlihan was engaged to render an opinion ("Opinion") to the Board of Directors (the "Board") of the Acquirer as to whether, as of the date of such Opinion, (i) the Merger Consideration to be paid by the Acquirer for the Target in conjunction with the Merger is fair from a financial point of view to the shareholders of the Acquirer, and (ii) the fair market value of the Target is at least equal to 80% of the balance in the Acquirer's trust account (excluding the amount held in the trust account representing a portion of the underwriters' discount).
An Employee-owned Company
105 W. Madison Suite 1500 Chicago, IL 60602
Tel: 312.499.5900 Toll Free: 800.654.4977 Fax: 312.499.5901
www.houlihansmith.com www.fairnessopinion.com www.solvencyopinion.com
F-1
Our Opinion is being rendered in such form and substance customary to transactions of a similar nature and on a basis that is consistent with our professional responsibilities to the Acquirer, and shall be subject to the undertaking of certain inquiries concerning the Merger and the business of the Acquirer. In connection therewith, Houlihan has relied upon public and non-public reports of the Acquirer and other information supplied to it by or on behalf of the Acquirer. Houlihan shall not in any respect be responsible for the accuracy or completeness of any such report or information, public or non-public, supplied to it by or on behalf of the Acquirer or for any obligation to verify the same nor for any conclusions based upon inaccurate or incomplete information.
We have not been requested to opine as to, and this Opinion does not express an opinion as to, make any recommendations with respect to, or otherwise address, among other things, (i) the underlying business decision of the Acquirer, shareholders of the Acquirer, or any other party to proceed with or effect the Merger, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the form or any other portion or aspect of, the Merger or otherwise (other than to the extent expressly specified herein), (iii) the relative merits of the Merger as compared to any alternative business strategies that might exist for the Acquirer or the effect of any other transaction in which the Acquirer or any other party might engage, (iv) the solvency or creditworthiness of the Acquirer or any other participant in the Merger under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, (v) the fairness of the Merger Consideration to be paid by the Acquirer for the Target in conjunction with the Merger to any investors of the Acquirer, other than the shareholders of the Acquirer, or (vi) the prospects of the impact of Acquirer entering into or consummating the Merger under any other contract, agreement or arrangement to which the Acquirer may be a party.
In performing our analyses and for purposes of the Opinion set forth herein, Houlihan has, among other things:
F-2
We have relied upon and assumed, without independent verification, the accuracy, completeness and reasonableness of the financial, legal, tax, and other information discussed with or reviewed by us
F-3
and have assumed such accuracy and completeness for purposes of rendering an opinion. We have further relied upon the assurances and representations from Acquirer that they are unaware of any facts that would make the information provided to us to be incomplete or misleading for the purposes of our Opinion. Furthermore, no opinion, counsel or interpretation is intended in matters that require legal, regulatory, accounting, insurance, tax or other similar professional advice. It is assumed that such opinions, counsel or interpretations have been or will be obtained from the appropriate professional sources. Furthermore, we have relied, with your consent, upon Acquirer and their respective advisers, as to all legal, regulatory, accounting, insurance and tax matters with respect to the Acquirer and the Merger.
The Opinion shall be used only (i) by the Board in evaluating the Merger Consideration to be paid by the Acquirer for the Target in conjunction with the Merger and the fair market value of the Target is at least equal to 80% of the balance in the Acquirer's trust account (excluding the amount held in the trust account representing a portion of the underwriters' discount) and (ii) in reports made by Acquirer to its shareholders and regulatory agencies. This Opinion has been furnished for the use and benefit of the Board in connection with their evaluation of the Merger Consideration to be paid by the Acquirer for the Target in conjunction with the Merger and may not be used for any other purpose without our prior written consent.
Our Opinion is necessarily based upon our evaluation of information made available to us, as well as, the economic, monetary, market, financial, regulatory and other conditions as they exist and can be evaluated on the date hereof and we have not undertaken, and we assume no responsibility, to update, revise, reaffirm or withdraw this Opinion, or otherwise comment on or consider events or circumstances occurring after the date hereof. We disclaim any obligation to advise the Board or any person of any change in any fact or matter affecting our Opinion, which may come or be brought to our attention after the date of this Opinion. We did not provide, and will not provide, any advice with respect to any legal conclusions as to whether the Merger may be prohibited by law.
In rendering our Opinion, we have assumed, with your consent, that the Merger will be consummated on the terms described in the Merger Agreement, without any waiver or modification of any material terms or conditions, and that in the course of obtaining the necessary regulatory or third party approvals for the Merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on the Acquirer or the Merger.
Each of the analyses conducted by Houlihan was carried out to provide a particular perspective of the Merger. Houlihan did not form a conclusion as to whether any individual analysis, when considered in isolation, supported or failed to support our Opinion as to the fairness of (i) the Merger Consideration to be paid by the Acquirer for the Target in conjunction with the Merger to the shareholders of the Acquirer, and (ii) the fair market value of the Target is at least equal to 80% of the balance in the Acquirer's trust account (excluding the amount held in the trust account representing a portion of the underwriters' discount). Houlihan does not place any specific reliance or weight on any individual analysis, but instead, concludes that its analyses taken as a whole, supports its conclusion and Opinion. Accordingly, Houlihan believes that its analyses must be considered in their entirety and that selecting portions of its analyses or the factors it considered, without considering all analyses and factors collectively, could create an incomplete view of the processes underlying the analyses performed by Houlihan in connection with the preparation of the Opinion.
This Opinion is not intended to be, and does not constitute, a recommendation to the Board to proceed with the Merger. This Opinion relates solely to the question of the fairness of (i) the Merger Consideration to be paid by the Acquirer for the Target in conjunction with the Merger to the shareholders of the Acquirer, and (ii) the fair market value of the Target is at least equal to 80% of the balance in the Acquirer's trust account (excluding the amount held in the trust account representing a
F-4
portion of the underwriters' discount). This Opinion should not be construed as creating any fiduciary duty on our part to any person.
Except as set forth in our engagement letter with the Acquirer dated August 20, 2009, this Opinion may not be disclosed, reproduced, disseminated, quoted, summarized or referred to at any time, in any manner or for any purpose, nor shall any references to Houlihan or any of its affiliates be made, without the prior written consent of Houlihan, in each case except as set forth in the fifth preceding paragraph of this letter.
Houlihan, a Financial Industry Regulatory Authority (FINRA) member, as part of its investment banking services, is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, underwritings, private placements, bankruptcy, capital restructuring, solvency analyses, stock buybacks, and valuations for corporate and other purposes. Houlihan has no prior investment banking relationships with either party involved in the transaction. Houlihan has received a non-contingent fee from PAC relating to its services in providing the Opinion. In an engagement letter dated August 20, 2009, PAC has agreed to indemnify Houlihan with respect to Houlihan's services relating to the Opinion.
Based on and subject to the foregoing, we are of the opinion that, as of the date hereof, (i) the Merger Consideration to be paid by the Acquirer for the Target in conjunction with the Merger is fair from a financial point of view to the shareholders of the Acquirer, and (ii) the fair market value of the Target is at least equal to 80% of the balance in the Acquirer's trust account (excluding the amount held in the trust account representing a portion of the underwriters' discount).
Very truly yours,
/s/ Houlihan Smith & Company
Houlihan Smith & Company, Inc.
F-5
Section 262 of the Delaware General Corporation Law
§ 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to § 251 (other than a merger effected pursuant to § 251(g) of this title), § 252, § 254, § 257, § 258, § 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in § 251(f) of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.
G-1
(c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for notice of such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to § 228 or § 253 of this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be
G-2
not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) of this section hereof and who is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party shall have the right to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) of this section hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) of this section hereof, whichever is later. Notwithstanding subsection (a) of this section, a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such person's own name, file a petition or request from the corporation the statement described in this subsection.
(f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.
(h) After the Court determines the stockholders entitled to an appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding the Court shall determine the fair value of the shares exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all
G-3
relevant factors. Unless the Court in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, however that this provision shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation within 60 days after the effective date of the merger or consolidation, as set forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
G-4
Chapter 13. Dissenters' Rights. California General Corporation Law
§ 1300 Corp.
(a) If the approval of the outstanding shares (Section 152) of a corporation is required for a reorganization under subdivisions (a) and (b) or subdivision (e) or (f) of Section 1201, each shareholder of the corporation entitled to vote on the transaction and each shareholder of a subsidiary corporation in a short-form merger may, by complying with this chapter, require the corporation in which the shareholder holds shares to purchase for cash at their fair market value the shares owned by the shareholder which are dissenting shares as defined in subdivision (b). The fair market value shall be determined as of the day before the first announcement of the terms of the proposed reorganization or short-form merger, excluding any appreciation or depreciation in consequence of the proposed action, but adjusted for any stock split, reverse stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form merger either (A) listed on any national securities exchange certified by the Commissioner of Corporations under subdivision (o) of Section 25100 or (B) listed on the National Market System of the NASDAQ Stock Market, and the notice of meeting of shareholders to act upon the reorganization summarizes this section and Sections 1301, 1302, 1303 and 1304; provided, however, that this provision does not apply to any shares with respect to which there exists any restriction on transfer imposed by the corporation or by any law or regulation; and provided, further, that this provision does not apply to any class of shares described in subparagraph (A) or (B) if demands for payment are filed with respect to 5 percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of shareholders entitled to vote on the reorganization and (A) were not voted in favor of the reorganization or, (B) if described in subparagraph (A) or (B) of paragraph (1) (without regard to the provisos in that paragraph), were voted against the reorganization, or which were held of record on the effective date of a short-form merger; provided, however, that subparagraph (A) rather than subparagraph (B) of this paragraph applies in any case where the approval required by Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder of dissenting shares and includes a transferee of record.
§ 1301 Corp.
(a) If, in the case of a reorganization, any shareholders of a corporation have a right under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to purchase their shares for cash, that corporation shall mail to each such shareholder a notice of the approval of the reorganization by its outstanding shares (Section 152) within 10 days after the date of that approval, accompanied by a copy of Sections 1300, 1302, 1303, and 1304 and this section, a statement of the price determined by the corporation to represent the fair market value of the dissenting shares, and a brief description of the procedure to be followed if the shareholder desires
H-1
to exercise the shareholder's right under those sections. The statement of price constitutes an offer by the corporation to purchase at the price stated any dissenting shares as defined in subdivision (b) of Section 1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase the shareholder's shares for cash under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the corporation to purchase shares shall make written demand upon the corporation for the purchase of those shares and payment to the shareholder in cash of their fair market value. The demand is not effective for any purpose unless it is received by the corporation or any transfer agent thereof (1) in the case of shares described in clause(A) or (B) of paragraph (1) of subdivision (b) of Section 1300 (without regard to the provisos in that paragraph), not later than the date of the shareholders' meeting to vote upon the reorganization, or (2) in any other case within 30 days after the date on which the notice of the approval by the outstanding shares pursuant to subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record by the shareholder which the shareholder demands that the corporation purchase and shall contain a statement of what that shareholder claims to be the fair market value of those shares as of the day before the announcement of the proposed reorganization or short-form merger. The statement of fair market value constitutes an offer by the shareholder to sell the shares at that price.
§ 1302 Corp.
Within 30 days after the date on which notice of the approval by the outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, the shareholder shall submit to the corporation at its principal office or at the office of any transfer agent thereof, (a) if the shares are certificated securities, the shareholder's certificates representing any which the shareholder demands that the corporation purchase, to be stamped or endorsed with a statement that the shares are dissenting shares or to be exchanged for certificates of appropriate denomination so stamped or endorsed or (b) if the shares uncertificated securities, written notice of the number of which the shareholder demands that the corporation purchase. Upon subsequent transfers of the dissenting shares on the books of corporation, the new certificates, initial transaction statement, and other written statements issued therefor shall bear a like statement, together with the name of the original dissenting holder of the shares.
§ 1303 Corp.
(a) If the corporation and the shareholder agree that the are dissenting shares and agree upon the price of the shares, the dissenting shareholder is entitled to the agreed price with interest thereon at the legal rate on judgments from the date of the agreement. Any agreements fixing the fair market value of dissenting shares as between the corporation and the holders thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the market value of dissenting shares shall be made within 30 days after the amount thereof has been agreed or within 30 days after statutory or contractual conditions to the reorganization satisfied, whichever is later, and in the case of certificated securities, subject to surrender of the certificates therefor, unless provided otherwise by agreement.
§ 1304 Corp.
(a) If the corporation denies that the shares are shares, or the corporation and the shareholder fail to agree upon the fair market value of the shares, then the shareholder demanding purchase of such shares as dissenting shares or any corporation, within six months after the date on which notice of approval by the outstanding shares (Section 152) or notice to subdivision (i) of Section 1110 was mailed
H-2
to the shareholder, not thereafter, may file a complaint in the superior court of the proper county praying the court to determine whether the shares dissenting shares or the fair market value of the dissenting shares or both or may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as or be joined as defendants in any such action and two or more actions may be consolidated.
(c) On the trial of the action, the court shall determine issues. If the status of the shares as dissenting shares is issue, the court shall first determine that issue. If the market value of the dissenting shares is in issue, the court determine, or shall appoint one or more impartial appraisers determine, the fair market value of the shares.
§ 1305 Corp.
(a) If the court appoints an appraiser or appraisers, they proceed forthwith to determine the fair market value per share. Within the time fixed by the court, the appraisers, or a of them, shall make and file a report in the office of the clerk of the court. Thereupon, on the motion of any party, the report shall be submitted to the court and considered on such evidence as the court considers relevant. If the court finds the report reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report within 10 days from the date of their appointment or within such further time as may be allowed by the court or the report is confirmed by the court, the court shall determine the fair value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall rendered against the corporation for payment of an amount equal the fair market value of each dissenting share multiplied by number of dissenting shares which any dissenting shareholder who is party, or who has intervened, is entitled to require the to purchase, with interest thereon at the legal rate from the on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect uncertificated securities and, with respect to securities, only upon the endorsement and delivery to the of the certificates for the shares described in the judgment. party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation the appraisers to be fixed by the court, shall be or apportioned as the court considers equitable, but, if the exceeds the price offered by the corporation, the corporation pay the costs (including in the discretion of the court fees, fees of expert witnesses and interest at the legal rate judgments from the date of compliance with Sections 1300, 1301 and 1302 if the value awarded by the court for the shares is more 125 percent of the price offered by the corporation under subdivision (a) of Section 1301).
§ 1306 Corp.
To the extent that the provisions of Chapter 5 prevent the to any holders of dissenting shares of their fair market value, shall become creditors of the corporation for the amount together with interest at the legal rate on judgments until the of payment, but subordinate to all other creditors in any proceeding, such debt to be payable when permissible under provisions of Chapter 5.
§ 1307 Corp.
Cash dividends declared and paid by the corporation upon dissenting shares after the date of approval of the reorganization the outstanding shares (Section 152) and prior to payment for shares by the corporation shall be credited against the total to be paid by the corporation therefor.
H-3
§ 1308 Corp.
Except as expressly limited in this chapter, holders of shares continue to have all the rights and privileges incident their shares, until the fair market value of their shares is upon or determined. A dissenting shareholder may not withdraw demand for payment unless the corporation consents thereto.
§ 1309 Corp.
Dissenting shares lose their status as dissenting shares and holders thereof cease to be dissenting shareholders and cease to entitled to require the corporation to purchase their shares upon happening of any of the following:
(a) The corporation abandons the reorganization. Upon abandonment of the reorganization, the corporation shall pay on demand to any dissenting shareholder who has initiated proceedings in good under this chapter all necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement in accordance with Section 1302 or are surrendered for conversion into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the status of the shares as dissenting shares or upon the purchase price of the shares, and neither files a complaint or intervenes in a pending action as provided in Section 1304, within six months after the date on which notice of the approval by the outstanding shares or notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation, withdraws the shareholder's demand for purchase of dissenting shares.
§ 1310 Corp.
If litigation is instituted to test the sufficiency or of the votes of the shareholders in authorizing a reorganization, any proceedings under Sections 1304 and 1305 shall be suspended until final determination of such litigation.
§ 1311 Corp.
This chapter, except Section 1312, does not apply to classes of shares whose terms and provisions specifically set forth the amount to be paid in respect to such shares in the event of a or merger.
§ 1312 Corp.
(a) No shareholder of a corporation who has a right under chapter to demand payment of cash for the shares held by shareholder shall have any right at law or in equity to attack validity of the reorganization or short-form merger, or to have reorganization or short-form merger set aside or rescinded, except an action to test whether the number of shares required to or approve the reorganization have been legally voted in favor thereof; but any holder of shares of a class whose terms provisions specifically set forth the amount to be paid in respect them in the event of a reorganization or short-form merger entitled to payment in accordance with those terms and provisions or,if the principal terms of the reorganization are approved pursuant subdivision (b) of Section 1202, is entitled to payment in with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form is directly or indirectly controlled by, or under common with, another party to the reorganization or short-form merger,subdivision (a) shall not apply to any shareholder of such party has not demanded payment of cash for such shareholder's pursuant to this chapter; but if the shareholder institutes action to attack the validity of the reorganization or merger or to have the reorganization or short-form merger set or rescinded, the shareholder shall not thereafter have any right demand payment of cash for the shareholder's shares
H-4
pursuant to chapter. The court in any action attacking the validity of reorganization or short-form merger or to have the or short-form merger set aside or rescinded shall not restrain or the consummation of the transaction except upon 10 days' prior to the corporation and upon a determination by the court that no other remedy will adequately protect the complaining or the class of shareholders of which such shareholder is a member. (c) f one of the parties to a reorganization or short-form is directly or indirectly controlled by, or under common control with, another party to the reorganization or short-form merger, any action to attack the validity of the reorganization or merger or to have the reorganization or short-form merger set or rescinded, (1) a party to a reorganization or short-form merger which controls another party to the reorganization or merger shall have the burden of proving that the transaction is just and reasonable as to the shareholders of the controlled party, and (2) a person who controls two or more parties to a shall have the burden of proving that the transaction is just reasonable as to the shareholders of any party so controlled.
§ 1313 Corp.
A conversion pursuant to Chapter 11.5 (commencing Section 1150) shall be deemed to constitute a for purposes of applying the provisions of this chapter, in accordance with and to the extent provided in Section 1159.
H-5
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Prospect's amended and restated certificate of incorporation provides as follows:
"Section 8.1. Right to Indemnification.
(A) director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Any repeal or modification of this paragraph (A) by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation with respect to events occurring prior to the time of such repeal or modification.
(B) The Corporation, to the full extent permitted by Section 145 of the DGCL, as amended from time to time, shall indemnify all persons whom it may indemnify pursuant thereto. Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit or proceeding for which such officer or director may be entitled to indemnification hereunder shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized hereby."
Prospect's amended and restated by-laws provides as follows:
"Article VII Indemnification of Directors and Officers
7.1 The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
7.2 The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other
II-1
enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
7.3 To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 or 2 of this Article VII, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith.
7.4 Any indemnification under sections 1 or 2 of this Article VII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in such section. Such determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or
(b) If such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion,
(c) By the stockholders.
7.5 Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Section. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate.
7.6 The indemnification and advancement of expenses provided by, or granted pursuant to the other sections of this Article VII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.
7.7 The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VII.
7.8 For purposes of this Article VII, references to "the Corporation" shall include, in addition to the resulting Corporation, any constituent Corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person
II-2
who is or was a director, officer, employee or agent of such constituent Corporation, or is or was serving at the request of such constituent Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article VII with respect to the resulting or surviving Corporation as he would have with respect to such constituent Corporation if its separate existence had continued.
7.9 For purposes of this Article VII, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VII.
7.10 The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
7.11 No director or officer of the Corporation shall be personally liable to the Corporation or to any stockholder of the Corporation for monetary damages for breach of fiduciary duty as a director or officer, provided that this provision shall not limit the liability of a director or officer (i) for any breach of the director's or the officer's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of Delaware, or (iv) for any transaction from which the director or officer derived an improper personal benefit."
Section 145 of the DGCL concerning indemnification of officers, directors, employees and agents is set forth below.
"Section 145. Indemnification of officers, directors, employees and agents; insurance.
(a) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a
II-3
director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys' fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to such provision after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.
(g) A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by
II-4
such person in any such capacity, or arising out of such person's status as such, whether or not the corporation would have the power to indemnify such person against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation's obligation to advance expenses (including attorneys' fees)."
Commission Position on Indemnification for Securities Act Liabilities
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, Prospect has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Item 21. Exhibits and Financial Statement Schedules
The following exhibits are filed as part of this proxy statement/prospectus:
Exhibit No. | Description | ||
---|---|---|---|
2.1 | Agreement and Plan of Merger, by and among Prospect Acquisition Corp., KW Merger Sub Corp. and Kennedy-Wilson, Inc., dated as of September 8, 2009, included as Annex A to the proxy statement/prospectus. | ||
|
3.1 |
|
Amended and Restated Certificate of Incorporation of Prospect Acquisition Corp., previously filed as Exhibit 3.1 to Prospect's Annual Report on Form 10-K filed March 31, 2008. |
II-5
Exhibit No. | Description | ||
---|---|---|---|
3.2 | Amended and Restated Bylaws of Prospect Acquisition Corp., previously filed as Exhibit 3.2 to Prospect's Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-145110) filed October 26, 2007. | ||
|
3.3 |
|
Form of Second Amended and Restated Certificate of Incorporation of Prospect Acquisition Corp., included as Annex D to the proxy statement/prospectus. |
|
3.4 |
|
Certificate of Incorporation of Kennedy-Wilson, Inc., filed March 27, 1992, filed herewith. |
|
3.5 |
|
Certificate of Amendment of Certificate of Incorporation of Kennedy-Wilson, Inc., dated November 20, 1995, filed herewith. |
|
3.6 |
|
Certificate of Amendment of Certificate of Incorporation of Kennedy-Wilson, Inc., dated November 19, 1996, filed herewith. |
|
3.7 |
|
Certificate of Amendment of Certificate of Incorporation of Kennedy-Wilson, Inc., dated December 15, 1997, filed herewith. |
|
3.8 |
|
Certificate of Amendment of Certificate of Incorporation of Kennedy-Wilson, Inc., dated April 29, 1998, filed herewith. |
|
3.9 |
|
Certificate of Amendment of Certificate of Incorporation of Kennedy-Wilson, Inc., dated April 18, 1999, filed herewith. |
|
3.10 |
|
Certificate of Amendment of Certificate of Incorporation of Kennedy-Wilson, Inc., dated March 25, 2009, filed herewith. |
|
3.11 |
|
Bylaws of Kennedy-Wilson, Inc., filed herewith. |
|
3.12 |
|
Amended Certificate of Designation, Preferences and Rights of Series A Preferred Stock of Kennedy-Wilson, Inc., dated as of May 30, 2008, filed herewith. |
|
4.1 |
|
Specimen Unit Certificate of Prospect Acquisition Corp., previously filed as Exhibit 4.1 to Prospect's Annual Report on Form 10-K filed March 31, 2008. |
|
4.2 |
|
Specimen Common Stock Certificate of Prospect Acquisition Corp., previously filed as Exhibit 4.2 to Prospect's Annual Report on Form 10-K filed March 31, 2008. |
|
4.3 |
|
Specimen Warrant Certificate of Prospect Acquisition Corp., previously filed as Exhibit 4.3 to Prospect's Annual Report on Form 10-K filed March 31, 2008. |
|
4.4 |
|
Warrant Agreement between Continental Stock Transfer & Trust Company and Prospect Acquisition Corp., previously filed as Exhibit 4.4 to Prospect's Annual Report on Form 10-K filed March 31, 2008. |
|
4.5 |
|
Form of Amendment No. 1 to Warrant Agreement between Continental Stock Transfer & Trust Company and Prospect Acquisition Corp., included as Annex B to the proxy statement/prospectus. |
|
4.6 |
|
Form of Amended and Restated Warrant Agreement between Continental Stock Transfer & Trust Company and Kennedy-Wilson Holdings, Inc., included as Annex C to the proxy statement/prospectus. |
|
4.7 |
|
Form of Specimen Warrant Certificate of Kennedy-Wilson Holdings, Inc., filed herewith. |
|
5.1* |
|
Opinion of Bingham McCutchen LLP regarding the validity of securities. |
|
8.1** |
|
Form of Opinion of Bingham McCutchen LLP regarding certain federal income tax matters. |
II-6
Exhibit No. | Description | ||
---|---|---|---|
8.2** | Form of Opinion of Loeb and Loeb LLP regarding certain federal income tax matters. | ||
|
10.1 |
|
Promissory Note issued by Prospect Acquisition Corp. to Flat Ridge Investments LLC on July 17, 2007, previously filed as Exhibit 10.1 to Prospect's Registration Statement on Form S-1 (File No. 333-145110) filed August 3, 2007. |
|
10.2 |
|
Promissory Note issued by Prospect Acquisition Corp. to LLM Investors L.P. on July 17, 2007, previously filed as Exhibit 10.2 to Prospect's Registration Statement on Form S-1 (File No. 333-145110) filed August 3, 2007. |
|
10.3 |
|
Promissory Note issued by Prospect Acquisition Corp. to LLM Structured Equity Fund L.P. on July 17, 2007, previously filed as Exhibit 10.3 to Prospect's Registration Statement on Form S-1 (File No. 333-145110) filed August 3, 2007. |
|
10.4 |
|
Stock Purchase Agreement dated July 18, 2007 between Prospect Acquisition Corp. and Flat Ridge Investments LLC, LLM Structured Equity Fund L.P. and LLM Investors L.P., previously filed as Exhibit 10.4 to Prospect's Registration Statement on Form S-1 (File No. 333-145110) filed August 3, 2007. |
|
10.5 |
|
Stock Purchase Agreement dated August 1, 2007 by and among Flat Ridge Investments LLC, SJC Capital LLC, Michael P. Castine and Daniel Gressel, previously filed as Exhibit 10.5 to Prospect's Registration Statement on Form S-1 (File No. 333-145110) filed August 3, 2007. |
|
10.6 |
|
Stock Purchase Agreement dated August 1, 2007 by and among LLM Structured Equity Fund L.P., LLM Investors L.P. and Capital Management Systems, Inc., previously filed as Exhibit 10.6 to Prospect's Registration Statement on Form S-1 (File No. 333-145110) filed August 3, 2007. |
|
10.7 |
|
Letter Agreement by and among Prospect Acquisition Corp., Citigroup Global Markets Inc. and each executive officer, director and initial stockholders of Prospect Acquisition Corp., previously filed as Exhibit 10.7 to Prospect's Annual Report on Form 10-K filed March 31, 2008. |
|
10.8 |
|
Investment Management Trust Agreement between Continental Stock Transfer & Trust Company and Prospect Acquisition Corp., previously filed as Exhibit 10.8 to Prospect's Annual Report on Form 10-K filed March 31, 2008. |
|
10.9 |
|
Escrow Agreement between Prospect Acquisition Corp., Continental Stock Transfer & Trust Company and the initial stockholders of Prospect, previously filed as Exhibit 10.9 to Prospect's Annual Report on Form 10-K filed March 31, 2008. |
|
10.10 |
|
Administrative Services Agreement dated July 30, 2007 between Teleos Management, L.L.C., LLM Capital Partners LLC and Prospect Acquisition Corp., previously filed as Exhibit 10.10 to Prospect's Registration Statement on Form S-1 (File No. 333-145110) filed August 3, 2007. |
|
10.11 |
|
Registration Rights Agreement dated November 14, 2007 by and among Prospect Acquisition Corp. and Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P., Capital Management Systems, Inc., SJC Capital LLC, Michael P. Castine, Daniel Gressel, Michael Downey, James J. Cahill and John Merchant, previously filed as Exhibit 10.11 to Prospect's Annual Report on Form 10-K filed March 31, 2008. |
II-7
Exhibit No. | Description | ||
---|---|---|---|
10.12 | Sponsors' Warrants Purchase Agreement by and among Prospect Acquisition Corp. and Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P. and Capital Management Systems, Inc., previously filed as Exhibit 10.12 to Prospect's Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-145110) filed October 17, 2007. | ||
|
10.13 |
|
Right of First Review Letter Agreement by and among Prospect Acquisition Corp., David A. Minella, Patrick J. Landers, James J. Cahill, Michael P. Castine, William Cvengros, Michael Downey, Daniel Gressel, William Landman, Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P. and Capital Management Systems, Inc., previously filed as Exhibit 10.13 to Prospect's Annual Report on Form 10-K filed March 31, 2008. |
|
10.14 |
|
Stock Purchase Agreement dated September 6, 2007 by and between Flat Ridge Investments LLC and Michael Downey, previously filed as Exhibit 10.14 to Prospect's Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-145110) filed September 10, 2007. |
|
10.15 |
|
Stock Purchase Agreement dated September 6, 2007 by and among James J. Cahill, LLM Structured Equity Fund L.P., LLM Investors L.P. and Capital Management Systems, Inc., previously filed as Exhibit 10.15 to Prospect's Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-145110) filed September 10, 2007. |
|
10.16 |
|
Stock Purchase Agreement dated October 15, 2007 by and among the sellers identified on Schedules B and C thereto, Flat Ridge Investments LLC and James J. Cahill, previously filed as Exhibit 10.16 to Prospect's Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-145110) filed October 17, 2007. |
|
10.17 |
|
Stock Purchase Agreement dated October 25, 2007 by and among Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P., Capital Management Systems, Inc. and John Merchant, previously filed as Exhibit 10.17 to Prospect's Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-145110) filed October 26, 2007. |
|
10.18 |
|
Amendment to Administrative Services Agreement dated December 31, 2008 between Teleos Management, L.L.C., LLM Capital Partners LLC and Prospect Acquisition Corp., previously filed as Exhibit 10.1 to Prospect's Current Report on Form 8-K filed January 7, 2009. |
|
10.19 |
|
Executive Office Lease Agreement dated January 1, 2009 between Prospect Acquisition Corp. and Professional Suites at the Galleria, Inc., previously filed as Exhibit 10.2 to Prospect's Current Report on Form 8-K filed January 7, 2009. |
|
10.20 |
|
Forfeiture Agreement dated September 8, 2009 by and among Prospect Acquisition Corp., De Guardiola Advisors, Inc., De Guardiola Holdings, Inc., Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P., CMS Platinum Fund, L.P., Inc., SJC Capital LLC, Michael P. Castine, Daniel Gressel, Michael Downey, James J. Cahill and John Merchant and Kennedy-Wilson, Inc., filed herewith. |
|
10.21 |
|
Letter Agreement dated September 17, 2009 by Prospect Acquisition Corp. and Citigroup Global Markets Inc. Ladenburg Thalmann & Co. Inc. and I-Bankers Securities, Inc., filed herewith. |
|
10.22 |
|
Letter Agreement dated September 4, 2009 by Prospect Acquisition Corp. and De Guardiola Advisors, Inc., filed herewith. |
II-8
Exhibit No. | Description | ||
---|---|---|---|
10.23 | Form of Lock-Up Agreement by Prospect Acquisition Corp. and certain stockholders of Prospect, filed herewith. | ||
|
10.24 |
|
Form of Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan, included as Annex E to the proxy statement/prospectus. |
|
10.25 |
|
Form of Consultant Restricted Stock Award Agreement to Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan, filed herewith. |
|
10.26 |
|
Form of Employee Performance Unit Award Agreement to Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan, filed herewith. |
|
10.27 |
|
Form of Employee Restricted Stock Award Agreement to Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan, filed herewith. |
|
10.28 |
|
Promissory Note issued by Kennedy-Wilson, Inc. to The Guardian Life Insurance Company of America on November 3, 2008, filed herewith. |
|
10.29 |
|
Form of Fifteenth Amendment to Employment Agreement by Kennedy-Wilson, Inc. and William J. McMorrow, filed herewith. |
|
10.30 |
|
Employment Agreement dated August 14, 1992 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.31 |
|
Amendment to Employment Agreement dated as of January 1, 1993 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.32 |
|
Second Amendment to Employment Agreement dated as of between January 1, 1994 Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.33 |
|
Third Amendment to Employment Agreement dated as of March 31, 1995 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.34 |
|
Fourth Amendment to Employment Agreement dated as of January 1, 1996 Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.35 |
|
Amendment to Employment Agreement dated as of February 28, 1996 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.36 |
|
Fifth Amendment to Employment Agreement dated as of May 19, 1997 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.37 |
|
Sixth Amendment to Employment Agreement dated as of August 20, 1998 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.38 |
|
Seventh Amendment to Employment Agreement dated as of August 9, 1999 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.39 |
|
Eighth Amendment to Employment Agreement dated as of January 3, 2000 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.40 |
|
Ninth Amendment to Employment Agreement dated as of October 1, 2000 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.41 |
|
Tenth Amendment to Employment Agreement dated as of April 22, 2002 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.42 |
|
Eleventh Amendment to Employment Agreement dated as of October 1, 2003 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
II-9
Exhibit No. | Description | ||
---|---|---|---|
10.43 | Twelfth Amendment to Employment Agreement dated as of April 21, 2004 between Kennedy-Wilson and William J. McMorrow, filed herewith. | ||
|
10.44 |
|
Thirteenth Amendment to Employment Agreement dated as of January 1, 2008 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.45 |
|
Fourteenth Amendment to Employment Agreement dated as of February 1, 2009 between Kennedy-Wilson and William J. McMorrow, filed herewith. |
|
10.46 |
|
Form of Second Amendment to Employment Agreement by Kennedy-Wilson, Inc. and Mary L. Ricks, filed herewith. |
|
10.47 |
|
Employment Agreement dated February 1, 2009 between Kennedy-Wilson and Mary L. Ricks, filed herewith. |
|
10.48 |
|
First Amendment to Employment Agreement dated June 1, 2009 between Kennedy-Wilson and Mary L. Ricks, filed herewith. |
|
10.49 |
|
Form of First Amendment to Employment Agreement by Kennedy-Wilson, Inc. and Donald J. Herrema, filed herewith. |
|
10.50 |
|
Employment Agreement dated June 15, 2009 between Kennedy-Wilson and Donald J. Herrema, filed herewith. |
|
10.51 |
|
Employment Agreement dated April 1, 1996 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.52 |
|
Amendment to Employment Agreement dated April 1, 1997 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.53 |
|
Second Amendment to Employment Agreement dated April 1, 1998 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.54 |
|
Third Amendment to Employment Agreement dated as of August 15, 1998 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.55 |
|
Fourth Amendment to Employment Agreement dated as of April 1, 1999 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.56 |
|
Fifth Amendment to Employment Agreement dated as of April 1, 2000 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.57 |
|
Sixth Amendment to Employment Agreement dated as of January 1, 2001 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.58 |
|
Seventh Amendment to Employment Agreement dated as of March 28, 2001 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.59 |
|
Eighth Amendment to Employment Agreement dated as of September 1, 2002 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.60 |
|
Ninth Amendment to Employment Agreement dated October 1, 2003 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.61 |
|
Tenth Amendment to Employment Agreement dated January 1, 2004 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.62 |
|
Eleventh Amendment to Employment Agreement dated January 1, 2005 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
II-10
Exhibit No. | Description | ||
---|---|---|---|
10.63 | Twelfth Amendment to Employment Agreement dated January 1, 2006 between Kennedy-Wilson and Freeman Lyle, filed herewith. | ||
|
10.64 |
|
Thirteenth Amendment to Employment Agreement dated January 1, 2007 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.65 |
|
Fourteenth Amendment to Employment Agreement dated March 1, 2007 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.66 |
|
Fifteenth Amendment to Employment Agreement dated January 1, 2008 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.67 |
|
Sixteenth Amendment to Employment Agreement dated June 1, 2008 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.68 |
|
Seventeenth Amendment to Employment Agreement dated January 1, 2009 between Kennedy-Wilson and Freeman Lyle, filed herewith. |
|
10.69 |
|
Employment Agreement dated January 4, 1999 between Kennedy-Wilson and James Rosten, filed herewith. |
|
10.70 |
|
Amendment to Employment Agreement dated as of January 1, 2001 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
|
10.71 |
|
Second Amendment to Employment Agreement dated as of March 15, 2001 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
|
10.72 |
|
Third Amendment to Employment Agreement dated as of January 3, 2003 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
|
10.73 |
|
Fourth Amendment to Employment Agreement dated as of September 5, 2003 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
|
10.74 |
|
Fifth Amendment to Employment Agreement dated as of October 1, 2003 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
|
10.75 |
|
Sixth Amendment to Employment Agreement dated as of January 1, 2004 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
|
10.76 |
|
Seventh Amendment to Employment Agreement dated as of April 19, 2004 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
|
10.77 |
|
Eighth Amendment to Employment Agreement dated as of January 1, 2005 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
|
10.78 |
|
Ninth Amendment to Employment Agreement dated as of February 11, 2005 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
|
10.79 |
|
Tenth Amendment to Employment Agreement dated as of January 1, 2006 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
|
10.80 |
|
Eleventh Amendment to Employment Agreement dated as of August 1, 2006 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
|
10.81 |
|
Twelfth Amendment to Employment Agreement dated as of January 1, 2007 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
|
10.82 |
|
Thirteenth Amendment to Employment Agreement dated as of January 1, 2008 between Kennedy-Wilson Properties and James Rosten, filed herewith. |
II-11
Exhibit No. | Description | ||
---|---|---|---|
10.83 | Fourteenth Amendment to Employment Agreement dated as of January 1, 2009 between Kennedy-Wilson Properties and James Rosten, filed herewith. | ||
|
10.84 |
|
Employment Agreement dated January 1, 2006 between KW Multi-Family Management Group and Robert Hart, filed herewith. |
|
10.85 |
|
Amendment to Employment Agreement dated as of August 1, 2006 between KW Multi-Family Management Group and Robert Hart, filed herewith. |
|
10.86 |
|
Second Amendment to Employment Agreement dated as of January 1, 2007 between KW Multi-Family Management Group and Robert Hart, filed herewith. |
|
10.87 |
|
Third Amendment to Employment Agreement dated as of January 1, 2008 between KW Multi-Family Management Group and Robert Hart, filed herewith. |
|
10.88 |
|
Fourth Amendment to Employment Agreement dated as of January 1, 2009 between KW Multi-Family Management Group and Robert Hart, filed herewith. |
|
10.89 |
|
Promissory Note issued by Kennedy-Wilson, Inc. to William J. McMorrow on April 10, 2006, filed herewith. |
|
10.90 |
|
Business Loan Agreement dated July 29, 2009 between Kennedy-Wilson, Inc. and Pacific Western Bank, filed herewith. |
|
10.91 |
|
Amended and Restated Loan Agreement dated June 5, 2008 between Kennedy-Wilson, Inc. and U.S. Bank National Association, filed herewith. |
|
10.92 |
|
Junior Subordinated Indenture dated, January 31, 2007 between Kennedy-Wilson, Inc. and The Bank of New York Trust Company, National Association, as trustee, filed herewith. |
|
10.93 |
|
1992 Non-Employee Director Stock Option Plan, filed herewith. |
|
10.94 |
|
Shareholders Agreement dated November 3, 2008 between Kennedy-Wilson, Inc. and The Guardian Life Insurance Company of America, filed herewith. |
|
10.95 |
|
Office Lease dated August 19, 1998 between Wilshire-Camden Associates and Kennedy-Wilson, Inc., filed herewith. |
|
10.96 |
|
First Amendment to Office Lease dated March 5, 1999 between Wilshire-Camden Associates and Kennedy-Wilson, Inc., filed herewith. |
|
10.97 |
|
Second Amendment to Lease dated June 2, 1999 between Wilshire-Camden Associates and Kennedy-Wilson, Inc., filed herewith. |
|
10.98 |
|
Third Amendment to Office Lease dated December 20, 2002 between Brighton Enterprises, LLC and Kennedy-Wilson, Inc., filed herewith. |
|
10.99 |
|
Fourth Amendment to Office Lease dated September 11, 2003 between Wilshire-Camden Associates and Kennedy-Wilson, Inc., filed herewith. |
|
10.100 |
|
Fifth Amendment to Office Lease dated January 7, 2006 between Douglas Emmett 2000, LLC and Kennedy-Wilson, Inc., filed herewith. |
|
10.101 |
|
Standard Office Lease dated March 3, 2009 by and among 9701-Hempstead Plaza, LLC, 9701-Carolina Gardens LLC, 9701-West Point Realty LLC, 9701-Dakota Leasing LLC and 9701-Iowa Leasing LLC and Kennedy-Wilson Inc., filed herewith. |
II-12
Exhibit No. | Description | ||
---|---|---|---|
10.102 | Second Amended and Restated Guaranty of Payment dated November 4, 2008 by Arthur S. Levine, as Trustee of the Ray J. Rutter Trust, Arthur S. Levine, as Trustee of the Susan Ray Rutter Trust, and Arthur S. Levine, as Trustee of the Robert Jonathan Rutter Trust, and Kennedy-Wilson Inc., to Bank Midwest N.A, filed herewith. | ||
|
10.103 |
|
Commercial Guaranty dated November 24, 2008 for borrower TDM Beach Villas, LLC, to Pacific Western Bank, by Kennedy-Wilson, Inc., filed herewith. |
|
10.104 |
|
Amended and Restated Guaranty dated October 25, 2007 Agreement by Kennedy-Wilson, Inc. in favor of Bank of America, N.A., as agent for lenders, filed herewith. |
|
10.105 |
|
Amendment to Irrevocable standby letters of credit dated October 26, 2007 from Bank of America to the beneficiary, City of Walnut Creek on behalf of Fairways 340 LLC, filed herewith. |
|
10.106 |
|
Guaranty Agreement made as of August 14, 2007 by Kennedy-Wilson, Inc. in favor of Bank of America, N.A., as agent for lenders, filed herewith. |
|
10.107 |
|
Repayment Guaranty made as of September 4, 2007 by Kennedy-Wilson, Inc. in favor of Wachovia Bank, N.A., as agent for lenders, filed herewith. |
|
10.108 |
|
Commercial Guaranty made as of September 13, 2007 by Kennedy-Wilson, Inc., to Pacific Western Bank, on behalf of Windscape Village LLC, filed herewith. |
|
10.109 |
|
Guaranty Agreement by Kennedy Wilson, Inc., on behalf of Waseda Partners, to Mizuho Bank, Ltd., filed herewith. |
|
10.110 |
|
Commercial Guaranty made as of July 20, 2009 by Kennedy-Wilson, Inc., on behalf of KW Indigo Land, LLC, to Pacific Western Bank, filed herewith. |
|
10.111 |
|
Repayment Guaranty made as of May 9, 2007 by Kennedy-Wilson, Inc. and KW Property Fund I, L.P. for the benefit of Wachovia Bank National Association, filed herewith. |
|
10.112 |
|
Commercial Guaranty dated January 16, 2009 to Pacific Western Bank by KWI Property Fund I, L.P., filed herewith. |
|
10.113 |
|
Guaranty made as of May 29, 2008 by Kennedy-Wilson, Inc. and KW Property Fund III, L.P. for the benefit of Deutsche Bank, AG, filed herewith. |
|
10.114 |
|
Payment Guaranty dated as of June 2009 by Kennedy-Wilson, Inc., in favor of The Guardian Life Insurance Company of America, filed herewith. |
|
10.115 |
|
Guaranty made as of September 9, 2005, by Kennedy-Wilson, Inc., a Delaware corporation, in favor of Bank of America, N.A., filed herewith. |
|
10.116 |
|
1992 Kennedy-Wilson, Inc. Incentive and Nonstatutory Stock Option Plan, filed herewith. |
|
10.117 |
|
Repayment Guaranty made as of September 4, 2007 by KWI Property Fund I, L.P. and KW Property Fund II, L.P., Delaware limited partnerships in favor of Wachovia Bank, N.A., as agent for lenders, filed herewith. |
|
21.1 |
|
List of Subsidiaries of Kennedy-Wilson, Inc., filed herewith. |
|
23.1 |
|
Consent of McGladrey & Pullen, LLP, filed herewith. |
|
23.2 |
|
Consent of KPMG LLP, filed herewith. |
|
23.3* |
|
Consent of Bingham McCutchen LLP (included in Exhibit 5.1). |
II-13
Exhibit No. | Description | ||
---|---|---|---|
24.1 | Power of Attorney (included on the signature page). | ||
|
99.1* |
|
Form of Proxy for Holders of Prospect Acquisition Corp. Common Stock. |
|
99.2* |
|
Form of Proxy for Holders of Prospect Acquisition Corp. Warrants. |
|
99.3 |
|
Consent of Houlihan Smith & Company, Inc., filed herewith. |
|
99.4 |
|
Consent of Kent Mouton, filed herewith. |
|
99.5 |
|
Consent of Jerry R. Solomon, filed herewith. |
|
99.6 |
|
Consent of Norman Creighton, filed herewith. |
|
99.7 |
|
Consent of Thomas Sorell, filed herewith. |
|
99.8 |
|
Consent of Cathy Hendrickson, filed herewith. |
|
99.9 |
|
Consent of William J. McMorrow, filed herewith. |
(a) | The undersigned registrant hereby undertakes: | |
(1) |
|
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
i. |
|
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
ii. |
|
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and |
iii. |
|
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
(2) |
|
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
(3) |
|
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
II-14
(6) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: | |
i. |
|
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
ii. |
|
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
iii. |
|
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
iv. |
|
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
(g)(1) |
|
The undersigned registrant hereby undertakes as follows: That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form. |
(2) |
|
The registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (h)(1) immediately preceding, or (ii) that purports to meet the requirements of section 10(a) (3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
(h) |
|
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
II-15
(i) | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. | |
(ii) |
|
For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally promptly means. This includes information contained in documents filed subsequent to the effective date of the registration statement though the date of responding request.
The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
II-16
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Naples, State of Florida, on September 24, 2009.
PROSPECT ACQUISITION CORP. | |||
|
By: |
|
/s/ DAVID A. MINELLA David A. Minella Chief Executive Officer (Principal Executive Officer) |
KNOW ALL PERSONS BY THESE PRESENTS , that each person whose signature appears below hereby constitutes and appoints David A. Minella and James J. Cahill, and each of them, as such person's true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) and additions to this registration statement on Form S-4 and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or such person's substitute or substitutes may lawfully do or cause to be done by virtue hereof. This Power of Attorney has not been executed in the State of New York.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following person in the capacities and on the dates indicated.
Signature
|
Title
|
Date
|
||
---|---|---|---|---|
|
|
|
|
|
/s/ DAVID A. MINELLA
David A. Minella |
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer) |
September 24, 2009 | ||
/s/ JAMES J. CAHILL James J. Cahill |
|
Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) |
|
September 24, 2009 |
/s/ PATRICK J. LANDERS |
|
President and Director |
|
September 24, 2009 |
/s/ MICHAEL P. CASTINE |
|
Director |
|
September 24, 2009 |
/s/ WILLIAM CVENGROS |
|
Director |
|
September 24, 2009 |
/s/ MICHAEL DOWNEY |
|
Director |
|
September 24, 2009 |
/s/ DANIEL GRESSEL |
|
Director |
|
September 24, 2009 |
/s/ WILLIAM LANDMAN |
|
Director |
|
September 24, 2009 |
/s/ JOHN MERCHANT |
|
Director |
|
September 24, 2009 |
II-17
Exhibit 3.4
CERTIFICATE OF INCORPORATION
OF
KENNEDY-WILSON, INC.
The name of the Corporation is Kennedy-Wilson, Inc.
For purposes of this Certificate of incorporation, the following terms shall have the meanings indicated, and all capitalized terms used herein and not otherwise defined shall nave the meanings ascribed to such terms in Section 203(c) of the Delaware General Corporation Law, as in effect on the date hereof:
The address of the registered office of the Corporation in the State of Delaware is Corporation Service Company, 1013 Centre Road, City of Wilmington, County of New Castle and the name of its registered agent at that address is Corporation Service Company.
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware general Corporation Law.
2
The annual meeting of stockholders shall be held at such time, on such date and at such place (within or without the State of Delaware) as provided in the Bylaws of the Corporation. Subject to any requirement of applicable law, the books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws of the Corporation. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
Special meetings of stockholders of the Corporation for any Purpose or purposes stay be called at any tins by a majority of the members of the Board of Directors oz by a committee of the Board of Directors which has been duly designated by the Board of Directors and whose power and authority, as provided in a resolution by the Board of Directors or in the Bylaws of the Corporation, includes the power to call such meetings, but such special meetings of stockholders of the Corporation mar not be called by any other Person or Persons or in any other
3
manner; provided, however, that if a proposal requiring stockholder approval is made by or on behalf of an Interested stockholder or a director who is an Affiliate or Associate of an interested Stockholder, of if an Interested Stockholder otherwise seeks action requiring stockholder approval, then the affirmative vote of a majority of the Independent Directors shall also be required to call a special meeting of stockholders for the purpose of Considering such proposal or obtaining such approval; and provided further that if and to the extent that any special, Meeting of stockholders may be called by any other Person or Persons specified in any certificate of designations filed Under Section 151(g) of the Delaware General Corporation Law (or its successor statute as in effect from time to time), then such special meeting may also be called by the Person or Persons, in the manner, at the times and for the purposes so specified.
The number of directors that shall constitute the whole Board shall be as specified in the Bylaws of the Corporation, as the same may be amended from tine to time. Notwithstanding the foregoing, during any period in which the holders of any one or more series of Preferred Stock, voting as a class, shall be entitled to elect a specified number of directors by reason of dividend arrearages or other contingencies giving them the right to do so, then and during such time as such right continues, (A) the then otherwise authorized number of directors shall be increased by such specified number of directors and the holders of shares of such series of Preferred Stock, voting as a class, shall be entitled to elect such specified number of directors in accordance with the procedure set forth in the resolution or resolutions of the Board creating such series and providing for the issuance of such shares and (B) each such additional director shall serve until his or her successor shall be elected and shall qualify, or until his or her right to hold such office terminates pursuant to the resolution or resolutions of the Board creating such series of Preferred Stock and providing for the issuance of shares of such series, whichever occurs earlier. Whenever the holders of shares of such series of Preferred Stock are divested of such right to elect directors pursuant to the resolution or resolutions of the Board creating such series end providing for the issuance of such shares, the terms of office of all directors elected by the holders of such series of Preferred Stock pursuant to such rights, or elected to fill any vacancies resulting from the death, resignation or removal of directors so elected by the holders of such series, shall forthwith terminate and the authorized number of directors shall be reduced accordingly.
Any election of directors or other action by the stockholders of the Corporation must be effected at an annual or special meeting of stockholders and may not be effected by written consent without a meetings
4
At each annual election, the directors chosen to succeed those whose terms then expire shall be of the same class of the directors they succeed unless, by reason of any intervening changes in the authorized number of directors, the designated board shall designate one or more directorships whose term then expires as directorships of another class in order more nearly to achieve equality of number of directors among the classes. If a director dies, resigns or is removed, the director chosen to fill the vacant directorship shall be of the same class as the director he or she succeeds, unless, by reason of any previous changes in the authorized number of directors, the Board shall designate such vacant directorship as a directorship of another class in order more nearly to achieve equality in the number of directors among the classes.
Notwithstanding the rule that the three classes shall be as nearly equal in number of directors as reasonably possible, in the event of any change in the authorized number of directors, each director then continuing to serve as such shall nevertheless continue as a director of the class of which he is a member until the expiration of his current tern or his prior death, resignation or removal. If any newly created directorship may, consistently with the rule that the three classes shall be as nearly equal in number of directors as reasonably possible, be allocated to one of two or more classes, the Board shall allocate it to that of the available classes whose term of office is due to expire at the earliest date following such allocation.
Vacancies and newly erected directorship; resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may, unless the Board of Directors determines otherwise, only be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director) provided, however, that if the holders of any class or classes of stock or series thereof are entitled to elect one or more directors; vacancies and newly created directorships of such class or classes or series may only be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.
5
To the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended (the Delaware Law), a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. The Corporation shall indemnify, in the manlier sea to the fullest extent permitted by the Delaware Law, any person (or the estate of any person) who is or was a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the Corporation, and whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise. The Corporation may indemnify, in the manner and to the fullest extent permitted by the Delaware Law, any person (or the estate of any person) who is or was a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the Corporation, and whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that Such person is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as am employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The corporation
6
may, to the fullest extent permitted by the Delaware Law, purchase and maintain insurance on behalf of any such director, officer, employee or agent against any liability which may be asserted against such person. To the fullest extent permitted by the Delaware Law, the indemnification provided herein shall include expenses (including attorneys fees), judgments, fines and amounts paid in settlement and, in the manner provided by the Delaware Law, any such expenses may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding. The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person for any such expenses to the fullest extent permitted by the Delaware Law, nor shall it be deemed exclusive of any other rights to which any person seeking indemnification from the Corporation may be entitled under any agreement, vote of stockholders or disinterested directors, or otherwise; both as to action in such persons official capacity and as try action in another capacity while holding such office.
No repeal or modification of the foregoing paragraph shall adversely affect any right or protection of a director of the Corporation existing by virtue of the foregoing paragraph at the time of such repeal or modification.
7
The Board of Directors, when evaluating any proposed transaction that would result in a person or entity becoming an interested Stockholder or an interested Stockholder increasing his ownership of capital Stock of the Corporation, or any transaction or any proposed transaction with another party which would constitute a Business Combination if the other party to the transaction ware an Interested Stockholder, shall, in connection with the exercise of its judgment in determining what is in the bent interests of the Corporation and its stockholders, give due consideration to all relevant factors, including without limitation, the independence and integrity of the Corporations operations, the social, economic and environmental effects on the stockholders, employees, customers, suppliers and other constituents of the Corporation and its subsidiaries and on the communities in which the Corporation and its subsidiaries operate or are located or in which they serve.
To the maximum extent permissible under Section 252 of the Delaware General Corporation Law, the stockholders of the Corporation shall be entitled to the statutory appraisal rights provided therein, notwithstanding any exception otherwise provided therein, with respect to any transaction described in Article XI involving the Corporation which requires the affirmative vote of the holders of not leaky than 66-2/3% of the Disinterested Shares then outstanding.
The name and mailing address of the incorporator of the Corporation is:
Alan D. Wallace
2950 31 st Street
Santa Monica, California 90405
The undersigned, being the incorporator hereinbefore named, for the purpose of forming a corporation to do business both within and without the State of Delaware, and in pursuance of the De/aware Genera/ Corporation Law, does make file this Certificate.
|
/s/ Alan D. Wallace |
|
Alan D. Wallace |
|
Incorporator |
8
Exhibit 3.5
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF KENNEDY-WILSON, INC.
KENNEDY-WILSON, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the Corporation), hereby certifies:
FIRST: That the Board of Directors of the Corporation, at a special meeting held on October 2, 1995, unanimously adopted a resolution declaring it advisable that the Certificate of Incorporation of the Corporation be amended as follows:
That Section 1 of Article V of the Certificate of Incorporation be amended to read in its entirety as follows:
SECTION 1. Number of Authorized Shares . The Corporation shall be authorized to issue two classes of shares of stock to be designated, respectively, Common Stock and Preferred Stock; the total number of shares of all classes of stock that the Corporation shall have authority to issue is Twenty-Five Million (25,000,000) shares consisting of Twenty Million (20,000,000) shares of Common Stock, par value $.01 per share, and Five Million (5,000,000) shares of Preferred Stock, par value $.01 per share. Upon the amendment of this Article, each ten of the outstanding shares of Common Stock of the Corporation of the par value of $.01 shall be reverse split into one share of Common Stock of the Corporation of the par value of $.01; provided, however that no fractional shares shall be issued and in lieu thereof the Corporation shall purchase for cash only such fractional interest resulting from the reverse split.
SECOND: That the stockholders of the Corporation have approved the foregoing amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, KENNEDY-WILSON, INC. has caused this Certificate of Amendment to be executed and attested to by the undersigned officers of the Corporation this 20 th day of November, 1995.
|
|
KENNEDY-WILSON, INC. |
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
|
William J. McMorrow, Chairman of the Board |
|
|
|
|
|
|
|
|
[CORPORATE SEAL] |
|
|
|
|
|
|
|
|
|
|
|
ATTEST: |
|
|
|
|
|
|
|
|
|
|
|
/s/ Randall G. Dotemoto |
|
|
|
Randall G. Dotemoto, Secretary |
|
|
|
2
Exhibit 3.6
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF KENNEDY-WILSON, INC.
KENNEDY-WILSON, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the Corporation), hereby certifies:
FIRST: That the Board of Directors of the Corporation, at a special meeting held on September 30, 1996, unanimously adopted a resolution declaring it advisable that the Certificate of Incorporation of the Corporation be amended as follows:
That the first sentence of Section 1 of Article V of the Certificate of Incorporation be amended to read in its entirety as follows:
The Corporation shall be authorized to issue two classes of shares of stock to be designated, respectively, Common Stock and Preferred Stock; the total number of shares of all classes of stock that the Corporation shall have authority to issue is Two Million Five Hundred Thousand (2,500,000) shares consisting of Two Million (2,000,000) share of Common Stock, par value $.01 per share, and Five Hundred Thousand (500,000) shares of Preferred Stock, par value $.01 per share.
SECOND: That the stockholders of the Corporation have approved the foregoing amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, KENNEDY-WILSON, INC. has caused this Certificate of Amendment to be executed and attested to by the undersigned officers of the Corporation this 19 th day of November, 1996.
|
|
KENNEDY-WILSON, INC. |
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
|
William J. McMorrow, Chairman of the Board |
|
|
|
|
|
|
|
|
[CORPORATE SEAL] |
|
|
|
|
|
|
|
|
|
|
|
ATTEST: |
|
|
|
|
|
|
|
|
|
|
|
/s/ Freeman A. Lyle |
|
|
|
Freeman A. Lyle, Secretary |
|
|
|
2
Exhibit 3.7
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF KENNEDY-WILSON, INC.
KENNEDY-WILSON, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the Corporation), hereby certifies:
FIRST: That the Board of Directors of the Corporation, at a special meeting held on September 29, 1997, unanimously adopted a resolution declaring it advisable that the Certificate of Incorporation of the Corporation be amended as follows:
That Section 1 of Article V of the Certificate of Incorporation be amended to read in its entirety as follows:
The Corporation shall be authorized to issue two classes of shares of stock to be designated, respectively, Common Stock and Preferred Stock; the total number of shares of all classes of stock that the Corporation shall have authority to issue is Six Million (6,000,000) shares consisting of Five Million (5,000,000) share of Common Stock, par value $.01 per share, and One Million (1,000,000) shares of Preferred Stock, par value $.01 per share.
SECOND: That the stockholders of the Corporation have approved the foregoing amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, KENNEDY-WILSON, INC. has caused this Certificate of Amendment to be executed and attested to by the undersigned officers of the Corporation this 15 th day of December, 1997.
|
KENNEDY-WILSON, INC. |
|
|
|
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
William J. McMorrow, Chairman of the Board |
|
|
|
|
|
|
[CORPORATE SEAL] |
|
|
|
|
|
|
|
|
ATTEST: |
|
|
|
|
|
|
|
|
/s/ Freeman A. Lyle |
|
|
Freeman A. Lyle, Secretary |
|
2
Exhibit 3.8
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF KENNEDY-WILSON, INC.
KENNEDY-WILSON, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the Corporation), hereby certifies:
FIRST: That the Board of Directors of the Corporation, at a special meeting held on March 27, 1998, unanimously adopted a resolution declaring it advisable that the Certificate of Incorporation of the Corporation be amended as follows:
That Section 1 of Article V of the Certificate of Incorporation be amended to read in its entirety as follows:
The Corporation shall be authorized to issue two classes of shares of stock to be designated, respectively, Common Stock and Preferred Stock; the total number of shares of all classes of stock that the Corporation shall have authority to issue is Twelve Million (12,000,000) shares consisting of Ten Million (10,000,000) share of Common Stock, par value $.01 per share, and Two Million (2,000,000) shares of Preferred Stock, par value $.01 per share.
SECOND: That the stockholders of the Corporation have approved the foregoing amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, KENNEDY-WILSON, INC. has caused this Certificate of Amendment to be executed and attested to by the undersigned officers of the Corporation this 29 th day of April, 1998.
|
KENNEDY-WILSON, INC. |
|
|
|
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
William J. McMorrow, Chairman of the Board |
|
|
|
|
|
|
[CORPORATE SEAL] |
|
|
|
|
|
|
|
|
ATTEST: |
|
|
|
|
|
|
|
|
/s/ Freeman A. Lyle |
|
|
Freeman A. Lyle, Secretary |
|
2
Exhibit 3.9
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF KENNEDY-WILSON, INC.
KENNEDY-WILSON, INC. (the Corporation), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That pursuant to a written consent dated February 19, 1999, the Board of Directors of the Corporation unanimously adopted resolutions declaring it advisable that the Certificate of Incorporation of the Corporation be amended and calling a special meeting of the stockholders of the Corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that an amendment to Section 1 of Article V of the Certificate of Incorporation is hereby approved so that said Section 1 will be amended in its entirety to read as follows:
SECTION 1. Number of Authorized Shares . The Corporation shall be authorized to issue two classes of stock to be designated, respectively, Common Stock and Preferred Stock; the total number of shares of all classes of stock that the Corporation shall have authority to issue is Fifty-Five Million (55,000,000) shares consisting of Fifty Million (50,000,000) share of Common Stock, par value $.01 per share, and Five Million (5,000,000) shares of Preferred Stock, par value $.01 per share.
SECOND: That thereafter, a special meeting of the stockholders of the Corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of said amendment.
THIRD: That said amendment was duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware
IN WITNESS WHEREOF, KENNEDY-WILSON, INC. has caused this Certificate of Amendment to be executed and attested to by its undersigned officers of the Corporation this 18 day of April, 1999.
|
KENNEDY-WILSON, INC. |
||
|
|
||
|
|
||
|
By: |
/s/ William J. McMorrow |
|
|
|
Name: William J. McMorrow |
|
|
|
Title: Chairman and Chief Executive Officer |
|
|
|
||
|
|
||
ATTEST: |
|
||
|
|
||
|
|
||
By: |
/s/ Freeman A. Lyle |
|
|
|
Name: Freeman A. Lyle |
|
|
|
Title: Secretary |
|
2
Exhibit 3.10
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
KENNEDY-WILSON, INC.
Kennedy-Wilson, Inc., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the Corporation ), does hereby certify that:
FIRST : That at a meeting of the Board of Directors of the Corporation resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of the Corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of the Corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED , that the Certificate of Incorporation of this Corporation be amended by (a) deleting SECTION 3 of ARTICLE X thereof and the ARTICLES thereof numbered II, VII, IX, XI, XIV and XV in their entirety (such ARTICLES to thereafter be left blank) and (b) changing the ARTICLES numbered as V and XIII thereof so that, as amended, said ARTICLES shall be read as follows:
ARTICLE V: Authorized Capital Stock
2
3
ARTICLE XIII: Amendment of Corporate Documents
SECOND : That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of the Corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD : That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
4
IN WITNESS WHEREOF , the Corporation has caused this certificate to be signed this 25 th day of March 2009.
|
KENNEDY-WILSON, INC. |
|
|
|
|
|
|
|
|
By: |
/s/ Freeman A. Lyle |
|
Name: |
Freeman A. Lyle |
|
Title: |
Executive Vice President, |
|
|
Chief Financial Officer and Secretary |
Exhibit 3.11
KENNEDY-WILSON, INC..
a Delaware corporation
BYLAWS
Article I: Offices
SECTION 1.1 Registered Office . The registered office of KennedyWilson, Inc. (the Corporation) shal1. be at Corporate Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware, and the name of the registered agent in charge thereof shall be The Corporation Trust Company.
SECTION 1.2 Principal Office. The principal office for the transaction of the business of the Corporation shall be at 2950 31st Street, Santa Monica, California 90405. The Board of Directors of the Corporation (the Board) is hereby granted full power and authority to change said principal office from one location to another.
SECTION 1.3 Other Offices , The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or as the business of the Corporation may require.
ARTICLE II; Meetings of Stockholders
SECTION 2.1 Place of Meetings . All annual meetings of stockholders and all other meetings of stockholders shall be held either at the principal office of the Corporation or at any other place within or without the State of Delaware that may be designated by the Board pursuant to authority hereinafter granted to the Board.
SECTION 2.2 Annual Meetings . Annual meetings of stockholders of the Corporation for the purpose of electing directors and for the transaction of such other proper business as may come before such meetings may be held at such time and place and on such date as the Board shall determine by resolution.
SECTION 2.3 Special Meetings . Special meetings of stockholders of the Corporation for any purpose or purposes may only be called in accordance with the provisions of the Certificate of Incorporation.
SECTION 2.4 Notice of Meetings . Except as otherwise required by law, notice of each meeting of stockholders, whether annual or special, shall be given not less than 10 days nor more than 60 days before the date of the meeting to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to such stockholder personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to
such stockholder at such stockholders post office address furnished by such stockholder to the Secretary of the Corporation for such purpose, or, if such stockholder shall not have furnished an address to the Secretary for such purpose, then at such stockholders post office address last known to the Secretary, or by transmitting a notice thereof to such stockholder at such address by telegraph, cable, wireless or fax. Except as otherwise expressly required by law, no publication of any notice of a meeting of stockholders shall be required. Every notice of a meeting of stockholders shall state the place, date and hour of the meeting and, in the case of a special meeting, shall also state the purpose for which the meeting is called, Notice of any meeting of stockholders shall not be required to be given to any stockholder to whom notice may be omitted pursuant to applicable Delaware law or who shall have waived such notice, and such notice shall be deemed waived by any stockholder who shall attend such meeting in person or by proxy, except a stockholder who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawful called or convened. Except as otherwise expressly required by law, notice of any adjourned meeting of stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken.
SECTION 2.5 Quorum . Except as otherwise required by law, the holders of record of a majority in voting interest of the shares of stock of the Corporation entitled to be voted thereat, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of stockholders of the Corporation or any adjournment thereof. Subject to the requirement of a larger percentage vote contained in the Certificate of Incorporation, these Bylaws or by statute, the stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding any withdrawal of stockholders that may leave less than a quorum remaining, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. In the absence of a quorum at any meeting or any adjournment thereof, a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat or, in the absence there from of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally called.
SECTION 2.6 voting .
(A) Each stockholder shall, at each meeting of stockholders, be entitled to vote in person or by proxy each share of the stock of the Corporation that has voting rights on the matter in question and that shall have been held by such stockholder and registered in such stockholders name on the books of the Corporation:
(1) on the date fixed pursuant to Section 6.5 of these Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting; or
(ii) if no such record date shall have been so fixed, then (a) at the close of business on the day next preceding the day upon which notice of the meeting shall
be given or (b) if notice of the meeting shall be waived, at the close of business on the day next preceding the day upon which the meeting shall be held.
(B) Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation the pledgor shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or the pledgees proxy, may represent such stock and vote thereon. Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenant5 by the entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the Delaware General Corporation Law.
(C) Any such voting rights may be exercised by the stockholder entitled thereto in person or by such stockholders proxy appointed by an instrument in writing, subscribed by such stockholder or by such stockholders attorney thereunto authorized and delivered to the, secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date unless said proxy shall provide for a longer period. The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless such stockholder shall in writing so notify the secretary of the meeting prior to the voting of the proxy. At any meeting of stockholders, all matters, except as otherwise provided in the Certificate of Incorporation, in these Bylaws or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat and thereon, a quorum being present. The vote at any meeting of stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by such stockholders proxy, if there be such proxy, and it shall state the number of shares voted.
SECTION 2.7 List of Stockholders . The Secretary of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of such stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
SECTION 2.8 Judges . If at any meeting of stockholders a vote by written ballot shall be taken on any question, the chairman of such meeting may appoint a judge or judges to act with respect to such vote. Each judge so appointed shall first subscribe an oath faithfully to execute the duties of a judge at such meeting with strict impartiality and according to the best of such judges ability. Such judges shall decide upon the qualification of the voters and shall report the number of shares represented at the meeting and entitled to vote on such question, shall conduct and accept the votes, and, when the voting is completed, shall ascertain and report the number of shares voted respectively for and against the question. Reports of judges shall be in writing and subscribed and delivered by them to the Secretary of the Corporation. The judge! need trot be stockholders of the Corporation, and any officer of the Corporation may be a judge on any question other than a vote for or against a proposal in which such officer shall have a material interest.
SECTION 2.9 Advance Notice of Stockholder Proposals and Stockholder Nominations .
(A) At any meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (i) by or at the direction of the Board or (ii) by any stockholder of the Corporation who complies with the notice procedures set forth in this Section 2.9(A). For business to be properly brought before any special meeting of the stockholders by a stockholder, the stockholder must have given notice thereof in writing to the Secretary of the Corporation not less than 90 days in advance of such meeting or,. if later, the seventh day following the first public announcement of the date of such meeting. A stockholders notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (1) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (2) the name and address, as they appear on the Corporations books, of the stockholder proposing such business, (3) the class and number of shares of the Corporation that are beneficially owned by the stockholder, and (4) any material interest of the stockholder in such business. In addition, the stockholder making such proposal shall promptly provide any other information reasonably requested by the Corporation. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any meeting of the stockholders except in accordance with the procedures set forth in this Section 2.9. The Chairman of any such meeting shall direct that any business not properly brought before the meeting shall not be considered.
(B) Nominations for the election of directors may be made by the Board or by any stockholder entitled to vote in the election of directors; provided, however, that a stockholder may nominate a person for election as a director at a meeting only if written notice of such stockholders intent to make such nomination has been given to the Secretary of the Corporation not later than 90 days in advance of such meeting or, if later, the seventh day following the first public announcement of the date of such meeting. Each such notice shall set forth: (i) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (ii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting and nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (iv) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the United States Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the Board: and (v) the consent of each nominee to serve as a director of the Corporation if so elected. In addition, the stockholder making such nomination shall promptly provide any other information reasonably requested by the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this section 2.9(3). The Chairman of any meeting of stockholders shall direct that any nomination not made in accordance with these procedures be disregarded.
ARTICLE III: Board of Directors
SECTION 3.1 General Powers . Subject to any requirements in the Certificate of Incorporation, those Bylaws, and of the Delaware General Corporation Law as to action which must be authorized or approved by the stockholders, any and all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be under the direction of, the Board to the fullest extent permitted by law. Without limiting the generality of the foregoing, it is hereby expressly declared that the Board shall have the following powers, to wit:
(A)to select and remove all the officers, agents and employees of the Corporation, prescribe such powers and duties for them as may not be inconsistent with law, the Certificate of Incorporation or these Bylaws, fix their compensation, and require from them security for faithful service;
(B) to conduct, manage and control the affairs and business of the Corporation, and to make such rules and regulations therefore not inconsistent with law the Certificate of Incorporation or these Bylaws (as the same may be amended from time to time), as it may deem best;
(C) to change the location of the registered office of the Corporation in Section 1.1 hereof; to change the principal office and the principal office for the transaction of the business of the Corporation from one location to another as provided in Section 1.2 hereof; to f ix and locate from time to time one or more subsidiary offices of the Corporation within or without the State of Delaware as provided in Section 1.3 hereof; to designate any place within or without the State of Delaware for the holding of any meeting or meetings of stockholders; and to adopt, make and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates from time to time, and in its judgment as it may deem best, provided such seal and such certificate shall at all times comply with the provisions of law;
(D) to authorize the issue of shares of stock of the Corporation from time to time, upon such terms and for such considerations as may be lawful;
(E) to borrow money and incur indebtedness for the purposes of the Corporation, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust and securities therefor; and
(F) by resolution adopted by a majority of the authorized number of directors, to designate an executive and other committees of the Board, each consisting of one or more directors, to serve at the pleasure of the Board, and to prescribe the manner in which proceedings of such committee or committees shall be conducted.
SECTION 3.2 Number and Term of Office . The authorized number of directors of the Corporation shall be nine until this section 3.2 is amended by a resolution duly adopted by the Board or by the stockholders of the Corporation, in either case in accordance with the provisions of Article XIV of the Certificate of Incorporation. Directors need not be stockholders. Each of the directors of the Corporation shall hold office until such directors successor shall have been duly elected and shall qualify or until such director shall resign or shall have been removed in the manner provided in these Bylaws.
SECTION 3.3 Election of Directors . The directors shall be elected by the stockholders of the Corporation, and at each election the persons receiving the greater number of votes, up to the number of directors then to be elected, shall be the persons then elected, the election of directors is subject to any provisions contained in the Certificate of Incorporation relating thereto, including any provisions for a classified Board.
SECTION 3.4 Resignations . Any director of the Corporation may resign at any time by giving written notice to the Board or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, it shall take effect immediately upon receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 3.5 Vacancies , Except as otherwise provided in the Certificate of Incorporation, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors, or any other cause, may be filled by vote of the majority of the remaining directors, although less than a quorum, or by a sole remaining director; provided, however, that whenever the holders of any class or series of shares are entitled to elect one or more directors, any vacancy or newly created directorship of such class or series may be filled by a majority of the directors elected by such class or series then in office, or by a sole remaining director so elected. Each director so chosen to fill a vacancy shall hold office until such directors successor shall have been elected and shall qualify or until such director shall resign or shall have been removed. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such directors term of office.
SECTION 3.6 Place of Meeting . The Board or any committee thereof may hold any of its meetings at such place or places within or without the State of Delaware as the Board or such committee may from time to time by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or a waiver of notice of any such directors may participate in any regular or special meeting of the Board or any committee thereof by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board or such committee can hear each other, and such participation shall constitute presence in person at such meeting.
SECTION 3.7 Regular Meetings , Regular meetings of the Board may be held at such times as the Board shall from time to time by resolution determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day not a legal holiday. Except as provided by law, notice of regular meetings need not be given.
SECTION 3.8 Special Meetings . Special meetings of ie Board for any purpose or purposes shall be called at any .me by the Chairman of the Board or, if the Chairman of the Board is absent or unable or refuses to act, by the Chief Executive Officer or the President. Except as otherwise provided by law or by these Bylaws, written notice of the time and place of special meetings shall be delivered personally or by facsimile transmission to each director, or sent to each director by mail or by other form of written communication, charges prepaid, addressed to such director at such directors address, or in the case of facsimile transmission at the facsimile number, as it is shown upon the records of the Corporation, or, if it is not so shown on such records and is not readily ascertainable, at the place in which the meetings of the directors are regularly held. In case such notice is mailed or telegraphed, it shall be deposited in the United States in 1 or delivered to the telegraph company in the County in which he principal office for the transaction of the business f the Corporation is located at least 48 hours prior to the t e of the holding of the meeting. In case such notice is delivered personally or by facsimile transmission as above provided, it shall be delivered at least 24 hours prior to the time of the holding of the meeting. Such mailing, telegraphing, delivery or facsimile transmission as above provided shall be due, legal and personal notice to such director. Except where otherwise required by law or by these Bylaws, notice of the purpose of a special meeting need not be given, Notice of any meeting of the Board shall not be required to be given to any director who is present at such meeting, except a director who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
SECTION 3.9 Quorum and Manner of Acting . Except as otherwise provided in these Bylaws, the Certificate of Incorporation or by applicable law, the presence of a majority of the authorized number of directors shall be required to constitute a quorum for the transaction of business at any meeting of the Board, and all matters shall be decided at any such meeting, a quorum being present, by the affirmative vote of a majority of the directors present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, provided any action taken is approved by at least a majority of the
required quorum for such meeting. In the absence of a quorum, a majority of directors present at any meeting may adjourn the same from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. The directors shall act only as a Board, and the individual directors shall have no power as such.
SECTION 3.10 Action by Consent . Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if consent in writing is given thereto by all members of the Board or of such committee, as the case may be, and such consent is filed with the minutes of proceedings of the Board or of such committee.
SECTION 3.11 Compensation . Directors who are not employees of the Corporation or any of its subsidiaries may receive an annual fee for their services as directors in an amount fixed by resolution of the Board, and, in addition, a fixed fee, with or without expenses of attendance, may be allowed by resolution of the Board for attendance at each meeting, including for attendance at each meeting of a committee of the Board. Nothing herein contained shall be construed to preclude any director -from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefore.
SECTION 3.12 Committees . By resolution adopted by a majority of the authorized number of directors, the Board may designate an executive committee, an audit committee and a stock option committee and such other committees as it shall determine. Each committee shall consist of two or more of the members of the Board and shall serve at the pleasure of the Board. Each such committee may be governed by a charter adopted by a majority of the authorized number of directors. To the extent provided in any such charter and subject to any restrictions or limitations on the delegation of power and authority imposed by applicable Law, any such committee shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Any such committee shall keep written minutes of its meetings and report the same to the Board at the next regular meeting of the Board. Unless the Board or these Bylaws shall otherwise prescribe the manner of proceedings of any such committee, meetings of such committee may be regularly scheduled in advance and may be called at any time by the chairman of the committee or by any two members thereof; otherwise, the provisions of these Bylaws with respect to notice and conduct of meetings of the Board shall govern committees of the Board and actions by such committees.
ARTICLE IV: Officers
SECTION 4.1 Officers . The officers of the corporation shall be a Chief Executive Officer, a President, one or more Vice Presidents (the number thereof and their respective titles to be determined by the Board), a Secretary, a Treasurer, a Controller and such other officers as may be appointed at the discretion of the Board in accordance with the provisions of Section 4.3 hereof. The Board may appoint a Chairman of the Board and, if the Board so designates, the chairman of the Board may be an officer of the Corporation. Any number of offices may be held by the same person.
SECTION 4.2 Election . The officers of the Corporation, except such officers as may be appointed or elected in accordance with the provisions of Sections 4.3 or 4.5 hereof, shall be chosen annually by the Board at the first meeting thereof held after the annual meeting of stockholders, and each officer shall hold office until such officer shall resign or shall be removed or otherwise disqualified to serve, or until such officers successor shall be elected and qualified.
SECTION 4.3 Other Officers . In addition to the officers chosen annually by the Board at its first meeting, the Board also may appoint or elect such other officers as the business of the Corporation may require, each of whom shall have such authority and perform such duties as are provided in these Bylaws or as the Board may from time to time specify and each of whom shall hold office until such officer shall resign or shall be removed or otherwise disqualified to serve, or until such officers successor shall be elected and qualified.
SECTION 4.4 Removal and Resignation . Any officer may be removed, either with or without cause, by resolution of the Board passed by a majority of the directors at the time in office, at any regular or special meeting of the Board, or, except in case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.
SECTION 4.5 Vacancies . A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to such office.
ARTICLE V: Contracts, Checks, Drafts, Bank Accounts; Etc.
SECTION 5.1. Execution of Contracts . The Board, except as in these Bylaws otherwise provided, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and oh behalf of the Corporation, and such authority may be general or confined to specific instances; and unless so authorized by the Board or by these Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount.
SECTION 5.2 Checks. Drafts. Etc . All checks, drafts or other orders for payment of money, notes or other evidence of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board. Each such officer, assistant, agent or attorney shall give such bond, if any, as the Board may require.
SECTION 5.3 Deposits . All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select, or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, the Chairman of the Board, the Chief Executive Officer, the President, any Vice President or the Treasurer (or any other officer or officers,
assistant or assistants, agent or agents, or attorney or attorneys of the Corporation who shall from time to time be determined by the Board) may endorse, assign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the Corporation.
SECTION 5.4 General and Special Bank Accounts . The Board day from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as the Board may select or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI: Shares and their transfer
SECTION 6.1 Certificates for Stock . Every owner of stock of the Corporation shall be entitled to have a certificate or certificates, to be in such form as the Board shall prescribe, certifying the number and class or series of shares of the stock of the Corporation owned by such owner. The certificates representing shares of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the Chairman of the Board, the Chief Executive Officer, the President or any Vice President, and by the Secretary or the Treasurer. Any or all of the signatures on the certificates may be a facsimile. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, any such certificate, shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as though the person who signed such certificate, or whose facsimile signature shall have been placed thereupon, were such officer, transfer agent or registrar at the date of issue. A record shall be kept of the respective names of the persons, firms or corporations owning the stock represented by such certificates, the number and class or series of shares represented by such certificates, respectively, and the respective dates thereof, and in case of cancellation, the respective dates of cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be cancelled, and no new certificate or certificates shall be iss~aed in exchange for any existing certificate until such existing certificate shall have been so cancelled, except in cases provided for in Section 6.4 hereof.
SECTION 5.2 transfers of Stock . Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by such holders attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, or with a transfer clerk or a transfer agent appointed as provided in Section 6.3 hereof, and upon surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact shall be so expressed in the entry of transfer if, when the certificate or certificates shall be presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so.
SECTION 6.3 Regulations , the Board may make such rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates for shares of the stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates for stock to bear the signature or signatures of any of them.
SECTION 6.4 Lost. Stolen, Destroyed,, and Mutilated Certificates . In any case of loss, theft, destruction, or mutilation of any certificate of stock, another may be issued in its place upon proof of such loss, theft, destruction, or mutilation and upon the giving of a bond of indemnity to the Corporation in such form and in such sum as the Board may direct; provided, however, that a new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper so to do.
SECTION 6.5 Fixing Date for Determination of Stockholders of Record . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If in any case involving the determination of stockholders for any purpose other than notice of or voting at a meeting of stockholders the Board shall not fix such a record date, then the record date for determining stockholders for such purpose shall be the close of business on the day on which the Board shall adopt the resolution relating thereto. A determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.
ARTICLE VII: Indemnification
SECTION 7.1 Scope of Indemnification , the Corporation shall indemnify, in the manner and to the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereinafter be amended (the Delaware Law), and by the Certificate of Incorporation, any person (or the estate of any person) who is or was a party, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the Corporation, and whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise. The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person to the fullest extent permitted by the Delaware Law, nor shall it be deemed exclusive of any other rights to which any person seeking indemnification from the Corporation may be entitled under any agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in such persons official capacity and as to action in another capacity while holding
such office. The Corporation may enter into indemnification agreements with any one or more of its directors, officers, employees and agents upon resolution duly adopted by the Board of Directors. Such agreements may indemnify such persons to the fullest extent permissible under law.
ARTICLE VIII: Miscellaneous
SECTION 8.1 Seal . The Board shall adopt a corporate seal, which shall be in the form of a circle and shall bear the name of the Corporation and words showing that the Corporation was incorporated in the State of Delaware.
SECTION 8.2 Waiver of Notices . Whenever notice is required to be given by these Bylaws or the Certificate of Incorporation or by law, the person entitled to said notice may waive such notice in writing, either before or after the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.3 Amendments . Except as otherwise provided herein or in the Certificate of Incorporation, these Bylaws or any of them may be altered, amended, repealed or rescinded and new Bylaws may be adopted by the Board,, or by the stockholders at any annual or special meeting of stockholders provided that notice of such proposed alteration, amendment, repeal, rescission or adoption is given in the notice of such meeting.
SECTION 8.4 Representation of Other Corporations , The Chairman of the Board, the Chief Executive Officer, the President or the Secretary or any Vice President of the Corporation is authorized to vote, represent and exercise on behalf of the Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the Corporation. The authority herein granted to said officers to vote or represent on behalf of the Corporation any and all shares held by the Corporation in any other corporation or corporations may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney duly executed by such officers.
SECTION 8.5 Jurisdiction for Stockholder Suits . Any action brought by any stockholder against the Corporation or against any officer, director, employee, agent or advisor of the Corporation, including without limitation any such action brought on behalf of the Corporation, shall be brought solely in a court of competent jurisdiction located in the State of Delaware.
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify;
1. That I am the 4uly elected and acting secretary of Kennedy-Wilson, Inc., a Delaware corporation; and
2. That the foregoing Bylaws, comprising 16 pages, constitue the Bylaws of said corporation as duly adopted by action of the Board of Directors of the Corporation duly taken on March 29, 1992.
IN WITNESS WHEREOF, I hays hereunto subscribed my name this day of April, 1992.
Alan D. Wallace, Secretary
RESOLUTIONS TO BE ADOPTED
BY
TILE BOARD OF DIRECTORS
OF
KENNEDY-WILSON, INC.,
March 26, 2009
WHEREAS, it is deemed to be advisable and in the best interests of the Corporation that the Corporation amend its Bylaws concerning (a) special meetings of the stockholders of the Corporation and (b) the number of the directors of the Corporation.
NOW, THEREFORE, BE IT RESOLVED, that Article II, Section 2.3 of the Bylaws of the Corporation is hereby amended, in its entirety, to read as follows:
Special Meetings . Special meetings of the stockholders, for any purpose or purposes prescribed in the notice of the meeting, may be called by the Board of Directors or the chief executive officer and shall be held at such place, on such date, and at such time as they or he or she shall fix.;
RESOLVED, FURTHER, that the first sentence of Article III, Section 3.2 of the Bylaws of the Corporation be, and it hereby is, deleted in its entirety and the following is substituted in its place:
The number of directors who shall constitute the whole Board of Directors shall be such number as the Board of Directors shall from time to time have designated, except that in the absence of any such designation, such number shall be seven (7).;
RESOLVED FURTHER, that the Secretary of the Corporation is hereby authorized and directed to execute a certificate of adoption of said amendment to the Bylaws and to insert said Amendment to Bylaws, as so certified, in the corporate minute book and to see that a copy of said Amendment to Bylaws, similarly certified, is kept at the principal office for the transaction of business of the Corporation pursuant to Section 109 of the Delaware General Corporation Law.
Exhibit 3.12
AMENDED CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS
of
SERIES A PREFERRED STOCK
of
KENNEDY-WILSON, INC.
Pursuant to Section 151 of the Delaware General Corporation Law, the undersigned, Freeman Lyle, being the Secretary of Kennedy-Wilson, Inc., a corporation organized and existing under the laws of the State of Delaware (the Corporation), hereby certifies that the following resolution was adopted unanimously by the Board of Directors of the Corporation (the Board of Directors or the Board), at a duly called meeting:
RESOLVED that pursuant to the authority expressly granted to the Board of Directors by the provisions of the Corporations Certificate of Incorporation, as amended (the Articles), the Board hereby creates a series of the preferred stock of this Corporation which Series A Preferred Stock (a) shall be designated Series A Preferred Stock, (b) shall have a par value equal to $.01 per share, (c) shall consist of sixty thousand (60,000) authorized shares and (d) shall have the following powers, designations, preferences and other rights, qualifications, limitations, or restrictions (in addition to those previsions set forth in the Articles which are applicable to the Series A Preferred Stock):
The designation of this series, which consists of 60,000 shares of Preferred Stock, is the Series A Preferred Stock (the Series A Preferred Stock) and the face amount shall be One Thousand Dollars ($1,000.00) per share (the Face Amount).
Dividends on the Series A Preferred Stock shall accrue and shall be cumulative from the Issuance Date (the Dividend Commencement Date). For each outstanding share of Series A Preferred Stock, Dividends shall be payable quarterly for each share of Series A Preferred Stock on June 30, September 30, December 31 and March 31 of each year (each, a Dividend Payment Date), commencing on June 30, 2008 and continuing until such share is fully converted, except that if any Dividend Payment Date is not a business day, then such Dividend Payment Date shall be the immediately preceding business day. Payment of the Dividend shall be made in cash.
2
3
4
5
On or prior to the Issuance Date, the Corporation shall reserve 1,428,571 shares of its authorized but unissued shares of Common Stock for issuance upon conversion of the Series A Preferred Stock, and, thereafter, the number of authorized but unissued shares of Common Stock so reserved (the Reserved Amount) shall at all times he sufficient to provide for the full conversion of all of the Series A Preferred Stock outstanding at the conversion price thereof.
All shares of the Series A Preferred Stock shall rank prior to the Corporations Common Stock and any class or series of capital stock of the Corporation hereafter created in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.
6
The holders of the Series A Preferred Stock shall have no voting power whatsoever, except as otherwise provided by the Delaware General Corporation Law (the DGCL), in this Article VIII and in Article IX below.
Notwithstanding the above, the Corporation shall provide each holder of Series A Preferred Stock with prior notification of any meeting of the stockholders (and copies of proxy materials and other information sent to stockholders). If the Corporation takes a record of its stockholders for the purpose of determining stockholders entitled to (i) receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation or recapitalization) any share of any class or any other securities or property, or to receive any other right, or (ii) to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the. Corporation, or any proposed merger, consolidation, liquidation, dissolution or winding up of the Corporation, the Corporation shall mail a notice to each holder of Series A Preferred Stock, at least 15 days prior to the record date specified therein (or 45 days prior to the consummation of the transaction or event, whichever is earlier, but in no event earlier than public announcement of such proposed transaction), of the date on which any such record is to be taken for the purpose of such vote, dividend, distribution, right or other event, and a brief statement regarding the amount and character of such vote, dividend, distribution, right or other event to the extent known at such time.
To the extent that under the DGCL the vote of the holders of the Series A Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Corporation, the affirmative vote or consent of the holders of at least a majority of the then outstanding shares of the Series A Preferred Stock represented at a duly held meeting at which a quorum is present or by written consent of the Majority Holders (except as otherwise may be required under the DGCL) shall constitute the approval of such action by the class. To the extent that under the DGCL holders of the Series A Preferred Stock are entitled to vote on a matter with holders of Common Stock, voting together as one class, each share of Series A Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which it is then convertible using the record date for the taking of such vote of stockholders as the date as of which the Conversion Price is calculated.
7
If in connection with any Liquidation Event, the holders of the Series A Preferred Stock are entitled to vote to approve such Liquidation Event as a class, then the holders of such Series A Preferred Stock shall agree to vote their shares in favor of the Liquidation Event, conditioned on the receipt by all holders of Series A Preferred Stock of their respective Liquidation Preference, in full.
So long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not take any of the following corporate actions (whether by merger, consolidation or otherwise) without first obtaining the approval (by vote or written consent, as provided by the DGCL) of the Majority Holders:
Notwithstanding the foregoing, no change pursuant to this Article IX shall be effective to the extent that, by its terms, it applies to less than all of the holders of shares of Series A Preferred Stock then outstanding.
8
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK}
9
IN . WITNESS WHEREOF, this Amended Certificate of Designation is executed on behalf of the Corporation this 30th day of May, 2008.
KENNEDY-WILSON, INC.
By: |
/s/ Freeman Lyle |
|
Name: Freeman Lyle |
|
|
Title: Secr etary |
|
10
Exhibit 4.7
[Form of Warrant Certificate]
[Face]
NUMBER |
|
WARRANTS |
THIS WARRANT WILL BE VOID IF NOT EXERCISED PRIOR TO
5:00 P.M. NEW YORK CITY TIME, NOVEMBER 14, 2013
KENNEDY-WILSON HOLDINGS, INC.
Incorporated Under the Laws of the State of Delaware
|
CUSIP |
WARRANT CERTIFICATE
This Warrant Certificate certifies that , or registered assigns, is the registered holder of warrants (the Warrants ) to purchase shares of Common Stock, $.0001 par value (the Common Stock ), of Kennedy-Wilson Holdings, Inc. (formerly Prospect Acquisition Corp.), a Delaware corporation (the Company ). Each Warrant entitles the holder, upon exercise during the period set forth in the Warrant Agreement referred to below, to purchase from the Company that number of fully paid and non-assessable shares of Common Stock (each, a Warrant Share ) as set forth below at the exercise price (the Exercise Price ) as determined pursuant to the Warrant Agreement payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent, but only subject to the conditions set forth herein and in the Warrant Agreement. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.
Each Warrant is initially exercisable for one fully paid and non-assessable share of Common Stock. The number of Warrant Shares issuable upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
The initial Exercise Price per share of Common Stock for any Warrant is equal to $12.50 per share. The Exercise Price is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
Warrants may be exercised only during the Warrant Exercise Period subject to the conditions set forth in the Warrant Agreement and to the extent not exercised by the end of such Warrant Exercise Period such Warrants shall become void.
Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed and construed in accordance with the internal laws of the State of New York, without regard to conflicts of laws principles thereof.
|
KENNEDY-WILSON HOLDINGS, INC. |
|
|
|
|
|
By: |
|
|
|
Patrick J. Landers |
|
|
President |
|
|
|
|
By: |
|
|
|
James Cahill |
|
|
Secretary |
Countersigned:
Dated: , 20
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By: |
|
|
|
Authorized Signatory |
|
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants entitling the holder on exercise to receive shares of Common Stock, par value $0.0001 per share, of the Company (the Common Stock ), and are issued or to be issued pursuant to an amended and restated Warrant Agreement dated as of [ ], 2009 (the Warrant Agreement ), duly executed and delivered by the Company to Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (the Warrant Agent ), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words holders or holder meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.
Warrants may be exercised at any time during the Warrant Exercise Period set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price as specified in the Warrant Agreement, at the principal corporate trust office of the Warrant Agent. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise of this Warrant.
Notwithstanding anything else in this Warrant Certificate or the Warrant Agreement, no Warrant may be exercised unless at the time of exercise (i) a registration statement covering the Warrant Shares to be issued upon exercise is effective under the Act and (ii) a prospectus thereunder relating to the Warrant Shares is current. In no event shall the Warrants be settled on a net cash basis during the Warrant Exercise Period nor shall the Company be required to issue unregistered shares upon the exercise of any Warrant.
Once the Warrants become exercisable and there is an effective registration statement covering the shares of Common Stock issuable upon exercise of the Warrants available and current throughout the 30-day redemption period defined below, the Company may redeem the outstanding Warrants (except with respect to the sponsors Warrants held by a sponsor or its permitted transferee) in whole and not in part at a price of $0.01 per Warrant upon a minimum of 30 days prior written notice of redemption (the 30-day redemption period ) and if, and only if, the last sale price of the Companys Common Stock equals or exceeds $19.50 per share for any 20 trading days within a 30-trading day period ending three business days before the notice of redemption is sent. If the Company calls the Warrants for redemption, it will have the option to require all holders that wish to exercise Warrants to do so on a cashless basis. In such event, each holder would pay the exercise price by surrendering the Warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between the exercise price of the Warrants and the fair market value (defined below) by (y) the fair market value. The fair market value shall mean the average reported last sale price of the Common Stock for the ten trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Warrants.
The Warrant Agreement provides that upon the occurrence of certain events the number of Warrant Shares set forth on the face hereof may, subject to certain conditions, be adjusted. No
fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the principal corporate trust office of the Warrant Agent by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company.
Exhibit 8.1
September , 2009
Prospect Acquisition Corp.
9130 Galleria Court, Suite 318
Naples, Fl. 34109
Ladies and Gentlemen:
We have acted as counsel for Prospect Acquisition Corp., a Delaware corporation, in connection with (i) the Merger, as defined and described in the Agreement and Plan of Merger, dated as of September 8, 2009 (the Agreement ), by and among Prospect, Merger Sub and KW and (ii) the preparation and filing of the related Registration Statement on Form S-4 (the Registration Statement ), which includes the Proxy Statement/Prospectus (the Proxy Statement/Prospectus ), filed with the Securities and Exchange Commission (the Commission ). Unless otherwise indicated, each capitalized term used herein has the meaning ascribed to it in the Agreement.
In connection with this opinion, we have examined the Agreement, the Registration Statement, the Proxy Statement/Prospectus and such other documents as we have deemed necessary or appropriate in order to enable us to render our opinion. In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies, and the authenticity of the originals of such latter documents. We have not, however, undertaken any independent investigation of any factual matter set forth in any of the foregoing. For purposes of this opinion, we have assumed, with your permission, (i) that the Merger will be consummated in the manner described in Merger Agreement and the Proxy Statement/Prospectus and (ii) that the statements concerning the Merger set forth in the Agreement and the Proxy Statement/Prospectus are true, complete and correct and will remain true, complete and correct at all times up to and including the Effective Time. We have also assumed that the parties have complied with and, to the extent applicable, will continue to comply with, the obligations, covenants, and agreements contained in the Agreement.
Based on our examination of the foregoing items and subject to the assumptions, exceptions, limitations and qualifications as set forth herein, we are of the opinion that for United States federal income tax purposes, the discussion entitled Material United States Federal Income Tax Consequences - Tax Consequences of the Merger to Prospect and United States Holders of Prospect Common Stock and Material United States Federal Income Tax Consequences - Tax Consequences of the Warrant Amendment to United States Holders of Prospect Warrants in the Registration Statement insofar as it relates to statements of United States law or legal conclusions is correct in all material respects.
The opinion is based upon existing provisions of the Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated or proposed thereunder, and interpretations thereof by the Internal Revenue Service (the IRS ) and the courts, all of which are subject to change with prospective or retroactive effect, and our opinion could be adversely affected or
rendered obsolete by any such changes. No ruling has been or will be sought from the IRS as to the United States federal income tax consequences of any aspect of the Merger. The opinion expressed herein is not binding on the IRS or any court, and there can be no assurance that the IRS or a court of competent jurisdiction will not disagree with such opinion. Further, no assurance can be given that future legislative, judicial or administrative changes would not adversely affect the accuracy of the conclusions stated herein. The opinions expressed herein are as the date hereof, and we assume no obligation to update or supplement such opinions to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur or become effective. In the event any one of the statements, representations, warranties or assumptions upon which we have relied is incorrect, our opinion might be adversely affected and may not be relied upon.
We express our opinion herein only as to those matters specifically set forth above and no opinion should be inferred as to the tax consequences of the Merger under any state, local or non-U.S. law, or with respect to other areas of U.S. federal taxation. We are members of the Bar of the State of New York, and we do not express any opinion herein concerning any law other than the federal law of the United States.
This opinion is furnished to you solely for use in connection with the Registration Statement. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference of our firm in the Registration Statement under the caption Legal Matters. In giving this consent, however, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 and the rules and regulations of the Securities and Exchange Commission promulgated thereunder.
|
Very truly yours, |
|
|
|
|
|
BINGHAM McCUTCHEN LLP |
Exhibit 8.2
|
|
LOEB & LOEB LLP |
|
|
|
|
|
|
|
|
|
345 Park Avenue |
Direct |
212.407.4000 |
|
|
New York, NY 10154-1895 |
Main |
212.407.4000 |
|
|
|
Fax |
212.407.4990 |
Kennedy-Wilson, Inc.
9601 Wilshire Blvd., Suite 220
Beverly Hills, CA
90210
Re: Registration Statement of Prospect Acquisition Corp.
Ladies and Gentlemen:
We have acted as counsel to Kennedy-Wilson, Inc., a Delaware corporation (the Company), in connection with the Registration Statement on Form S-4 under the Securities Act of 1933, as amended (the Securities Act), filed by Prospect Acquisition Corp. on September [ ], 2009, as amended through the date hereof (the Registration Statement). The terms Merger and Merger Agreement have the meanings ascribed to them in the Registration Statement.
As counsel to the Company, we have reviewed the Registration Statement and the Merger Agreement. In rendering this opinion, we have assumed with your approval the genuineness of all signatures, the legal capacity of all natural persons, the legal authority of all entities, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies, and the completeness and accuracy of the documents reviewed by us. We have assumed with your approval and not verified the accuracy of the factual matters and representations set forth in the above-referenced documents, as well as the representations that you have provided us in a separate letter dated [September] [ ], 2009 (the Representation Letter). We have also assumed that the Merger will be consummated in accordance with the terms of the documents pertaining thereto without any waiver or breach of any material term or provision thereof, that each party shall act in accordance with its covenants and obligations under the Merger Agreement, that the Merger will be effective under applicable law, and that the Merger will be reported in a manner consistent with its treatment as a reorganization within the meaning of Section 368(a) of the United States Internal Revenue Code of 1986, as amended.
Based on the foregoing and subject to the assumptions, limitations and qualifications stated in the Registration Statement and herein, we hereby confirm and adopt as our opinion the statements of United States federal income tax law on the date hereof as set forth in the Registration Statement under the caption Material United States Federal Income Tax Consequences Tax Consequences of the Merger to United States Holders of Kennedy-Wilson Stock.
This opinion is based upon the existing provisions of the United States Internal Revenue Code of 1986, as amended, Treasury Regulations promulgated thereunder, published revenue rulings and procedures from the United States Internal Revenue Service (IRS) and judicial decisions, all as in effect on the date hereof. Any such authority is subject to change, and any change may be retroactive in effect and may affect our opinion as set forth herein. Our opinion is based on
the facts, assumptions and representations set forth in the Registration Statement, the Merger Agreement, the Representation Letter and this opinion. If any of the facts, assumptions or representations is not true, correct or complete, our opinion may not be applicable. We undertake no responsibility to update this opinion or to advise you of any developments or changes as a result of a change in legal authority, fact, assumption or document, or any inaccuracy in any fact, representation or assumption, upon which this opinion is based, or otherwise.
This opinion is issued in connection with the Registration Statement, and may not be relied on for any other purpose. This opinion may not be reproduced, quoted, circulated or referred to in any other document, without our prior written consent, which may be withheld in our sole discretion. Notwithstanding the foregoing, nothing herein shall be construed as a limitation on the ability to disclose the tax treatment or tax structure of the proposed transaction.
Our opinion is not binding on the IRS or a court. The IRS may disagree with one or more of our conclusions, and a court may sustain the IRSs position.
Except as expressly provided herein, we express no opinion with respect to any tax matter in the Registration Statement.
We hereby consent to the filing of this letter as an exhibit to the Registration Statement and to the reference to this firm as counsel to the Company under the caption Legal Matters in the Registration Statement, without implying or admitting that we are experts within the meaning of the Securities Act or the rules and regulations of the Securities and Exchange Commission issued thereunder, with respect to any part of the Registration Statement, including this exhibit.
Very truly yours, |
|
|
|
|
|
Loeb & Loeb LLP |
|
2
FORFEITURE AGREEMENT
FORFEITURE AGREEMENT is made and entered into as of September 8, 2009 (this " Agreement "), by and among (i) PROSPECT ACQUISITION CORP., a Delaware corporation (" Prospect "), (ii) DE GUARDIOLA ADVISORS, INC., a Delaware corporation (" DGA "), (iii) DE GUARDIOLA HOLDINGS, INC., a Delaware corporation (" DGH "), (iv) Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P., CMS Platinum Fund, L.P., SJC Capital LLC, Michael P. Castine, Daniel Gressel, Michael Downey, James J. Cahill and John Merchant (collectively, the " Prospect Founders "), and (v) KENNEDY-WILSON, INC., a Delaware corporation (" KW ").
RECITALS
WHEREAS, Prospect, KW Merger Sub Corp., a Delaware corporation and wholly-owned subsidiary of Prospect (" Merger Sub ") and KW are concurrently entering into that certain Agreement and Plan of Merger (the " Merger Agreement "; capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Merger Agreement), pursuant to which, among other things, Merger Sub will be merged with and into KW, with KW to be the surviving corporation; and
WHEREAS, as an inducement to KW entering into the Merger Agreement, the Prospect Founders have agreed to forfeit an aggregate of 2,575,000 of their shares of Prospect Common Stock.
NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, and intending to be legally bound hereby, the parties agree as follows:
AGREEMENT
Section 1 Forfeiture and Cancellation of Prospect Common Stock .
(a) Each of the Prospect Founders agrees that, immediately prior to and contingent upon the Closing under the Merger Agreement, he, she or it shall surrender to Prospect for cancellation stock certificates representing a number of shares of Prospect Common Stock set forth next to each Prospect Founder's name on Schedule 1 hereto under the heading "Shares Forfeited to Prospect" (the " Forfeited Shares ").
(b) Each of the Prospect Founders (i) represents and warrants that he, she or it owns his, her or its Forfeited Shares free and clear of liens or encumbrances other than the transfer restrictions set forth in such Prospect Founder's Letter Agreement, dated as of November 14, 2007, by and among such Prospect Founder, Prospect and Citigroup Global Markets Inc. or in that certain Escrow Agreement, dated as of November 14, 2007, by and among Prospect, the Prospect Founders and Continental Stock Transfer & Trust Company, and (ii) agrees that he, she or it shall not incur any additional liens or encumbrances on the Forfeited Shares prior to the Closing under the Merger Agreement.
(c) Each of the Prospect Founders acknowledges and agrees that KW would not have entered into the Merger Agreement if the Prospect Founders had not entered into this Agreement concurrently therewith.
Section 2 Stock Issuance to DGH .
(a) Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, at the Closing under the Merger Agreement, in consideration of DGA's engagement by Prospect under the letter agreement, dated as of August 10, 2009, between DGA and Prospect (the " Engagement Letter "), Prospect shall issue to DGH 375,000 shares of Prospect Common Stock (the " Advisor Shares ").
(b) DGA agrees that Prospect's delivery of the Advisor Shares shall be in full and complete satisfaction of Prospect's obligation to pay the equity portion of the Transaction Fee pursuant to and as defined in the Engagement Letter.
Section 3 Representations and Warranties . Each party hereto hereby represents and warrants to each other party, as of the date hereof and as of Closing, as follows:
(a) Power and Authority. Such party has the full power and authority to enter into this Agreement and to perform its obligations under this Agreement in accordance with the provisions of this Agreement. This Agreement has been duly authorized, executed and delivered by such party and constitutes a legal, valid and binding obligation of such party, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, moratorium or other similar laws affecting creditors' rights generally and by general equitable principles.
(b) No Conflicts. The execution and delivery of this Agreement by such party does not, and, the performance of, and compliance with, the terms of this Agreement by such party, will not, (i) conflict with or violate any provision of any law, statute, judgment, injunction, decree, ruling or resolution to which such party is subject, (ii) violate its organizational documents, if applicable, or (iii) conflict with or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material agreement or other instrument to which it is a party or that is applicable to such party or any of its assets, or any order or decree applicable to such party.
(c) Consents. No permit, authorization, consent or approval of or by, or any notification of or registration, declaration or filing with, any person (governmental or private) is required to be obtained or made by such party in connection with the execution, delivery and performance by it of this Agreement or the consummation by such party of the transactions contemplated hereby.
Section 4 Additional Representation and Warranties of DGH . DGH hereby represents and warrants to Prospect, as of the date hereof and as of Closing, as follows:
(a) Accredited Investor. DGH is an "accredited investor" within the meaning of Rule 501(a) under the Securities Act, and understands that Prospect has relied upon its being an accredited investor in deciding to proceed with the transactions contemplated hereby, and in ascertaining the requirements of law applicable to the issuance of the Advisor Shares pursuant to Section 2 of this Agreement. DGH's financial condition is such that DGH is able to bear all economic risks of investment in the Advisor Shares, including a complete loss of DGH's investments therein. DGH acknowledges that Prospect has provided it with adequate access to financial and other information concerning Prospect as requested and that it has had the opportunity to ask questions of and receive answers from Prospect concerning the transactions contemplated under this Agreement and to obtain therefrom any additional information necessary to make an informed decision regarding an investment in Prospect.
(b) Investment. DGH is acquiring the Advisor Shares from Prospect in a private placement for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same, and DGH has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof.
(c) Unregistered Securities. DGH acknowledges and agrees that the Advisor Shares must be held indefinitely until such time as they are subsequently registered under the Securities Act or an exemption from such registration is available. DGH has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act, which currently permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among
2
other things: the availability of certain current public information about Prospect, minimum holding periods and restrictions on the number of shares sold in a given period.
Section 5 Termination . This Agreement shall automatically terminate and have no further force and effect upon the termination of the Merger Agreement.
Section 6 Miscellaneous .
(a) Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the parties at the addresses set forth on the signature pages (or at such other address for a party as shall be specified in writing to all other parties).
(b) Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed by all of the parties hereto. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
(c) Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The terms "hereof," "herein," and "hereby" and words of similar import will, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.
(d) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
(e) Counterparts; Facsimile Execution. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Facsimile or electronic execution and delivery of this Agreement is legal, valid and binding for all purposes.
(f) Entire Agreement; Third Party Beneficiaries. This Agreement, taken together with all Schedules hereto (a) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the transactions contemplated hereby and (b) is not intended to confer upon any Person other than the parties any rights or remedies.
(g) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.
(h) Consent to Jurisdiction; Waiver of Jury Trial. (i) Each of the parties irrevocably agrees that any legal action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this
3
Agreement and the rights and obligations arising hereunder brought by any other party hereto or its successors or assigns, shall be brought and determined exclusively in any state or federal court within the City of New York, New York. Each of the parties hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than the aforesaid courts. Each of the parties hereby irrevocably waives, and agrees not to assert as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (1) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to serve in accordance with this Section 6(h), (2) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (3) to the fullest extent permitted by applicable Law, any claim that (x) the suit, action or proceeding in such court is brought in an inconvenient forum, (y) the venue of such suit, action or proceeding is improper or (z) this Agreement, or the subject mater hereof, may not be enforced in or by such courts.
(ii) EACH OF THE PARTIES IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE TRANSACTION DOCUMENTS, THE TRANSACTION OR THE ACTIONS OF THE PARTIES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
(i) Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and permitted assigns.
[Remainder of Page Intentionally Left Blank.]
4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
PROSPECT ACQUISITION CORP. | |||
|
By: |
|
/s/ David A. Minella |
Name: David A. Minella
Title: Chairman and CEO Address: 9130 Galleria Court, Suite 318 Naples, FL 34109 |
|||
|
With a copy to: |
||
|
Bingham McCutchen LLP 399 Park Avenue New York, NY 10022 Attention: Floyd I. Wittlin, Esq. |
||
|
DE GUARDIOLA ADVISORS, INC. |
||
|
By: |
|
/s/ Roberto De Guardiola |
Name: Roberto De Guardiola
Title: President Address: 405 Park Avenue New York, NY 10022 |
|||
|
DE GUARDIOLA HOLDINGS, INC. |
||
|
By: |
|
/s/ Roberto De Guardiola |
Name: Roberto De Guardiola
Title: President Address: 405 Park Avenue New York, NY 10022 |
|||
|
KENNEDY-WILSON, INC. |
||
|
By: |
|
/s/ William J. McMorrow |
Name: William J. McMorrow
Title: Chief Executive Officer Address: 9601 Wilshire Blvd. Beverly Hills, CA 90210 |
|
Prospect Founders : |
||
|
FLAT RIDGE INVESTMENTS LLC |
||
|
By: |
|
/s/ David A. Minella |
Name: David A. Minella
Title: Managing Member Address: 814 Hollow Tree Ridge Road Darien, CT 06820 |
|||
|
LLM STRUCTURED EQUITY FUND L.P. |
||
|
By: |
|
/s/ Patrick J. Landers |
Name: Patrick J. Landers
Title: Managing Director, LLM Capital Partners LLC Address: 205 Franklin Street Boston, MA 02110 |
|||
|
LLM INVESTORS L.P. |
||
|
By: |
|
/s/ Patrick J. Landers |
Name: Patrick J. Landers
Title: Managing Director, LLM Capital Partners LLC Address: 205 Franklin Street Boston, MA 02110 |
|||
|
CMS PLATINUM FUND, L.P. |
||
|
By: |
|
/s/ William Landman |
Name: William Landman
Title: Address: 308 E. Lancaster Avenue Wynnewood, PA 19096 |
|
SJC CAPITAL LLC |
||
|
By: |
|
/s/ William Cvengros |
Name: William Cvengros
Title: Manager and CEO Address: 31975 Peppertree Bend San Juan Capistrano, CA 92675 |
|||
|
/s/ Michael P. Castine Michael P. Castine Address: 14 Larkspur Lane Greenwich, CT 06831 |
||
|
/s/ Daniel Gressel Daniel Gressel Address: 55 Cedar Cliff Road Greenwich, CT 06878 |
||
|
/s/ Michael Downey Michael Downey Address: 7940 SE Golfhouse Drive Hobe Sound, FL 33455 |
||
|
/s/ James J. Cahill James J. Cahill Address: |
||
|
/s/ John Merchant John Merchant Address: |
Schedule 1
Prospect Founder
|
Shares of
Prospect Common Stock Held |
Pro Rata
Percentage |
Shares
Forfeited to Prospect |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Flat Ridge Investments LLC | 3,271,753 | 52.348048 | % | 1,347,964 | ||||||
LLM Structured Equity Fund L.P. | 1,475,404 | 23.606464 | % | 607,867 | ||||||
LLM Investors L.P. | 30,110 | 0.481760 | % | 12,406 | ||||||
CMS Platinum Fund, L.P. | 376,378 | 6.022048 | % | 155,068 | ||||||
SJC Capital LLC | 138,021 | 2.208336 | % | 56,865 | ||||||
Michael P. Castine | 138,021 | 2.208336 | % | 56,865 | ||||||
Daniel Gressel | 138,021 | 2.208336 | % | 56,865 | ||||||
Michael Downey | 138,021 | 2.208336 | % | 56,865 | ||||||
James J. Cahill | 406,250 | 6.50 | % | 167,375 | ||||||
John Merchant | 138,021 | 2.208336 | % | 56,865 | ||||||
Total | 6,250,000 | 100 | % | 2,575,000 |
Exhibit 10.21
PROSPECT ACQUISITION CORP.
9130 Galleria Court, Suite 318
Naples, FL 34109
September 17, 2009
Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York 10013
Ladenburg Thalmann & Co. Inc.
520 Madison Ave.
New York, NY 10013
I-Bankers Securities, Inc.
201 Wilshire Blvd., Suite A14
Santa Monica, CA 90401
Dear Sirs:
Reference is made to that certain Underwriting Agreement (the Underwriting Agreement ), dated November 14, 2007, between Prospect Acquisition Corp. ( Company ) and Citigroup Global Markets Inc. ( Citigroup ), as representative of the several underwriters in the Companys initial public offering ( IPO ). Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed to them in the Underwriting Agreement.
The Company and Kennedy Wilson, Inc. are discussing entering into a proposed business combination transaction (the Transaction ). The Company and the underwriters listed below hereby agree that the aggregate Deferred Discount payable by the Company to such underwriters upon consummation of the Transaction pursuant to the Underwriting Agreement shall be reduced from $10,000,000 to $6,000,000.
|
Very truly yours, |
|
|
|
|
|
PROSPECT ACQUISITION CORP. |
|
|
|
|
|
By: |
/s/ James J. Cahill |
|
Name: |
James J. Cahill |
|
Title: |
CFO |
Accepted and Agreed: |
|
|
|
|
|
CITIGROUP GLOBAL MARKETS INC. |
|
|
|
|
|
By: |
/s/ David Spivak |
|
Name: |
David Spivak |
|
Title: |
Managing Director |
|
Accepted and Agreed: |
|
||
|
|
||
LADENBURG THALMANN & CO. INC. |
|
||
|
|
|
|
By: |
/s/ Steve Kaplan |
|
|
Name: |
Steve Kaplan |
|
|
Title: |
Managing Director |
|
|
Accepted and Agreed: |
|
||
|
|
||
I-BANKERS SECURITIES, INC. |
|
||
|
|
||
By: |
/s/ James Bell |
|
|
Name: |
James Bell |
|
|
Title: |
Managing Director |
|
|
Exhibit 10.22
CONFIDENTIAL
September 4, 2009
David A. Minella
Chairman & CEO
Prospect Acquisition Corp.
9130 Galleria Court, Suite 318
Naples, FL 34109
Dear Mr. Minella:
We are pleased to confirm the arrangements under which DE GUARDIOLA ADVISORS, INC. (DGA) is engaged by PROSPECT ACQUISITION CORP. (the Company) as its financial advisor in connection with a Transaction (defined below) with the Target (defined below).
As used in this agreement, the term Target shall refer to Kennedy Wilson, Inc.
During the term of our engagement, DGA will provide you with customary financial advice and assistance in connection with this Transaction, including performing financial analyses and assisting you in negotiating the financial and contractual aspects of a Transaction. This engagement, however, does not include the rendering of an opinion as to the fairness of the consideration to be paid to the Target in a Transaction, nor does it include the solicitation or recommendation to purchase any securities of the Company or the Target.
DGAs cash fee for this Transaction will be $1,500,000. In addition, the Company will issue to DGA 375,000 shares, which will be substantially similar to the existing Founders Shares (as defined in the Companys offering documents), which together with the cash fee, represent the Transaction Fee that will be payable by the Company only upon the closing of the transaction. The 375,000 Founders Shares included as part of the Transaction Fee will be subject to adjustment as described in the Letter of Intent dated July 12, 2009 and confirmed in either the forthcoming definitive agreements between the Company and the Target or a separate letter agreement.
As used in this agreement, the term Transaction shall mean any merger, reverse merger, acquisition, or other business combination involving the Target.
The Company also agrees to reimburse DGA periodically for its reasonable out-of-pocket expenses, including all travel and other out-of-pocket expenses and fees and disbursements. Notwithstanding the previous sentence, unless otherwise agreed, the Company shall not be required to reimburse DGA for any fees and disbursements to third party professionals unless the Company shall have consented in writing to DGA retaining them. This paragraph shall not apply to any expenses incurred pursuant to Annex A hereof.
The Company recognizes and confirms that DGA, in performing the service contemplated under this agreement, will be relying on publicly available information and on information furnished by the Company and/or the Target without independent verification, that DGA will not assume responsibility for the accuracy and completeness of such information, and that DGA will not under this agreement undertake to make an independent appraisal or valuation of any of the assets of the Target.
The Companys interest in a Transaction, the subject matter of this agreement and all confidential information and data furnished to DGA by or at the request of the Company, whether oral or written, will be maintained in confidence by DGA and not disclosed to any third party, except as provided herein, without the Companys prior written consent, so long as such information or data remains confidential, unless required by applicable law or legal process. At the written request of the Company, DGA will destroy all confidential information of the Company in the event this agreement terminates.
In connection with an engagement such as this, it is DGAs policy to receive indemnification pursuant to the provisions set forth in Annex A. The Company agrees to the provisions with respect to our indemnity and other matters set forth in Annex A, which is incorporated by reference into this letter.
DGA acknowledges that, as contemplated by the Companys Prospectus dated November 14, 2007, the Company established a trust account for the benefit of its public stockholders and that the Company has agreed with its public stockholders to obtain a waiver from all third party vendors and prospective target businesses waiving any and all right, title, interest or claim of any kind in or to any monies in the Trust Account. DGA agrees to execute the waiver set forth in Annex B on the date hereof.
2
The Company also recognizes and acknowledges that DGA will be providing advisory services and assistance to both the Company and the Target in connection with this transaction.
Any written or oral opinion or advice provided by DGA in connection with our engagement is exclusively for the information of the Board of Directors and senior management of the Company and does not constitute a recommendation to any shareholder of the Company concerning action that such shareholder might or should take in connection with a Transaction. Such opinions or advice may not be disclosed to any third party or circulated or referred to publicly without our prior written consent. DGA may, at our own expense, place announcements or advertisements in financial newspapers, journals and marketing materials describing our services hereunder.
The Company acknowledges that it is not relying on the advice of DGA for tax, legal or accounting matters, it is seeking and will rely on the advice of its own professionals and advisors for such matters and it will make an independent analysis and decision regarding any Transaction based upon such advice.
The initial term of this agreement shall run six (6) months from the execution of this agreement. The services of DGA may be terminated at any time with or without cause effective upon receipt of written notice to that effect. From and after the date a termination notice is delivered to DGA hereunder, DGA shall render no additional service to the Company hereunder, except as otherwise agreed in writing by DGA and the Company, provided that in all events DGAs obligation to keep certain information confidential will survive any termination. DGA will be entitled to the Transaction Fee set forth above in the event that at any time prior to the expiration of Eighteen (18) months after such termination a Transaction with the Target is consummated by the Company.
This agreement may not be modified, amended or supplemented except by written agreement executed by both parties hereto. This agreement amends and supersedes all prior agreements of the parties with respect to the subject matter herein, and in the event of any conflict or ambiguity between the terms of any such prior agreement and this agreement, the terms of this agreement shall control.
The Company agrees to cause any affiliate, including a newly formed affiliate, which may become a party to a Transaction, to execute appropriate documentation binding it to the terms of this agreement.
3
This agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the conflict of laws provisions thereof.
Please confirm that the foregoing is in accordance with your understanding by signing and returning to us the enclosed copy of this letter, which shall become a binding agreement upon our receipt. We are delighted to accept this engagement and look forward to working with you on this assignment.
4
Very truly yours, |
|
|
DE GUARDIOLA ADVISORS, INC. |
|
|
|
|
|
|
|
|
By: |
/s/ Henry Hardaway |
|
|
|
|
Title: Vice-President |
|
|
|
|
|
Date: September 4, 2009 |
|
|
|
|
|
|
|
|
Agreed and Accepted: |
|
|
PROSPECT ACQUISITION CORP. |
|
|
|
|
|
|
|
|
By: |
/s/ James J. Cahill |
|
|
|
|
Title: Chief Financial Officer |
|
|
|
|
|
Date: September 4, 2009 |
|
5
In the event that DGA becomes involved in any capacity in any pending or threatened claim or any action, proceeding or investigation brought by or against any person in connection with or as a result of our engagement pursuant to this letter, the Company periodically will reimburse DGA for its reasonable legal and other costs and expenses (including the costs of any investigation and preparation) incurred in connection therewith. The Company also will indemnify and hold DGA harmless against any and all losses, claims, damages or liabilities to any such person in connection with or as a result of our engagement pursuant to this letter. If for any reason (other than by reason of the waiver set forth in Annex B to this letter) the foregoing indemnification is unavailable to DGA or insufficient to hold it harmless, then the Company shall contribute to the amount paid or payable by DGA in respect of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and DGA on the other hand in the matters contemplated by this letter, and, if applicable law does not permit allocation solely on the basis of benefits, the relative fault of the Company and DGA with respect to such loss, claim, damage or liability and any other relevant equitable considerations, subject to the limitation that in any event the aggregate contributions of DGA (and all other parties indemnified hereunder) will not exceed the amount of fees actually received by DGA pursuant to this Agreement. For purposes hereof, the relative benefits to the Company and DGA of any Transaction consummated hereunder shall be deemed to be in the same proportion that the total value paid or contemplated to be paid by the Company and/or its affiliates bears to the fees paid to DGA in connection with such Transaction. The reimbursement, indemnity and contribution obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, and shall be binding upon and inure to the benefit of the successors and assignsof the Company and DGA. The provisions of this Annex A shall not apply to the extent that any such losses, claims, damages, liabilities, costs and expenses that arise out of the gross negligence, willful misconduct or bad faith by DGA in performing the services that are the subject of this letter. The Company also agrees that neither DGA nor any of its affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Company or any person asserting claims on behalf or in right of the Company in connection with or as a result of our engagement pursuant to this letter except to the extent that any losses, claims, damages or liabilities incurred by the Company arise out of the gross negligence, willful misconduct or bad faith by DGA in performing the services that are the subject of this letter. The Company will not, without the prior written consent of DGA, which consent shall not be unreasonably withheld or delayed, settle any action or proceeding in connection with or resulting from our engagement pursuant to this letter unless such settlement includes an express, complete and unconditional release of DGA (and its affiliates, partners, directors, agents, employees and controlling persons), signed by all parties to such settlement, from all losses, claims, damages and liabilities asserted in such action or proceeding and relating to our engagement pursuant to this letter. Notwithstanding anything to the contrary herein, the Company will not be required to indemnify DGA for any amount paid or payable by DGA in the settlement of any claim, action, proceeding or investigation without the written consent of the Company, which consent will not be unreasonably withheld or delayed. The provisions of this Annex A shall survive any termination or completion of the engagement provided by this letter, and shall in all cases be subject to the provisions of the waiver set forth in Annex B of this letter.
6
Annex B
De Guardiola Advisors
405 Park Avenue, Suite 1201
New York, NY
September 4, 2009
Prospect Acquisition Corp.
9130 Galleria Court
Naples, FL 34109
Ladies and Gentlemen:
De Guardiola Advisors ( we ) understand that Prospect Acquisition Corp. (the Company ) is a recently organized blank-check company formed for the purpose of acquiring (an Initial Business Combination ) one or more businesses or assets in the financial services industry. We further understand that the Companys sole assets consist of the cash proceeds of the recent public offering (the IPO ) and private placements of its securities, and that substantially all of those proceeds have been deposited in a trust account with a third party (the Trust Account ) for the benefit of the Company, certain of its stockholders and the underwriters of its IPO. The monies in the Trust Account may be disbursed only (1) to the Company in limited amounts from time to time (and in no event more than $2,750,000 in total) in order to permit the Company to pay its operating expenses; (2) if the Company completes an Initial Business Combination, to certain dissenting public stockholders, to the underwriters in the amount of underwriting discounts and commissions they earned in the IPO but whose payment they have deferred, and then to the Company; and (3) if the Company fails to complete an Initial Business Combination within the allotted time period and liquidates, subject to the terms of the agreement governing the Trust Account, to the Company in limited amounts to permit the Company to pay the costs and expenses of its liquidation and dissolution, and then to the Companys public stockholders (as such term is defined in the agreement governing the Trust Account).
For and in consideration of the Companys entry into the Confidentiality Agreement between us and the Company dated as of the date hereof, we hereby waive any right, title, interest or claim of any kind (any Claim ) we have or may have in the future in or to any monies in the Trust Account and agree not to seek recourse against the Trust Account or any funds distributed therefrom (except amounts released to the Company as described in clause (1) of the preceding paragraph) as a result of, or arising out of, any Claims against the Company in connection with contracts or agreements with the Company or in connection with services performed for or products provided to the Company.
This letter shall be governed by and construed and enforced in accordance with the laws of the State of New York. We hereby irrevocably waive, to the fullest extent permitted by applicable
7
law, any and all right to trial by jury in any legal proceeding arising out of or relating to this letter or any Claim subject hereto.
|
Yours very truly, |
|
|
|
|
|
DE GUARDIOLA ADVISORS |
|
|
|
|
|
|
|
|
By |
/s/ Henry Hardaway |
|
Name: Henry Hardaway |
|
|
Title: Vice President |
8
LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT (this "Lock-Up Agreement"), dated as of , 2009, by and among Prospect Acquisition Corp., a Delaware corporation (the "Company") and (the "Stockholder").
WHEREAS , the Company was organized to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more operating business in the financial services industry ("Business Combination");
WHEREAS , the Company consummated an initial public offering in November 2007 ("IPO") in connection with which it raised net proceeds of approximately $247.0 million which were placed in a trust account pending the consummation of a Business Combination, or the dissolution and liquidation of the Company, in the event it is unable to consummate a Business Combination by November 14, 2009;
WHEREAS , the Company expects to consummate a Business Combination with Kennedy-Wilson, Inc. (the "Acquisition") pursuant to certain agreements.
WHEREAS, the Stockholder owns shares of the Company's common stock, of which the Company desires that shares (1) (the "Three Month Shares") be locked up for three months and that shares (2) (the "One-Year Shares") be locked up for one year, and which the Stockholder has agreed that it will lock-up for such periods of time.
(1) 10% of shares received as merger consideration.
(2) 90% of shares received as merger consideration and 100% of Management Incentive Shares.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree that, subject to consummation of the Business Combination:
Section 1. (a) The Stockholder may not offer, sell, contract to sell, pledge or grant any option to purchase or otherwise dispose of or offer to dispose of (collectively, a "Disposition") any of the Three-Month Shares for a period commencing on the date hereof and ending on , 2010, inclusive, or any of the One-Year Shares for a period commencing on the date hereof and ending on , 2010, inclusive, without the prior written consent of the Company; provided, however, that the Stockholder may transfer any Shares: (1) to any partner, shareholder or member of the Stockholder if, prior to such transfer, such partner, shareholder or member agrees in writing to be bound by the restrictions set forth herein; (2) to any controlled affiliate of the Stockholder if, prior to such transfer, such affiliate agrees in writing to be bound by the restrictions set forth herein, or (3) for estate planning purposes if, prior to such transfer, the person receiving such Shares agrees in writing to be bound by the restrictions set forth herein.
(b) For the purpose of effectuating this Lock-Up Agreement, the Stockholder hereby consents to the Company issuing a stop transfer instruction to the transfer agent in accordance with the terms of this Lock-Up Agreement. Any sale of Shares in violation of this Lock-Up Agreement by the Stockholder without the consent of the Company shall constitute a material breach of this Lock-Up Agreement.
(c) The Stockholder acknowledges that its breach or impending violation of any of the provisions of this Lock-Up Agreement may cause irreparable damage to the Company for which remedies at law would be inadequate. The Stockholder further acknowledges and agrees that the provisions set forth herein are essential terms and conditions of the Lock-Up Agreement that the Company may seek to enforce in addition to any of its rights or remedies provided under any other agreement decree or order by any court of competent jurisdiction enjoining such impending or actual violation of any of such provisions. Such decree or order, to the extent appropriate, shall specifically enforce the full performance of any such provision by the Stockholders. This remedy shall be in addition to all other remedies available to the Company at law or equity.
Section 2. This Lock-Up Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns, and upon the Stockholder and his or her heirs, executors, administrators, legatees and legal representatives.
Section 3. Should any part of this Lock-Up Agreement, for any reason whatsoever, be declared invalid, illegal, or incapable of being enforced in whole or in part, such decision shall not affect the validity of any remaining portion, which remaining portion shall remain in full force and effect as if this Lock-Up Agreement had been executed with the invalid portion thereof eliminated, and it is hereby declared the intention of the parties hereto that they would have executed the remaining portion of this Lock-Up Agreement without including therein any portion which may for any reason be declared invalid.
Section 4. This Lock-Up Agreement shall be construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed in such State without application of the principles of conflicts of laws of such State.
Section 5. This Lock-Up Agreement and all rights hereunder are personal to the parties and shall not be assignable, and any purported assignment in violation thereof shall be null and void.
Section 6. (a) All notices, requests, demands and other communications to any party hereunder shall be in writing and shall be given to such party at its address or telecopier number set forth on the
2
signature page hereto, or such other address or telecopier number as such party may hereinafter specify by notice to each other party hereto.
(b) Each notice, request or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified herein and a confirmation of the telecopy being sent is received or, (ii) if given by certified mail, 72 hours after such communication is deposited in the mails with first class and certified postage prepaid, properly addressed or, (iii) if given by any other means, when delivered at the address specified on the signature page hereto.
Section 7. The failure of either party to insist upon the strict performance of any of the terms, conditions and provisions of this Lock-Up Agreement shall not be construed as a waiver or relinquishment of future compliance therewith, and said terms, conditions and provisions shall remain in full force and effect. No waiver of any term or any condition of this Lock-Up Agreement on the part of either party shall be effective for any purpose whatsoever unless such waiver is in writing and signed by such party.
3
IN WITNESS WHEREOF, the parties hereto have executed this Lock-Up Agreement as of the day and year first written above.
PROSPECT ACQUISITION CORP. | |||
|
By: |
|
Name: Title: |
|
Address: |
||
|
Telecopy Number: |
||
|
[Stockholder] |
||
|
By: |
|
Name: Title: |
|
Address: |
||
|
Telecopy Number: |
4
Exhibit 10.25
KENNEDY-WILSON HOLDINGS, INC.
2009 EQUITY PARTICIPATION PLAN
CONSULTANT RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT made as of _____________, 200_, by and between Kennedy-Wilson Holdings, Inc., a Delaware corporation (the Company ), and _____________________ (the Awardee ).
WITNESSETH:
WHEREAS, the Company has adopted the Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan (the Plan ) for the benefit of its employees, nonemployee directors and consultants and the employees, nonemployee directors and consultants of its affiliates, and
WHEREAS, the Committee has authorized the award to the Awardee of shares of Restricted Stock ( Restricted Shares ) under the Plan, on the terms and conditions set forth in the Plan and as hereinafter provided,
NOW, THEREFORE, in consideration of the premises contained herein, the Company and the Awardee hereby agree as follows:
1. Definitions .
To the extent not defined herein, terms used in this Agreement which are defined in the Plan shall have the same meanings as set forth in the Plan.
2. Award of Restricted Shares .
The Committee hereby awards to the Awardee [insert # of shares] Restricted Shares. All such Restricted Shares shall be subject to the restrictions and forfeiture provisions contained in Sections 4, 5 and 6, such restrictions and forfeiture provisions to become effective immediately upon execution of this Agreement by the parties hereto.
3. Stock Issuance .
The Awardee hereby acknowledges that the Restricted Shares are issued in book entry form on the books and records as kept by the Companys transfer agent, shall be registered in the name of the Awardee and a stock certificate evidencing the Restricted Shares shall not be delivered to the Awardee until the Awardee satisfies the vesting requirements contained in Section 4. In the event that a stock certificate is delivered to the Awardee before the vesting requirements are satisfied, the Awardee hereby acknowledges that such stock certificate shall bear the following legend:
The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of an Agreement entered into between the registered owner and Kennedy-Wilson Holdings, Inc., effective as of
_______________________, 200_. Copies of such Agreement are on file in the offices of the Secretary, Kennedy-Wilson Holdings, Inc., 9601 Wilshire Blvd., Suite 220, Beverly Hills, CA 90210.
4. Vesting .
Subject to Section 9, the Restricted Shares shall vest, no longer be subject to Restrictions and become transferable pursuant to the terms of the Plan as follows:
(a) One-fifth (1/5) upon the occurrence of both (i) the Awardee being an Employee of the Company or an Affiliate as of the first anniversary of the date of the award of the Restricted Shares pursuant to this Agreement (the Award Date ), and (ii) the Companys assets under management equaling or exceeding Three Billion Dollars ($3,000,000,000.00) (the Performance Requirement ) as of September 30, 2010;
(b) One-fifth (1/5) upon the occurrence of both (i) the Awardee being an Employee of the Company or an Affiliate as of the second anniversary of the Award Date, and (ii) the Companys satisfying the Performance Requirement as of September 30, 2011;
(c) One-fifth (1/5) upon the occurrence of both (i) the Awardee being an Employee of the Company or an Affiliate as of the third anniversary of the Award Date, and (ii) the Companys satisfying the Performance Requirement as of September 30, 2012;
(d) One-fifth (1/5) upon the occurrence of both (i) the Awardee being an Employee of the Company or an Affiliate as of the fourth anniversary of the Award Date, and (ii) the Companys satisfying the Performance Requirement as of September 30, 2012; and
(e) One-fifth (1/5) upon the occurrence of both (i) the Awardee being an Employee of the Company or an Affiliate as of the fifth anniversary of the Award Date, and (ii) the Companys satisfying the Performance Requirement as of September 30, 2012.
To the extent that any of the above vesting requirements contained in Section 4(a)-(e) are not satisfied, the Restricted Shares subject to those particular vesting requirements shall thereupon be forfeited by the Awardee.
Notwithstanding the foregoing, if, prior to the Awardees fully satisfying any of the above service requirements, the Awardees status or engagement as a Consultant with or for the Company or an Affiliate shall be terminated by the Company or Affiliate without Cause or by the Awardee for Good Reason, in any such event, all the then unforfeited Restricted Shares shall thereupon become fully vested, no longer subject to Restrictions and transferable; provided , however , that the Restricted Shares shall remain subject to the satisfaction of the Performance Requirement upon the applicable dates as set forth in Sections 4(a), (b) and (c).
For purposes of this Section 4 and Section 5, the term Good Reason shall mean the voluntary termination of the employment (or other service relationship) of the Awardee with the Company or an Affiliate by the Awardee within six months of the Companys or Affiliates (A) instructing the Awardee to work (or provide services) full-time or substantially full-time at any location not acceptable to the Awardee (other than the Companys or Affiliates main headquarters) that is more than 50 miles from the Awardees principal place of work and more than 50 miles from the
2
Awardees principal residence, (B) eliminating or materially reducing the Awardees duties for the Company or Affiliate or (C) materially reducing the Awardees base pay (or base compensation).
For purposes of this Section 4, the term Companys assets under management shall mean the value of assets under management by the Company, as reflected in the footnotes to the Companys financial statements, plus the cost of properties subject to property management contracts with the Company (not taking into account any properties the values of which are reflected in the footnotes to such financial statements).
5. Termination of Consultant Status .
Sections 6.3, 6.4 and 6.5 of the Plan shall control; provided , however , that notwithstanding anything in the Plan to the contrary, including but not limited to the provisions of Section 6.3(b) of the Plan, if the Awardees status or engagement as a Consultant with or for the Company or an Affiliate shall be terminated by the Company or Affiliate without Cause or by the Awardee for Good Reason, in any such event, the Awardee shall not forfeit any of his or her Restricted Shares; provided , however , that the Restricted Shares shall remain subject to the satisfaction of the Performance Requirement upon the applicable dates as set forth in Section 4(a), (b) and (c).
6. Restriction on Transferability .
Except as otherwise provided in the Plan and subject to Section 9, the Restricted Shares shall not be transferable unless and until (and solely to the extent) the Awardee satisfies the vesting requirements contained in Section 4.
7. Voting and Dividend Rights .
The Awardee shall have the voting and dividend rights of a stockholder of Common Stock with respect to the Restricted Shares.
8. Regulation by the Committee .
This Agreement and the Restricted Shares shall be subject to the administrative procedures and rules as the Committee shall adopt. All decisions of the Committee upon any question arising under the Plan or under this Agreement, shall be conclusive and binding upon the Awardee.
9. Change of Control .
Notwithstanding the vesting requirements contained in Section 4 and the transfer restrictions contained in Section 6, upon a Change of Control, all of the Restricted Shares shall automatically become fully vested, no longer subject to Restrictions and freely transferable, in each case as of the date of such Change of Control.
3
10. Amendment .
The Committee may amend this Agreement at any time and from time to time; provided , however , that no amendment of this Agreement that would impair the Awardees rights or entitlements with respect to the Restricted Shares shall be effective without the prior written consent of the Awardee.
11. Plan Terms .
The terms of the Plan are hereby incorporated herein by reference.
12. Effective Date of Award .
The award of each Restricted Share under this Agreement shall be effective as of the date first written above.
13. Awardee Acknowledgment .
By executing this Agreement, the Awardee hereby acknowledges that he or she has received and read the Plan and this Agreement and that he or she agrees to be bound by all of the terms of both the Plan and this Agreement.
ATTEST: |
|
KENNEDY-WILSON HOLDINGS, INC. |
||
|
|
|
||
|
|
|
||
|
|
By: |
|
|
|
|
|
||
|
|
Its: |
|
|
|
|
|
||
|
|
|
||
|
|
|
, Awardee |
|
4
Exhibit 10.26
KENNEDY-WILSON HOLDINGS, INC.
2009 EQUITY PARTICIPATION PLAN
EMPLOYEE PERFORMANCE UNIT AWARD AGREEMENT
THIS AGREEMENT made as of , 200 , by and between Kennedy-Wilson Holdings, Inc., a Delaware corporation (the Company ), and (the Awardee ).
WITNESSETH:
WHEREAS, the Company has adopted the Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan (the Plan ) for the benefit of its employees, nonemployee directors and consultants and the employees, nonemployee directors and consultants of its affiliates, and
WHEREAS, the Committee has authorized a Performance Unit Award to be made to the Awardee (the Award ) under the Plan, on the terms and conditions set forth in the Plan and as hereinafter provided,
NOW, THEREFORE, in consideration of the premises contained herein, the Company and the Awardee hereby agree as follows:
1. Definitions .
To the extent not defined herein, terms used in this Agreement which are defined in the Plan shall have the same meanings as set forth in the Plan.
2. Award of Performance Units .
The Committee hereby awards to the Awardee [insert # of units] Performance Units. All such Performance Units shall be subject to the forfeiture provisions contained in Sections 4 and 5, such forfeiture provisions to become effective immediately upon execution of this Agreement by the parties hereto.
3. Value of Performance Units .
Subject to the forfeiture provisions contained in Sections 4 and 5, each Performance Unit granted hereunder shall entitle the Awardee, pursuant to Section 7, to receive a cash payment from the Company equal to One Dollar ($1.00).
4. Vesting .
The Performance Units shall vest pursuant to the terms of the Plan as follows:
(a) upon the occurrence of both (i) the Awardee being an Employee of the Company or an Affiliate as of , 20 , and (ii) the Companys
assets under management equaling or exceeding Three Billion Dollars ($3,000,000,000.00) (the Performance Requirement ) as of , 20 ; and
(b) upon the occurrence of both (i) the Awardee being an Employee of the Company or an Affiliate as of , 20 , and (ii) the Companys satisfying the Performance Requirement as of , 20 .
Subject to the provisions of Section 5, if the above Awardee service and Performance Requirements are not met with respect to any Performance Units hereunder, such Performance Units shall be forfeited by the Awardee.
For purposes of this Section 4, the term Companys assets under management shall mean the value of assets under the Companys management [ , as reflected in the footnotes to the Companys financial statements ] , plus the cost of properties subject to property management contracts with the Company [ (not taking into account any properties the values of which are reflected in the footnotes to such financial statements) ] .
5. Termination of Employment .
Notwithstanding Section 4, if, prior to the Awardees fully satisfying any of the service-related requirements set forth in Section 4, the Awardees employment with the Company or an Affiliate shall be terminated by the Company or Affiliate without Cause or by the Awardee for Good Reason, in any such event, all the Performance Units shall thereupon become fully vested, solely upon the basis of whether or not the Performance Requirements are met.
For purposes of this Section 5, the term Good Reason shall mean the voluntary termination of the employment (or other service relationship) of the Awardee with the Company or an Affiliate by the Awardee within six months of the Companys or Affiliates (A) instructing the Awardee to work (or provide services) full-time or substantially full-time at any location not acceptable to the Awardee (other than the Companys or Affiliates main headquarters) that is more than 50 miles from the Awardees principal place of work and more than 50 miles from the Awardees principal residence, (B) eliminating or materially reducing the Awardees duties for the Company or Affiliate or (C) reducing the Awardees base pay (or compensation).
6. Restriction on Transferability .
Except as otherwise provided in the Plan, the Performance Units shall not be transferable.
7. Payment .
(a) On , 20 , to the extent that the applicable vesting requirements under Section 4(a) have been satisfied, the Company shall make a cash payment to the Awardee, reduced by all applicable amounts under Section 9, in an amount equal to the product of One Dollar ($1.00) multiplied by the number of the Awardees vested Performance Units, as determined pursuant to Section 4(a); and
2
(b) On , 20 , to the extent that the applicable vesting requirements under Section 4(b) have been satisfied, the Company shall make a cash payment to the Awardee, reduced by all applicable amounts pursuant to Section 9, in an amount equal to the product of One Dollar ($1.00) multiplied by the number of the Awardees vested Performance Units, as determined pursuant to Section 4(b).
8. Regulation by the Committee .
This Agreement and the Performance Units shall be subject to the administrative procedures and rules as the Committee shall adopt. All decisions of the Committee upon any question arising under the Plan or under this Agreement, shall be conclusive and binding upon the Awardee.
9. Withholding .
If the Company or an Affiliate shall be required to withhold any amounts in connection with the Awardees Performance Unit Award by reason of any federal, state or local tax rules or regulations, the Company or Affiliate shall be entitled to deduct and withhold such amounts.
10. Amendment .
The Committee may amend this Agreement at any time and from time to time; provided , however , that no amendment of this Agreement that would impair the Awardees rights or entitlements with respect to the Performance Units shall be effective without the prior written consent of the Awardee.
11. Plan Terms .
The terms of the Plan are hereby incorporated herein by reference.
12. Effective Date of Award .
The Award under this Agreement shall be effective as of the date first written above.
3
13. Awardee Acknowledgment .
By executing this Agreement, the Awardee hereby acknowledges that he or she has received and read the Plan and this Agreement and that he or she agrees to be bound by all of the terms of both the Plan and this Agreement.
ATTEST: |
|
KENNEDY-WILSON HOLDINGS, INC. |
||
|
|
|
||
|
|
|
||
|
|
By: |
|
|
|
|
|
||
|
|
Its: |
|
|
|
|
|
||
|
|
|
||
|
|
|
, Awardee |
|
4
Exhibit 10.27
KENNEDY-WILSON HOLDINGS, INC.
2009 EQUITY PARTICIPATION PLAN
EMPLOYEE RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT made as of _______________, 200_, by and between Kennedy-Wilson Holdings, Inc., a Delaware corporation (the Company ), and ____________________ (the Awardee ).
WITNESSETH:
WHEREAS, the Company has adopted the Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan (the Plan ) for the benefit of its employees, nonemployee directors and consultants and the employees, nonemployee directors and consultants of its affiliates, and
WHEREAS, the Committee has authorized the award to the Awardee of shares of Restricted Stock ( Restricted Shares ) under the Plan, on the terms and conditions set forth in the Plan and as hereinafter provided,
NOW, THEREFORE, in consideration of the premises contained herein, the Company and the Awardee hereby agree as follows:
1. Definitions .
To the extent not defined herein, terms used in this Agreement which are defined in the Plan shall have the same meanings as set forth in the Plan.
2. Award of Restricted Shares .
The Committee hereby awards to the Awardee [insert # of shares] Restricted Shares. All such Restricted Shares shall be subject to the restrictions and forfeiture provisions contained in Sections 4, 5 and 6, such restrictions and forfeiture provisions to become effective immediately upon execution of this Agreement by the parties hereto.
3. Stock Issuance .
The Awardee hereby acknowledges that the Restricted Shares are issued in book entry form on the books and records as kept by the Companys transfer agent, shall be registered in the name of the Awardee and a stock certificate evidencing the Restricted Shares shall not be delivered to the Awardee until the Awardee satisfies the vesting requirements contained in Section 4. In the event that a stock certificate is delivered to the Awardee before the vesting requirements are satisfied, the Awardee hereby acknowledges that such stock certificate shall bear the following legend:
The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of an Agreement entered into between the registered owner and Kennedy-Wilson Holdings, Inc., effective as of
_______________, 200__. Copies of such Agreement are on file in the offices of the Secretary, Kennedy-Wilson Holdings, Inc., 9601 Wilshire Blvd., Suite 220, Beverly Hills, CA 90210.
4. Vesting .
Subject to Section 9, the Restricted Shares shall vest, no longer be subject to Restrictions and become transferable pursuant to the terms of the Plan as follows:
(a) One-fifth (1/5) upon the occurrence of both (i) the Awardee being an Employee of the Company or an Affiliate as of the first anniversary of the date of the award of the Restricted Shares pursuant to this Agreement (the Award Date ), and (ii) the Companys assets under management equaling or exceeding Three Billion Dollars ($3,000,000,000.00) (the Performance Requirement ) as of September 30, 2010;
(b) One-fifth (1/5) upon the occurrence of both (i) the Awardee being an Employee of the Company or an Affiliate as of the second anniversary of the Award Date, and (ii) the Companys satisfying the Performance Requirement as of September 30, 2011;
(c) One-fifth (1/5) upon the occurrence of both (i) the Awardee being an Employee of the Company or an Affiliate as of the third anniversary of the Award Date, and (ii) the Companys satisfying the Performance Requirement as of September 30, 2012;
(d) One-fifth (1/5) upon the occurrence of both (i) the Awardee being an Employee of the Company or an Affiliate as of the fourth anniversary of the Award Date, and (ii) the Companys satisfying the Performance Requirement as of September 30, 2012; and
(e) One-fifth (1/5) upon the occurrence of both (i) the Awardee being an Employee of the Company or an Affiliate as of the fifth anniversary of the Award Date, and (ii) the Companys satisfying the Performance Requirement as of September 30, 2012.
To the extent that any of the above vesting requirements contained in Section 4(a)-(e) are not satisfied, the Restricted Shares subject to those particular vesting requirements shall thereupon be forfeited by the Awardee.
Notwithstanding the foregoing, if, prior to the Awardees fully satisfying any of the above service requirements, the Awardees employment with the Company or an Affiliate shall be terminated by the Company or Affiliate without Cause or by the Awardee for Good Reason, in any such event, all the then unforfeited Restricted Shares shall thereupon become fully vested, no longer subject to Restrictions and transferable; provided , however , that the Restricted Shares shall remain subject to the satisfaction of the Performance Requirement upon the applicable dates as set forth in Sections 4(a), (b) and (c).
For purposes of this Section 4 and Section 5, the term Good Reason shall mean the voluntary termination of the employment (or other service relationship) of the Awardee with the Company or an Affiliate by the Awardee within six months of the Companys or Affiliates (A) instructing the Awardee to work (or provide services) full-time or substantially full-time at any location not acceptable to the Awardee (other than the Companys or Affiliates main headquarters) that is more than 50 miles from the Awardees principal place of work and more than 50 miles from the
2
Awardees principal residence, (B) eliminating or materially reducing the Awardees duties for the Company or Affiliate or (C) materially reducing the Awardees base pay (or base compensation).
For purposes of this Section 4, the term Companys assets under management shall mean the value of assets under management by the Company, as reflected in the footnotes to the Companys financial statements, plus the cost of properties subject to property management contracts with the Company (not taking into account any properties the values of which are reflected in the footnotes to such financial statements).
5. Termination of Employment .
Sections 6.2, 6.4 and 6.5 of the Plan shall control; provided , however , that notwithstanding anything in the Plan to the contrary, including but not limited to the provisions of Section 6.2(b) of the Plan, if the Awardees employment with the Company or an Affiliate shall be terminated by the Company or Affiliate without Cause or by the Awardee for Good Reason, in any such event, the Awardee shall not forfeit any of his or her Restricted Shares; provided , however , that the Restricted Shares shall remain subject to the satisfaction of the Performance Requirement upon the applicable dates as set forth in Section 4(a), (b) and (c).
6. Restriction on Transferability .
Except as otherwise provided in the Plan and subject to Section 9, the Restricted Shares shall not be transferable unless and until (and solely to the extent) the Awardee satisfies the vesting requirements contained in Section 4.
7. Voting and Dividend Rights .
The Awardee shall have the voting and dividend rights of a stockholder of Common Stock with respect to the Restricted Shares.
8. Regulation by the Committee .
This Agreement and the Restricted Shares shall be subject to the administrative procedures and rules as the Committee shall adopt. All decisions of the Committee upon any question arising under the Plan or under this Agreement, shall be conclusive and binding upon the Awardee.
9. Change of Control .
Notwithstanding the vesting requirements contained in Section 4 and the transfer restrictions contained in Section 6, upon a Change of Control, all of the Restricted Shares shall automatically become fully vested, no longer subject to Restrictions and freely transferable, in each case as of the date of such Change of Control.
3
10. Withholding .
The Company or an Affiliate shall be entitled to deduct and withhold the minimum amount necessary in connection with the Awardees Restricted Stock Award to satisfy its withholding obligations under any and all federal, state and/or local tax rules or regulations.
11. Amendment .
The Committee may amend this Agreement at any time and from time to time; provided , however , that no amendment of this Agreement that would impair the Awardees rights or entitlements with respect to the Restricted Shares shall be effective without the prior written consent of the Awardee.
12. Plan Terms .
The terms of the Plan are hereby incorporated herein by reference.
13. Effective Date of Award .
The award of each Restricted Share under this Agreement shall be effective as of the date first written above.
14. Awardee Acknowledgment .
By executing this Agreement, the Awardee hereby acknowledges that he or she has received and read the Plan and this Agreement and that he or she agrees to be bound by all of the terms of both the Plan and this Agreement.
ATTEST: |
|
KENNEDY-WILSON HOLDINGS, INC. |
||
|
|
|
||
|
|
|
||
|
|
By: |
|
|
|
|
|
||
|
|
Its: |
|
|
|
|
|
||
|
|
|
||
|
|
|
, Awardee |
|
4
Exhibit 10.28
KENNEDY-WILSON, INC.
7% Convertible Subordinated Note due November 3, 2018
No. R-1 |
PPN: 489399 A@4 |
$30,000,000.00 |
November 3, 2008 |
Kennedy-Wilson, Inc., a Delaware corporation (the Company), the principal office of which is located at 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, for value received, hereby promises to pay to The Guardian Life Insurance Company of America, a New York corporation, whose principal office is located at 7 Hanover Square, New York, New York 10004-2616 or its assigns (the Holder) the sum of Thirty Million Dollars ($30,000,000.00), or such lesser amount as shall then equal the outstanding principal amount thereof and any unpaid accrued interest thereon, as set forth below, and which shall be due and payable in full on the earlier to occur of: (i) November 3, 2018, or (ii) when declared due and payable upon the occurrence of an Event of Default (as defined accordance with Section 12 of the Securities Purchase Agreement (as defined below).
This Note is one of a series of Convertible Subordinated Notes (herein called the Notes) issued pursuant to that certain Securities Purchase Agreement, dated as of October 31, 2008 (as from time to time amended, restated, supplemented or otherwise modified, the Securities Purchase Agreement), between the Company and the respective purchasers named therein and is entitled to the benefits thereof
The following is a statement of the rights of the Holder of this Note and the conditions to which this Note is subject, and to which the Holder hereof, by the acceptance of this Note, agrees:
Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to such terms in the Securities Purchase Agreement. As used in this Note, the following terms shall have the following meanings:
2
Notwithstanding the foregoing, (x) in the event of the sale of shares of Common Stock of the Company to a third party in connection with a Change of Control Event, the stated purchase price for such shares shall be deemed to be the Fair Value thereof, and (y) if clauses (i), (ii) or (iii) above or clause (x) above are not applicable to such shares of Common Stock, then the Fair Value of such shares shall be the fair value of such shares of Common Stock as reasonably determined in good faith by the Board of Directors of the Company; provided, however, that if the Holder shall object in writing to such determination within 15 Business Days of receiving written notice of such value, then the determination shall be made by an independent appraiser of recognized national standing (selected by the Company and reasonably satisfactory to the Holder at the time outstanding), in each case in accordance with generally accepted financial practice. With respect to any determination made by an independent appraiser as provided in clause (y) above, such determination shall be set forth in writing, and the Company shall, immediately following such determination, deliver a copy thereof to the Holder. The determination so made shall be conclusive and binding on the Company and on the Holder. The Company shall pay all of the expenses incurred in connection with any such determination, including, without limitation, the expenses of the independent appraiser engaged to make such determination provided that if the Fair Value as determined by the independent appraiser shall be equal to or less than the Fair Value determined by the Board of Directors of the Company, the fees and expenses or the independent appraiser shall be paid by the Holder). If the Company shall not have selected such appraiser within 20 days after the occurrence of the event giving rise to the need therefor, then the Holder may select such appraiser.
3
Interest shall accrue at a rate of seven percent (7%) per annum from the date hereof, payable quarterly in cash on February 3, May 3, August 3 and November 3 of each year (each, an Interest Payment Date), commencing on February 3, 2009, and continuing until the date this Note is converted in accordance with Section 4 below or is otherwise paid in full together with all accrued and unpaid interest thereon. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company may not prepay this Note, unless the principal amount hereof has become due and payable as provided herein and in the Securities Purchase Agreement.
If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price and with the effect provided in the Securities Purchase Agreement.
4
5
6
7
On or prior to the date of this Note, the Company shall reserve 750,000 shares of its authorized but unissued shares of Common Stock for issuance upon conversion of the Notes, and, thereafter, the number of authorized but unissued shares of Common Stock so reserved (the Reserved Amount) shall at all times be sufficient to provide for the full conversion of all of the Notes outstanding at the conversion price thereof.
The indebtedness evidenced by this Note is senior in priority to all Common Stock and Preferred Stock now or hereafter issued by Company and is junior and subordinate only to the Senior Indebtedness as defined below.
The indebtedness evidenced by this Note is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of all the Companys Senior Indebtedness, as hereinafter defined.
8
9
10
11
Prior to a conversion of this Note, the Holder of this Note shall have no voting power whatsoever, except as otherwise provided by the Delaware General Company Law (the DGCL) and in Section 9 below.
So long as this Note is outstanding, the Company shall not take any of the following corporate actions (whether by merger, consolidation or otherwise) without first obtaining the approval (by vote or written consent, as provided by the DGCL) of the Holder:
12
13
IN WITNESS WHEREOF, this Convertible Subordinated Note is executed on behalf of the Company this 3 rd day of November , 2008.
KENNEDY-WILSON, INC. |
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ Freeman Lyle |
|
|
Name: Freeman Lyle |
|
|
|
Title: EVP & CFO |
|
|
|
[Signature page to Note]
14
Exhibit 10.29
FIFTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Fifteenth Amendment to Employment Agreement (the Fifteenth Amendment) is made and entered into by and between KENNEDY-WILSON, INC., a Delaware corporation (the Company), and William J. McMorrow, an individual (Employee). This amendment will become effective at the times set forth below, which include the time at which KW Merger Sub Corp. (Merger Sub), a subsidiary of Prospect Acquisition Corp. (PAX), is merged into the Company (the Effective Time).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended January 1, 1993, January 1, 1994, March 31, 1995, January 1, 1996, May 19, 1997, August 20, 1998, August 9, 1999, January 3, 2000, October 1, 2000, April 22, 2002, October 1, 2003, April 21, 2004, January 1, 2008, and February 1, 2009 (collectively, the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement shall be modified as set forth below and that, except as modified, the Agreement shall remain in full force and effect.
WHEREAS, Company and Employee have agreed that the modifications set forth below that are effective as of the Effective Time shall be conditioned upon the consummation of the merger of PAX into the Company.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of the times set forth below.
1. Section 2 (b) is deleted immediately before the Effective Time.
2. Section 9 is deleted as of the Effective Time and a new Section 9 is substituted as of the Effective Time, to read as follows:
9. Termination .
(a) Either Company or Employee may terminate this Agreement at any time during the Term, in the event of a material breach of this Agreement by Employee or Company which is not corrected within thirty (30) days after the written notice of the breach is delivered to the other party. The written notice from Company to Employee shall include a reasonably detailed description of Employees acts or omissions, which constitute cause for termination. The term cause shall mean: (i) the breach of any material provision of this Agreement; (ii) persistent misconduct, neglect or negligence in the performance of Employees duties and obligations as set forth in this Agreement; (iii) disloyal, dishonest or illegal conduct or moral turpitude of
Employee; (iv) such material carelessness or inefficiency in the performance of his duties that Employee, in the reasonable discretion of Company, is deemed unfit to continue in the service of Company; and (v) the material and persistent failure of Employee to comply with the policies or directives of Company and/or failure to take direction from Company management.
(b) Employees employment with Company shall cease upon the date of his death or physical or mental disability to the extent that Employee becomes disabled for more than sixty (60) consecutive days or ninety (90) days in the aggregate in any 12-month period and unable to perform his duties on a full-time basis. Upon termination for death or physical or mental disability, Company shall continue to pay Employee the basic salary described in Section 4 for the remainder of the Term of the Agreement on the Companys ordinary payroll dates applicable to similarly situated employees of the Company, together with such other employee benefits (other than continued participation under the Companys Section 401(k) plan) as Employee may be entitled to under the provisions of Section 6 (or if such benefits cannot be provided pursuant to the terms of the applicable plans, comparable benefits, provided, however, that the provision of comparable benefits shall be made following Employees termination of employment only if and to the extent that such benefits may be provided at no additional cost above what was previously paid by the Company).
(c) If the Employee is terminated by Company prior to the end of the Term without cause, then Company shall continue to pay Employee the basic salary described in Section 4 for the remainder of the Term of the Agreement on the Companys ordinary payroll dates applicable to similarly situated employees of the Company, together with such other employee benefits (other than continued participation under the Companys Section 401(k) plan) as Employee may be entitled to under the provisions of Section 6 (or if such benefits cannot be provided pursuant to the terms of the applicable plans, comparable benefits, provided, however, that the provision of comparable benefits shall be made following Employees termination of employment only if and to the extent that such benefits may be provided at no additional cost above what was previously paid by the Company).
(d) If Company instructs Employee to work full-time or substantially full-time at any location not acceptable to Employee (other than the Companys main headquarters) that is more than 50 miles from Employees then principal place of work and more than 50 miles from Employees then principal residence, or eliminates or materially reduces his duties as CEO/Chairman, then Employee may elect to deem such action(s) a constructive termination by Company and resign his employment, provided that (i) such resignation occurs within one year of such action(s); (ii) Employee provides written notice to the Company of such action(s) within 90 days thereof; and (iii) the Company fails to cure the action(s) constituting such constructive termination within 30 days of receipt of the notice. In the event of such a resignation, Company shall continue to pay or provide Employee for the remainder of the Term the basic salary described in Section 4 of the Agreement on the Companys ordinary payroll dates applicable to similarly situated employees of the Company, together with such other employee benefits (other than continued participation under the
2
Companys Section 401(k) plan) as Employee may be entitled to under the provisions of Section 6 (or if such benefits cannot be provided pursuant to the terms of the applicable plans, comparable benefits, provided, however, that the provision of comparable benefits shall be made following Employees termination of employment only if and to the extent that such benefits may be provided at no additional cost above what was previously paid by the Company).
(e) If Employee terminates this Agreement without cause or Employee is terminated for cause, then Employee shall be entitled to receive only the compensation described in Section 4 above earned to the date of termination. Company shall not pay Employee the salary and other benefits which Employee would have been entitled to for the remainder of the term of the Agreement under Sections 4 and Section 6 above, provided that in the event Employee so resigns, Employee will receive a bonus for the year in which he resigned in the ordinary course but prorated based on the number of days Employee was employed by the Company that year (provided that, if the bonus is intended to be qualified under section 162(m) of the Internal Revenue Code, payment of the prorated bonus shall be contingent on satisfaction of the performance target applicable to the bonus).
(f) This Agreement may be terminated by Employee at any time, provided such termination shall have the effect set forth as follows:
(i) Termination of this Agreement pursuant to this Section 9 shall not relieve Employee of his obligations to comply with Sections 7 and 8 hereof, which provisions shall survive the termination of this Agreement. If, and only if, Employee is terminated without cause or Employee resigns due to the Companys material breach of this Agreement which is not corrected within thirty (30) days after the Employees written notice of the breach to the Company, then Employee shall be relieved of his obligations under Sections 7 and 8 hereof.
3. A new Section 11 is added, effective as of September 4, 2009:
11. October 15, 2009 Bonus Payments.
The Company shall pay Employee a cash bonus of $4.85 million on October 15, 2009 if Employee is employed by Company through October 15, 2009. The bonus shall be promptly repaid if either (a) the merger of Merger Sub into Company does not occur by November 15, 2009 or (b) Employee has not remained employed with the Company through the Effective Time. The requirement of continued employment in the preceding two sentences shall not apply, however, if employment has terminated on account of death or disability.
4. A new Section 12 is added, effective as of the Effective Time:
12. April 1, 2010 and January 1, 2011 Bonus Payments.
(a) Subject to the conditions set forth in this Section 12, Company shall pay Employee a cash bonus of $2.425 million on April 1, 2010, and a cash bonus of $4.425 million on January 1, 2011.
3
(b) The bonus payable April 1, 2010 is conditioned on (1) approval by the PAX Compensation Committee of the issuance of the bonus as a Performance Unit Award under the Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan (the Plan), (2) approval of the Plan by the shareholders of PAX (3) Employees continued employment through April 1, 2010, and (4) satisfaction as of March 31, 2010 of the Performance Target, and (5) reapproval of the Performance Target by the PAX Compensation Committee subsequent to the Effective Time. The Performance Target is that the Companys assets under management be at least $3 billion. For this purpose, assets under management shall equal the value of assets under management by the Company, as reflected in the footnotes to the Companys financial statements, plus the cost of properties subject to property management contracts with the Company (not taking into account any properties whose value is reflected in the footnotes). In the event that the Performance Target is not met as of March 31, 2010, the bonus otherwise due March 31, 2010 shall, nevertheless, continue to be paid on July 1, 2010, October 1, 2010, or January 1, 2011, respectively, if the Performance Target is satisfied as of the earliest of June 30, 2010, September 30, 2010, or December 31, 2010, respectively, and Employee has remained employed through the date on which the Performance Target is met.
(c) The bonus payable January 1, 2011 is conditioned on (1) approval by the PAX Compensation Committee of the issuance of the bonus as a Performance Unit Award under the Plan, (2) approval of the Plan by the shareholders of PAX (3) Employees continued employment through January 1, 2011, (4) satisfaction of the Performance Target as of December 31, 2010, and (5) reapproval of the Performance Target by the PAX Compensation Committee subsequent to the Effective Time.
(d) Notwithstanding the preceding subsections of this section, the bonuses described herein shall be payable even if Employee is not employed through the dates set forth above, provided that the other conditions to the payment of the bonus are met and Employee terminates employment under conditions that would entitle him under Section 9(c) or (d) to payment of his salary through the remainder of the Term.
5. A new Section 13 is added, effective immediately prior to the Effective Time.
13. Note Forgiveness.
Immediately prior to the Effective Time, the principal and interest shall be forgiven on the note dated April 10, 2006 from Employee to Company and the note shall be treated as paid in full.
6. A new Section 14 is added, effective as of the Effective Time: ___ 2009:
14. Restricted Shares.
(a) Immediately after the Effective Time and subject to the conditions set forth herein, Employee shall be issued 900,000 restricted shares
4
of common stock of PAX. The restricted shares are conditioned on (1) approval by the PAX Compensation Committee of the issuance and terms of the restricted shares under the Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan (the Plan), subject to the conditions set forth below in (b) and (c), (2) approval of the Plan by the shareholders of PAX, (3) Employees continued employment through the dates set forth below in (b), (4) satisfaction of the Performance Target, and (5) reapproval of the Performance Target by the PAX Compensation Committee subsequent to the Effective Time.
(b) 180,000 restricted shares shall become vested on each of the first through fifth anniversaries of the Effective Time, provided that, with respect to the shares vesting on the first anniversary, the Performance Target is met as of September 30, 2010; with respect to the shares vesting on the second anniversary, the Performance Target is met as of September 30, 2011; and, with respect to the shares vesting on the third through fifth anniversaries, the Performance Target is met as of September 30, 2012 with respect to each tranche of 180,000 restricted stares, vesting shall be conditioned upon Employees continued employment through each of the first, second, third, fourth and fifth anniversaries of the Effective Time, respectively.
(c) Notwithstanding subsections (a) and (b), if, prior to the Employees fully satisfying the above 5-year vesting requirement, Employees employment with the Company shall be terminated by the Company without cause or by the Employee for Good Reason, in any such event, the requirement of continued employment shall no longer apply, so that, assuming the Performance Target is met as of the relevant date, the restricted shares that have not been forfeited as of such termination date shall thereupon become fully vested, no longer subject to restrictions, and transferable. As used in this subsection, Good Reason shall mean the voluntary termination by Employee of his employment with the Company within six months of the Companys (A) instructing the Employee to work (or provide services) full-time or substantially full-time at any location not acceptable to the Employee (other than the employers main headquarters) that is more than 50 miles from Employees principal place of work and more than 50 miles from Employees principal residence, (B) eliminating or materially reducing the Employees duties for the Company, or (C) materially reducing the Employees base pay (or compensation). In addition, all unvested restricted shares that have not been forfeited in connection with a termination of employment shall become immediately vested in the event of a Change in Control, as defined in the Plan.
7. A new Section 15 is added, effective as of the Effective Time:
15. Section 280G.
(a) Notwithstanding anything in this Employment Agreement to the contrary, in the event that the Companys independent public accountants (the Accountants) shall determine that receipt of all payments or benefits made or provided by the Company or its affiliated companies in the nature of compensation to or for Employees benefit (each, a Payment), whether payable or to be provided pursuant to this Employment Agreement or otherwise, and including, without limitation, the post-termination payments and
5
benefits provided pursuant to Section 9 and the restricted shares provided pursuant to Section 14, would subject Employee to the excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the Code), the Payments shall be reduced to the Reduced Amount (as defined below).
(b) If the Accountants determine that aggregate Payments should be reduced to the Reduced Amount, the Company shall promptly give Employee notice to that effect and a copy of the detailed calculation thereof. Any reduction of the Payments shall be made in such a manner as will provide Employee with the greatest Net After-Tax Receipt, as defined below.
(c) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accountants hereunder, it is possible that Payments will have been made by the Company to or for the benefit of Employee which should not have been so made (Overpayment), or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of Employee could have been so paid or distributed (Underpayment), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accountants, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or Employee which the Accountants believe has a high probability of success, determine that an Overpayment has been made, Employee shall pay any such Overpayment to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by Employee to the Company if and to the extent such payment would not either reduce the amount on which Employee is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accountants determine that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of Employee together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.
(d) The following terms have the meanings set forth below:
(i) Reduced Amount shall mean the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999 of the Code.
(ii) Net After-Tax Receipt shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of all Payments net of all taxes imposed on Employee with respect thereto under the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Employees taxable income for the immediately preceding taxable year, or such other rate(s) as Employee certifies, in Employees sole discretion, as likely to apply to him in the relevant tax year(s).
(e) Subject to the last sentence of this subsection (e), all determinations made by the Accountants under this Section 15 shall be conclusive and binding upon the Company and Employee for all purposes. All
6
fees and expenses of the Accountants shall be borne solely by the Company. For purposes of making the calculations required by this Section 15, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Employee will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make determinations under this Section 15. In the event that Employee disagrees with the determination of the Accountants under this Section 15, he can have such determination reviewed pursuant to the alternative dispute resolution currently set forth in the employment agreement between the Company and Donald J. Herrema, effective as of June 15, 2009. If such mechanism is used, review shall be de novo and no presumption of correctness shall attach to the Accountants determination.
8. A new Section 16 is added, effective as of January 1, 2009.
7
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Fifteenth Amendment on the dates written below.
8
COMPANY
KENNEDY-WILSON, Inc.
a Delaware corporation |
|
|
|
|
|
|
|
|
|
|
|
Kent Y. Mouton |
|
Date |
Chairman, Compensation Committee |
|
|
|
|
|
EMPLOYEE |
|
|
|
|
|
|
|
|
|
|
|
William J. McMorrow, Chairman |
|
Date |
9
Exhibit 10.30
EMPLOYMENT AGREEMENT
This Employment Agreement (the Agreement) is made and entered into as of the 14 day of August, 1992, by and between Kennedy-Wilson, a Delaware corporation with its principal office located in Santa Monica, California (the Company), and William J. McMorrow, an individual (Employee).
AGREEMENT
1. Services Provided to the Company . During the term of this Agreement, Employee shall devote 100% of his working hours to advance the business and welfare of the Company and its subsidiaries and shall have such powers and duties as may from time to time be prescribed by the Board of Directors of the Company, which duties may, in the Companys sole discretion, be changed in any legal manner from time to time. The initial duties of Employee shall include, without limitation, serving the Company as Chief Executive Officer and Chairman of the Board of the Company. Employee shall provide the Company with the benefit of his best judgment and efforts in performing his duties hereunder.
2. Term . Employee shall be employed by the Company pursuant to this Agreement for a term beginning on the date of this Agreement and continuing through to, and terminating at the close of business on the third anniversary of the date hereof (unless earlier terminated pursuant to Section.9 hereof).
3. Commitment to the Company . During the ten of this Agreement, Employee shall not be involved, individually or as an employee, principal, officer, general partner, director or shareholder of any company, in any real estate development activities without first obtaining the consent and approval of a majority of the Companys Board of Directors. The limitation contained in this Section shall not apply, however, to the ownership of less than 1% of the capital stock of any publicly held corporation or to participation in real estate development activities as a limited partner. For purposes of this Section, Employee shall be deemed the owner of any interests held by Employee, Employees spouse, or any other un-emancipated minor member of Employees family.
4. Compensation to Employee . During the term of this Agreement, the Company shall pay to Employee compensation (the Compensation) consisting of:
(i) a salary equal to $450,000 per annum, payable on such basis as is the normal payment pattern of the Company, not to be less frequently than monthly; and
(ii) an annual bonus in an amount equal to up to 100% of the Employees annual salary, the exact amount of which shall be determined by the Compensation Committee (the Committee) of the Board of Directors of the Company. In making such determination, the Committee shall consider, among other things, the annual financial results of the Company, including return on equity.
5. Expenses . Employee shall be entitled to reimbursement from the Company for any out-of-pocket expenses, including travel expenses, incurred by Employee in the ordinary course of providing his services hereunder. Such reimbursement shall be made by the Company within 30 days after receipt of a statement therefore from Employee setting forth in reasonable detail the expenses for which reimbursement is requested, accompanied by customary documentation evidencing such expenses.
6. Insurance Coverage and Benefits . During the term of this Agreement, the Company will provide Employee, at the Companys expense, coverage under the major medical, hospitalization and other insurance programs maintained by the Company for its officers generally. In addition, Employee will receive during the term of this Agreement all other company-provided benefits to which Employee was entitled in the ordinary course immediately prior to the date hereof as an employee of Kennedy-Wilson, Inc., a California corporation and all other company provided benefits which are, from time to time, made available by the Company to its officers.
7. Noncompetition Covenant . During the term of this Agreement and for a period of three years thereafter, Employee will not, directly or indirectly:
(a) (i) in any manner induce, attempt to induce, or assist others to induce or attempt to induce any employee, partner, joint venturer, independent contractor, agent or customer of the company to terminate its, his or her association with the Company, or (ii) do anything to interfere with the relationship between the Company and such person or entity or other persons or entities dealing with the Company; or
(b) in any capacity (whether as an individual, promoter, proprietor, general partner, joint venturer, employee, agent, consultant, director, officer, manager, shareholder or otherwise) work for, act as a consultant or adviser to, own any interest in, or otherwise be connected in any manner with the ownership, management, operation or control of (collectively Associated With), any person or entity which at any time during the term of this Agreement or for a period of three years thereafter engages in the businesses engaged in by the Company including without limitation the real estate auction marketing business without the consent of the Board of Directors of the Company. Employee acknowledges that the Companys existing services are marketed internationally and that its business plans include marketing throughout the entire world either directly or through others. Accordingly the restrictions in this Section 7 shall extend to operations in any part of the world. Employee further acknowledges that all patents, trade secrets, know how, technology data, formulae, plans, specifications and other information used by the Company or under development in connection with its business are the property of the Company, and that Employee does not have the right to disclose, make available or use any of the foregoing for the benefit of himself or any other person or entity.
(c) Nothing in this Section 7 shall restrict Employee from owning not more than 1% of the outstanding shares of any class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, or any limited partner interest in a limited partnership or similar passive investment interest so long as the nature of such investment
prevents, pursuant to applicable law,. Employees control of the management of the issuer of such investment interest.
(d) The parties hereto intend that the covenants and agreements contained in this section 7 shall be deemed to be a series of separate covenants and agreements, one for each and every country, county, state, city and other jurisdiction in the world with respect to which the Companys business has been or is hereafter carried on. If any of the foregoing is determined by any court of competent jurisdiction to be invalid or unenforceable by reason of such agreement extending for too great a period of time or over too great a geographical area, or by reason of its being too extensive in any other respect, such agreement shall be interpreted to extend only over the maximum period of time and geographical area and to the maximum extent enforceable, all as determined by such court in such action. Any determination that any provision hereof is invalid or unenforceable, in whole or in part, shall have no effect on the validity or enforceability of any remaining provision thereof.
(e) Notwithstanding the foregoing, nothing herein shall prevent Employee, following the termination of his employment or the end of the term of this Agreement, from being associated with any person or entity engaged in any real estate activities or matters other than real estate auction activities or matters.
8. Confidential and Proprietary Information . Employee recognizes that he has occupied and will occupy a position of trust with respect to business information of a confidential or proprietary nature which is the property of the Company and which has been and will be imparted to him or her from time to time in the course of the performance of his duties under this Agreement. Employee agrees that:
(a) he shall not at any time, whether during the term hereof or thereafter, use or disclose directly or indirectly any confidential or proprietary information of the Company to any person, except that he may use and disclose to other Company personnel such confidential and proprietary information in the course of the performance of his duties hereunder; and
(b) he shall return promptly upon the termination of this Agreement or otherwise upon the request of the Company any and all copies of any documentation or materials containing any confidential or proprietary information of the Company.
For purposes of this Agreement, the term. confidential or proprietary infor-mation of the Company shall include all information of any nature and in any form which is owned by the Company and which is not at the time publicly available or generally known to persons engaged in businesses similar to that of the company, including, but not limited to, practices, procedures and methods and other facts relating to the business of the company; practices, procedures and methods and other facts related to sales, marketing, advertising, promotions, financial matters, clients, client lists of the Company and all other information of a confidential and proprietary nature.
9. Termination .
(a) This Agreement will terminate upon the death or incapacity of Employee. Incapacity shall mean the inability to perform the services due hereunder for a consecutive 30 calendar day period.
(b) This Agreement may also be terminated by the Company:
(i) in the event of a material breach of this Agreement by Employee which is not corrected within10 days after the Companys written notice of the breach to Employee; and
(ii) for cause, which includes, without limitation, Employees violation of law, material wrongful act or omission, malfeasance or gross negligence which causes or can reasonably be anticipated to cause material damage to the business or reputation of the Company.
(c) This Agreement may be terminated by Employee upon a material breach of this Agreement by the company which is not corrected within 10 days after Employees written notice of the breach to the company.
(d) Termination of this Agreement pursuant to this Section 9 shall not relieve Employee of his obligations to comply with Sections 7 and 8 hereof. Upon the termination of this Agreement by the Company pursuant to Section 9(b) or the resignation of Employee during the term of this Agreement, any further compensation to Employee shall terminate on the date this Agreement is so terminated by the company or Employee resigns; provided that in the event Employee so resigns, Employee will receive a bonus f or the year in which he resigned in the ordinary course but prorated based on the number of days the Employee was employed by the Company that year. In all other cases, Employee, or his estate, will receive all salary and bonuses due hereunder and remaining to be paid, during the term hereof in the ordinary course.
10. General Provisions .
(a) Notices . Any notice to be given pursuant to this Agreement shall be in writing and, in the absence of receipted hand delivery, shall be deemed duly given when mailed, if the same shall be sent by certified or registered mail, return receipt requested, or by a nationally recognized overnight courier, and the mailing date shall be deemed the date from which all time periods pertaining to a date of notice shall run. Notices shall be addressed to the parties at the following addresses:
If to the Company, to: Kennedy-Wilson, Inc.
2950 31st Street
Suite 300
Santa Monica, California 90405
Attention: President
If to Employee, to: |
William J. McMorrow c/o
Kennedy-Wilson, Inc. 2950
|
|
Santa Monica, California 90405 |
(b) Successors and Assigns . This Agreement shall be binding upon and shall inure to the benefit of the Company and any successors whether by merger, consolidation, transfer of substantially all assets or similar transaction, and it shall be binding upon and shall inure to the benefit of Employee and his heirs and legal representatives. This Agreement is personal to Employee and shall not be assignable by Employee.
(c) Waiver of Breach . The waiver by the Company or Employee of a breach of any provision of this Agreement by the other shall not operate or be construed as a waiver of any subsequent breach by the other.
(d) Entire Agreement/Modification . This Agreement shall constitute the entire agreement between the parties hereto with respect to the subject matter hereof, and shall supersede all previous oral and written and all contemporaneous oral negotiations, commitments, agreements and understandings relating hereto. Any modification of this Agreement shall be effective only if it is in. writing and signed by the parties to this Agreement;
(e) Applicable Law . The validity of this Agreement and the interpretation and performance of all of its terms shall be construed and enforced in accordance with the laws of the State of California.
(f) Severability . Any provision of this Agreement which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this paragraph be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable.
(g) Counterparts . This Agreement may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
EMPLOYEE |
|
KENNEDY-WILSON, INC. |
|
|
A Delaware corporation |
/s/ William J. McMorrow |
|
/s/ William Stevenson |
|
|
President |
Exhibit 10.31
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the Amendment) is made and entered into as of the 1st day of January, 1993, by and between KennedyWilson, Inc., a Delaware corporation with its principal office located in Santa Monica, California (the Company), and William 3. McMorrow, an individual (Employee).
RECITALS
WHEREAS , the Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992 (the Employment Agreement), providing for the employment of the Employee by the Company pursuant to the terms of such Employment Agreement; and
WHEREAS , the Company and Employee have agreed that the tens of the Employment Agreement should be modified and, in connection therewith, Employee has agreed to forego any compensation pursuant to the Employment Agreement for the period beginning November 15, 1992 and ending December 31, 1992;
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
i. section 4 of the Employment Agreement shall be amended such that the annual salary amount $450,000 appearing in such Section shall become $350,000.
2. The Company and Employee acknowledge and agree that, notwithstanding the tens of the Employment Agreement, Employee has not and shall not receive any compensation from the Company for the period beginning November 15, 1992 and ending December 31, 1992.
3. Subject to the foregoing, the Employment Agreement shall remain in effect, and each of the Company and Employee hereby ratifies and affirms the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
EMPLOYEE |
|
/s/William J. McMorrow |
|
|
|
KENNEDY-WILSON, INC. |
|
A Delaware corporation |
|
/s/ William Stevenson |
|
President |
|
Exhibit 10.32
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement (the Second Amendment) is made and entered into as of January 1, 1994 by and between KENNEDYWILSON, INC., a Delaware corporation, with its principal office located in Santa Monica, California (the Company) and WILLIAM J. McMORROW, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended by that certain Amendment to Employment Agreement dated as of January 1, 1993 (collectively, the Employment Agreement), providing for the employment of Employee by Company pursuant to the terms of such Employment Agreement; and
WHEREAS , Company and Employee have agreed that the terms of the Employment Agreement should be modified with respect to Employees compensation.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Employment Agreement, effective as of January 1, 1994, as follows:
1. Employee shall be paid an annual salary of $400,000 as compensation for Employees duties as Chief Executive Officer. Therefore, Section 4(i) of the Employment Agreement is amended such that the annual salary amount of $350,000 is deleted and the annual salary amount of $400,000 is inserted in lieu thereof.
2. Section 4(u) of the Employment Agreement is deleted in its entirety and the following is inserted in lieu thereof:
4(ii) As additional compensation to Employee for Employees duties as Chief Executive Officer, Employee shall be a participant in the Companys Corporate Profit Incentive Plan and will be entitled to an annual target incentive bonus of $500,000, with a maximum annual incentive bonus of $i,000,000, under the terms and conditions of the Corporate Profit Incentive Plan.
3. Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Second Amendment as of the date first above written.
COMPANY |
|
KENNEDY-WILSON, Inc. |
|
a Delaware corporation |
|
/s/ Randall G. Dotemoto |
|
Chief Operating Officer |
|
Chief Financial Officer |
|
|
|
EMPLOYEE |
|
/s/ William J. McMorrow, |
|
Exhibit 10.33
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT .
This Third Amendment to Employment Agreement (the Third Amendment) is made and entered into as of March 31, 1995, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Santa Monica, California (the Company) and WILLIAM J. McMORROW, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended by that certain Amendment to Employment Agreement dated as of January 1, 1993, and that certain Second Amendment to Employment Agreement dated January 1, 1994 (collectively, the Employment Agreement), providing for the employment of Employee by Company pursuant to the terms of such Employment Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified with respect to the term of the Employment Agreement and severance provisions.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Employment Agreement as follows:
1. Section 2 of the Employment Agreement is deleted in its entirety and the following is inserted in lieu thereof:
2. Term . (a) Employee shall be employed by the Company pursuant to this Employment Agreement for a term beginning on August 14, 1992 and continuing through to, and terminating at the close of business on the fifth anniversary of the date thereof (unless earlier terminated pursuant to Section 9 hereof).
(b) In the event that the Employment Agreement is not renewed prior to the close of business on the fifth anniversary of the date thereof, Employee shall, in consideration of his execution of the General Release attached as Exhibit A hereof, be entitled to a payment from the Company equal to the compensation to Employee paid during the preceding twelve (12) months in accordance with Section 4(i) of the Employment Agreement, but in no event less than $400,000 (the Severance Payment). Such Severance Payment shall be paid to Employee ten (10) days following his execution and delivery to Company of such General Release; provided that Employee has not revoked such General Release in the meanwhile.
2. Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Third Amendment as of the date first above written.
KENNEDY-WILSON, INC. |
|
a Delaware corporation |
|
/S/ RANDALL DOTEMOTO |
|
Chief Operating Officer, |
|
Chief Financial Officer and Secretary |
|
|
|
|
|
EMPLOYEE |
|
|
|
/S/ WILLIAM J. McMORROW |
|
Exhibit 10.34
FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Fourth Amendment to Employment Agreement (the Fourth Amendment) is made and entered into as of January 1, 1996, by and between KENNEDY-WILSON, INC., a Delaware Corporation, with its principal office located in Santa Monica, California (the Company) and WILUAM J. MCMORROW, an individual (Employee).
RECITALS
WHEREAS , Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended by that certain Amendment to Employment Agreement dated as of January 1, 1993 and that certain Second Amendment to Employment Agreement dated January 1, 1994 and that certain Third Amendment to Employment Agreement dated March 31, 1995, (collectively, the Employment Agreement), providing for the employment of Employee by Company pursuant to the terms of such Employment Agreement; and
WHEREA S, Company and Employee have agreed that the terms of the Employment Agreement should be modified with respect to the term of the Employment Agreement, salary and bonus provision.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Employment Agreement as follows:
1. Section 2 (a) of the Employment Agreement is deleted in its entirety and the following is inserted in lieu thereof:
2. Term . a) Employee shall be employed by the Company pursuant to this Employment Agreement for a term beginning on August 14, 1992 and continuing through to, and terminating at the close of business on December 31, 1997, (unless earlier terminated pursuant to Section 9 hereof).
2. Section 4(i) of the Employment Agreement shall be amended such that the annual salary amount of $400,000 is deleted and the annual salary amount of $300,000 plus an annual salary advance amount of $100,000 payable against bonus earned is inserted in lieu thereof.
3. Section 4(ii) of the Employment Agreement is deleted in its entirety and the following is inserted in lieu thereof:
4. (iii) an annual bonus payable in an amount as follows:
PROFIT (MM) |
|
BONUS |
|
0 to 1 |
|
0 |
|
1 to 3 |
|
10%(MAX. $100K) |
|
3 to 7.5 |
|
20% |
|
Bonus Cap$7.5MM Profit
4.(iii) The Company shall pay to Employee a bonus at the six (6) month interval based upon 1st and 2nd quarter profits, consistent with the bonus schedule in 4(H). At year end, additional bonus shall be paid on year end profits or any excess bonus payout at the six month interval shall be refunded by Employee and/or the excess bonus payout will be offset by Employees 1997 salary.
4. Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Fourth Amendment as of the date first above written.
COMPANY |
|
KENNEDY-WILSON, Inc. a Delaware corporation |
|
/s/ James C. Ozello, Acting Secretary |
|
Compensation Committee |
|
|
|
EMPLOYEE |
|
/s/ William J. McMorrow, Chairman |
|
Exhibit 10.35
AMENDMENT TO EMPLOYMENT AGREEMENT
OF WILLIAM J. MCMORROW
1. Term: Extended from 8/15/97 to 12/31/97.
2. Salary: $300,000 per annum
3. Salary Advance payable against bonus earned; $100,000 per annum.
4. Bonus payable as follows:
BONUS
PROFIT (MM) |
|
BONUS |
|
0 to 1 |
|
0 |
|
1 to 3 |
|
10% (Max. $100 K) |
|
3 to 3.75 |
|
20% |
|
CAP $7.5MM Profit
5. Bonus paid at S months based on 1st and 2nd Quarter profits. At year end, additional bonus paid on year end profits or excess bonus payout to be refunded by check and/or offset excess bonus payout by 1997 Salary.
APPROVED:
/s/ William E. Elliot |
|
2/29/96 |
|
/s/ Donald B. Prell |
|
3/2/96 |
|
/s/ Kent Y. Mouton |
|
3/5/96 |
|
Exhibit 10.36
FIFTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This Fifth Amendment to Employment Agreement (the Fifth Amendment) is made and entered into as of May 19, 1997, by and between KENNEDY-WILSON, INC., A Delaware corporation, with its principal office located in Santa Monica, California (the Company), and WILLIAM J. McMORROW, an individual (Employee).
RECITALS
WHEREAS , Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended January 1, 1993, January 1, 1994, March 31, 1995 and January 1, 1996, providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment, Bonus and Severance Agreement.
AMENDMENT TO AGREEMENT
NOW, THEREFORE , for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of May 19, 1997 as follows:
1. Section 2 of the Employment Agreement is deleted in its entirety and the following is inserted in lieu thereof:
2. Term (a): Employee shall be employed by the Company pursuant to his Employment Agreement for a term beginning in August 14, 1992, and continuing through to and terminating at the close of business on December 31, 1999, (unless earlier terminated pursuant to Section 9 hereof).
(b): In the event the Employment Agreement is terminated due to change in control, or non renewal of the Agreement, except if change in control or non renewal is for cause (which shall mean only Employees violation of criminal law, material wrong act or omission, malfeasance or gross negligence which causes material damage to the business or reputation of the Companies), disability or death, the Employee shall in consideration of his execution of the General Release attached as Exhibit A, hereof, be entitled to payment from the Company equal to two (2) times the Employees annual compensation. The annual compensation would be the arithmetic average of the most recent three (3) year period and would include salary and bonus as reported in the Proxy Statement, (the Severance Payment). Such Severance Payment shall be paid to Employee ten (10) days following his execution and delivery to Company of such General Release, provided Employee has not revoked such General Release in the meanwhile.
2. Section 4(ii) of the Employment Agreement is deleted in its entirety and the following is inserted in lieu thereof:
4(ii). An annual bonus payable in an amount as follows:
1998 Bonus 20% on profits of 3MM to 17.5MM (pretax, pre bonus)
1997 Bonus 20% on profits of 3MM to 12.5MtvI (pre tax, pre bonus)
1999 Bonus 20% on profits of 3MM to 22.5MM (pre tax, pre bonus)
3. Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Fifth Amendment as of the date first above written.
COMPANY |
|
ATTEST: |
KENNEDY-WILSON, Inc. a Delaware corporation |
|
/s/ Kent Y. Mouton |
/s/ James C. Ozello, Acting Secretary |
|
Chairman, Compensation |
Compensation Committee |
|
Committee |
|
|
|
EMPLOYEE |
|
/s/ Freeman Lyle |
/s/ William J. McMorrow, Chairman |
|
Senior Managing Director, and Chief Financial Officer |
Exhibit 10.37
SIXTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This Sixth Amendment to Employment Agreement (the Sixth Amendment) is made and entered into as of August 20, 1998, by and between KENNEDY-WILSON, INC., A Delaware corporation, with its principal office located in Santa Monica, California (the Company), and WILLIAM J. McMORROW, an individual (Employee).
RECITALS
WHEREAS , Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended January 1, 1993, January t, 1994, March 31, 1995, January 1, 1996, and May 19, 1997, providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS , Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Bonus Structure.
AMENDMENT TO AGREEMENT
NOW, THEREFORE , for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of August 21, 1998 as follows:
1. Section 4(h) the annual bonus is amended such that the existing bonus cap at $17.SIvflvI for 1998 and $22.5MM for 1999 is deleted and the following bonus cap is inserted in lieu thereof:
1998 Bonus: 20% of profits of 3MM to 25MM
1999 Bonus: 20% of profits of 3MM to 35MM
Bonus calculations are to be based on Company profit; pre-tax, pre-bonus paid to all other employees, pre-reserves and pre-Company contributions to the Deferred Compensation Plan.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Sixth Amendment as of the date first above written.
COMPANY |
|
ATTEST: |
KENNEDY-WILSON, Inc. a Delaware corporation |
|
/s/ Kent Y. Mouton |
/s/ James C. Ozello, Acting Secretary |
|
Chairman, Compensation |
Compensation Committee |
|
Committee |
|
|
|
EMPLOYEE |
|
/s/ Freeman Lyle |
/s/ William J. McMorrow, Chairman |
|
Senior Managing Director, and Chief Financial Officer |
Exhibit 10.38
SEVENTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This Seventh Amendment to Employment Agreement (the Seventh Amendment) is made and entered into as of August 9,1999; by and between KENNEDY-WILSON, INC., A Delaware corporation, with its principal office located in Beverly Hills, California (the Company), and WILLIAM J. McMORROW, an individual (Employee).
WHEREAS , Company and Employee entered into that certain Employment Agreement dated as of August 14, 1992, as amended January 1, 1993 , January 1, 1994, March 31, 1995, January 1, 1996, May 19, l997 aud August 20, 1998 providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS , Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term and extend the Bonus Plan.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of August 9, 1999 as follows:
1. The Term of the Agreement is extends until December 31, 2000. Therefore, Section 2(a) of the Employment Agreement is amended such that the termination date of December 1,1999 is deleted and the termination date of December 31 in lieu thereof.
2. Section 4(ii) the annual bonus is amended such that the existing bonus cap at $25MM for 1998 and 535MM for 1999 is deleted and the following bonus cap is inserted in lieu thereof;
2000 Bonus: 20% of profits of $3MM to $35 MM
Bonus calculations are to be based on company profit, pre-tax, pre-bonus paid to all other employees, pre-reserves and pre-Company contributions to the Deferred Compensation Plan.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Seventh Amendment as of the date first above written.
COMPANY |
|
|
KENNEDY-WILSON, Inc. a Delaware corporation |
|
/s/ Kent Y. Mouton |
/s/ James C. Ozello, Acting Secretary |
|
Chairman, Compensation |
Compensation Committee |
|
Committee |
|
|
|
EMPLOYEE |
|
/s/ Freeman Lyle |
/s/ William J. McMorrow, Chairman |
|
Senior Managing Director, and Chief Financial Officer |
Exhibit 10.39
EIGHTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This Eighth Amendment to Employment Agreement (the Eighth Amendment) is made and entered into as of January 3, 2000, by and between KENNEDY-WILSON, INC., a Delaware corporation, with its principal office located in Beverly Hills, California (the Company), and WILLIAM J. McMORROW, an individual (Employee).
RECITALS
WHEREAS , Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended January 1, 1993, January 1, 1994, March 31, 1995, January 1, 1996, May 19, 1997, August 20, 1998 and August 9, 1999 providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS , Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term, Salary and Bonus Plan.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2000 as follows:
1. The Term of the Agreement is extended until December 31, 2002. Therefore, Section 2(a) of the Employment Agreement is amended such that the termination date of December 31, 2000 is deleted and the termination date of December 31, 2002 is inserted in lieu thereof
2. Section 4 (i) of the Employment Agreement shall be amended such that the annual salary of $300,000. plus an annual salary advance amount of $100,000. payable against bonus earned is deleted and the annual salary of $400,000 is inserted in lieu thereof.
3. Section 4(h) of the Employment Agreement is deleted in it entirety and the following is inserted in lieu thereof:
4 (ii) An annual bonus of 10% of profits.
Bonus calculations are to be based on Company profit; pre-tax, pre-bonus paid to all other employees, pre-reserves and pre-Company contributions to the Deferred Compensation Plan.
4. (iii) A one-time grant of Restricted Stock of seven hundred thousand (700,000) shares
of Kennedy-Wilson, Inc. common stock shall be granted to Employee effective 4-15-00. The seven hundred thousand shares of restricted stock will vest equally over the three-year term of the Agreement according to the following schedule:
Year Ending |
|
Number of Shares Vested |
|
|
|
|
|
1-01-01 |
|
233,333 |
|
1-01-02 |
|
233,333 |
|
1-01-03 |
|
233,334 |
|
All Restricted Stock Granted as detailed in 4 (iii) may be deferred in the Companys Deferred Compensation Plan at the election of the Employee but shall not be subject to the Company match as otherwise defined in the Deferred Compensation Plan.
All Restricted Stock Granted as detailed in 4 (iii) above would vest immediately upon change in control. Change in control shall mean the first to occur of any of the following events:
(a) Any person (as that tem is used Section 13 and 14 (d) (2) of the Securities Exchange Act of 1934 (Exchange Act) becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act), directly or indirectly, of 50% or more of the Companys capital stock entitled to vote in the election of directors;
(b) During any period of not more than two consecutive years, not including any period prior to the adoption of this Amendment, individuals who at the beginning of such period constitute the board of directors of the Company, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c), (d) or (e) of this section) whose election by the board of directors or nomination for election by the Companys stockholders was approved by a vote of at least three-fourths (3/4ths) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof.
(c) The shareholders of the Company approve any consolidation or merger of the Company, other than a consolidation or merger of the Company in which the holders of the common stock of the Company immediately prior to the consolidation or merger hold more than 50% of the common stock of the surviving corporation immediately after the consolidation or merger;
(d) The shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or
(e)The shareholders of the Company approve the sale or transfer of all or substantially all of the assets of the Company to parties that are not within a controlled group of corporations (as defined in Code Section 1563) in which the Company is a member.
4 (iv) A one-time contribution of $1.25 million shall be granted to Employee, $625,000 payable 2-29-00 and $625,00 payable 6-30-00. The $1.25 million may be deferred in the Companys Deferred Compensation Plan at the election of the Employee and shall be subject to the Company match as otherwise defined in the Deferred Compensation Plan.
4. Section 9 (d) is amended such that the following is added: In the event of the Employees death, the Restricted Stock Grant as detailed in 4 (iii) will immediately vest and be awarded to Employees estate.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned of the date first above written.
COMPANY |
|
|
KENNEDY-WILSON, Inc. a Delaware corporation |
|
/s/ Kent Y. Mouton |
/s/ James C. Ozello, Acting Secretary |
|
Chairman, Compensation |
Compensation Committee |
|
Committee |
|
|
|
EMPLOYEE |
|
/s/ Freeman Lyle |
/s/ William J. McMorrow, Chairman |
|
Senior Managing Director, and Chief Financial Officer |
RESOLUTIONS OF THE
COMPENSATION COMMITTEE
OF KENNEDY-WILSON, INC.
a Delaware corporation
The Compensation Committee of the Board of Directors of Kennedy-Wilson, Inc., having met on December 9, 1999 approves the following resolutions in regard to amending the employment contract of William J. McMorrow, the Chief Executive Officer of Kennedy-Wilson, Inc.
WHEREAS, after due consideration and review, the Compensation Committee of the Board of Directors desires to amend the employment contract of William J. McMorrow, the Chief Executive Officer of Kennedy-Wilson, Inc.;
NOW THEREFORE, BE IT RESOLVED, that the employment contract is amended as follows:
· The term is extended for three years commencing January l , 2000 and expiring December 31, 2002.
· The annual salary shall be $400,000.00.
· The employee shall be entitled to a non-discretionary annual bonus equal to 10% of pie-tax, pre-bonus, pit-deferred compensation program earnings.
· The employee shall receive a one-time restricted stock grant on January l, 2000 of 700,000 shares. Shares to vest in equal one-third increments at the end of the first, second and third years with immediate acceleration upon a change in control.
· The employee shall receive a one-time payment of $1,250,000.00 granted to employee, $625,000.00 payable on February 29, 2000 and $625,000.00 payable on Jane 30, 2000, which may be deferred at election of employee and matched as otherwise defined in Plan.
The undersigned hereby certify they are the Compensation Committee of the Board of Directors of the Corporation. Executed as of December 9, 1999.
/s/ Donald B. Prell |
|
/s/ Kent Y. Mouton |
|
|
Chairman |
Exhibit 10.40
NINTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This Ninth Amendment to Employment Agreement (the Ninth Amendment) is made and entered into as of October 1, 2000, by and between KENNEDY-WILSON, INC., a Delaware corporation, with its principal office located in Beverly Hills, California (the Company), and WILLIAM J. McMORROW, an individual (Employee).
RECITALS
WHEREAS , Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended January 1, 1993, January 1, 1994, March 31, 1995, January 1, 1996, May 19, 1997, August 20, 1998, August 9, 1999, and January 3, 2000 providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS , Company and Employee have agreed that this Ninth Amendment should supersede in its entirety the Eighth Amendment and that the terms of the Employment Agreement should be modified to change the Term, Salary and Bonus Plan.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the patties hereby amend the Agreement, effective as of January 1, 2000 as follows:
1. The Term of the Agreement is extended until December 31, 2009. Therefore, Section 2 (a) of the Employment Agreement is amended such that the termination date of December 31, 2002 is deleted and the termination date of December 31, 2009 is inserted in lieu thereof
2. Section 4 (i) of the Employment Agreement shall be amended such that the annual salary of $300,000. plus an annual salary advance amount of $100,000. payable against bonus earned is deleted and the annual salary of $400,000 is inserted in lieu thereof
3. Section 4 (ii) of the Employment Agreement is deleted in it entirety and the following is inserted in lieu thereof:
(a) For the year 2000, an annual bonus of 5% of profits.
(b) For the years 2001-2009, an annual bonus of 10% of profits.
Bonus calculations are to be based on Company profit; pre-tax, pre-bonus paid to all other employees, pre-reserves and pre-Company contributions to the Deferred Compensation Plan.
4 (iii) A one-time grant of Restricted Stock of seven hundred thousand (700,000) shares of Kennedy-Wilson, Inc. common stock shall be granted to Employee effective 1-01-01. The seven hundred thousand shares of restricted stock will vest equally over the ten-year term of the Agreement according to the following schedule:
Year Ending |
|
Number of Shares Vested |
|
|
12-01-01 |
|
|
70,000 |
|
1-01-02 |
|
|
70,000 |
|
1-01-03 |
|
|
70,000 |
|
1-01-04 |
|
|
70,000 |
|
1-01-05 |
|
|
70,000 |
|
1-01-06 |
|
|
70,000 |
|
1-01-07 |
|
|
70,000 |
|
1-01-08 |
|
|
70,000 |
|
1-01-09 |
|
|
70,000 |
|
1-01-10 |
|
|
70,000 |
|
All Restricted Stock Granted as detailed in 4 (iii) may be deferred in the Companys Deferred Compensation Plan at the election of the Employee but shall not be subject to the Company match as otherwise defined in the Deferred Compensation Plan.
All Restricted Stock Granted as detailed in 4 (iii) above would vest immediately upon change in control. Change in control shall mean the first to occur of any of the following events:
(a) Any person (as that tem is used Section 13 and 14 (d) (2) of the Securities Exchange Act of 1934 (Exchange Act) becomes the beneficial owner (as that term is used in Section 13 (d) of the Exchange Act), directly or indirectly, of 50% or more of the Companys capital stock entitled to vote in the election of directors;
(b) During any period of not more than two consecutive years, not including any period prior to the adoption of this Amendment, individuals who at the beginning of such period constitute the board of directors of the Company, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c), (d) or (e) of this section) whose election by the board of directors or nomination for election by the Companys stockholders was approved by a vote of at least three-fourths (3/4ths) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;
(c) The shareholders of the Company approve any consolidation or merger of the Company, other than a consolidation or merger of the Company in which the holders of the common stock of the Company immediately prior to the consolidation or merger hold more than 50% of the common stock of the surviving corporation immediately after the consolidation or merger;
(d) The shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or
(e) The shareholders of the Company approve the sale or transfer of all or substantially all of the assets of the company to parties that are not within a controlled group of corporations (as defined in Code Section 1563) in which the Company is a member.
If Employees employment were terminated for any reason after December 31, 2002, Employee would acquire full ownership of all Restricted Stock as detailed in 4 (iii) above.
4 (iv) A one-time contribution of $1.75 million shall be granted to Employee, $625,000 payable 2-29-00, $625,00 payable 6-30-00, $250,000 payable 3-115-01, and $250,000 payable 6-30-01. The $1.75 million may be deferred in the Companys Deferred Compensation Plan at the election of the Employee and shall be subject to the Company match as otherwise defined in the Deferred Compensation Plan. The $1.75 million shall vest over ten years.
4. Section 9 (d) is amended such that the following is added: In the event of the Employees death, the Restricted Stock Grant as detailed in 4 (iii) will immediately vest and be awarded to Employees estate.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Ninth Amendment as of the date first above written.
COMPANY |
|
|
KENNEDY-WILSON, Inc. a Delaware corporation |
|
/s/ Kent Y. Mouton |
/s/ James C. Ozello, Acting Secretary |
|
Chairman, Compensation |
Compensation Committee |
|
Committee |
|
|
|
EMPLOYEE |
|
/s/ Freeman Lyle |
/s/ William J. McMorrow, Chairman |
|
Senior Managing Director, and Chief Financial Officer |
Exhibit 10.41
TENTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This Tenth Amendment to Employment Agreement (the Tenth Amendment) is made and entered into as of April 22, 2002, by and between KENNEDY-WILSON, INC., a Delaware corporation (the Company), and WILLIAM J. McMORROW, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended January 1, 1993, January 1, 1994, March 31, 1995, January 1, 1996, May 19, 1997, August 20, 1998, August 9, 1999, January 3, 2000, and October 1, 2000 (collectively, the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified as set forth below.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of April 22, 2002 as follows:
1. Effective as of April 22, 2002 (but not for any calendar year or partial fiscal year prior thereto), Section 4 (ii) of the Employment Agreement is deleted in it entirety, and the following is inserted in lieu thereof:
4 (ii) Discretionary Bonus . In addition to the base salary provided for above, at the discretion of the Company, Employee may receive with respect to each fiscal year (or portion thereof) during the term of this Agreement, a discretionary bonus in an amount determined in the sole and absolute discretion of the Compensation and Stock Option Committees of the Board of Directors.
2. A new Section 4 (iv) is added as follows:
4 (iv) A one-time grant of Restricted Stock of one million (1,000,000) shares of Kennedy-Wilson, Inc. common stock shall be granted to Employee effective 4-22-02. The one million shares of restricted stock will vest equally over the remaining eight-year term of the Agreement according to the following schedule:
Year Ending |
|
Number of Shares Vested |
|
|
12-31-02 |
|
89,923 |
|
|
12-31-03 |
|
130,011 |
|
|
12-31-04 |
|
130,011 |
|
|
12-31-05 |
|
130,011 |
|
|
12-31-06 |
|
130,011 |
|
|
12-31-07 |
|
130,011 |
|
|
12-31-08 |
|
130,011 |
|
|
12-31-09 |
|
130,011 |
|
|
All Restricted Stock granted as detailed in 4 (iv) may be deferred in the Companys Deferred Compensation Plan at the election of the Employee but shall not be subject to the Company match as otherwise defined in the Deferred Compensation Plan.
All Restricted Stock as detailed in 4 (iv) above shall vest immediately upon any change in control of the Company. Change in control shall mean the first to occur of any of the following events:
(a) Any person (as that term is used in Section 13 and 14 (d) (2) of the Securities Exchange Act of 1934 (Exchange Act)) becomes the beneficial owner (as that term is used in Section 13 (d) of the Exchange Act), directly or indirectly, of 50% or more of the Companys capital stock entitled to vote in the election of directors;
(b) During any period of not more than two consecutive years, not including any period prior to the adoption of this Amendment, individuals who at the beginning of such period constitute the board of directors of the Company, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c), (d) or (e) of this section) whose election by the board of directors or nomination for election by the Companys stockholders was approved by a vote of at least three-fourths (3/4ths) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;
(c) The shareholders of the Company approve any consolidation or merger of the Company, other than a consolidation or merger of the Company in which the holders of the common stock of the Company immediately prior to the consolidation or merger hold more than 50% of the common stock of the surviving corporation immediately after the consolidation or merger;
(d) The shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or
(e) The shareholders of the Company approve the sale or transfer of all or substantially all of the assets of the Company to parties that are not within a controlled group of corporations (as defined in Code Section 1563) in which the Company is a member.
If any vesting of Restricted Stock in accordance with this Agreement results in the imposition of federal and/or state income taxes against Employee, then Company shall upon Employees request loan Employee funds sufficient to discharge the federal and or state income tax liability when due which arises solely from the vesting of the applicable portion of the Restricted Stock. Employee shall be solely responsible for the payment of any federal and state income taxes which are assessed as a result of Employees sale of any Restricted Stock. Any loan made by Company to Employee under the provisions of this paragraph shall bear interest at a variable rate equal to the prime rate of interest as published in the Wall Street Journal from time to time during the term of the loan and the principal balance of such loan together with accrued interest thereon shall be due and payable in full on the fifth (5th) anniversary date of the making of the loan by Company to Employee. Any such loan may be prepaid at any time by Employee without penalty.
3. Section 9(d) is amended such that the following is added:
In the event of the Employees death or disability (to the extent he cannot provide services to Company as chief executive officer on a continuing basis), the Restricted Stock grant as detailed in 4 (iii) and 4 (v) will immediately vest and be awarded to Employees estate. If Employees employment is terminated for any reason, all unvested Restricted Stock granted to Employee and as detailed in 4 (iv) above and Restricted Stock previously granted as detailed in 4 (iii) of the Ninth Amendment to Employees Employment Agreement dated October 1, 2000 shall vest immediately upon such termination.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Tenth Amendment as of the date first above written.
COMPANY |
|
|
KENNEDY-WILSON, Inc. a Delaware corporation |
|
/s/ Kent Y. Mouton |
/s/ James C. Ozello, Acting Secretary |
|
Chairman, Compensation |
Compensation Committee |
|
Committee |
|
|
|
EMPLOYEE |
|
/s/ Freeman Lyle |
/s/ William J. McMorrow, Chairman |
|
Senior Managing Director, and Chief Financial Officer |
Exhibit 10.42
ELEVENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Eleventh Amendment to Employment Agreement (the Eleventh Amendment) is made and entered into as of October 1, 2003, by and between KENNEDY-WILSON, INC., a Delaware corporation (the Company), and WILLIAM J. McMORROW, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended January 1, 1993, January 1, 1994, March 31, 1995, January 1, 1996, May 19, 1997, August 20, 1998, August 9, 1999, January 3, 2000, October 1, 2000, and April 22, 2002 (collectively, the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified as set forth below.
AMENDMENT TO AGREEMENT
NOW, THEREFORE , for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of October 1, 2003:
1. Section 4 (i) of the Employment Agreement is amended such that the annual salary of $400,000 is deleted and the annual salary of $800,000 is inserted in lieu thereof:
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF , the undersigned have executed this Eleventh Amendment as of the date first above written.
COMPANY |
|
|
KENNEDY-WILSON, Inc. a Delaware corporation |
|
Kent Y. Mouton |
/s/ James C. Ozello, Acting Secretary |
|
/s/ Chairman, Compensation |
Compensation Committee |
|
Committee |
|
|
|
EMPLOYEE |
|
|
/s/ William J. McMorrow, Chairman |
|
/s/ Freeman Lyle |
|
|
Senior Managing Director, and Chief Financial Office |
Exhibit 10.43
TWELFTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Twelfth Amendment to Employment Agreement (the Twelfth Amendment) is made and entered into as of April 21, 2004, by and between KENNEDY-WILSON, INC., a Delaware corporation (the Company), and WILLIAM J. McMORROW, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended January 1, 1993, January 1, 1994, March 31, 1995, January 1, 1996, May 19, 1997, August 20, 1998, August 9, 1999, January 3, 2000, October 1, 2000, April 22, 2002 and October 1, 2003 (collectively, the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified as set forth below.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of April 21, 2004:
1. Section 2 (a) is amended such that the Term of the Agreement is extended until December 31, 2014. Therefore, the termination date of December 31, 2009 is deleted and the termination date of December 31, 2014 is inserted in lieu thereof.
2. Section 4 (v.) of the Employment Agreement is added as follows:
Section 4 (v.)
a. Entrance Fee and monthly dues (commencing May 1, 2004) for membership in Tokyo Golf Club, Japan;
Note: If Tokyo Golf Club will not allow membership fee and monthly dues to be paid directly by Company, then Company will reimburse Employee on a tax equalized and tax neutral basis.
b. Admission Fee and monthly dues for membership in LA Country Club, Los Angeles;
Note: If LA Country Club will not allow membership fee and monthly dues to be paid directly by Company, then Company will reimburse Employee on a tax equalized and tax neutral basis.
c. Annual premium payments of $250,000 each to be made January 2005 and January 2006 for variable annuity life insurance policy underwritten by Mass Mutual. Reimbursement to Employee of $250,000 premium payment Employee made January 2004.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Eleventh Amendment as of the date first above written.
COMPANY |
|
|
KENNEDY-WILSON, Inc. a Delaware corporation |
|
/s/ Kent Y. Mouton |
/s/ James C. Ozello, Acting Secretary |
|
Chairman, Compensation |
Compensation Committee |
|
Committee |
|
|
|
EMPLOYEE |
|
/s/ Freeman Lyle |
/s/ William J. McMorrow, Chairman |
|
Senior Managing Director, and Chief Financial Officer |
Exhibit 10.44
THIRTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Thirteenth Amendment to Employment Agreement (the Thirteenth Amendment) is made and entered into as of January 1, 2008, by and between KENNEDY-WILSON, INC., a Delaware corporation (the Company), and WILLIAM J. McMORROW, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended January 1, 1993, January 1, 1994, March 31, 1995, January 1, 1996, May 19, 1997, August 20, 1998, August 9, 1999, January 3, 2000, October 1, 2000, April 22, 2002, October 1, 2003, and April 21, 2004 (collectively, the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified as set forth below.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2008:
1. Section 4 (i) of the Employment Agreement is amended such that the annual salary of $800,000 is deleted and the annual salary of $950,000 is inserted in lieu thereof:
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Thirteenth Amendment as of the date first above written.
COMPANY |
|
|
KENNEDY-WILSON, Inc. a Delaware corporation |
|
/s/ Kent Y. Mouton |
/s/ James C. Ozello, Acting Secretary |
|
Chairman, Compensation |
Compensation Committee |
|
Committee |
|
|
|
EMPLOYEE |
|
|
/s/ William J. McMorrow, Chairman |
|
|
Exhibit 10.45
FOURTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Fourteenth Amendment to Employment Agreement (the Fourteenth Amendment) is made and entered into as of February 1, 2009, by and between KENNEDY-WILSON, INC., a Delaware corporation (the Company), and William J. McMorrow, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of August 14, 1992, as amended January 1, 1993, January 1, 1994, March 31, 1995, January 1, 1996, May 19, 1997, August 20, 1998, August 9, 1999, January 3, 2000, October 1, 2000, April 22, 2002, October 1, 2003, April 21, 2004, and January 1, 2008 (collectively, the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified as set forth below.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of February 1, 2009:
1. Section 2 (a) is amended such that the Term of the Agreement is extended until December 31, 2019. Therefore, the termination date of December 31, 2014 is deleted and the termination date of December 31, 2019 is inserted in lieu thereof.
2. Section 2(b) is deleted in its entirety and the following is substituted in its place:
(b) Change in Control . In the event of a Change in Control as defined below the Company shall make a one-time payment to Employee upon such Change in Control equal to two (2) times the Employees annual compensation. The annual compensation would be the arithmetic average of all compensation paid to Employee in each of the most recent three (3) year periods and would include salary and bonus as reported in the Proxy Statement or the Companys books, as applicable.
Change in Control shall mean the first to occur of any of the following events:
(i) Any person (as that term is used in Section 13 and 14 (d) (2) of the Securities Exchange Act of 1934 (Exchange Act) becomes the beneficial owner (as that term is used in Section 13 (d) of the Exchange Act), directly or indirectly, of 50% or more of the Companys capital stock entitled to vote in the election of Directors;
(ii) If at anytime after the date of this Agreement, individuals who constitute the incumbent Board of Directors cease for any reason to constitute at least a majority of the Board. For this purpose, any person who becomes a member of the Board after the date of this Agreement and who is approved by the vote of at least a majority of the persons who constitute the incumbent Board shall be considered a member of the incumbent Board, but any person whose election as a director occurs as the result of an actual or threatened election contest, or actual or threatened solicitation of proxies or consents by or on behalf of any person or entity shall not be considered a member of the incumbent Board;
(iii) The shareholders of the Company approve any consolidation or merger of the Company, other than a consolidation or merger of the Company in which the holders of the common stock of the Company immediately prior to the consolidation or merger hold more than 50% of the common stock of the surviving corporation immediately after the consolidation or merger;
(iv) The shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or
(v) The shareholders of the Company approve the sale or transfer of all or substantially all of the assets of the Company to parties that are not within a controlled group of corporations (as defined in Code Section 1563) in which the Company is a member.
3. Section g is deleted in its entirety and the following is substituted in its place:
9. Termination .
(a) Either Company or Employee may terminate this Agreement at any time during the Term, in the event of a material breach of this Agreement by Employee or Company which is not corrected within thirty (30) days after the written notice of the breach is delivered to the other party. The written notice from Company to Employee shall include a reasonably detailed description of Employees acts or omissions, which constitute cause for termination. The term cause shall mean: (i) the breach of any material provision of this Agreement; (ii) persistent misconduct, neglect or negligence in the performance of Employees duties and obligations as set forth in this Agreement; (iii) disloyal, dishonest or illegal conduct or moral turpitude of Employee; (iv) such material carelessness or inefficiency in the performance of his duties that Employee, in the reasonable discretion of Company, is deemed unfit to continue in the service of Company; and (v) the material and persistent failure of Employee to comply with the policies or directives of Company and/or failure to take direction from Company management.
(b) Employees employment with Company shall cease upon the date of his death or physical or mental disability to the extent that Employee becomes disabled for more than sixty (60) consecutive days or ninety (90) days in the aggregate in any 12-month period to perform his duties on a full-time basis. Upon termination for death or physical or mental disability, Company shall continue to pay Employee the salary and other benefits described in Section 4 for the remainder of the Term of the Agreement, together with such other
compensation as Employee may be entitled to under the provisions of Section 6, Benefits (or if such benefits cannot be provided pursuant to the terms of the applicable plans, comparable benefits due hereunder and remaining to be paid during the Term in the ordinary course, provided that the payment of fringe or comparable benefits shall be subject to the availability of such benefits following Employees termination of employment at no additional cost above what was previously paid by the Company).
(c) If the term of the Agreement is terminated by Company for cause, then Company shall continue to pay Employee the salary and other benefits described in Section 4 for the remainder of the Term of the Agreement, together with such other compensation as Employee may be entitled to under the provisions of Section 6, Benefits (or if such benefits cannot be provided pursuant to the terms of the applicable plans, comparable benefits due hereunder and remaining to be paid during the Term in the ordinary course, provided that the payment of fringe or comparable benefits shall be subject to the availability of such benefits following Employees termination of employment at no additional cost above what was previously paid by the Company).
(d) If after a Change in Control Company instructs Employee to work full-time or substantially full-time at any location not acceptable to Employee (other than the Companys main headquarters) or eliminates or materially reduces his duties as CEO I Chairman , then Employee may elect to deem such action(s) as a constructive termination by Company in which case Employees employment shall be deemed terminated, and Company shall continue to pay Employee the salary and other benefits described in Section 4 of the Agreement and Section 2 (b) hereof for the remainder of the Term of the Agreement, together with such other compensation as Employee may be entitled to under the provisions of Section 6, Benefits (or if such benefits cannot be provided pursuant to the terms of the applicable plans, comparable benefits due hereunder and remaining to be paid during the Term in the ordinary course, provided that the payment of fringe or comparable benefits shall be subject to the availability of such benefits following Employees termination of employment at no additional cost above what was previously paid by the Company).
(e) If Employee terminates this Agreement without cause, then Employee shall be entitled to receive only the compensation described in Section 4 above earned to the date of termination. Company shall not pay Employee the salary and other benefits which Employee would have been entitled to for the remainder of the term of the Agreement under Sections 4 and Section 6 above, provided that in the event Employee so resigns, Employee will receive a bonus for the year in which he resigned in the ordinary course but prorated based on the number of days the Employee was employed by the Company that year. In all other cases, Employee, or his estate, will receive all salary and bonuses due herein and remaining to be paid during the term hereof in the ordinary course.
3
(f) This Agreement may be terminated by Employee at any time, provided such termination shall have the effect set forth as follows:
(i) Termination of this Agreement pursuant to this Section 9 shall not relieve Employee of his obligations to comply with Sections 7 and 8 hereof, which provisions shall survive the termination of this Agreement. If and only if, Employee resigns due to the Companys material breach of this Agreement which is not corrected within thirty (30) days after the Employees written notice of the breach to the Company, then Employee shall be relieved of his obligations under Section 7 and 8 hereof.
3. Section 10 (a) is amended such that the addresses of notices to be delivered to the parties is changed to:
If to the Company, to: Kennedy Wilson
9601 Wilshire Boulevard, Suite 200
Beverly Hills, CA 90210
Attention: President
If to Employee, to: William 3. McMorrow
Kennedy Wilson
9601 Wilshire Boulevard, Suite 200
Beverly Hills, CA 90210
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Fourteenth Amendment as of the date first above written.
COMPANY |
|
|
KENNEDY-WILSON, Inc. a Delaware corporation |
|
|
/s/ James C. Ozello, Acting Secretary |
|
/s/ Kent Y. Mouton |
Compensation Committee |
|
Chairman, Compensation |
|
|
Committee |
|
|
|
EMPLOYEE |
|
|
/s/ William J. McMorrow, Chairman |
|
|
4
Exhibit 10.46
This Second Amendment to Employment Agreement (the Second Amendment) is made and entered into by and between KENNEDY-WILSON, INC., a Delaware corporation (the Company), and Mary L. Ricks, an individual (Employee). This amendment will become effective at the times set forth below, including the time at which KW Merger Sub Corp. (Merger Sub), a subsidiary of Prospect Acquisition Corp. (PAX), is merged into the Company (the Effective Time).
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement shall be modified as set forth below and that, except as modified, the Agreement shall remain in full force and effect.
WHEREAS , Company and Employee have agreed that the modifications set forth below that are effective as of the Effective Time shall be conditioned upon the consummation of the merger of PAX into the Company.
NOW, THEREFORE , for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, as follows:
1. Section 3 (b) is deleted immediately before the Effective Time.
2. Section 11(c) is amended as of the Effective Time to read as follows:
(c) If the Employee is terminated by Company prior to the end of the Term without cause, then Company shall continue to pay Employee the basic salary described in Section 5(a) for the remainder of the Term of the Agreement on the Companys ordinary payroll dates applicable to similarly situated employees of the Company, together with such other employee benefits (other than continued participation under the Companys Section 401(k) plan) as Employee may be entitled to under the provisions of Section 6 (or if such benefits cannot be provided to Employee pursuant to the terms of the applicable plans, comparable benefits, provided, however, that the provision of comparable benefits shall be made following Employees termination of employment only if and to the extent that such benefits may be provided at no additional cost to the Company above what was previously paid by the Company). Notwithstanding Section 2, if Company instructs Employee to work full-time or substantially full-time at any location not acceptable to Employee (other than the Companys main headquarters) that is more than 50 miles from Employees then principal place of work and more than 50 miles from Employees then principal residence, or eliminates or materially reduces her duties as a senior executive level manager and supervisor of projects, personnel and budgets, then Employee may elect to deem such action(s) a constructive termination by Company and resign her employment, provided that (i) such
1
resignation occurs within one year of such action(s); (ii) Employee provides written notice to the Company of such action(s) within 90 days thereof; and (iii) the Company fails to cure the action(s) constituting such constructive termination within 30 days of receipt of the notice. In the event of such a resignation, Company shall continue to pay or provide the compensation and benefits described in this Section 11(c) for the remainder of the Term and Employees employment shall be terminated.
3. The old Section 12 captioned Miscellaneous shall be renumbered as Section 17.
4. A new Section 12 is added, effective as of September 4, 2009:
12. October 15, 2009 Bonus Payments.
The Company shall pay Employee a cash bonus of $2 million on October 15, 2009 if Employee is employed by Company through October 15, 2009. The bonus shall be promptly repaid if either (a) the merger of Merger Sub into Company does not occur by November 15, 2009 or (b) Employee has not remained employed with the Company through the Effective Time. The requirement of continued employment in the preceding two sentences shall not apply, however, if employment has terminated on account of death or disability.
5. A new Section 13 is added, effective as of the Effective Time:
13. April 1, 2010 and January 1, 2011 Bonus Payments.
(a) Subject to the conditions set forth in this Section 13, Company shall pay Employee a cash bonus of $1 million on April 1, 2010, and a cash bonus of $1 million on January 1, 2011.
(b) The bonus payable April 1, 2010 is conditioned on (1) approval by the PAX Compensation Committee of the issuance of the bonus as a Performance Unit Award under the Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan (the Plan), (2) approval of the Plan by the shareholders of PAX (3) Employees continued employment through April 1, 2010, (4) satisfaction as of March 31, 2010 of the Performance Target, and (5) reapproval of the Performance Target by the PAX Compensation Committee subsequent to the Effective Time. The Performance Target is that the Companys assets under management be at least $3 billion. For this purpose, assets under management shall equal the value of assets under management by the Company, as reflected in the footnotes to the Companys financial statements, plus the cost of properties subject to property management contracts with the Company (not taking into account any properties whose value is reflected in the footnotes). In the event that the Performance Target is not met as of March 31, 2010, the bonus otherwise due March 31, 2010 shall, nevertheless, be paid on July 1, 2010, October 1, 2010, or January 1, 2011, respectively, if the Performance Target is satisfied as of the earliest of June 30,
2
2010, September 30, 2010, or December 31, 2010, respectively, and Employee has remained employed through the date on which the Performance Target is met.
(c) The bonus payable January 1, 2011 is conditioned on (1) approval by the PAX Compensation Committee of the issuance of the bonus as a Performance Unit Award under the Plan, (2) approval of the Plan by the shareholders of PAX (3) Employees continued employment through January 1, 2011, (4) satisfaction of the Performance Target as of December 31, 2010, and (5) reapproval of the Performance Target by the PAX Compensation Committee subsequent to the Effective Time.
(d) Notwithstanding the preceding subsections of this section, the bonuses described herein shall be payable even if Employee is not employed through the dates set forth above, provided that the other conditions to the payment of the bonus are met and Employee terminates employment under conditions that would entitle her under Section 11(c) to payment of her salary through the remainder of the Term.
6. A new Section 14 is added, effective as of the Effective Time:
14. Restricted Shares.
(a) Immediately after the Effective Time and subject to the conditions set forth herein, Employee shall be issued 900,000 restricted shares of common stock of PAX. The restricted shares are conditioned on (1) approval by the PAX Compensation Committee of the issuance and terms of the restricted shares under the Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan (the Plan), subject to the conditions set forth below in (b) and (c), (2) approval of the Plan by the shareholders of PAX, (3) Employees continued employment through the dates set forth below in (b), (4) satisfaction of the Performance Target, and (5) reapproval of the Performance Target by the PAX Compensation Committee subsequent to the Effective Time.
(b) 180,000 restricted shares shall become vested on each of the first through fifth anniversaries of the Effective Time, provided that, with respect to the shares vesting on the first anniversary, the Performance Target is met as of September 30, 2010; with respect to the shares vesting on the second anniversary, the Performance Target is met as of September 30, 2011; and with respect to the shares vesting on the third through fifth anniversaries, the Performance Target is met as of September 30, 2012 with respect to each tranche of 180,000 restricted stares, vesting shall be conditioned upon Employees continued employment through each of the first, second, third, fourth and fifth anniversaries of the Effective Time, respectively.
(c) Notwithstanding subsections (a) and (b), if, prior to the Employees fully satisfying the above 3-year vesting requirement, Employees employment with the Company shall be terminated by the Company without cause or by the Employee for Good Reason, in any such event, the requirement of continued employment shall no longer apply, so that, assuming the Performance
3
Target is met as of the relevant date, the restricted shares that have not been forfeited as of such termination date shall thereupon become fully vested, no longer subject to restrictions, and transferable. As used in this subsection, Good Reason shall mean the voluntary termination by Employee of her employment with the Company within six months of the Companys (A) instructing the Employee to work (or provide services) full-time or substantially full-time at any location not acceptable to the Employee (other than the employers main headquarters) that is more than 50 miles from Employees principal place of work and more than 50 miles from Employees principal residence, (B) eliminating or materially reducing the Employees duties for the Company, or (C) materially reducing the Employees base pay (or compensation). In addition, all unvested restricted shares that have not been forfeited in connection with a termination of employment shall become immediately vested in the event of a Change in Control, as defined in the Plan.
7. A new section 15 is added, effective as of the Effective Time:
15. Section 280G.
(a) Notwithstanding anything in this Employment Agreement to the contrary, in the event that the Companys independent public accountants (the Accountants) shall determine that receipt of all payments or benefits made or provided by the Company or its affiliated companies in the nature of compensation to or for Employees benefit (each, a Payment), whether payable or to be provided pursuant to this Employment Agreement or otherwise, and including, without limitation, the post-termination payments and benefits provided pursuant to Section 11(c) and the restricted shares provided pursuant to Section 14, would subject Employee to the excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the Code), the Payments shall be reduced to the Reduced Amount (as defined below).
(b) If the Accountants determine that aggregate Payments should be reduced to the Reduced Amount, the Company shall promptly give Employee notice to that effect and a copy of the detailed calculation thereof. Any reduction of the Payments shall be made in such a manner as will provide Employee with the greatest Net After-Tax Receipt, as defined below.
(c) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accountants hereunder, it is possible that Payments will have been made by the Company to or for the benefit of Employee which should not have been so made (Overpayment), or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of Employee could have been so paid or distributed (Underpayment), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accountants, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or Employee which the Accountants believe has a high probability of success, determine that an Overpayment has been made, Employee shall pay any such Overpayment to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no amount
4
shall be payable by Employee to the Company if and to the extent such payment would not either reduce the amount on which Employee is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accountants determine that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of Employee together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.
(d) The following terms have the meanings set forth below:
(i) Reduced Amount shall mean the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999 of the Code.
(ii) Net After-Tax Receipt shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of all Payments net of all taxes imposed on Employee with respect thereto under the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Employees taxable income for the immediately preceding taxable year, or such other rate(s) as Employee certifies, in Employees sole discretion, as likely to apply to him in the relevant tax year(s).
(e) Subject to the last sentence of this subsection (e), all determinations made by the Accountants under this Section 15 shall be conclusive and binding upon the Company and Employee for all purposes. All fees and expenses of the Accountants shall be borne solely by the Company. For purposes of making the calculations required by this Section 15, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Employee will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make determinations under this Section 15. In the event that Employee or Company disagrees with the determination of the Accountants under this Section 15, either can have such determination reviewed through the Alternative Dispute Resolution mechanism set forth in Section 12. If such mechanism is used, review shall be de novo and no presumption of correctness shall attach to the Accountants determination.
8. A new Section 16 is added, effective as of January 1, 2009.
16. Section 409A.
5
6
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF , the undersigned have executed this Second Amendment on the dates written below.
COMPANY: |
|
|
|
KENNEDY WILSON, Inc. |
|
|
|
a Delaware corporation |
|
|
|
|
|
|
|
By: |
|
|
|
Name: William J. McMorrow |
|
Date |
|
Title: Chairman / Chief Executive Officer |
|
|
|
|
|
|
|
EMPLOYEE: |
|
|
|
|
|
|
|
|
|
|
|
Mary L. Ricks |
|
Date |
|
7
Exhibit 10.47
EMPLOYMENT AGREEMENT
This Employment Agreement (the Agreement) is made and entered into as of February 1, 2009 by and between KENNEDY WILSON, INC., a Delaware corporation (the Company), and Mary L. Ricks (Employee), with reference to the following facts and circumstances:
RECITALS:
A: Company is diversified real estate marketing and investment firm whose businesses include the management, marketing, development and acquisition of real estate and real estate related assets, such as secured promissory notes, real estate brokerage and marketing programs for all types of properties and financial instruments. Employee is experienced in real estate transactions and financial instruments.
B. Company desires to employ Employee and Employee desires to be employed by Company for the purposes and on the terms and conditions set forth in this Agreement.
C. This Agreement replaces and supersedes in their entirety any and all prior agreements, express or implied, written or oral, performed or unperformed, pertaining to the employment of Employee and the compensation to be paid to her therefore, and all such prior agreements and understandings are hereby terminated and shall be of no further force or effect.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Employee agree as follows:
1. Employment . Company hereby employs Employee and Employee hereby accepts employment to perform the duties described in Section 2 below, on the terms, conditions and covenants set forth in this Agreement.
2. Services Provided to the Company . Subject to the policy guidelines and directives of the Company which are provided to her by Company from time to time during the term of this Agreement, Employee shall serve as President of and be responsible for the operation of Kennedy Wilson Investment Sales Group, and to advance the business and welfare of Kennedy Wilson as determined by the Company from time to time, and have such powers and duties as may from time to time be prescribed by the Chairman and Chief Executive Officer of the Company, which duties may, in the Companys reasonable discretion, be changed in any legal manner from time to time. Employee shall have no authority to bind or obligate Company to the
purchase or sale of any real property, or to any other financial commitment, including without limitation the borrowing of any monies on a secured or unsecured basis, without obtaining the prior authorization of Company as to the specific transaction. Employees duties also shall include such other matters or responsibilities as Company and Employee may jointly agree upon from time to time during the term of this Agreement.
Employees employment is on a full-time and best efforts basis meaning that during the term of this Agreement, Employee shall not accept any full or part-time employment, including without limitation as an Independent Consultant, after working hours or otherwise, without the prior written consent of Company, which may be given, withheld or conditioned in Companys sole and absolute discretion. Employee shall devote her full energies, interests, abilities, and productive time to the performance of her duties and responsibilities under this Agreement. During the term of this Agreement, Employee shall not, directly or indirectly, whether as a partner, employee, creditor, shareholder or otherwise, promote, participate or engage in any activity or other business competitive with Companys businesses. Notwithstanding the foregoing, Company acknowledges that Employee has made and will continue to make personal investments that will require Employees periodic attention. Employee may participate in such personal investments to the full extent desired by Employee so long as such personal investment activity does not detract from Employees ability to devote her full energies and productive interests to the performance of her duties and responsibilities under this Agreement.
3. Term of Employment .
(a) Employee shall be employed by the Company pursuant to this Agreement for a term (the Term) beginning on February 1, 2009, and continuing through to, and terminating at the close of business on January 31, 2014 (unless earlier terminated pursuant to Section 11).
(b) Change in Control . In the event of a Change in Control as defined below the Company shall make a one-time payment to Employee upon such Change in Control equal to two (2) times the Employees annual compensation. The annual compensation would be the arithmetic average of all compensation paid to Employee in each of the most recent three (3) year periods and would include salary and bonus as reported in the Proxy Statement or the Companys books, as applicable.
Change in Control shall mean the first to occur of any of the following events:
(i) Any person (as that tem is used Section 13 and 14 (d) (2) of the Securities Exchange Act of 1934 (Exchange Act) becomes the beneficial owner (as that term is used in Section 13 (d) of the Exchange Act), directly or indirectly, of 5Q% or more of the Companys capital stock entitled to vote in the election of Directors;
(ii) If at anytime after the date of this Agreement, individuals who constitute the incumbent Board of Directors cease for any reason to constitute at least a majority of the Board. For this purpose, any person who becomes a member of the Board after the date of this Agreement and who is approved by the vote of at least a majority of the persons who constitute the incumbent Board shall be considered a member of the incumbent Board, but any person whose election as a director occurs as the result of an actual or threatened election contest, or actual or threatened solicitation of proxies or consents by or on behalf of any person or entity shall not be considered a member of the incumbent Board;
(iii) The shareholders of the Company approve any consolidation or merger of the Company, other than a consolidation or merger of the Company in which the holders of the common stock of the Company immediately prior to the consolidation or merger hold more than 50% of the common stock of the surviving corporation immediately after the consolidation or merger;
(iv) The shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or
(v) The shareholders of the Company approve the sale or transfer of all or substantially all of the assets of the Company to parties that are not within a controlled group of corporations (as defined in Code Section 1563) in which the Company is a member.
4. Commitment to the Company .
(a) During the Term, Employee shall not be involved, individually or as an Employee, principal, officer, general partner, director or shareholder, in the marketing and! or sale of any real estate properties or any real estate activities that are not proprietary to Kennedy Wilson, without first obtaining the consent and approval of a majority of the Companys Board of Directors. The limitation contained in this Section 4 shall not apply, however, to the ownership of not more than one percent (1%) of the outstanding shares of any class of securities of a publicly-held issuer subject to the public reporting requirements of the Securities and Exchange Act of 1934, as amended, or any limited partner interest in a limited partnership or similar passive investment interest so long as the nature of such investment prevents, pursuant to applicable law, Employees control of the management of the issuer of such investment interests. For purposes of this Section 4, Employee shall be deemed the owner of any interests held by Employee, Employees spouse, or any other un-emancipated minor member of the Employees family.
(b) Employee shall, at all times during the Term, strictly adhere to and comply with all of Companys policies, rules and procedures as they currently exist and
as they may be changed by the Company. Employee agrees that to the best of her ability and experience she will at all times loyally and conscientiously perform all of the duties and obligations required of him expressly or by implication by the terms of this Agreement.
5. Compensation.
(a) Salary : Company shall pay a basic salary to Employee at the rate of $50,000.00 per month ($600,000.00 annualized) for the term of this Agreement, payable in bi-monthly equal installments, $50,000.00 per month total, subject to such deductions and withholdings as Company may from time to time be required to make pursuant to applicable law, governmental regulation or order.
(b) Discretionary Bonus : In addition to the base salary provided for above, at the discretion of the Company, Employee may receive with respect to each fiscal year (or portion thereof) during the term of this Agreement, a discretionary bonus in an amount determined in the sole and absolute discretion of the Compensation Committee of the Board of Directors.
Employee acknowledges that Company has not provided Employee with any projections or estimates of a Discretionary Bonus that might be received by Employee under the terms of this Agreement as an inducement to Employee to accept employment with Company.
6. Other Benefits . During the Term of her employment and subject to applicable eligibility requirements of position, tenure, salary, age, health and other qualifications as may be set forth in the Companys Employment Handbook, or pursuant to the terms of the applicable benefit provider, Employee shall participate in such benefit plans or programs as are available to the Companys other employees, including without limitation medical, dental, disability, life insurance, and, 401K Plan.
Employee will be eligible to invest in the principal investments at an investment percentage consistent with others who have a similar level of responsibility at the Company.
7. Business Expenses . Employee will be required to incur ordinary and necessary travel and other business expenses in connection with the performance of her duties hereunder, and Employee shall be entitled to reimbursement from Company for such expenses in accordance with Companys policies and procedures.
8. Non-Competition . For all periods that Employee is employed pursuant to this Agreement and for a period of six (6) months thereafter, unless Company has
terminated Employee without cause, or if Company has not renewed Employees employment in Companys sole and absolute discretion, Employee shall not directly or indirectly:
(a) Engage in any business in the State of California which engages in the same businesses or similar businesses engaged in by the Company during the Term, without the consent of the Board of Directors of the Company, or which would result in using or revealing any trade secrets or confidential information of the Company, including but not limited to activities, whether direct or indirect, as proprietor, partner, shareholder, principal, agent, or employee; and
(b) In any manner induce, attempt to induce, or assist others to induce or attempt to induce any employee, partner, joint venturer, independent contractor, agent or customer of the Company to terminate its, his or her association with the Company, or do anything to interfere with the relationship between the Company and such person or entity or other persons or entities dealing with the Company.
(c) The parties hereto intend that the covenants and agreements contained in this Section 8 shall be deemed to be a series of separate covenants and agreements, one for each and every country, county, state, city and other jurisdiction in the world with respect to which the Companys business has been or is hereafter carried on. If any of the foregoing is determined by any court of competent jurisdiction to be invalid or unenforceable by reason of such agreement extending for too great a period of time or over too great a geographical area, or by reason of its being too extensive in any other respect, such agreement shall be interpreted to extend only over the maximum period of time and geographical area and to the maximum extend enforceable, all as determined by such court in such action. Any determination that any provision hereof is invalid or unenforceable, in whole or in part, shall have no effect on the validity or enforceability of any remaining provision hereof.
(d) Notwithstanding the foregoing, nothing herein shall prevent Employee, following the termination of her employment or the end of the Term, whichever is later, from being associated with any person or entity engaged in any real estate activities or matters other than real estate auction activities or other activities which constitute a primary line of business of the Company at the time of such termination. Employee represents and warrants that she is not restricted or prohibited in any way from entering into this Agreement or performing services hereunder at any time, whether by non-competition, covenant, or otherwise, and shall indemnify, defend and hold the Company harmless from and against any damages, claims, costs (including attorneys fees) or liabilities as a result of the incorrectness of such representation and warranty.
9. Trade Secrets . Employee has not disclosed to Company, and Employee has been advised that Company will not accept at any time during the course of Employees employment
at Company, the disclosure Of any trade secret (as that term is defined in California Civil Code Section 3426 et. Seq.) the disclosure or misappropriation of which by Employee would constitute a breach by Employee of any obligation to any third party, including any former employers. Employee represents and warrants she has informed Company of the existence of any and all agreements, including covenants not to compete, between Employee and third parties which may in any way relate to, impact, or prevent Employees employment at Company. Employee represents and warrants she has not taken any act prior to signing this Agreement that constitutes a breach of any agreement which may in any way relate to, impact, or prevent Employees employment at Company.
10. Confidential and Proprietary Information . Employee recognizes that she will occupy a position of trust with respect to business information of a confidential or proprietary nature which is the property of the Company and which has been and will be imparted to her from time to time in the course of the performance of her duties under this Agreement. All agreements, documents, studies, analyses, comparables, data, statistics, marketing materials, leads and lead lists developed or prepared by Employee or others in Companys employ during the term of this Agreement shall be and remain confidential and shall be the sole property of Company. Employee hereby acknowledges that Company develops and utilizes valuable procedures, confidential information and copyrighted materials, including but not limited to names of property owners who may wish to sell their property by auction or other means, names of potential purchasers, leads and lead lists, studies and analyses, methods of obtaining prospects, marketing and auction procedures and various brochures and other printed materials, all of which constitute a valuable part of Companys assets built up by Companys ingenuity, time, labor and expense over a period of many years and all of which constitute Company trade secrets. Employee agrees that:
(a) She shall not at any time, whether during the Term or thereafter, use, divulge or disclose directly or indirectly any confidential or proprietary information of the Companies to any person, except that she may use and disclose to other Company personnel such confidential and proprietary information in the course of the performance of her duties hereunder or when legally required to do so in connection with any pending litigation or administrative inquiry; and
(b) She shall return promptly upon the termination of this Agreement or otherwise upon the request of the Company any and all copies of any documentation or materials containing any confidential or proprietary information of the Company.
For purposes of this Agreement, the term Confidential or Proprietary Information of the Company shall include all information which is owned by the Companies and which is not at the time publicly available or generally known to persons engaged in businesses similar to that of the Company, including practices, procedures and methods and other facts relating to the business of the Companies; practices, procedures and methods and other facts related to sales, marketing, advertising, promotions, financial matters, clients, client
lists of the Company and similar information of a confidential and proprietary nature. Employee agrees that her breach of this Section 10 will cause irreparable harm to the Company. Employee agrees that the remedy at law for any breach by her of this Section 10 will be inadequate and, in addition to any other remedy available to the Company, the Company shall be entitled to injunctive relief for any actual or threatened breach of this Section 10 without proof that any actual damages have been caused by such breach, and without any need to post bond or similar security.
11. Termination .
(a) Termination . (Employment At Will) Either Company or Employee may terminate this Agreement at any time during the sixty (60) month Term, with or without cause, by delivering written notice of its election to the other. The written notice of termination for cause from Company to Employee shall include a reasonably detailed description of Employees acts or omissions, which constitute cause for termination. The term cause shall mean: (I) the breach of any provision of this Agreement; (ii) misconduct, neglect or negligence in the performance of Employees duties and obligations as set forth in this Agreement; (iii) disloyal, dishonest or illegal conduct or moral turpitude of Employee; (iv) such material carelessness or inefficiency in the performance of her duties that Employee, in the reasonable discretion of Company, is deemed unfit to continue in the service of Company; and (v) the material and persistent failure of Employee to comply with the policies or directives of Company and/or failure to take direction from Company management.
(b) Employees employment with Company shall cease upon the date of her death or physical or mental disability to the extent that Employee becomes disabled for more than thirty (30) consecutive days or sixty (60) days in the aggregate in any 12-month period to perform her duties on a full-time basis. Upon termination for physical or mental disability, Employee shall be entitled to receive the compensation described in Section 5(a)-(b) and Section 6 to the date of termination. Upon termination for death, Employee shall be entitled to receive the compensation described in Section 5(a)-(b) and Section 6 to the date of termination, and such compensation will be payable to the Mary Ricks revocable Trust dated February 7, 2000.
(c) If the term of the Agreement is terminated by Company without cause, then Company shall continue to pay Employee the salary and other benefits described in Section 5(a) for the remainder of the Term of the Agreement, together with such other compensation as Employee may be entitled to under the provisions of Section 6, Benefits (or if such benefits cannot be provided pursuant to the terms of the applicable plans, comparable benefits due hereunder and remaining to be paid during the Term in the ordinary course, provided that the payment of fringe or comparable benefits shall be subject to the availability of such benefits following Employees termination of employment at no additional cost above what was previously paid by the Company). If after a Change in Control Company instructs Employee to work full-time or substantially full-time at any location not acceptable to Employee (other
than the Companys main headquarters) or eliminates or materially reduces her duties as a senior executive level manager and supervisor of projects, personnel and budgets, then Employee may elect to deem such action(s) a constructive termination at will by Company in which case Company shall continue to pay the compensation and benefits described in this Section 11(c) and Employees employment shall be deemed terminated.
(d) Except as otherwise provided in subparagraph 11(c) above, if Employee terminates this Agreement without cause, then Employee shall be entitled to receive only the compensation described in Section 5 above earned to the date of termination. Company shall not pay Employee the salary and other benefits which Employee would have been entitled to for the remainder of the term of the Agreement under Sections 5(a)-(b) and Section 6 above.
(e) If the Term of Employees employment is terminated for cause, then Employee shall be entitled to receive only the compensation described in Section 5 above earned to the date of termination.
(f) This Agreement may be terminated by Employee at any time, provided such termination shall have the effect set forth as follows:
Termination of this Agreement pursuant to this Section 11 shall not relieve Employee of her obligations to comply with Sections 9 and 10 hereof, which provisions shall survive the termination of this Agreement. If and only if, Employee resigns due to the Companys material breach of this Agreement which is not corrected within ten (10) days after the Employees written notice of the breach to the Company, then Employee shall be relieved of her obligations under Section 10 hereof.
12. Alternative Dispute Resolution . The parties to this Agreement specifically desire an early resolution of any dispute between them, which arises out of this Agreement. It is therefore, agreed that any controversy arising out of this Agreement, whether dealing with breach, interpretation or otherwise, shall be heard by a reference (Referee) pursuant to the provisions of the applicable sections of the Code of Civil Procedure and in accordance with the provisions described below; provided, however, that if injunctive relief is sought, the complaining party may seek such relief from the California Superior Court without the use of a Referee.
(a) Enforcement of Agreement . This reference provision may be enforced by the filing of a complaint or petition or motion seeking specific enforcement. Service of such motion on the opposing party shall constitute the Claim Date for purposes of this provision.
(b) Selection of Referee . The Referee shall be a retired Judge of the Court selected by mutual agreement of the parties. If the parties cannot agree then a
Referee shall be appointed by the California Superior Court in accordance with the appropriate Section of the Code of Civil Procedure. Each party shall be entitled to only one disqualification pursuant to the appropriate Section of the Code of Civil Procedure. The parties hereby waive their right to a trial by jury and agree that their dispute shall be tried by the Referee so selected.
(c) Decisional Rules . The trial shall be conducted and the issues determined in compliance with all judicial rules and all statutory and decisional law of the Sate of California as if the matter were formally litigated in Superior Court. The Referee shall conduct and decide all pre-trial and post-trial procedures as if the matter were formally litigated in the Superior Court. All rules of evidence as set forth in the California Evidence Code; other statutory and decisional law of California State and all-relevant California County Superior Court Rules shall be applicable to any proceeding before the Referee.
(d) Discovery . The parties to this Agreement expressly waive their right to engage in any discovery with the exception of depositions and requests for the inspection, production and copying of documents. Interrogatories, requests for admissions and depositions upon written interrogatories shall not be permitted. The Referee shall be authorized to issue subpoenas requiring attendance at hearings and/or trial. All discovery permitted by this Agreement shall be completed no later than fifteen (15) days before the first hearing date established by the Referee. The Referee may extend such period in the event of a partys refusal to provide requested discovery for any reason whatsoever, including legal objections raised to such discovery or unavailability of a witness due to absence or illness. No party shall be entitled to priority in conducting discovery. Depositions may be taken by either party upon seven (7) days written notice. Request for production or inspection of documents shall be responded to within ten (10) days after service. All disputes relating to discovery shall be submitted to the Referee whose decision shall be final and binding upon the parties.
(e) Hearings and Trial . Except as set forth in this Agreement, the Referee shall determine the manner in which the proceeding is conducted including the time and place of all hearings, the order or presentation of evidence, and all other questions that arise with respect to the course of the proceeding. All proceedings and hearings conducted before the Referee, except for trial, shall be conducted without a court reporter unless one is requested by a party. The party making the request shall have the obligation to arrange and pay for the court reporter. The costs of the court reporter at the trial shall be borne equally by the parties. The trial shall be conducted without a jury on consecutive dates, as opposed to being conducted piecemeal on various dates separated by postponements or adjournments. The trial shall be conducted in a courtroom or in surroundings with formality as close to a courtroom as possible. The Referee shall set the matter for hearing within sixty (60) days after the Claim Date and try all issues of law or fact and report a statement of decision upon them, if possible, within ninety (90)
days of the Claim Date.
(f) Decision of Referee . The Referee shall be empowered to enter equitable as well as legal relief, to provide all temporary and/or provisional remedies and to enter equitable orders that will be binding upon the parties. The Referee shall issue a single judgment at the close of the proceeding that shall dispose of all of the claims of the parties that are the subject of the reference. Any decision rendered by the Referee shall be final, binding and conclusive and judgment shall be entered pursuant to the appropriate Section of the Code of Civil Procedure in any court in the State of California having jurisdiction.
(g) Attorneys Fees . The prevailing party shall be entitled to costs and reasonable attorneys fees, including without limitation costs and fees incurred upon any appeal, as awarded by the court.
(h) Appeal . The judgment entered upon the decision of the Referee shall be subject to all post-trial procedures and to appeal in the same manner as an appeal from any order or judgment in a civil action.
12. Miscellaneous .
(a) Assignment . This Agreement is for the unique personal services of Employee and may not be assigned by Employee without the express written consent of Company and its affiliates. Except as so provided, this Agreement shall be binding upon and inure to the benefit of the respective heirs, personal representatives, successors and assigns of the parties hereto,
(b) License . Employee hereby agrees to obtain / maintain any professional license in the State of California and in any other jurisdiction that may be required to do business. During any period that Employee does not have such a license in good standing, she will not be required to perform acts within a given jurisdiction for which a license is required in such jurisdiction, and Employee hereby agrees not to take any such actions for which a license is required until she has obtained the requisite license for such jurisdiction.
(c) Severability . Each provision, sub-provision or term of this Agreement is intended to be severable and shall continue in full force and effect although other provisions herein may be determined invalid or void for any reason.
(d) Attorneys Fees . Subject to Section 8 hereof, in the event suit is brought to enforce the terms of this Agreement, the prevailing party shall be entitled to costs and reasonable attorneys fees, including without limitation those costs and fees
incurred upon any appeal, as awarded by the court.
(e) Entire Agreement Amendments . This Agreement contains the entire agreement of the parties with respect to the subject matter covered hereby and may be amended, waived or terminated only by an instrument in writing signed by the parties hereto. This Agreement shall be interpreted according to its fair meaning and not for or against the party which drafted same.
(f) Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
(g) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
COMPANY: |
|
|
KENNEDY WIL ON, Inc. |
|
|
A Delaware corporation |
|
|
|
|
|
/s/ William J. McMorrow |
|
|
Title: |
Chairman/Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Mary L. Ricks |
|
|
Exhibit 10.48
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the Amendment) is made and entered into as of June 1, 2009 by and between KENNEDY WILSON, INC., a Delaware corporation (the Company), and Mary L. Ricks (Employee), with reference to the following facts and circumstances:
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of February 1, 2009 (the Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Job Title.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, as follows:
1.Section 2 of the Agreement is modified such that the title of President of Kennedy Wilson Investment Sales Group is deleted in its entirety and the following is added in lieu thereof Executive Vice Chairman, Kennedy Wilson International and Co-CEO, KW Commercial Investment Group.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.
COMPANY: |
|
KENNEDY W SON, Inc. |
|
|
|
|
|
/s/William McMorrow |
|
Title: Chairman Chief Executive Officer |
|
|
|
EMPLOYEE |
|
/s/ Mary L. Ricks |
|
Exhibit 10.49
This First Amendment to Employment Agreement (the First Amendment) is made and entered into by and between KENNEDY-WILSON, INC., a Delaware corporation (the Company), and Donald J. Herrema, an individual (Employee). This amendment will become effective at the times set forth below, including the time at which KW Merger Sub Corp., a subsidiary of Prospect Acquisition Corp. (PAX), is merged into the Company (the Effective Time).
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement shall be modified as set forth below and that, except as modified, the Agreement shall remain in full force and effect.
WHEREAS, Company and Employee have agreed that the modifications set forth below that are effective as of the Effective Time shall be conditioned upon the consummation of the merger of PAX into the Company.
NOW, THEREFORE , for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, as follows:
1. Section 3 is amended as of the Effective Time to read as follows:
(a) Employee shall be employed by the Company pursuant to this Agreement for a term (the Term) beginning on June 15, 2009, and continuing through to, and terminating at the close of business on January 31, 2014 (unless earlier terminated pursuant to Section 11).
2. Section 5(c) is deleted effective as of the Effective Time.
3. Section 11(a) is deleted effective as of the Effective Time by deleting the words eighteen (18) month.
4. Section 11(c) is amended as of the Effective Time to read as follows:
If the Employee is terminated by Company prior to the end of the Term without cause, then Company shall continue to pay Employee the basic salary described in Section 5(a) for the remainder of the Term of the Agreement on the Companys ordinary payroll dates applicable to similarly situated employees of the Company, together with such other employee benefits (other than continued participation under the Companys Section 401(k) plan) as Employee may be entitled to under the provisions of Section 6 (or if such benefits cannot be provided to Employee pursuant to the terms of the applicable plans, comparable benefits, provided, however, that the provision of comparable benefits shall be made following Employees termination of employment only if and to the extent that such
1
benefits may be provided at no additional cost to the Company above what was previously paid by the Company). Notwithstanding Section 2, if Company instructs Employee to work full-time or substantially full-time at any location not acceptable to Employee (other than the Companys main headquarters) that is more than 50 miles from Employees then principal place of work and more than 50 miles from Employees then principal residence, or eliminates or materially reduces his duties as a senior executive level manager and supervisor of projects, personnel and budgets, then Employee may elect to deem such action(s) a constructive termination by Company and resign his employment, provided that (i) such resignation occurs within one year of such action(s); (ii) Employee provides written notice to the Company of such action(s) within 90 days thereof; and (iii) the Company fails to cure the action(s) constituting such constructive termination within 30 days of receipt of the notice. In the event of such a resignation, Company shall continue to pay or provide the compensation and benefits described in this Section 11(c) for the remainder of the Term and Employees employment shall be terminated.
5. The old Section 12 captioned Miscellaneous shall be renumbered as Section 15.
6. A new Section 12 is added, effective as of the Effective Time:
15. Restricted Shares.
(a) Immediately after the Effective Time and subject to the conditions set forth herein, Employee shall be issued 900,000 restricted shares of common stock of PAX. The restricted shares are conditioned on (1) approval by the PAX Compensation Committee of the issuance and terms of the restricted shares under the Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan (the Plan), subject to the conditions set forth below in (b) and (c), (2) approval of the Plan by the shareholders of PAX, (3) Employees continued employment through the dates set forth below in (b), (4) satisfaction of the Performance Target and (5) reapproval of the Performance Target by the PAX Compensation Committee subsequent to the Effective Time. The Performance Target is that the Companys assets under management by the Company be at least $3 billion. For this purpose, assets under management shall equal the value of assets under management, as reflected in the footnotes to the Companys financial statements, plus the cost of properties subject to property management contracts with the Company (not taking into account any properties whose value is reflected in the footnotes). The restricted shares shall be subject to all terms and conditions of the Plan.
(b) 180,000 restricted shares shall become vested on each of the first through fifth anniversaries of the Effective Time, provided that, with respect to the shares vesting on the first anniversary, the Performance Target is met as of September 30, 2010; with respect to the shares vesting on the second anniversary, the Performance Target is met as of September 30, 2011; and with respect to the shares vesting on the third through fifth anniversaries, the Performance Target is met as of September 30, 2012 with respect to each tranche of 180,000 restricted stares, vesting shall be conditioned upon Employees
2
continued employment through each of the first, second, third, fourth and fifth anniversaries of the Effective Time, respectively.
(c) Notwithstanding subsections (a) and (b), if, prior to the Employees fully satisfying the above 3-year vesting requirement, Employees employment with the Company shall be terminated by the Company without cause or by Employee for Good Reason, in any such event, the requirement of continued employment shall no longer apply, so that, assuming the Performance Target is met as of the relevant date(s), the restricted shares that have not been forfeited as of such termination date shall thereupon become fully vested, no longer subject to restrictions, and transferable. As used in this subsection, Good Reason shall mean the voluntary termination by Employee of his employment with the Company within six months of the Companys (A) instructing the Employee to work (or provide services) full-time or substantially full-time at any location not acceptable to the Employee (other than the employers main headquarters) that is more than 50 miles from Employees principal place of work and more than 50 miles from Employees principal residence, (B) eliminating or materially reducing the Employees duties for the Company, or (C) materially reducing the Employees base pay (or compensation). In addition, all unvested restricted shares that have not been forfeited in connection with a termination of employment shall become immediately vested in the event of a Change in Control, as defined in the Plan.
7. A new Section 13 is added, effective as of the Effective Time.
13. Section 280G.
(a) Notwithstanding anything in this Employment Agreement to the contrary, in the event that the Companys independent public accountants (the Accountants) shall determine that receipt of all payments or benefits made or provided by the Company or its affiliated companies in the nature of compensation to or for Employees benefit (each, a Payment), whether payable or to be provided pursuant to this Employment Agreement or otherwise, and including, without limitation, the post-termination payments and benefits provided pursuant to Section 11(c) and the restricted shares provided pursuant to Section 12, would subject Employee to the excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the Code), the Payments shall be reduced to the Reduced Amount (as defined below).
(b) If the Accountants determine that aggregate Payments should be reduced to the Reduced Amount, the Company shall promptly give Employee notice to that effect and a copy of the detailed calculation thereof. Any reduction of the Payments shall be made in such a manner as will provide Employee with the greatest Net After-Tax Receipt, as defined below.
(c) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accountants hereunder, it is possible that Payments will have been made by the Company to or for the benefit of Employee which should not have been so made (Overpayment), or that additional amounts which will have not been paid or distributed by the
3
Company to or for the benefit of Employee could have been so paid or distributed (Underpayment), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accountants, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or Employee which the Accountants believe has a high probability of success, determine that an Overpayment has been made, Employee shall pay any such Overpayment to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by Employee to the Company if and to the extent such payment would not either reduce the amount on which Employee is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accountants determine that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of Employee together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.
(d) The following terms have the meanings set forth below:
(i) Reduced Amount shall mean the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999 of the Code.
(ii) Net After-Tax Receipt shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of all Payments net of all taxes imposed on Employee with respect thereto under the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Employees taxable income for the immediately preceding taxable year, or such other rate(s) as Employee certifies, in Employees sole discretion, as likely to apply to him in the relevant tax year(s).
(e) Subject to the last sentence of this subsection (e), all determinations made by the Accountants under this Section 13 shall be conclusive and binding upon the Company and Employee for all purposes. All fees and expenses of the Accountants shall be borne solely by the Company. For purposes of making the calculations required by this Section 13, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Employee will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make determinations under this Section 13. In the event that Employee or Company disagrees with the determination of the Accountants under this Section 13, either can have such determination reviewed through the Alternative Dispute Resolution mechanism set forth in Section 12. If such mechanism is used, review shall be de novo and no presumption of correctness shall attach to the Accountants determination.
8. A new Section 14 is added, effective as of January 1, 2009:
14. Section 409A.
4
5
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF , the undersigned have executed this Amendment on the dates written below.
COMPANY: |
|
|
|
KENNEDY WILSON, Inc. |
|
|
|
a Delaware corporation |
|
|
|
|
|
|
|
By: |
|
|
|
Name: William J. McMorrow |
|
Date |
|
Title: Chairman / Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
EMPLOYEE: |
|
|
|
|
|
|
|
|
|
|
|
Donald J. Herrema |
|
Date |
|
6
Exhibit 10.50
EMPLOYMENT AGREEMENT
This Employment Agreement (the Agreement) is made and entered into as of June 15, 2009 by and between Kennedy Wilson, Inc., a Delaware corporation (the Company), and Donald J. Herrema (Employee), with reference to the following facts and circumstances:
RECITALS:
A. Company is a diversified real estate marketing and investment firm whose businesses include the management, marketing, development and acquisition of real estate and real estate related assets, such as secured promissory notes, real estate brokerage and marketing programs for all types of properties and financial instruments. Employee is experienced in real estate transactions and financial instruments.
B. Company desires to employ Employee and Employee desires to be employed by Company for the purposes and on the terms and conditions set forth in this Agreement.
C. This Agreement replaces and supersedes in their entirety any and all prior agreements, express or implied, written or oral, performed or unperformed, pertaining to the employment of Employee or any and all consulting agreements and the compensation to be paid to him therefore, and all such prior agreements and understandings are hereby terminated and shall be of no further force or effect.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Employee agree as follows:
1. Employment . Company hereby employs Employee and Employee hereby accepts employment to perform the duties described in Section 2 below, on the terms, conditions and covenants set forth in this Agreement.
2. Services Provided to the Company . Subject to the policy guidelines and directives of the Company which are provided to him by Company from time to time during the term of this Agreement, Employee shall serve as Executive Vice Chairman of Kennedy Wilson International, and President and CEO of Kennedy Wilson East, and be responsible for the operation of Kennedy Wilson East, and to advance the business and welfare of Kennedy Wilson as determined by the Company from time to time, and have such powers and duties as may from time to time be prescribed by the Chairman and Chief Executive Officer of the Company, which duties may, in the Companys reasonable discretion, be changed in any legal manner from time to time. Employee shall have no authority to bind or obligate Company to the purchase or sale of any real property, or to any other financial commitment, including without limitation the borrowing of any monies on a secured or unsecured basis, without obtaining the prior authorization of Co9(any as to the specific transaction. Employees duties also shall include such other matters or responsibilities as Company and Employee may jointly agree upon from time to time during the term of this Agreement.
Employee will serve as Member of the Executive Committee of Kennedy Wilson International.
Employees employment is on a full-time and best efforts basis meaning that during the term of this Agreement, Employee shall not accept any full or part-time employment, including without limitation as an Independent Consultant, after working hours or otherwise, without the prior written consent of Company, which may be given, withheld or conditioned in Companys sole and absolute discretion. Employee shall devote his full energies, interests, abilities, and productive time to the performance of his duties and responsibilities under this Agreement. During the term of this Agreement, Employee shall not, directly or indirectly, whether as a partner, employee, creditor, shareholder or otherwise, promote, participate or engage in any activity or other business competitive with Companys businesses. Notwithstanding the foregoing, Company acknowledges that Employee has made and will continue to make personal investments that will require Employees periodic attention. Employee may participate in such personal investments to the full extent desired by Employee so long as such personal investment activity does not detract from Employees ability to devote his full energies and productive interests to the performance of his duties and responsibilities under this Agreement.
3. Term of Employment .
(a) Employee shall be employed by the Company pursuant to this Agreement for a term (the Term) beginning on June 15, 2009, and continuing through to, and terminating at the close of business on December 31, 2010 (unless earlier terminated pursuant to Section 11).
4. Commitment to the Company .
(a) During the Term, Employee shall not be involved, individually or as an Employee, principal, officer, general partner, director or shareholder, in the marketing and! or sale of any real estate properties or any real estate activities that are not proprietary to Kennedy Wilson, without first obtaining the consent and approval of a majority of the Companys Chairman / CEO. The limitation contained in this Section 4 shall not apply, however, to the ownership of not more than one percent (l%) of the outstanding shares of any class of securities of a publicly-held issuer subject to the public reporting requirements of the Securities and Exchange Act of 1934, as amended, or any limited partner interest in a limited partnership or similar passive investment interest so long as the nature of such investment prevents, pursuant to applicable law, Employees control of the management of the issuer of such investment interests. For purposes of this Section 4, Employee shall be deemed the owner of any interests held by Employee, Employee spouse, or any other un-emancipated minor member of the Employees family.
(b) Employee shall, at all times during the Term, strictly adhere to and comply with all of Companys policies, rules and procedures as they currently exist and as they may be changed by the Company. Employee agrees that to the best of his ability and experience he will at all times loyally and conscientiously perform all of the duties and obligations required of him expressly or by implication by the terms of this Agreement.
5. Compensation .
(a) Salary : Company shall pay a basic salary to Employee at the rate of $50,000.00 per month ($600,000.00 annualized) for the term of this Agreement, payable in bi-monthly equal installments, $50,000.00 per month total, subject to such deductions and withholdings as Company may from time to time be required to make pursuant to applicable law, governmental regulation or order.
(b) Discretionary Bonus : In addition to the base salary provided for above, at the discretion of the Company, Employee may receive with respect to each fiscal year (or portion thereof) during the term of this Agreement, a discretionary bonus in an amount determined in the sole and absolute discretion of the Compensation Committee of the Board of Directors. For calendar year 2009, Employee will receive a minimum bonus of $500,000. to be paid no later than March 31, 2010.
(c) Stock Options : Upon execution of this Agreement the Company shall grant to Employee under the Companys 2009 Incentive and Non-statutory Stock Option Plan a non-transferable option to purchase an aggregate of 100,000 shares of the Common Stock at an exercise price of $30.00 per share (the Exercise Price), The grant of such options is to be approved by the Stock Option Committee of the Board of Directors of the Company on or before the next Stock Option Committee meeting, on such terms and subject to such conditions as are set forth in the Stock Option Agreement between the Company and Employee.
(d) Right to Invest : Consultant shall have the right to invest as a general partner in KW Fund III consistent with others who have a similar level of responsibility to the Company, as well as Employee will be eligible to invest in other principal investments of Company at an investment percentage consistent with others who have a similar level of responsibility at the Company.
(e) Change in Control . In the event of a Change in Control as defined below the Company shall make a one-time payment to Employee upon such Change in Control equal to $500,000. Change in Control shall mean that William J. McMorrow, Chairman! CEO is no longer an Employee of Company.
Employee acknowledges that Company has not provided Employee with any projections or estimates of a Discretionary Bonus that might be received by Employee under the terms of this Agreement as an inducement to Employee to accept employment with Company.
6. Other Benefits . During the Term of his employment and subject to applicable eligibility requirements of position, tenure, salary, age, health and other qualifications as may be
set forth in the Companys Employment Handbook, or pursuant to the terms of the applicable benefit provider, Employee shall participate in such benefit plans or programs as are available to the Companys other employees, including without limitation medical, dental, disability, life insurance, and, 401K Plan.
7. Business Expenses . Employee will be required to incur ordinary and necessary travel and other business expenses in connection with the performance of his duties hereunder, and Employee shall be entitled to reimbursement from Company for such expenses in accordance with Companys policies and procedures.
8. Non-Competition . For all periods that Employee is employed pursuant to this Agreement and for a period of six (6) months thereafter, unless Company has terminated Employee without cause, or if Company has not renewed Employees employment in Companys sole and absolute discretion, Employee shall not directly or indirectly:
(a) Engage in any business in the State of New York which engages in the same businesses or similar businesses engaged in by the Company during the Term, without the consent of the Board of Directors of the Company, or which would result in using or revealing any trade secrets or confidential information of the Company, including but not limited to activities, whether direct or indirect, as proprietor, partner, shareholder, principal, agent, or employee; and
(b) In any manner induce, attempt to induce, or assist others to induce or attempt to induce any employee, partner, joint venturer, independent contractor, agent or customer of the Company to terminate its, his or her association with the Company, or do anything to interfere with the relationship between the Company and such person or entity or other persons or entities dealing with the Company.
(c) The parties hereto intend that the covenants and agreements contained in this Section 8 shall be deemed to be a series of separate covenants and agreements, one for each and every country, county, state, city and other jurisdiction in the world with respect to which the Companys business has been or is hereafter carried on. If any of the foregoing is determined by any court of competent jurisdiction to be invalid or unenforceable by reason of such agreement extending for too great a period of time or over too great a geographical area, or by reason of its being too extensive in any other respect, such agreement shall be interpreted to extend only over the maximum period of time and geographical area and to the maximum extend enforceable, all as determined by such court in such action. Any determination that any provision hereof is invalid or unenforceable, in whole or in part, shall have no effect on the validity or enforceability of any remaining provision hereof.
(d) Notwithstanding the foregoing, nothing herein shall prevent Employee, following the termination of his employment or the end of the Term, whichever is later, from being associated with any person or entity engaged in any real estate activities or matters other than real estate auction activities or other activities which constitute a primary line of business of the Company at the time of such termination. Employee represents and warrants that he is not restricted or prohibited in any way from entering into this Agreement or performing services
hereunder at any time, whether by non-competition, covenant, or otherwise, and shall indemnify, defend and hold the Company harmless from and against any damages, claims, costs (including attorneys fees) or liabilities as a result of the incorrectness of such representation and warranty.
9. Trade Secrets . Employee has not disclosed to Company, and Employee has been advised that Company will not accept at any time during the course of Employees employment at Company, the disclosure of any trade secret (as that term is defined in California Civil Code Section 3426 et. Seq.) the disclosure or misappropriation of which by Employee would constitute a breach by Employee of any obligation to any third party, including any former employers. Employee represents and warrants he has informed Company of the existence of any and all agreements, including covenants not to compete, between Employee and third parties which may in any way relate to, impact, or prevent Employees employment at Company. Employee represents and warrants he has not taken any act prior to signing this Agreement that constitutes a breach of any agreement which may in any way relate to, impact, or prevent Employees employment at Company.
10. Confidential and Proprietary Information . Employee recognizes that he will occupy a position of trust with respect to business information of a confidential or proprietary nature which is the property of the Company and which has been and will be imparted to him from time to time in the course of the performance of his duties under this Agreement. All agreements, documents, studies, analyses, comparables, data, statistics, marketing materials, leads and lead lists developed or prepared by Employee or others in Companys employ during the term of this Agreement shall be and remain confidential and shall be the sole property of Company. Employee hereby acknowledges that Company develops and utilizes valuable procedures, confidential information and copyrighted materials, including but not limited to names of property owners who may wish to sell their property by auction or other means, names of potential purchasers, leads and lead lists, studies and analyses, methods of obtaining prospects, marketing and auction procedures and various brochures and other printed materials, all of which constitute a valuable part of Companys assets built up by Companys ingenuity, time, labor and expense over a period of many years and all of which constitute Company trade secrets. Employee agrees that:
(a) He shall not at any time, whether during the Term or thereafter, use, divulge or disclose directly or indirectly any confidential or proprietary information of the Companies to any person, except that he may use and disclose to other Company personnel such confidential and proprietary information in the course of the performance of his duties hereunder or when legally required to do so in connection with any pending litigation or administrative inquiry; and
(b) He shall return promptly upon the termination of this Agreement or otherwise upon the request of the Company any and all copies of any documentation or materials containing any confidential or proprietary information of the Company.
For purposes of this Agreement, the term Confidential or Proprietary Information of the Company shall include all information which is owned by the Companies and which is not at the time publicly available or generally known to persons engaged in businesses similar to that of the Company, including practices, procedures and methods and
other facts relating to the business of the Companies; practices, procedures and methods and other facts related to sales, marketing, advertising, promotions, financial matters, clients, client lists of the Company and similar information of a confidential and proprietary nature. Employee agrees that his breach of this Section 10 will cause irreparable harm to the Company. Employee agrees that the remedy at law for any breach by him of this Section 10 will be inadequate and, in addition to any other remedy available to the Company, the Company shall be entitled to injunctive relief for any actual or threatened breach of this Section 10 without proof that any actual damages have been caused by such breach, and without any need to post bond or similar security.
11. Termination .
(a) Termination . (Employment At Will) Either Company or Employee may terminate this Agreement at any time during the eighteen (18) month Term, with or without cause, by delivering written notice of its election to the other. The written notice of termination for cause from Company to Employee shall include a reasonably detailed description of Employees acts or omissions, which constitute cause for termination. The term cause shall mean: (I) the breach of any provision of this Agreement; (ii) misconduct, neglect or negligence in the performance of Employees duties and obligations as set forth in this Agreement; (iii) disloyal, dishonest or illegal conduct or moral turpitude of Employee; (iv) such material carelessness or inefficiency in the performance of his duties that Employee, in the reasonable discretion of Company, is deemed unfit to continue in the service of Company; and (v) the material and persistent failure of Employee to comply with the policies or directives of Company and/or failure to take direction from Company management.
(b) Employees employment with Company shall cease upon the date of his death or physical or mental disability to the extent that Employee becomes disabled for more than thirty (30) consecutive days or sixty (60) days in the aggregate in any 12-month period to perform his duties on a full-time basis. Upon termination for physical or mental disability, Employee shall be entitled to receive the compensation described in Section 5(a)-(b) and Section 6 to the date of termination. Upon termination for death, Employee shall be entitled to receive the compensation described in Section 5(a)-(b) to the date of termination, and such compensation will be payable to Sheryl A. Herrema or such Trust established for her benefit. Upon the simultaneous death of Employee and Sheryl A. Herrema such compensation shall be paid to Trusts established for the benefit of Employees children Douglas James Herrema, Markus Donald Herrema and Katherine-Grace.
Herrema, as per Employees Last Will and Testament.
(c) If the term of the Agreement is terminated by Company without cause, then Company shall continue to pay Employee the salary and other benefits described in Section 5(a) for the remainder of the Term of the Agreement, together with such other compensation as Employee may be entitled to under the provisions of Section 6, Benefits (or if such benefits cannot be provided pursuant to the terms of the applicable plans, comparable benefits due hereunder and remaining to be paid during the Term in the ordinary course, provided that the payment of fringe or comparable benefits shall be subject to the availability of such benefits
following Employees termination of employment at no additional cost above what was previously paid by the Company).
(d) Except as otherwise provided in subparagraph 11(c) above, if Employee terminates this Agreement without cause, then Employee shall be entitled to receive only the compensation described in Section 5 above earned to the date of termination. Company shall not pay Employee the salary and other benefits which Employee would have been entitled to for the remainder of the term of the Agreement under Section 5 and Section 6 above.
(e) If the Term of Employees employment is terminated for cause, then Employee shall be entitled to receive only the compensation described in Section 5 above earned to the date of termination.
(f) This Agreement may be terminated by Employee at any time, provided such termination shall have the effect set forth as follows:
Termination of this Agreement pursuant to this Section 11 shall not relieve Employee of his obligations to comply with Sections 9 and 10 hereof, which provisions shall survive the termination of this Agreement. If and only if, Employee resigns due to the Companys material breach of this Agreement which is not corrected within ten (10) days after the Employees written notice of the breach to the Company, then Employee shall be relieved of his obligations under Section 10 hereof.
12. Alternative Dispute Resolution . The parties to this Agreement specifically desire an early resolution of any dispute between them, which arises out of this Agreement. It is therefore, agreed that any controversy arising out of this Agreement, whether dealing with breach, interpretation or otherwise, shall be heard by a reference (Referee) pursuant to the provisions of the applicable sections of the Code of Civil Procedure and in accordance with the provisions described below; provided, however, that if injunctive relief is sought, the complaining party may seek such relief from the California Superior Court without the use of a Referee.
(a) Enforcement of Agreement . This reference provision may be enforced by the filing of a complaint or petition or motion seeking specific enforcement. Service of such motion on the opposing party shall constitute the Claim Date for purposes of this provision.
(b) Selection of Referee . The Referee shall be a retired Judge of the Court selected by mutual agreement of the parties. If the parties cannot agree then a Referee shall be appointed by the California Superior Court in accordance with the appropriate Section of the Code of Civil Procedure. Each party shall be entitled to only one disqualification pursuant to the appropriate Section of the Code of Civil Procedure. The parties hereby waive their right to a trial by jury and agree that their dispute shall be tried by the Referee so selected.
(c) Decisional Rules . The trial shall be conducted and the issues determined in compliance with all judicial rules and all statutory and decisional law of the Sate of California as if the matter were formally litigated in Superior Court. The Referee shall conduct and decide
all pre-trial and post-trial procedures as if the matter were formally litigated in the Superior Court. All rules of evidence as set forth in the California Evidence Code; other statutory and decisional law of California State and all-relevant California County Superior Court Rules shall be applicable to any proceeding before the Referee.
(d) Discovery . The parties to this Agreement expressly waive their right to engage in any discovery with the exception of depositions and requests for the inspection, production and copying of documents. Interrogatories, requests for admissions and depositions upon written interrogatories shall not be permitted. The Referee shall be authorized to issue subpoenas requiring attendance at hearings and/or trial. All discovery permitted by this Agreement shall be completed no later than fifteen (15) days before the first hearing date established by the Referee. The Referee may extend such period in the event of a partys refusal to provide requested discovery for any reason whatsoever, including legal objections raised to such discovery or unavailability of a witness due to absence or illness. No party shall be entitled to priority in conducting discovery. Depositions may be taken by either party upon seven (7) days written notice. Request for production or inspection of documents shall be responded to within ten (10) days after service. All disputes relating to discovery shall be submitted to the Referee whose decision shall be final and binding upon the parties.
(e) Hearings and Trial . Except as set forth in this Agreement, the Referee shall determine the manner in which the proceeding is conducted including the time and place of all hearings, the order or presentation of evidence, and all other questions that arise with respect to the course of the proceeding. All proceedings and hearings conducted before the Referee, except for trial, shall be conducted without a court reporter unless one is requested by a party. The party making the request shall have the obligation to arrange and pay for the court reporter. The costs of the court reporter at the trial shall be borne equally by the parties. The trial shall be conducted without a jury on consecutive dates, as opposed to being conducted piecemeal on various dates separated by postponements or adjournments. The trial shall be conducted in a courtroom or in surroundings with formality as close to a courtroom as possible. The Referee shall set the matter for hearing within sixty (60) days after the Claim Date and try all issues of law or fact and report a statement of decision upon them, if possible, within ninety (90) days of the Claim Date.
(f) Decision of Referee . The Referee shall be empowered to enter equitable as well as legal relief, to provide all temporary and/or provisional remedies and to enter equitable orders that will be binding upon the parties. The Referee shall issue a single judgment at the close of the proceeding that shall dispose of all of the claims of the parties that are the subject of the reference. Any decision rendered by the Referee shall be final, binding and conclusive and judgment shall be entered pursuant to the appropriate Section of the Code of Civil Procedure in any court in the State of California having jurisdiction.
(g) Attorneys Fees . The prevailing party shall be entitled to costs and reasonable attorneys fees, including without limitation costs and fees incurred upon any appeal, as awarded by the court.
(h) Appeal . The judgment entered upon the decision of the Referee shall be
subject to all post-trial procedures and to appeal in the same manner as an appeal from any order or judgment in a civil action.
12. Miscellaneous .
(a) Assignment . This Agreement is for the unique personal services of Employee and may not be assigned by Employee without the express written consent of Company and its affiliates. Except as so provided, this Agreement shall be binding upon and inure to the benefit of the respective heirs, personal representatives, successors and assigns of the parties hereto,
(b) License . Employee hereby agrees to obtain / maintain any professional license in the State of New York and in any other jurisdiction that may be required to do business. During any period that Employee does not have such a license in good standing, he will not be required to perform acts within a given jurisdiction for which a license is required in such jurisdiction, and Employee hereby agrees not to take any such actions for which a license is required until he has obtained the requisite license for such jurisdiction.
(c) Severability . Each provision, sub-provision or term of this Agreement is intended to be severable and shall continue in full force and effect although other provisions herein may be determined invalid or void for any reason.
(d) Attorneys Fees . Subject to Section 8 hereof, in the event suit is brought to enforce the terms of this Agreement, the prevailing party shall be entitled to costs and reasonable attorneys fees, including without limitation those costs and fees incurred upon any appeal, as awarded by the court.
(e) Entire Agreement; Amendments . This Agreement contains the entire agreement of the parties with respect to the subject matter covered hereby and may be amended, waived or terminated only by an instrument in writing signed by the parties hereto. This Agreement shall be interpreted according to its fair meaning and not for or against the party which drafted same.
(f) Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
(g) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
THE COMPANY:
|
|
||
a California corporation |
|
|
|
By: |
/s/ William McMorrow |
|
|
Name: |
William J. McMorrow |
|
|
Title: |
Chairman, CEO |
|
|
|
|
|
|
EMPLOYEE: EMPLOYEE: |
|
|
|
/s/ Donald J. Herrema Executive Officer |
|
|
Exhibit 10.51
EMPLOYMENT AGREEMENT
This Employment Agreement (the Agreement) is made and entered into as of the 1st day of April, 1996, by and between Kennedy-Wilson, Inc., a Delaware corporation with its principal office located in Santa Monica, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
A. KWI is a licensed California real estate broker in the business of marketing real property by auction and other means and desires to retain the services of Employee in conducting this business, subject to the terms and conditions of this Agreement.
B. Employee desires to be employed by KWI pursuant to the terms and conditions of this Agreement.
AGREEMENT
1. Services Provided to the Company . During the term of this Agreement, Employee shall devote his full business time and best efforts in the employment of the Company and its subsidiaries and shall have such powers and duties as may from time to time be prescribed by the Board of Directors or the Chief Executive Officer of the Company, which duties may, in the Companys reasonable discretion, be changed in any~ legal manner from time to time; provided, however, that any reassignment of Employees duties shall not require him to move from the Greater Los Angeles area arid shall not involve duties which are not appropriate for his level of expertise, ability Ôr compensation level. Such duties shall in all events be duties of an officer of the Company. The initial duties of Employee shall include, without limitation, serving as Executive Vice President and Chief Financial Officer of the Company with responsibility for overseeing the financial affairs of the Company. Employee shall provide the Company with the benefit of his best judgment and efforts in performing his duties hereunder.
2. Term . Employee shall be employed by the Company pursuant to this Agreement for a term beginning on the date of this Agreement and continuing through to, and terminating at 11:59 PM on March 31, 1997 (unless earlier terminated pursuant to Section 11 hereof).
3. Commitment to the Company . During the term of Employees employment under this Agreement, Employee shall not be involved, individually or as an employee, principal, officer, general partner, director or shareholder, in any real estate development activities without first obtaining the consent and approval of a majority of the Companys Board of Directors, the consideration of such consent shall not be unreasonably delayed and such consent shall be given or withheld on a consistent basis with the grant or refusal of the Board to grant consent to real estate development activities by other officers of the Company who are party to employment agreements with the Company. The limitation contained in this Section shall not apply, however, to the ownership of no more than 1 % of the capital stock of any publicly held corporation or to participation in real estate development activities as a limited partner. For purposes of this Section, Employee shall be deemed the owner of any interests held by Employee, Employees spouse, or any other un emancipated minor member of Employees family.
4. Compensation td Employee . During the term of this Agreement, the Company shall pay to Employee compensation (the Compensation) consisting of:
(i) a salary equal to $125,600 per annum, payable on such basis as is the normal payment pattern of the Company, not to be less frequently than monthly;
(ii) a discretionary bonus to be determined by the Company in its sole and absolute discretion which if awarded may be up to 40% of base salary ($50,000) based on Companys determination in its sole and absolute discretion of its achievement of profit goals. In determining whether any bonus shall be paid and the amount thereof, Company may examine a number of factors including, without limitation, employee achievement of the following:
a) To what extent did Employee provide Company Management with proactive and timely advise to enhance and further Companys business transactions and successes.
b. To what extent did Employee provide accurate, timely and appropriate financial reports to Management, Board of Directors and Public.
c. To what extent did Employee provide financial statements with analysis and action plan to CEO by the 15th of the following month.
d. To what extent did Employee manage accounting for capital expenditures and K-W owned properties.
e. To what extent did Employee manage bank relationships.
f. To what extent did Employee provide financial analysis, direction and control to guide the Company in meeting profit goals.
Employee acknowledges that Company has not provided Employee with any projections or estimates of Net Profit or Net Revenue that might be received by Employee under the terms of this Agreement as an inducement to Employee to accept employment with Company.
5. Expenses . Employee shall be entitled to reimbursement from the Company for any out-of-pocket expenses, including travel expenses(which shall not include the expense incurred for Employees daily commute to and from work), incurred by Employee in the ordinary course of providing his services hereunder and shall not exceed $300.00 per month. Such reimbursement shall be made by the Company after receipt of a statement therefore from Employee setting forth in reasonable detail the expenses for which reimbursement is requested, accompanied by customary documentation evidencing such expenses. In those instances, where out of town travel and per diem or where rare and unusual circumstances arise and may be required, expenses may exceed the $300 limit provided they are pre-approved by William J. McMorrow.
6. Deductions . It is understood that at compensation paid to Employee under this Agreement is subject to the customary tax, social security and other similar withholding requirements.
7. Benefits . For such time as Employee is employed by KWI, he shall be entitled to the same medical, dental and insurance, 401k plan, and other benefits as are generally available to other employees of KWI from time to time during the course of this Agreement.
8. Noncompetition Covenant . For so long as Employee is employed under this Agreement and for a period of three years thereafter, Employee will not, directly or indirectly:
(a) (i) in any manner induce, attempt to induce, or assist others to induce or attempt to induce any employee, partner, joint venturer, independent contractor, agent or customer of the Company to terminate its, his or her association with the Company, or (ii) do anything to interfere with the relationship between the Company and such person or entity or other persons or entities dealing with the Company; or
(b) Employee further acknowledges that all trade secrets, know-how, technology data, formulae, plans, specifications and other information used by the Company or under development in connection with its business are the property of the Company, and that Employee does not have the right to disclose, make available or use any of the foregoing for the benefit of himself or any other person or entity.
(c) Nothing in this Section 8 shall restrict Employee from owning not more than 1 % of the outstanding shares of any class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, or any limited partner interest in a limited partnership or similar passive investment interest so long as the nature of such investment prevents, pursuant to applicable law, Employees control of the management of the issuer of such investment interest.
(d) The parties hereto intend that the covenants and agreements contained in this Section 8 shall be deemed to be a series of separate covenants and agreements, one for each and every country, county, state, city and other jurisdiction in the world with respect to which the Companys business has been or is hereafter carried on. If any of the foregoing is determined by any court of competent jurisdiction to be invalid or unenforceable by reason of such agreement extending for too great a period of time or over too great a geographical area, or by reasons of its being too extensive in any other respect, such agreement shall be interpreted to extend only over the maximum period of time and geographical area and to the maximum extent enforceable, all as determined by such court in such action. Any determination that any provision hereof is invalid or unenforceable, in whole or in part, shall have no effect on the validity or enforceability of any remaining provision thereof.
Notwithstanding the foregoing, nothing herein shall prevent Employee, following the termination of his employment or the end of the term of this Agreement, from being associated with any person or entity engaged in any real estate activities or matters other than real estate
auction activities or matters or other activities which constitute a primarily line of business of the Company at the time of such termination.
9. Confidential and Proprietary Information . Employee recognizes that he has occupied and will occupy a position of trust with respect to business information of a confidential or proprietary nature which is the property of the Company and which has been and will be imparted to him from time to time in the course of the performance of his duties under this Agreement. Employee agrees that he shall not at any time, whether during the term hereof or thereafter, use or disclose directly or indirectly any confidential or proprietary information of the Company to any person, except that he may use and disclose to other Company personnel such confidential and proprietary information in the course of the performance of his duties hereunder. For purposes of this Agreement, the term confidential or proprietary information of the Company shall include all information which is owned by the Company and which is not at the time publicly available or generally known to persons engaged in businesses similar to that of the Company, including practices, procedures and methods and other facts relating to the business of the Company; practices, procedures and methods and other facts related to sales, marketing, advertising, promotions, financial matters, clients, client lists of the Company and similar information of a confidential and proprietary nature.
10. Stock Options . Upon execution of this Agreement the Company shall grant to Employee under the Companys 1992 Incentive and Nonstatutory Stock Option Plan a non-transferable non-incentive option to purchase an aggregate of 5,000 shares of the Common Stock at an exercise price equal to the price of the Common stock on the effective date of the Agreement. The grant of such options is to be approved by the Stock Option Committee of the Board of Directors of the Company on such terms and subject to such conditions as are set forth in the stock option agreement between the Company and Employee and an additional 5,000 shares of Common Stock on 12/31/96 providing Company and individual goals for 1996 are met.
11. Termination .
(a) This Agreement will terminate upon the death or physical or mental incapacity of Employee. Incapacity shall mean the inability to perform the services due hereunder for a consecutive 60 calendar day period.
(b) This Agreement may also be terminated by the Company:
(i) in the event of a material breach of this Agreement by Employee (which shall be limited only to a material breach by Employee of the terms of Sections 3,8 or 9 hereof or the first sentence of Section 1 hereof).
(ii) for cause.
(c) This Agreement may be terminated by Employee at any time provided that such termination shall have the effect set forth in paragraph Cd) below.
(d) Termination of this Agreement pursuant to Section 11 (b) shalt not relieve Employee of his obligations to comply with Sections 8 and 9 hereof. If Employee resigns due to the
Companys material breach which is not corrected within ten days after the Employees written notice of the breach to the Company, then Employee shall be relieved of his obligations under Section 8 hereof. If. Employee resigns for any other reason then his obligations under Sections 8 and 9 hereof will continue to apply. Upon the termination of this Agreement by the Company pursuant to Section 11(b) or upon the resignation of Employee during the term of this Agreement other than following a material breach by the Company hereunder, or prior to termination under Section 8 and 9 if applicable, any further compensation to Employee shall terminate on the date this Agreement is so terminated by the Company or Employee resigns. In alt other cases, Employee, or his estate, will receive all salary, bonuses and fringe benefits (or if such fringe benefits cannot be provided pursuant to the terms of the applicable plans, comparable benefits) due hereunder and remaining to be paid during the term hereof in the ordinary course, provided that the payment of fringe or comparable benefits shall be subject to the availability of such benefits following Employees termination of employment at no additional cost above what was previously being paid by the Company.
12. General Provisions .
(a) Notices . Any notice to be given pursuant to this Agreement shall be in writing and, in the absence of receipted hand delivery, shall be deemed duly given when mailed, if the same shall be sent by certified or registered mail, return receipt requested, or by a nationally recognized overnight courier and the mailing date shall be deemed the date from which all time periods pertaining to a date of notice shall run. Notices shall be addressed to the parties at the following addresses:
If to the Company, to: |
|
Kennedy-Wilson, Inc. |
|
|
530 Wilshire Boulevard |
|
|
Suite 101 |
|
|
Santa Monica, CA 90401 |
|
|
Attention: Chief Executive Officer |
If to Employee, to: |
|
Mr. Freeman A. Lyle, Jr. |
|
|
31 Silver Saddle Lane |
|
|
Rolling Hills Estates, CA 90274 |
(b) Successors and Assigns . This Agreement shall be binding upon and shall inure to the benefit of the Company and any successors whether by merger, consolidation, transfer of substantially all assets or similar transaction, and it shall be binding upon and shall inure to the benefit of Employee and his heirs and legal representatives. This Agreement is personal to Employee and shall not be assignable by Employee.
(c) Waiver of Breach . The waiver by the Company or Employee of a breach of any provision of this Agreement by the other shall not operate or be construed as a waiver of any subsequent breach by the other.
(d) Entire Agreement/Modification . This Agreement shall constitute the entire agreement between the parties hereto with respect to the subject matter hereof, and shall supersede all previous oral and written and all contemporaneous oral negotiations, commitments,
agreements and understandings relating hereto. Any modification of this Agreement shall be effective only if it is in writing and signed by the parties to this Agreement.
(e) Severability . Any provision of this Agreement which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this paragraph be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable.
(f) Counterparts . This Agreement may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes.
(g) Choice of Law . This Agreement shall be governed by the laws of the State of California.
(h) Alternative Dispute Resolution . The parties to this Agreement specifically desire an early resolution of any dispute between them which arises out of this Agreement. It is therefore, agreed that any controversy arising out of this Agreement, whether dealing with breach, interpretation or otherwise, shall be heard by a reference (Referee) pursuant to the provisions of Section 638 of the Code of Civil Procedure and in accordance with the provisions described below. Provided, however, that if injunctive relief is sought, the complaining party may seek such relief from the Los Angeles Superior Court without the use of a Referee.
1. Enforcement of Agreement. This reference provision may be enforced by the filing of a complaint or petition or motion seeking specific enforcement. Service of such motion on the opposing party shall constitute the Claim Date for purposes of this provision.
2. Selection of Referee. The Referee shall be a retired Judge of the Court selected by mutual agreement of the parties. If the parties cannot agree then a Referee shall be appointed by the Los Angeles Superior Court in accordance with Section 640 of the Code of Civil Procedure. Each party shall be entitled to only one disqualification pursuant to Section 170.6 of the Code of Civil Procedure. The parties hereby waive their right to a trial by jury and agree that their dispute shall be tried by the Referee so selected.
3. Decisional Rules. The trial shall be conducted and the issues determined in compliance with all judicial rules and all statutory and decisional law of the Sate of California as if the matter were formally litigated in Superior Court. The Referee shall conduct and decide all pre-trial and post-trial procedures as if the matter were formally litigated in the Superior Court. All rules of evidence as set forth in the California Evidence Code, other statutory and decisional law of California and all relevant Los Angeles County Superior Court Rules and California Rules of Court shall be applicable to any proceeding before the Referee.
4. Discovery. The parties to this Agreement expressly waive their right to engage in
any discovery with the exception of depositions and requests for the inspection, production and copying of documents. Interrogatories, requests for admissions and depositions upon written interrogatories shall not be permitted. The Referee shall be authorized to issue subpoenas requiring attendance at hearings and/or trial. All discovery permitted by this Agreement shall be completed no later than fifteen (15) days before the first hearing date established by the Referee. The Referee may extend such period in the event of a partys refusal to provide requested discovery for any reason whatsoever, including legal objections raised to such discovery or unavailability of a witness due to absence or illness. No party shall be entitled to priority in conducting discovery. Depositions may be taken by either party upon seven (7) days written notice. Request for production or inspection of documents shall be responded to within ten (10) days after service. All disputes relating to discovery shall be submitted to the Referee whose decision shall be final and binding upon the parties.
5. Hearings and Trial. Except as set forth in this Agreement, the Referee shall determine the manner in which the proceeding is conducted including the time and place of all hearings, the order or presentation of evidence, and all other questions that arise with respect to the course of the proceeding. All proceedings and hearings conducted before the Referee, except for trial, shall be conducted without a court reporter unless one is requested by a party. The party making the request shall have the obligation to arrange and pay for the court reporter. The costs of the court reporter at the trial shall be borne equally by the parties. The trial shall be conducted without a jury on consecutive dates, as opposed to being conducted piecemeal on various dates separated by postponements or adjournments. The trial shall be conducted in a courtroom or in surroundings with formality as close to a courtroom as possible. The Referee shall set the matter for hearing within sixty (60) days after the Claim Date and try all issues of law or fact and report a statement of decision upon them, if possible, within ninety (90) days of the Claim Date.
6. Decision of Referee. The Referee shall be empowered to enter equitable as well as legal relief, to provide all temporary and/or provisional remedies and to enter equitable orders that will be binding upon the parties. The Referee shall issue a single judgment at the close of the proceeding which shall dispose of all of the claims of the parties that are the subject of the reference. Any decision rendered by the Referee shall be final, binding and conclusive and judgment shall be entered pursuant to Section 644 of the Code of Civil Procedure in any court in the State of California having jurisdiction.
7. Attorneys Fees. The cost of the Referee shall be shared equally between the parties. However, the prevailing party shall be entitled to receive as part of the judgment in its favor an award of all actual attorneys fees and costs (including the Referee and court reporter fees) incurred with respect to the reference, and interest at the highest rate permitted by law as of the date of the breach.
8. Appeal. The judgment entered upon the decision of the Referee shall be subject to all post-trial procedures and to appeal in the same manner as an appeal from any order or judgment in a civil action.
(i) Assignment . This Agreement is for the unique personal services of Employee and may not be assigned by Employee without the express written consent of KWI. Except as so
provided, this Agreement shall be binding upon and inure to the benefit of the respective heirs, personal representatives, successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
|
COMPANY |
|
|
KENNEDY-WIL ON INTERNATIONAL |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer 4/22/96 |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle 4/17/96 |
Exhibit 10.52
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the Amendment) is made and entered into as of April 1, 1997, by and between KENNEDY-WILSON, INC., A Delaware corporation, with its principal office located in Santa Monica, California (the Company), and Freeman A. Lyle, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, (the Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Employees ten-n and compensation.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of April 1, 1997 as follows:
1. The Term of the Agreement is extended until March 31, 1998. Therefore, Section 2 of the Agreement is amended such that the termination date of March 31, 1997 is deleted and the termination date of March 31, 1998 is inserted in lieu thereof.
2. Section 4(i) of the Agreement is amended such that Employees salary effective January 1, 1997 is equal to $150,600 per annum payable on such basis as is the normal payment pattern of the Company, not to be less frequently than monthly.
IN WITNESS WHEREOF, the undersigned have executed this Second amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON INTERNATIONAL |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle |
Exhibit 10.53
SECOND AMENDMENT TO
EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement (the Second Amendment) is made and entered into as of April 1, 1998, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Santa Monica, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of April I, 1996, (the Agreement), providing for the employment Of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment and Salary.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of April 1, 1998 as follows:
1. The term of this Agreement is extended to March 31, 1999. Therefore, Section 1 (a) of the Agreement is amended such that the termination date of March 1, 1998 is deleted and the termination date of March 31, 1999 is inserted in lieu thereof.
2. Section 4(h) is deleted in its entirety and the following is inserted in lieu thereof:
A discretionary bonus to be determined by the Company in its sole and absolute discretion which, if awarded, may be up to 100% of base salary based on Companys determination in its sole and absolute discretion of its achievement of profit goals.
Subject to the foregoing, the Employment Agreement remains in fill force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date above written.
|
COMPANY |
|
|
KENNEDY-WILSON INTERNATIONAL |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle |
Exhibit 10.54
THIRD AMENDMENT TO
EMPLOYMENT AGREEMENT
This Third: Amendment to Employment Agreement (the Third Amendment) is made and entered into as of August 15, 1998, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, (the Agreement), providing for the employment Of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Salary.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of August 15, 1998 as follows:
1. Section 4(i) of the Agreement is amended such that Employees salary effective August 15, 1998 is equal to $180,000 per annum payable on such basis as is the normal payment pattern of the Company, not to be less frequently than monthly.
Subject to the foregoing, the Employment Agreement remains in ftill force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Second amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A Delaware Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr. |
Exhibit 10.55
FOURTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This Fourth Amendment to Employment Agreement (the Fourth Amendment) is made and entered into as of April 1, 1999, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Santa Monica, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, (the Agreement), providing for the employment Of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment and Salary.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of April 1, 1999 as follows:
1. The term of this Agreement is extended to March 31, 2000. Therefore, Section 1 (a) of the Agreement is amended such that the termination date of March 1, 1999 is deleted and the termination date of March 31, 2000 is inserted in lieu thereof
2. Section 4(i) of the Agreement is amended such that Employees salary effective April 1, 1999 is equal to $200,000 per annum payable on such basis as is the normal payment pattern of the Company, not to be less frequently than monthly.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
Section 4 (iii) A one time Signing Bonus of $210,000.00 shall be paid to Employee upon execution of this Amendment.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Fourth Amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A Delaware Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr. |
Exhibit 10.56
FIFTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This Fifth Amendment to Employment Agreement (the Fifth Amendment) is made and entered into as of April 1, 2000, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly -Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS , Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, and April 1, 1999 (the Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS , Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Salary and Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE , for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of April 1, 2000 as follows:
1. The term of this Agreement is extended to December 31, 2000. Therefore, Section 2 of the Agreement is amended such that the termination date of March 1, 2000 is deleted and the termination date of December 31, 2000 is inserted in lieu thereof.
2. Section 4 (i) of the Agreement is amended such that Employees salary effective April 1, 2000 is equal to $225,000.00 per annum payable on such basis as is the normal payment pattern of the Company, not to be less frequently than monthly, and subject to such deductions and withholdings as Company may from time to time be required to make pursuant to applicable law, governmental regulation or order.
3. Section 4 (iii) is added to the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Fourth Amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON INTERNATIONAL |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle Jr. |
Exhibit 10.57
SIXTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This Sixth Amendment to Employment Agreement (the Sixth Amendment) is made and entered into as of January 1, 2001, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, April 1, 1999, and April 1, 2000 (the Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2001 as follows:
1. The term of this Agreement is extended to December 31, 2001. Therefore, Section 2 of the Agreement is amended such that the termination date of December 31, 2000 is deleted and the termination date of December 31, 2001 is inserted in lieu thereof.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Fourth Amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A Delaware Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr. |
Exhibit 10.58
SEVENTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This Seventh Amendment to Employment Agreement (the Seventh Amendment) is made and entered into as of March 28, 2001, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS , Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, April 1, 1999, April 1, 2000, and January 1, 2001 (Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS , Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE , for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of March 28, 2001 as follows:
1. The term of this Agreement is extended to December 31, 2002. Therefore, Section 2 of the Agreement is amended such that the termination date of December 31, 2001 is deleted and the termination date of December 31, 2002 is inserted in lieu thereof.
2. Section 4 (iii) is deleted in its entirety and the following is added in lieu thereof:
Section 4 (iii) A one time signing bonus of $250,000. shall be paid to Employee. $150,000. to be paid upon execution of this Amendment and $100,000. to be paid no later than 12-15-01.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Fourth Amendment as of the date first above written.
IN WITNESS WHEREOF, the undersigned have executed this Fourth Amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A Delaware Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr. |
Exhibit 10.59
EIGHTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This Eighth Amendment to Employment Agreement (Eighth Amendment) is made and entered into as of September 1, 2002, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, April 1, 1999, April 1, 2000, January 1, 2001, and March 28, 2001 (Agreement), providing for the employment of Employee by Company pursuant to the tents of such Agreement; and
WHEREAS , Company and Employee have agreed that the tents of the Employment Agreement should be modified to change the Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE , for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend die Agreement, effective as of September 1, 2002 as follows:
1. The term of this Agreement is extended to December 31, 2003. Therefore, Section 2 of the Agreement is amended such that the termination date of December 31, 2002 is deleted and the termination date of December 31, 2003 is inserted in lieu thereof.
2. Section 4 (i) of the Agreement is amended such that Employees salary effective September 1, 2002 is equal to $300,000 per annum payable on such basis as is the normal payment pattern of the Company, not to be less frequently than monthly.
Subject to the foregoing, die Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Fourth Amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr. |
Exhibit 10.60
NINTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This Ninth Amendment to Employment Agreement (the Ninth Amendment) is made and entered into as of October 1, 2003, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS , Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, April 1, 1999, April 1, 2000, January 1, 2001, March 28, 2001, and September 1, 2002 (Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS , Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Salary.
NOW, THEREFORE , for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of October 1, 2003 as follows:
1. Section 4 (i) of the Agreement is amended such that Employees salary effective October 1, 2003 is equal to $325,000 per annum payable on such basis as is the normal payment pattern of the Company, not to be less frequently than monthly.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Ninth Amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A Delaware Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr. |
Exhibit 10.61
TENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Tenth Amendment to Employment Agreement (the Tenth Amendment) is made and entered into as of January 1, 2004, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly -Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS , Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, April 1, 1999, April 1, 2000, January 1, 2001, March 28, 2001, September 1, 2002, and October 1, 2003 (Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS , Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2004 as follows:
1. The Term of the Agreement is extended until December 31, 2004. Therefore, Section 2 of the Agreement is amended such that the termination date of December 31, 2003 is deleted and the termination date of December 31, 2004 is inserted in lieu thereof.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Tenth Amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr. |
Exhibit 10.62
ELEVENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Eleventh Amendment to Employment Agreement (the Eleventh Amendment) is made and entered into as of January 1, 2005, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, April 1, 1999, April 1, 2000, January 1, 2001, March 28, 2001, September 1, 2002, October 1, 2003, and January 4, 2004 (Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2005 as follows:
1. The Term of the Agreement is extended until December 31, 2005. Therefore, Section 2 of the Agreement is amended such that the termination date of December 31, 2004 is deleted and the termination date of December 31, 2005 is inserted in lieu thereof.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Tenth Amendment as of the date first above written
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr. |
Exhibit 10.63
TWELFTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Twelfth Amendment to Employment Agreement (the Twelfth Amendment) is made and entered into as of January 1, 2006, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS , Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, April 1, 1999, April 1, 2000, January 1, 2001, March 28, 2001, September 1, 2002, October 1, 2003, January 4, 2004, and January 1, 2005 (Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS , Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2006 as follows:
1. The Term of the Agreement is extended until December 31, 2006. Therefore, Section 2 of the Agreement is amended such that the termination date of December 31, 2005 is deleted and the termination date of December 31, 2006 is inserted in lieu thereof.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Tenth Amendment as of the date first above written
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A California Corporation |
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr. |
Exhibit 10.64
THIRTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Thirteenth Amendment to Employment Agreement (the Thirteenth Amendment) is made and entered into as of January 1, 2007, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS , Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, April 1, 1999, April 1, 2000, January 1, 2001, March 28, 2001, September 1, 2002, October 1, 2003, January 4, 2004, January 1, 2005 and January 1, 2006 (Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS , Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2007 as follows:
1. The Term of the Agreement is extended until December 31, 2007. Therefore, Section 2 of the Agreement is amended such that the termination date of December 31, 2006 is deleted and the termination date of December 31, 2007 is inserted in lieu thereof.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Tenth Amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr. |
Exhibit 10.65
FOURTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Fourteenth Amendment to Employment Agreement (the Fourteenth Amendment) is made and entered into as of March 1, 2007, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, April 1, 1999, April 1, 2000, January 1, 2001, March 28, 2001, September 1, 2002, October 1, 2003, January 4, 2004, January 1, 2005, January 1, 2006, and January 1, 2007 (Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Salary.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of March 1, 2007 as follows:
1. Section 4 (i) of the Agreement is amended such that Employees salary effective March 1, 2007 is equal to $355,000 per annum payable on such basis as is the normal payment pattern of the Company, not to be less frequently than monthly.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Tenth Amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr |
Exhibit 10.66
FIFTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Fifteenth Amendment to Employment Agreement (the Fifteenth Amendment) is made and entered into as of January 1, 2008, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS , Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, April 1, 1999, April 1, 2000, January 1, 2001, March 28, 2001, September 1, 2002, October 1, 2003, January 4, 2004, January 1, 2005, January 1, 2006, and January 1, 2007 (Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS , Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2008 as follows:
1. The Term of the Agreement is extended until December 31, 2008. Therefore, Section 2 of the Agreement is amended such that the termination date of December 31, 2007 is deleted and the termination date of December 31, 2008 is inserted in lieu thereof.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Tenth Amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr |
Exhibit 10.67
SIXTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Sixteenth Amendment to Employment Agreement (the Sixteenth Amendment) is made and entered into as of June 1, 2008, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, April 1, 1999, April 1, 2000, January 1, 2001, March 28, 2001, September 1, 2002, October 1, 2003, January 4, 2004, January 1, 2005, January 1, 2006, January 1, 2007, and January 1, 2008 (Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Salary.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of June 1, 2008 as follows:
1. Section 4 (i) of the Agreement is amended such that Employees salary effective June 1, 2008 is equal to $450,000 per annum payable on such basis as is the normal payment pattern of the Company, not to be less frequently than monthly.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and - Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Tenth Amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr |
Exhibit 10.68
SEVENTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Seventeenth Amendment to Employment Agreement (the Seventeenth Amendment) is made and entered into as of January 1, 2009, by and between KENNEDY-WILSON, INC., a Delaware corporation with its principal office located in Beverly Hills, California (the Company), and Freeman A. Lyle, Jr., an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of April 1, 1996, and amended April 1, 1997, April 1, 1998, April 1, 1999, April 1, 2000, January 1, 2001, March 28, 2001, September 1, 2002, October 1, 2003, January 4, 2004, January 1, 2005, January 1, 2006, January 1, 2007, January 1, 2008, and June 1, 2008 (Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2009 as follows:
1. The Term of the Agreement is extended until December 31, 2009. Therefore, Section 2 of the Agreement is amended such that the termination date of December 31, 2008 is deleted and the termination date of December 31, 2009 is inserted in lieu thereof.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Tenth Amendment as of the date first above written.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr |
MEMORANDUM OF UNDERSTANDING
The following is set forth to memorialize Employees agreement to defer $100,000 of the $250,000 signing bonus that was earned and payable on March 28, 2001 at the execution of the Seventh Amendment to his Employment Agreement.
Based on the Employees agreement to defer payment of $100,000 the Company hereby guarantees payment of $100,000 to be made on December 17, 2001.
|
COMPANY |
|
|
KENNEDY-WILSON, INC. |
|
|
A California Corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
|
Chief Executive Officer |
|
|
|
|
EMPLOYEE |
|
|
/s/ Freeman Lyle, Jr |
Exhibit 10.69
EMPLOYMENT AGREEMENT
This Employment Agreement (the Agreement) dated for reference purposes only is made and entered into as of January 4, 1999 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company), a wholly owned subsidiary of Kennedy Wilson, Inc., a Delaware corporation (KWI), having an address of 9601 Wilshire Boulevard, Suite 220, , and Jim Rosten having an address of 1280 Shadybrook Drive Beverly Hills, California 90210 (Employee), with reference to the following facts and circumstances:
RECITALS :
A. Company is a diversified real estate marketing, property management and investment firm whose businesses include the acquisition of real estate and real estate related assets, real estate brokerage and marketing programs for all types of properties and financial instruments. Employee is experienced in property management.
B. Company desires to employ Employee and Employee desires to be employed by Company for the purposes and on the terms and conditions set forth in this Agreement.
C. This Agreement replaces and supersedes in their entirety any and all prior agreements, express or implied, written or oral, performed or unperformed, pertaining to the employment of Employee and the compensation to be paid to him therefore, and all such prior agreements and understandings are hereby terminated and shall be of no further force or effect.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Employee agree as follows:
1. Employment . This Agreement shall become effective the first business day after termination of the Employees current employment. If said transaction is not consummated for any reason by January 31, 2000, then this Agreement shall not be effective and neither party shall have any liability to the other hereunder. Company hereby employs Employee commencing on the Effective Date and Employee hereby accepts employment to perform the duties described in Section 2 below, on the terms, conditions and covenants set forth in this Agreement.
2. Services provided to the Company . Employees duties shall be to provide marketing and corporate administration services, subject to the policy guidelines and directives, which are provided to him by Company from time to time during the term of this Agreement. Employee shall have no authority to bind or obligate Company to the purchase or sale of any real property, or to any other financial commitment, including without limitation the borrowing of any monies on a secured or unsecured basis, without obtaining the prior written authorization of Company as to the specific transaction. Employees duties may not be materially changed by Company without Employees prior written consent but shall include such other matters or responsibilities as Company and Employee may jointly agree upon from time to time during the term of this Agreement.
Employees employment is on a full-time and best efforts basis meaning that during the term of this Agreement, Employee shall not accept any full or part-time employment, including without limitation as an Independent Consultant, after working hours or otherwise, without the prior written consent of Company, which may be given, withheld or conditioned in Companys sole and absolute discretion. Employee shall devote his full energies, interests, abilities, and productive time to the performance of his duties and responsibilities under this agreement. During the term of this Agreement, Employee shall not, directly or indirectly, whether as a partner, employee, creditor, shareholder or
otherwise, promote, participate or engage in any activity or other business competitive with Companys businesses. Notwithstanding the foregoing, Company acknowledges that Employee has made and will continue to make personal investments, including but not limited to real estate investments, that will require Employees periodic attention. Employee may participate in such personal investments to the full extent desired by Employee so long as such personal investment activity does not detract from Employees ability to devote his full energies and productive interests to the performance of his duties and responsibilities under this Agreement. Company shall be responsible for payment of all dues and fees required in connection with the maintenance of any professional licenses that may be required of Employee in the performance or satisfaction of Employees duties hereunder.
3. Term of Employment . Employee shall be employed by the Company pursuant to this Agreement for a term (the Term) beginning on the Effective Date, when Employee begins to perform his duties, and continuing through to, and terminating on the second anniversary thereof.
4. Commitment to the Company .
(a) Except as provided above, during the Term, Employee shall not be involved, individually or as an Employee, principal, officer, general partner, director or shareholder, in any real estate, management, leasing, brokerage or development activities without first obtaining the consent and approval of a majority of the Companys Board of Directors, which shall be given or denied within 5 days, and shall not be unreasonably withheld. The limitation contained in this Section 4 shall not apply, however, to the ownership of not more than three percent (3%) of the outstanding shares of any class of securities of a publicly-held issuer subject to the public reporting requirements of the Securities and Exchange Act of 1934, as amended, or any limited partner interest in a limited partnership or similar passive investment interest so long as the nature of such investment prevents, pursuant to applicable law, Employees control of the management of the issuer of such investment interests.
(b) Employee shall, at all times during the Term, strictly adhere to and comply with all of Companys policies, rules and procedures as they currently exist and as they may be changed by the Company. Employee agrees that to the best of his ability and experience he will at all times loyally and conscientiously perform all of the duties and obligations required of him expressly or by implication by the terms of this Agreement.
5. Compensation .
(a) Salary. Company shall pay a basic salary to Employee at the rate of $20,833.00 per month for the Term of this Agreement, subject to such deductions and withholdings as Company may be required to make pursuant to applicable law, governmental regulation or order.
(b) Bonus . Employee shall be eligible annually to participate in a bonus pool. The Bonus Pool shall be defined as 20% of net operating income (NOl) from property services revenue from each client generated by the National Marketing Group, to the extent such client is generated by the National Marketing Group, during the first year that Employer or an affiliate or subsidiary performs services for the client. The Bonus Pool shall also include any revenue accrued but not paid during the first year to the extent such accrued funds are actually received by Employer after the one year period, but while Employee is still employed by Employer. (NOl) shall mean the gross revenues realized by the Employer during the applicable period from clients it approves as being generated by the National Marketing Group, (NMG) or where the NMG participates in the transaction, less costs and expenses properly incurred performing the services, as determined by KWIs Chief Financial Officer, including, without limitation, salaries, bonuses and benefits of all the employees who perform such services, marketing costs and write offs. Subject to such equitable adjustment as may occur with the consent of Employee, based upon growth of the national marketing group, Employee shall receive, within 60 days of
each calendar year end beginning with the year 2000, 50% of the 20% Bonus pool. The Bonus Pool shall also include all revenues from NMG clients, as defined herein, who terminate Employer as a vendor due to unsatisfactory performance by Employer during the bonus period, without fault of Employee.
(c) Stock Options . On July 1, 2000, KWI shall grant to Employee under KWIs 1992 Incentive and Nonstatutory Stock Option Plan (the Stock Option Plan) non-transferable incentive options to purchase an aggregate of 10,000 shares of common stock of KWI at an exercise price equal to the closing price of such KWI common stock on the NASDAQ National Market Quotation System as of the last business day prior to the effective date of the grant. Such options to purchase shall vest as follows: (i) 1/3rd on the first anniversary of the grant, (ii) 1/3rd on the second anniversary of the option grant, and (iii) 1/3rd on the third anniversary of the option grant. Such stock options shall be for a term of five (5) years from the date of the grant and may be exercised by Employee pursuant to the terms and provisions of the Stock Option Plan and a separate Stock Option Agreement between KWI and Employee. Such stock options shall immediately be fully vested and shall continue in full force and effect for the balance of their terms in the event that KIWI is sold (by sale of stock or assets) or merged into another company (other than an Affiliate) or if Employee shall terminate this Agreement for Cause. Employee acknowledges that he has been furnished with substantially the same kind of information regarding KIWI and its business as would be contained in a registration statement prepared in connection with a public sale of securities. Neither KIWI nor the Company nor any other person or party purporting to act on their behalf has made any representations to Employee as to the value of KIWI or its stock or any other matter pertaining to KIWI. The Company has advised Employee that the options issued to Employee will be subject to a registration statement filed with the Securities and Exchange Commission and therefore the shares received on exercise of the options will not be restricted stock. KWI joins this agreement solely for the purposes of this clause.
6. Other Benefits . During the Term of his employment and subject to applicable eligibility requirements of position, tenure, salary, age, health and other qualifications as may be set forth in the Companys Employment handbook, or pursuant to the terms of the applicable benefit provider or other policies, Employee shall participate in such benefit plans or programs as are available to all of the Companys other employees, including without limitation medical, dental, disability, life insurance, and 401K Plan.
7. Business Expenses . Employee will be required to incur ordinary and necessary travel and other business expenses in connection with the performance of his duties hereunder, and Employee shall be entitled to reimbursement from Company for such expenses in accordance with Companys policies and procedures. For example, Employer shall pay, in accordance with an annual budget as may be approved by the parties, the cost of Employees participation in 1RPM, continuing broker education, cell phone usage for business, monthly membership dues at the Jonathan Club, and a laptop computer.
8. Non-Competition . For all periods that Employee is employed pursuant to this Agreement and for a period of twelve (12) months thereafter, Employee shall not directly or indirectly:
(a) Engage in any business in the State of California without the consent of the Board of Directors of the Company which could or would result in a breach of sections 9 or 10 below., including but not limited to activities, whether direct or indirect, as proprietor, partner, shareholder, principal, agent, or employee; and
(b) In any manner induce, attempt to induce, or assist others to induce or attempt to induce any employee, partner, joint venturer, independent contractor, agent or of the Company to terminate its, his association with the Company, or do anything to interfere with the relationship between the Company and any executive or management level employee of the Company.
( c) The parties hereto intend that the covenants and agreements contained in this Section 8 shall be deemed to be a series of separate covenants and agreements, one for each and every county, state, city and other jurisdiction in California with respect to which the Companys business has been or is hereafter carried on. If any of the foregoing is determined by any court of competent jurisdiction to be invalid or unenforceable by reason of such agreement extending for too great a period of time or over too great a geographical area, or by reason of its being too extensive in any other respect, such agreement shall be interpreted to extend only over the maximum period of time and geographical area and to the maximum extend enforceable, all as determined by such court in such action. Any determination that any provision hereof is invalid or unenforceable, in whole or in part, shall have no effect on the validity or enforceability of any remaining provision hereof.
(d) Notwithstanding the foregoing, nothing herein shall prevent Employee, following the termination of his employment or the end of the Term, whichever is later, from being associated with any person or entity engaged in any real estate activities or matters which constitute a primary line of business of the Company at the time of such termination so long as such association does not result in a violation of Sections 9 and/or 10 below. Employee represents and warrants that except as provided in the letter agreement dated September 16, 1997, he is not restricted or prohibited in any way from entering into this Agreement or performing services hereunder at any time, whether by non-competition, covenant, or otherwise, and shall indemnify, defend and hold the Company harmless from and against any damages, claims, costs (including attorneys fees) or liabilities as a result of the incorrectness of such representation and warranty.
9. Trade Secrets . Employee has not disclosed to Company, and Employee has been advised that Company will not accept at any time during the course of Employees employment at Company, the disclosure of any trade secret (as that term is defined in California Civil Code Section 3426 et. seq.) the disclosure or misappropriation of which by Employee would constitute a breach by Employee of any obligation to any third party, including any former employers. Employee represents and warrants he has informed Company of the existence of any and all agreements, including covenants not to compete, between Employee and third parties which may in any way relate to, impact, or prevent Employees employment at Company. Employee represents and warrants he has not taken any act prior to signing this Agreement that constitutes a breach of any agreement which may in any way relate to, impact, or prevent Employees employment at Company.
10. Confidential and Proprietary Information . Employee recognizes that he will occupy a position of trust with respect to business information of a confidential or proprietary nature which is the property of the Company and which has been and will be imparted to him from time to time in the course of the performance of his duties under this Agreement. All agreements, documents, studies, analyses, comparables, data, statistics, marketing materials, leads and lead lists developed or prepared by Employee or others in Companys employ during the term of this Agreement (excluding only personal day planners maintained by Employee) shall be and remain confidential and shall be the sole property of Company. Employee hereby acknowledges that Company develops and utilizes valuable procedures, confidential information and copyrighted materials, including but not limited to names of property owners who may wish to sell their property by auction or other means, names of potential purchasers, leads and lead lists, studies and analyses, methods of obtaining prospects, marketing and auction procedures and various brochures and other printed materials, all of which constitute a valuable part of Companys assets built up by Companys ingenuity, time, labor and expense over a period of many years and all of which constitute Company trade secrets. Employee agrees that:
(a) He shall not at any time, whether during the Term or thereafter, use, divulge or disclose directly or indirectly any confidential or proprietary information of the Companies to any person, except that he may use and disclose to other Company personnel such confidential and proprietary information in the course of the performance of his duties hereunder or when legally required to do so in connection with any pending litigation or administrative inquiry; and
(b) He shall return promptly upon the termination of this Agreement or otherwise upon the request of the Company any and all copies of any documentation or materials containing any confidential or proprietary information of the Company.
For purposes of this Agreement, the term Confidential or Proprietary Information of the Company shall include all information which is owned by the Companies and which is not at the time publicly available or generally known to persons engaged in businesses similar to that of the Company, including practices, procedures and methods and other facts relating to the business of the Companies; practices, procedures and methods and other facts related to sales, marketing, advertising, promotions, financial matters, clients, client lists of the Company and similar information of a confidential and proprietary nature. Employee agrees that his breach of this Section 10 will cause irreparable harm to the Company. Employee agrees that the remedy at law for any breach of this Section 10 will be inadequate and, in addition to any other remedy available to the Company, the Company shall be entitled to injunctive relief for any actual or threatened breach of this Section 10 without proof that any actual damages have been caused by such breach.
11. Termination .
(a) Termination . (Employment At Will) Either Company or Employee may terminate this Agreement at any time during the twenty four-month Term, with or without cause, by delivering written notice of its election to the other. The written notice of termination for cause from Company to Employee shall include a reasonably detailed description of Employees acts or omissions which constitute cause for termination. The term cause shall mean: (i) the breach of any provision of this Agreement resulting in material harm or damage to the Company or the threat of same; (ii) misconduct, neglect or negligence in the performance of Employees duties and obligations as set forth in this Agreement resulting in material harm or damage to company or the threat of the same; (iii) disloyal, dishonest or illegal conduct or moral turpitude of Employee; (iv) such material carelessness or inefficiency in the performance of his duties that Employee, in the reasonable discretion of Company, is deemed unfit to continue in the service of Company; and (v) the failure of Employee to comply with the policies or directives of Company and/or failure to take reasonable direction from Company management In each provision of this paragraph allowing Employer to terminate for cause, Employee shall have reasonable notice and an opportunity to cure if the default by Employee has not yet caused material damage or harm.
(c) If the term of the Agreement is terminated by Company without cause, then Company shall continue to pay Employee the salary and other benefits described in Sections 5(a)-(b) above during and for the remainder of the Term of the Agreement (less the aggregate value of compensation and benefits received by Employee during the remainder of the Term from any source and without regard to characterization), together with such other compensation as Employee may be entitled to under the provisions of Sections 6 (or if such benefits cannot be provided pursuant to the terms of the applicable plans, comparable benefits due hereunder and remaining to be paid during the Term in the ordinary course, provided that the payment of fringe or comparable benefits shall be subject to the availability of such benefits following Employees termination of employment at no additional cost above what was previously paid by the Company). If Employee terminates this Agreement, then Company shall not pay Employee the salary and other benefits which Employee would have been entitled to for the remainder of
the term of the Agreement under Sections 5(a)-(b) above.
(d) If the Term of Employees employment is terminated for cause, then Employee shall be entitled to receive only the compensation described in Section 5 above earned to the date of termination.
(e) This Agreement may be terminated by Employee at any time, provided such termination shall have the effect set forth as follows:
Termination of this Agreement pursuant to Section 11 shall not relieve Employee of his obligations to comply with Sections 9 and 10 hereof, which provisions shall survive the termination of this Agreement.
12. Alternative Dispute Resolution . The parties to this Agreement specifically desire an early resolution of any dispute between them which arises out of this Agreement. It is therefore, agreed that any controversy arising out of this Agreement, whether dealing with breach, interpretation or otherwise, shall be heard by a reference (Referee) pursuant to the provisions of Section 638 of the Code of Civil Procedure and in accordance with the provisions described below; provided, however, that if injunctive relief is sought, the complaining party may seek such relief from the Los Angeles Superior Court without the use of a Referee.
(a) Enforcement of Agreement . This reference provision may be enforced by the filing of a complaint or petition or motion seeking specific enforcement. Service of such motion on the opposing party shall constitute the Claim Date for purposes of this provision.
(b) Selection of Referee . The Referee shall be a retired Judge of the Court selected by mutual agreement of the parties. If the parties cannot agree then a Referee shall be appointed by the Los Angeles Superior Court in accordance with Section 640 of the Code of Civil Procedure. Each party shall be entitled to only one disqualification pursuant to Section 170.6 of the Code of Civil Procedure. The parties hereby waive their right to a trial by jury and agree that their dispute shall be tried by the Referee so selected.
(c) Decisional Rules . The trial shall be conducted and the issues determined in compliance with all judicial rules and all statutory and decisional law of the Sate of California as if the matter were formally litigated in Superior Court. The Referee shall conduct and decide all pre-trial and post-trial procedures as if the matter were formally litigated in the Superior Court. All rules of evidence as set forth in the California Evidence Code, other statutory and decisional law of California and all relevant Los Angeles County Superior Court Rules and California Rules of Court shall be applicable to any proceeding before the Referee.
(d) Discovery . The parties to this Agreement expressly waive their right to engage in any discovery with the exception of depositions and requests for the inspection, production and copying of documents. Interrogatories, requests for admissions and depositions upon written interrogatories shall not be permitted. The Referee shall be authorized to issue subpoenas requiring attendance at hearings and/or trial. All discovery permitted by this Agreement shall be completed no later than fifteen (15) days before the first hearing date established by the Referee. The Referee may extend such period in the event of a partys refusal to provide requested discovery for any reason whatsoever, including legal objections raised to such discovery or unavailability of a witness due to absence or illness. No party shall be entitled to priority in conducting discovery. Depositions may be taken by either party upon seven- (7) days written notice. Request for production or inspection of documents shall be responded to within ten (10) days after service. All disputes relating to discovery shall be submitted to the Referee whose decision shall be final and binding upon the parties.
(e) Hearings and Trial . Except as set forth in this Agreement, the Referee shall determine the manner in which the proceeding is conducted including the time and place of all hearings, the order or presentation of evidence, and all other questions that arise with respect to the course of the proceeding. All proceedings and hearings conducted before the Referee, except for trial, shall be conducted without a court reporter unless one is requested by a party. The party making the request shall have the obligation to arrange and pay for the court reporter. The costs of the court reporter at the trial shall be borne equally by the parties. The trial shall be conducted without a jury on consecutive dates, as opposed to being conducted piecemeal on various dates separated by postponements or adjournments. The trial shall be conducted in a courtroom or in surroundings with formality as close to a courtroom as possible. The Referee shall set the matter for hearing within sixty (60) days after the Claim Date and try all issues of law or fact and report a statement of decision upon them, if possible, within ninety (90) days of the Claim Date.
(f) Decision of Referee . The Referee shall be empowered to enter equitable as well as legal relief, to provide all temporary and/or provisional remedies and to enter equitable orders that will be binding upon the parties. The Referee shall issue a single judgment at the close of the proceeding, which shall dispose of all of the claims of the parties that are the subject of the reference. Any decision rendered by the Referee shall be final, binding and conclusive and judgment shall be entered pursuant to Section 644 of the Code of Civil Procedure in any court in the State of California having jurisdiction.
(g) Attorneys Fees . The prevailing party shall be entitled to costs and reasonable attorneys fees, including without limitation costs and fees incurred upon any appeal, as awarded by the court.
(h) Appeal . The judgment entered upon the decision of the Referee shall be subject to all post-trial procedures and to appeal in the same manner as an appeal from any order or judgment in a civil action.
13. Miscellaneous .
(a) Assignment . This Agreement is for the unique personal services of Employee and may not be assigned by Employee without the express written consent of Company and its affiliates. Except as so provided, this Agreement shall be binding upon and inure to the benefit of the respective heirs, personal representatives, successors and assigns of the parties hereto,
(b) Real Estate License . Employee hereby agrees to maintain his real estate license in the State of California and in any other jurisdiction in which he is presently licensed. During any period that Employee does not have such a license in good standing, she will not be required to perform acts within a given jurisdiction for which a license is required in such jurisdiction, and Employee hereby agrees not to take any such actions for which a license is required until he has obtained the requisite license for such jurisdiction.
(c) Severability . Each provision, sub-provision or term of this Agreement is intended to be severable and shall continue in full force and effect although other provisions herein may be determined invalid or void for any reason.
(d) Attorneys Fees . Subject to Section 12 hereof, in the event suit is brought to enforce the terms of this Agreement, the prevailing party shall be entitled to costs and reasonable attorneys fees, including without limitation those costs and fees incurred upon any appeal, as awarded by the court.
(e) Entire Agreement; Amendments . This Agreement contains the entire agreement of the parties with respect to the subject matter covered hereby and may be amended, waived or terminated only by an instrument in writing signed by the parties hereto. This Agreement shall be interpreted according to its fair meaning and not for or against the party which drafted same.
(f) Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
(g) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
|
COMPANY: |
|
|
KENNEDY-WILSON PROPERTIES, LTD |
|
|
An Illinois corporation |
|
|
|
|
|
By: |
/s/ James Rosten |
|
|
|
|
THE COMPANY: |
|
|
|
|
|
KENNEDY-WILSON INTERNATIONAL |
|
|
a California corporation |
|
|
|
|
|
/s/ William McMorrow |
|
|
Title: |
Chairman/ CEO |
Exhibit 10.70
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the Amendment) is-made and entered into as of January 1, 2001 by and between~ Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, haying an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Services Provided to the Company, Term, and Bonus.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2001. as follows:
1. Paragraph one of Section 2. Services provided to the Company is deleted in its entirety and the following paragraph is added in lieu thereof:
2. Services Provided to the Company . Subject to the policy guidelines and directives of the Company which are provided to him by Company from time to time during the term of this Agreement, Employee shall serve as President of and be responsible for the operation of Kennedy-Wilson Proper-ties, Ltd. and to advance the business and welfare of Kennedy-Wilson Properties, Ltd. as determined by the Company from time to time. Employee shall have no authority to bind or obligate Company. to the purchase or sale of any real property, or to make any other financial commitment, including without limitation the borrowing of any monies on a secured or unsecured basis, without obtaining the prior written authorization of Company as to the specific transaction. Employees duties may not be materially changed by the Company without Employee s prior notice and also shall include such other matters or responsibilities as Company and Employee may jointly agree upon from time to time during the term of this Agreement.
2. The term of this Agreement is extended to December 31, 2002. Therefore, Section 3 of the Agreement is deleted in its entirety and the following is added in lieu thereof:
3. Term of Employment . Employee shall be employed by the Company pursuant to this Agreement for a term (the Term) beginning on January 1, 2001, and continuing through to, and terminating at the close of business on December 31, 2002 (unless earlier terminated pursuant to Section 11).
3. Section 5 (b) Bonus , is deleted in its entirety and the following is inserted in lieu thereof:
5 (b) Bonus . Employee shall be eligible as of December 31 of each calendar year to receive a bonus (the Bonus) which shall be calculated and paid as follows:
|
|
Net Profit Bonus Revenue |
|
Bonus |
|
|
|
||
|
|
0- |
|
$3MM |
|
-0- |
|
|
|
|
|
$3MM |
|
-$7MM |
|
10% |
|
|
|
|
|
$7MM |
|
- $9MM |
|
12.5% |
|
|
|
|
|
$9MM |
|
- Above |
|
15% |
|
|
|
Net Profits shall mean the gross revenue realized during the applicable fiscal year less costs and expenses which include without limitation Employees salary and benefits, the salaries and benefits of employees of Kennedy Wilson Properties, Ltd., and other expenses properly charged to such gross revenue according to generally acceptable accounting principles as determined in the commercially reasonable judgment of Companys Chief Financial Officer, but excluding depreciation & amortization, interest expense, cost of capital and corporate overhead allocation charges.
(c) Stub Year Bonus: Employee shall be eligible for a bonus for the period of September 1, 2000, through December 31, 2000 associated with Employees Executive Managing Director responsibilities. The bonus shall be discretionary and shall be determined at the sole and absolute discretion of the Compensation Committee. The Compensation Committee shall be composed of William McMorrow, Barry Schlesinger and James Ozello. Said bonus shall be paid in January 2001 and shall be charged to Corporate and not as a charge against Employees Accounting Unit.
Employee acknowledges that Company has not provided Employee with any projections or estimates of Bonus Pool Revenue that might be received by Employee under the terms of this Agreement as an inducement to Employee to accept employment with Company.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written above.
THE COMPANY: |
|
EMPLOYEE: |
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
a California corporation |
|
|
|
|
|
/s/ William McMorrow |
|
|
Title: Chairman/ CEO |
|
|
Exhibit 10.71
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement (the Second Amendment) is made and entered into as of 3-15-01 2001 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS. Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Services Provided to the Company, Term, and Bonus.
AMENDMENT TO AGREEMENT
NOW THEREFORE, for. good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of March 15, 2001 as follows:
1. Section 5 (a) of the Agreement is amended such that, effective March 15, 2001, the Company shall pay Employee a salary equal to $11,538.46 per pay period ($300,000.00 annualized) payable in equal installments every two weeks (based on 26 pay periods per year) and subject to such deductions and withholdings as Company may from time to time be required to make pursuant to applicable law, governmental regulation or
IN WITNESS WHEREOF, the undersigned have executed this Second Amendment as of the date first written above.
THE COMPANY: |
|
EMPLOYEE: |
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
a California corporation |
|
|
|
|
|
/s/ William McMorrow |
|
|
Title: Chairman/ CEO |
|
|
Exhibit 10.72
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Third Amendment to Employment Agreement (the Third Amendment) is made and entered into as of 1-03-03 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, and March 15, 2001 providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term, and Bonus.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2003 as follows:
1. Section 3 Term of Employment is amended such that the term of this Agreement is extended to December 31, 2003. Therefore, Section 3 of the Agreement is amended such that the termination date of December 31, 2002 is deleted and the termination date of December 31, 2003 is inserted in lieu thereof.
2. Section 5 (b) Bonus is deleted in its entirety and the following is added in lieu thereof:
(b) Bonus . Employee shall be eligible as of December 31 of each calendar year to receive a bonus (the Bonus) based on the net income of Kennedy Wilson Properties, LTD, (Division) which shall be calculated and paid as follows:
|
Net Income |
|
Bonus |
|
|
|
0 -MM |
|
10 |
% |
|
|
51MM -Above |
|
15 |
% |
|
Net income shall be equal to (i) the gross revenue credited to the Division, less (ii) cost and expenses incurred by the Division including without limitation office rent and expenses, salaries, bonuses and benefits of all employees and consultants who provide services for the Division, marketing costs, write-offs, depreciation and amortization, interest expense, a charge for general corporate overhead, and a cost of capital factor equal to twelve percent (12%) per annum of the amount of any indebtedness incurred or extended by Company for the operation of the Division and two percent (2%) per annum of the amount of any indebtedness which is guarantied by Company for the benefit of the Division, and other expenses properly charged to such gross revenue according to generally acceptable accounting principles as determined in the commercially reasonable judgment of Companys Chief Financial Officer.
3. Section 5(d) is added as follows:
(d) Incentive Bonus and Promote - KW Property Fund II (Fund II) and KW Private Equity Partnership I (Equity I) . Employee shall participate in the origination, marketing, and management of Fund II and Equity I.
(i) Promote II . Net profits generated upon the ultimate sale of any property acquired by Fund II and Equity I during the term of Employees employment are defined as the Promote-Il. Net profit shall mean the difference between the net sales price of a given property and the original acquisition price of the property plus any out-of-pocket investment in the applicable property of the Fund, less cost of capital and any other operating expenses with respect to such property. As Promote-Il Properties are sold and the Promote-Il is recorded and funded, a disbursement will be made to Employee equal to his participation in two thirds of the funded Promote-Il. The remaining one third will be held in reserve (Promote-Il a Reserve for Fund II properties and Promote-Il b Reserve for Equity I properties) to offset potential Fund II or Equity I property sale losses. Promote-Il a Reserve is only to be used for losses associated with Fund II properties and Promote-Il b Reserve is only to be used for losses associated with Equity I properties. When the last of the Promote-Il properties in each reserve is sold, any funds remaining in the appropriate Promote-Il Reserve, II a or II b, will be paid to the Employee within thirty (30) days of the properties sale. To the extent possible, all sums paid under this Promote-Il Section shall be treated for tax purposes in the same manner as distributions made to Kennedy-Wilson Property Services, Inc., General Partner. Promote-II multiplied by 20% is defined as the Promote-II Bonus Pool. The Employees portion of the Promote-Il Bonus Pool is equal to 1/3 of the first 50% of the Promote-Il Bonus Pool and Employee shall be eligible for a discretionary bonus of up to 80% of the second 50% of the Promote-II Bonus Pool. The discretionary bonus will be at the sole and absolute discretion of the Fund Compensation Committee. The Fund Compensation Committee shall be comprised of William McMorrow, Kent Mouton, Freeman Lyle, Barry Schlesinger, James Rosten, Philip Capron, and James Ozello.
(ii) Bonus Pool II . Net profits generated from the operation of Fund II and Equity I multiplied by 20% is defined as Bonus Pool II. Bonus Pool II is further defined to be the total fee revenues Kennedy Wilson receives from Fund II and Equity I less the total expenses incurred in generating those fees, multiplied by 20%. The Employees portion of Bonus Pool II is equal to 1/3 of the first 50% of Bonus Pool II and Employee shall be eligible for a discretionary bonus of up to 80% of the second 50% of the Bonus Pool. The discretionary bonus will be at the sole and absolute discretion of the Fund Compensation Committee. The Fund Compensation Committee shall be comprised of William McMorrow, Kent Mouton, Freeman Lyle, Barry Schlesinger, James Rosten, Philip Capron, and James Ozello.
IN WITNESS WHEREOF, the undersigned have executed this Second Amendment as of the date first written above.
THE COMPANY: |
|
EMPLOYEE: |
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
a California corporation |
|
|
|
|
|
/s/ William McMorrow |
|
|
Title: Chairman/ CEO |
|
|
Exhibit 10.73
FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Fourth Amendment to Employment Agreement (the Fourth Amendment) is made and entered into as of September 5, 2003 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, March 15, 2001, and January 3, 2003 providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Incentive Bonus and Promote KW Property Fund II and KW Private Equity Partnership Bonus Pool Il.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, as follows:
1. Section 5 (d) (iii) Bonus Pool II is deleted in its entirety and the following is added in lieu thereof.
(iii) Bonus Pool II . Net profits generated from the operation of Fund II and Equity I multiplied by 20% is defined as Bonus Pool II. Bonus Pool II is further defined to be the total fee revenues Kennedy Wilson receives from Fund II and Equity I less the total expenses incurred in generating those fees, multiplied by 20%. The Employees portion of Bonus Pool II is equal to 25%, however the Employee shall be eligible for a discretionary. bonus that could equal 30% of Bonus Pool II. The discretionary bonus will be at the sole and absolute discretion of the Fund Operating Committee. The Fund Operating Committee shall be comprised of William McMorrow, Kent Mouton, Freeman Lyle, Barry Schlesinger, James Rosten, and James Ozello.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Second Amendment as of the date first written above.
THE COMPANY: |
|
EMPLOYEE: |
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
a California corporation |
|
|
|
|
|
/s/ William McMorrow |
|
|
Title: Chairman/ CEO |
|
|
Exhibit 10.74
FIFTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Fifth Amendment to Employment Agreement (the Fifth Amendment) is made and entered into as of October 1, 2003 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS. Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, March 15, 2001, January 3, 2003, and September 5, 2003 providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Salary.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of October 1, 2003 as follows:
1. Section 5 (a) of the Agreement is amended such that, effective October 1, 2003, the Company shall pay Employee a salary equal to $15,384.62 per pay period ($400,000.00 annualized) payable in equal installments every two weeks (based on 26 pay periods per year) and subject to such deductions and withholdings as Company may from time to time be required to make pursuant to applicable law, governmental regulation or
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Fifth Amendment as of the date first written above.
THE COMPANY: |
|
EMPLOYEE: |
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
a California corporation |
|
|
|
|
|
/s/ William McMorrow |
|
|
Title: Chairman/ CEO |
|
|
Exhibit 10.75
SIXTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Sixth Amendment to Employment Agreement (the Sixth Amendment) is made and entered into as of January 1, 2004 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, March 15, 2001, January 3, 2003, September 5, 2003, and October 1, 2003, (Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2004 as follows:
1. Section 3 Term of Employment is amended such that the term of this Agreement is extended to December 31, 2004. Therefore, Section 3 of the Agreement is amended such that the termination date of December 31, 2003 is deleted and the termination date of December 31, 2004 is inserted in lieu thereof.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Sixth Amendment as of the date first written above.
THE COMPANY: |
|
EMPLOYEE: |
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
a California corporation |
|
|
|
|
|
/s/ William McMorrow |
|
|
Title: Chairman/ CEO |
|
|
Exhibit 10.76
SEVENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Seventh Amendment to Employment Agreement (the Seventh Amendment) is made and entered into as of April 19, 2004 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, March 15, 2001, January 3, 2003, September 5, 2003, October 1, 2003, and January 1, 2004 (Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Bonus.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of April 19, 2004 as follows:
1. Section 5 (b) Bonus is amended such that Section 5 (b) is deleted in its entirety and the following is added in lieu thereof:
Section 5 (b) Bonus In addition to the base salary provided for above, at the discretion of the Company, Employee may receive with respect to each fiscal year (or portion thereof) during the term of this Agreement, a discretionary bonus in an amount determined in the sole and absolute discretion of William J. McMorrow, Chairman, CEO, as approved by the Compensation and Stock Option Committees of the Board of Directors.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Seventh Amendment as of the date first written above.
THE COMPANY: |
|
EMPLOYEE: |
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
a California corporation |
|
|
|
|
|
/s/ William McMorrow |
|
|
Title: Chairman/ CEO |
|
|
Exhibit 10.77
EIGHTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Seventh Amendment to Employment Agreement (the Eighth Amendment) is made and entered into as of January 1, 2005 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, March 15, 2001, January 3, 2003, September 5, 2003, October 1,2003, January 1, 2004, and April 19, 2004 (the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2005 as follows:
1. Section 3 Term of Employment is amended such that the term of this Agreement is extended to December 31, 2005. Therefore, Section 3 of the Agreement is amended such that the termination date of December 31, 2004 is deleted and the termination date of December 31, 2005 is inserted in lieu thereof.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Seventh Amendment as of the date first written above.
THE COMPANY: |
|
EMPLOYEE: |
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
a California corporation |
|
|
|
|
|
/s/ William McMorrow |
|
|
Title: Chairman/ CEO |
|
|
Exhibit 10.78
NINTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Ninth Amendment to Employment Agreement (the Ninth Amendment) is made and entered into as of February 11, 2005 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, March 15, 2001, January 3, 2003, September 5, 2003, October 1, 2003, January 1, 2004, April 19, 2004, and January 1, 2005 (the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Incentive Bonus.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2005 as follows:
1. Incentive Bonus . Section 5 (d) (iii) Bonus Pool II is deleted in its entirety and the following is added in lieu thereof:
Incentive Bonus . Section 5 (d) (iii) Bonus Pool II Employee shall be entitled to an annual bonus for each calendar year of the term of this Agreement commencing with the calendar year ending December 31, 2005 according to the following formula. Employee shall receive a percentage of a portion of the Net (defined as the Bonus Pool) of each of the fund related businesses he is involved in. The total Bonus Pool for all participants shall be an amount equal to the sum of 20% of the total revenues less total expenses, less a twelve (12) percent cost of capital (funds invested by KW in the Business, prorated as to time the funds are actually invested during the Bonus Pool calculation time frame) and less an annual KW overhead charge of $75,000 (only charged against one Business Unit and until Fund Is term expires, Fund I will be that unit). For Fund II and subsequent funds Employee is involved in, Employee shall receive a portion of the 20% Bonus Pool as decided by the Bonus Pool Committee which is comprised of William McMorrow, Jim Ozello and Barry Schlesinger. The Incentive Bonus shall be paid to the Employee within ninety (90) days of the close of the calendar year or five days after the date the annual KW audit is received, whichever is earlier. Since each Business Unit Bonus Pool has different participants, each Business Units Bonus Pool will be calculated on a per Business Unit basis.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Seventh Amendment as of the date first written above.
THE COMPANY:
THE COMPANY: |
|
EMPLOYEE: |
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
a California corporation |
|
|
|
|
|
/s/ William McMorrow |
|
|
Title: Chairman/ CEO |
|
|
Exhibit 10.79
TENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Tenth Amendment to Employment Agreement (the Tenth Amendment) is made and entered into as of January 1, 2006 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, March 15, 2001, January 3, 2003, September 5, 2003, October 1, 2003, January 1, 2004, April 19, 2004, January 1, 2005, and February 11, 2005 (the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2006 as follows:
1. Section 3 Term of Employment is amended such that the term of this Agreement is extended to December 31, 2006. Therefore, Section 3 of the Agreement is amended such that the termination date of December 31, 2005 is deleted and the termination date of December 31, 2006 is inserted in lieu thereof.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written above.
THE COMPANY:
THE COMPANY: |
|
EMPLOYEE: |
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
a California corporation |
|
|
|
|
|
/s/ William McMorrow |
|
|
Title: Chairman/ CEO |
|
|
Exhibit 10.80
ELEVENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Eleventh Amendment to Employment Agreement (the Eleventh Amendment) is made and entered into as of August 1, 2006 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, March 15, 2001, January 3, 2003, September 5, 2003, October 1, 2003, January 1, 2004, April 19, 2004, January 1, 2005, February 11, 2005, and January 1, 2006 (the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Compensation.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of August 1, 2006 as follows:
1. Section 5 (a) of the Agreement is amended such that, effective August 1, 2006, the Company shall pay Employee a salary equal to $19,230.77 per pay period ($500,000.00 annualized) payable in equal installments every two weeks (based on 26 pay periods per year) and subject to such deductions and withholdings as Company may from time to time be required to make pursuant to applicable law, governmental regulation or order.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written above.
THE COMPANY:
THE COMPANY: |
|
EMPLOYEE: |
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
a California corporation |
|
|
|
|
|
/s/ William McMorrow |
|
|
Title: Chairman/ CEO |
|
|
Exhibit 10.81
TWELFTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Twelfth Amendment to Employment Agreement (the Twelfth Amendment) is made and entered into as of January 1, 2007 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, March 15, 2001, January 3, 2003, September 5, 2003, October 1, 2003, January 1, 2004, April 19, 2004, January 1, 2005, February 11, 2005 January 1, 2006, and August 1, 2006 (the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term of Employment.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2007 as follows:
1. Section 3 Term of Employment is amended such that the term of this Agreement is extended to December 31, 2007. Therefore, Section 3 of the Agreement is amended such that the termination date of December 31, 2006 is deleted and the termination date of December 31, 2007 is inserted in lieu thereof.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written above.
THE COMPANY: |
|
EMPLOYEE: |
|
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
|
a California corporation |
|
|
|
|
|
|
|
/s/ William McMorrow |
|
|
|
Title: |
Chairman/ CEO |
|
|
Exhibit 10.82
THIRTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Thirteenth Amendment to Employment Agreement (the Thirteenth Amendment) is made and entered into as of January 1, 2008 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, March 15, 2001, January 3, 2003, September 5, 2003, October 1, 2003, January 1, 2004, April 19, 2004, January 1, 2005, February 11, 2005 January 1, 2006, August 1, 2006, and January 1, 2007 (the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term and Compensation.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2008 as follows:
1. Section 3 Term of Employment is amended such that the term of this Agreement is extended to December 31, 2008. Therefore, Section 3 of the Agreement is amended such that the termination date of December 31, 2007 is deleted and the termination date of December 31, 2008 is inserted in lieu thereof.
2. Section 5 (a) of the Agreement is amended such that, effective January 1, 2008, the Company shall pay Employee a salary equal to $21,153.85 per pay period ($550,000.00 annualized) payable in equal installments every two weeks (based on 26 pay periods per year) and subject to such deductions and withholdings as Company may from time to time be required to make pursuant to applicable law, governmental regulation or order.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written above.
THE COMPANY: |
|
EMPLOYEE: |
|
KENNEDY-WILSON INTERNATIONAL |
|
/s/ Jim Rosten |
|
a California corporation |
|
|
|
|
|
|
|
/s/ William McMorrow |
|
|
|
Title: |
Chairman/ CEO |
|
|
Exhibit 10.83
FOURTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Fourteenth Amendment to Employment Agreement (the Fourteenth Amendment) is made and entered into as of January 1, 2009 by and between Kennedy-Wilson Properties, Ltd., an Illinois corporation (The Company) a wholly owned subsidiary of Kennedy-Wilson Inc. a Delaware corporation, having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, (Company), and James Rosten, an individual (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 4, 1999, and amended January 1, 2001, March 15, 2001, January 3, 2003, September 5, 2003, October 1, 2003, January 1, 2004, April 19, 2004, January 1, 2005, February 11, 2005 January 1, 2006, August 1, 2006, January 1, 2007, and January 1, 2008 (the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of January 1, 2009 as follows:
1. Section 3 Term of Employment is amended such that the term of this Agreement is extended to December 31, 2009. Therefore, Section 3 of the Agreement is amended such that the termination date of December 31, 2008 is deleted and the termination date of December 31, 2009 is inserted in lieu thereof.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written above.
THE COMPANY: |
|
EMPLOYEE: |
KENNEDY-WILSON INTERNATIONAL |
|
/s/ James Rosten |
a California corporation |
|
James Rosten |
By: |
|
|
/s/ William .McMorrow |
|
|
Title: Chairman, CEO |
|
|
Exhibit 10.84
EMPLOYMENT AGREEMENT
This Employment Agreement (the Agreement) is made and entered into as of January 1, 2006 by and between KW Multi-Family Management Group, Ltd. A Delaware corporation (the Company), having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210 and Robert E. Hart (Employee), with reference to the following facts and circumstances:
R E C I T A L S:
A. Company is diversified real estate marketing, property management, and investment firm whose businesses include the acquisition and management of real estate and real estate related assets.
B. Company desires to employ Employee and Employee desires to be employed by Company for the purposes and on the terms and conditions set forth in this Agreement.
C. This Agreement replaces and supersedes in their entirety any and all prior agreements, express or implied, written or oral, performed or unperformed, pertaining to the employment of Employee and the compensation to be paid to him therefor, and all such prior agreements and understandings are hereby terminated and shall be of no further force or effect.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Employee agree as follows:
1. Employment . Company hereby employs Employee and Employee hereby accepts employment to perform the duties described in Section 2 below, on the terms, conditions and covenants set forth in this Agreement.
2. Services Provided to the Company . Subject to the policy guidelines and directives of the Company which are provided to him by Company from time to time during the term of this Agreement, Employee shall be employed as President and Chief Executive Officer with responsibilities for day to day management of all Company operations, meeting revenue and expense objectives and all related business goals as approved by the Companys Board of Directors, and to advance the business and welfare of KW Multi-Family Management Group, Ltd. as determined by the Company from time to time. Within the guidelines as set forth by the Investment Committee, Employee shall have the authority to bind or obligate Company to the purchase or sale of any real property, or to make any other financial commitment, including without limitation the borrowing of any monies on a secured or unsecured basis,
Employees employment is on a full-time and best efforts basis meaning that during the term of this Agreement, Employee shall not accept any full or part-time employment, including without limitation as an Independent Consultant, after working hours or otherwise,
without the prior written consent of Company, which may be given, withheld or conditioned in Companys sole and absolute discretion. Employee shall devote his full energies, interests, abilities, and productive time to the performance of his duties and responsibilities under this Agreement. During the term of this Agreement, Employee shall not, directly or indirectly, whether as a partner, employee, creditor, shareholder or otherwise, promote, participate or engage in any activity or other business competitive with Companys businesses. Notwithstanding the foregoing, Company acknowledges that Employee has made and will continue to make personal investments that will require Employees periodic attention. Employee may participate in such personal investments to the full extent desired by Employee so long as such personal investment activity does not detract from Employees ability to devote his full energies and productive interests to the performance of his duties and responsibilities under this Agreement. Company shall be responsible for payment of all dues and fees required in connection with the maintenance of any professional licenses that may be required of Employee in the performance or satisfaction of Employees duties hereunder. Company shall indemnify, defend, protect and hold Employee harmless from the negligent acts and omissions of Employee so long as Employee acted in good faith an in the course of his employment.
3. Term of Employment . Employee shall be employed by the Company pursuant to this Agreement for a term (the Term) beginning on January 1, 2006 and continuing through to, and terminating at the close of business on December 31, 2006 (unless earlier terminated pursuant to Section 11).
4. Commitment to the Company .
(a) During the Term, Employee shall not be involved, individually or as an Employee, principal, officer, general partner, director or shareholder, in any real estate development activities without first obtaining the consent and approval of a majority of the Companys Board of Directors. The limitation contained in this Section 4 shall not apply, however, to the ownership of not more than one percent (l%) of the outstanding shares of any class of securities of a publicly-held issuer subject to the public reporting requirements of the Securities and Exchange Act of 1934, as amended, or any limited partner interest in a limited partnership or similar passive investment interest so long as the nature of such investment prevents, pursuant to applicable law, Employees control of the management of the issuer of such investment interests. For purposes of this Section 4, Employee shall be deemed the owner of any interests held by Employee, Employees spouse, or any other unemancipated minor member of the Employees family.
(b) Employee shall, at all times during the Term, strictly adhere to and comply with all of Companys policies, rules and procedures as they currently exist and as they may be changed by the Company. Employee agrees that to the best of his ability and experience he will at all times loyally and conscientiously perform all of the duties and obligations required of him expressly or by implication by the terms of this Agreement.
5. Compensation .
(a) Company shall pay a basic salary to Employee at the rate of $15,384.62 per pay period ($400,000.00 annualized) payable in equal installments every two weeks (based on 26 pay periods per year) and subject to such deductions and withholdings as Company may from time to time be required to make pursuant to applicable law, governmental regulation or order.
(b) Bonus. For each calendar year during the term of Employees employment, under this Agreement the Company shall make available a Bonus Pool equal to twenty percent (20%) of the net operating income for the applicable calendar year. The net operating income shall be equal to (i) the gross revenue less (ii) costs and overhead expenses incurred up to $2.3MM including among other things, salaries, bonuses and benefits of all Company employees, the Companys prorata share of any services, leased premises, and personnel provided by Kennedy Wilson, Inc. or its affiliates, KW Multi-Family Management Group, Ltd., marketing costs, and write-offs and for consultants who provide services.
Employee understands and acknowledges that the Bonus Pool as so calculated shall be distributed by Employee amongst the Companys employees in Employees sole and absolute discretion. The determination of net operating income for any applicable period and any dispute concerning the source an item of revenue or expense shall be approved or resolved by the Chief Financial Officer of Kennedy Wilson whose reasonable determination of same shall be conclusive.
Employee acknowledges that Company has not provided Employee with any projections or estimates of Bonus that might be received by Employee under the terms of this Agreement as an inducement to Employee to accept employment with Company.
6. Other Benefits . During the Term of his employment and subject to applicable eligibility requirements of position, tenure, salary, age, health and other qualifications as may be set forth in the Companys Employment Handbook, or pursuant to the terms of the applicable benefit provider, Employee shall participate in such benefit plans or programs as are available to the Companys other employees, including without limitation medical, dental, disability, life insurance, vacations, and 401K Plan.
7. Business Expenses . Employee will be required to incur ordinary and necessary travel and other business expenses in connection with the performance of his duties hereunder, and Employee shall be entitled to reimbursement from Company for such expenses, in accordance with Companys policies and procedures.
8. Non-Competition . For all periods that Employee is employed pursuant to this Agreement and for a period of twelve (12) months thereafter, unless Company has terminated Employee without cause, or if Company has not renewed Employees employment in Companys sole and absolute discretion, Employee shall not directly or indirectly:
(a) Engage in any business in the State of California which engages in the
same businesses or similar businesses engaged in by the Company during the Term, without the consent of the Board of Directors of the Company, or which could, or would result in using or revealing any trade secrets or confidential information of the Company, including but not limited to activities, whether direct or indirect, as proprietor, partner, shareholder, principal, agent, or employee; and
(b) In any manner induce, attempt to induce, or assist others to induce or attempt to induce any employee, partner, joint venturer, independent contractor, agent or customer of the Company to terminate its, his or her association with the Company, or do anything to interfere with the relationship between the Company and such person or entity or other persons or entities dealing with the Company.
(c) The parties hereto intend that the covenants and agreements contained in this Section 8 shall be deemed to be a series of separate covenants and agreements, one for each and every country, county, state, city and other jurisdiction in the world with respect to which the Companys business has been or is hereafter carried on. If any of the foregoing is determined by any court of competent jurisdiction to be invalid or unenforceable by reason of such agreement extending for too great a period of time or over too great a geographical area, or by reason of its being too extensive in any other respect, such agreement shall be interpreted to extend only over the maximum period of time and geographical area and to the maximum extend enforceable, all as determined by such court in such action. Any determination that any provision hereof is invalid or unenforceable, in whole or in part, shall have no effect on the validity or enforceability of any remaining provision hereof.
(d) Notwithstanding the foregoing, nothing herein shall prevent Employee, following the termination of his employment or the end of the Term from being associated with any person or entity engaged in any real estate activities or matters other than real estate activities which constitute a primary line of business of the Company at the time of such termination, so long as such association does not result in a violation of Section 9 or Section 10 below. Employee represents and warrants that he is not restricted or prohibited in any way from entering into this Agreement or performing services hereunder at any time, whether by non-competition, covenant, or otherwise, and shall indemnify, defend and hold the Company harmless from and against any damages, claims, costs (including attorneys fees) or liabilities as a result of the incorrectness of such representation and warranty.
9. Trade Secrets . Employee has not disclosed to Company, and Employee has been advised that Company will not accept at any time during the course of Employees employment at Company, the disclosure of any trade secret (as that term is defined in California Civil Code Section 3426 et. seq.) the disclosure or misappropriation of which by Employee would constitute a breach by Employee of any obligation to any third party, including any former employers. Employee represents and warrants he has informed Company of the existence of any and all agreements, including covenants not to compete, between Employee and third parties which may in any way relate to, impact, or prevent Employees employment at Company. Employee represents and warrants he has not taken any act prior to signing this Agreement that constitutes a breach of any agreement which may in any way relate to, impact, or prevent Employees employment at Company.
10. Confidential and Proprietary Information . Employee recognizes that he will occupy a position of trust with respect to business information of a confidential or proprietary nature which is the property of the Company and which has been and will be imparted to him from time to time in the course of the performance of his duties under this Agreement. All agreements, documents, studies, analyses, comparables, data, statistics, marketing materials, leads and lead lists developed or prepared by Employee or others in Companys employ during the term of this Agreement shall be and remain confidential and shall be the sole property of Company. Employee hereby acknowledges that Company develops and utilizes valuable procedures, confidential information and copyrighted materials, including but not limited to names of property owners who may wish to sell their property by auction or other means, names of potential purchasers, leads and lead lists, studies and analyses, methods of obtaining prospects, marketing and auction procedures and various brochures and other printed materials, all of which constitute a valuable part of Companys assets built up by Companys ingenuity, time, labor and expense over a period of many years and all of which constitute Company trade secrets. Employee agrees that:
(a) He shall not at any time, whether during the Term or thereafter, use, divulge or disclose directly or indirectly any confidential or proprietary information of the Companies to any person, except that he may use and disclose to other Company personnel such confidential and proprietary information in the course of the performance of his duties hereunder or when legally required to do so in connection with any pending litigation or administrative inquiry; and
(b) He shall return promptly upon the termination of this Agreement or otherwise upon the request of the Company any and all copies of any documentation or materials containing any confidential or proprietary information of the Company.
For purposes of this Agreement, the term Confidential or Proprietary Information of the Company shall include all information which is owned by the Companies and which is not at the time publicly available or generally known to persons engaged in businesses similar to that of the Company, including practices, procedures and methods and other facts relating to the business of the Companies; practices, procedures and methods and other facts related to sales, marketing, advertising, promotions, financial matters, clients, client lists of the Company and similar information of a confidential and proprietary nature. Employee agrees that his breach of this Section 10 will cause irreparable harm to the Company. Employee
agrees that the remedy at law for any breach by him of this Section 10 will be inadequate and, in addition to any other remedy available to the Company, the Company shall be entitled to injunctive relief for any actual or threatened breach of this Section 10 without proof that any actual damages have been caused by such breach, and without any need to post bond or similar security.
11. Termination .
(a) Termination . (Employment at Will) Either Company or Employee may terminate this Agreement at any time during the Term, with or without cause, by delivering written notice of its election to the other. The written notice of termination for cause from
Company to Employee shall include a reasonably detailed description of Employees acts or omissions that constitute cause for termination. The term cause shall mean: (i) the breach of any provision of this Agreement resulting in material harm or damage to the Company or the threat of material harm or damage to the Company; (ii) willful misconduct, neglect or negligence in the performance of Employees duties and obligations as set forth in this Agreement; (iii) disloyal, dishonest or illegal conduct or moral turpitude of Employee; (iv) such material carelessness or inefficiency in the performance of his duties that Employee, in the reasonable discretion of Company, is deemed unfit to continue in the service of Company; and (v) the material and persistent failure of Employee to comply with the policies or directives of Company and/or failure to take direction from Company management. Termination for violations of subsections 11 (a) (iv) and 11 (a) (v) shall only occur after written notice of deficiencies or failures and a 10 day cure period.
(b) Employees employment with Company shall cease upon the date of his death or physical or mental disability to the extent that Employee becomes disabled for more than sixty (60) consecutive days or ninety (90) days in the aggregate in any 12-month period to perform his duties on a full-time basis. Upon termination for death or physical or mental disability, Employee shall be entitled to receive the compensation described in Section 5(a)-(b) to the date of termination.
(c) If the term of the Agreement is terminated by Company without cause, then Company shall continue to pay Employee the salary described in Section 5(a) and 5 (b) above during and for the remainder of the Term of the Agreement, together with such other compensation as Employee may be entitled to under the provisions of Sections 6, Benefits (or if such benefits cannot be provided pursuant to the terms of the applicable plans, comparable benefits due hereunder and remaining to be paid during the Term in the ordinary course, provided that the payment of fringe or comparable benefits shall be subject to the availability of such benefits following Employees termination of employment at no additional cost above what was previously paid by the Company).
(d) If Employee terminates this Agreement, Employee shall only be entitled to receive the compensation described in Section 5(a) and 5 (b) to the date of termination.
(e) If the Term of Employees employment is terminated for cause, then Employee shall be entitled to receive only the compensation described in Section 5 (a) and 5 (b) above earned to the date of termination.
(f) This Agreement may be terminated by Employee at any time, provided such termination shall have the effect set forth as follows:
Termination of this Agreement pursuant to this Section 11 shall not relieve Employee of his obligations to comply with Section 10 hereof, which provision shall survive the termination of this Agreement. If and only if, Employee resigns due to the Companys material breach of this Agreement which is not corrected within ten (10) days after the Employees written notice of the breach to the Company, then Employee shall be relieved of his obligations under Section 10 hereof.
12. Alternative Dispute Resolution . The parties to this Agreement specifically desire an early resolution of any dispute between them, which arises out of this Agreement. It is therefore, agreed that any controversy arising out of this Agreement, whether dealing with breach, interpretation or otherwise, shall be heard by a reference (Referee) pursuant to the provisions of Section 638 of the Code of Civil Procedure and in accordance with the provisions described below; provided, however, that if injunctive relief is sought, the complaining party may seek such relief from the Los Angeles Superior Court without the use of a Referee.
(a) Enforcement of Agreement . This reference provision may be enforced by the filing of a complaint or petition or motion seeking specific enforcement. Service of such motion on the opposing party shall constitute the Claim Date for purposes of this provision.
(b) Selection of Referee . The Referee shall be a retired Judge of the Court selected by mutual agreement of the parties. If the parties cannot agree then a Referee shall be appointed by the Los Angeles Superior Court in accordance with Section 640 of the Code of Civil Procedure. Each party shall be entitled to only one disqualification pursuant to Section 170.6 of the Code of Civil Procedure. The parties hereby waive their right to a trial by jury and agree that their dispute shall be tried by the Referee so selected.
(c) Decisional Rules . The trial shall be conducted and the issues determined in compliance with all judicial rules and all statutory and decisional law of the Sate of California as if the matter were formally litigated in Superior Court. The Referee shall conduct and decide all pre-trial and post-trial procedures as if the matter were formally litigated in the Superior Court. All rules of evidence as set forth in the California Evidence Code; other statutory and decisional law of California and all-relevant Los Angeles County Superior Court Rules and California Rules of Court shall be applicable to any proceeding before the Referee.
(d) Discovery . The parties to this Agreement expressly waive their right to engage in any discovery with the exception of depositions and requests for the inspection, production and copying of documents. Interrogatories, requests for admissions and depositions upon written interrogatories shall not be permitted. The Referee shall be authorized to issue subpoenas requiring attendance at hearings and/or trial. All discovery permitted by this Agreement shall be completed no later than fifteen (15) days before the first hearing date established by the Referee. The Referee may extend such period in the event of a partys refusal to provide requested discovery for any reason whatsoever, including legal objections raised to such discovery or unavailability of a witness due to absence or illness. No party shall be entitled to priority in conducting discovery. Depositions may be taken by either party upon seven (7) days written notice. Request for production or inspection of documents shall be responded to within ten (10) days after service. All disputes relating to discovery shall be submitted to the Referee whose decision shall be final and binding upon the parties.
(e) Hearings and Trial . Except as set forth in this Agreement, the Referee shall determine the manner in which the proceeding is conducted including the time and place of all hearings, the order or presentation of evidence, and all other questions that arise with respect to the course of the proceeding. All proceedings and hearings conducted before the Referee,
except for trial, shall be conducted without a court reporter unless one is requested by a party. The party making the request shall have the obligation to arrange and pay for the court reporter. The costs of the court reporter at the trial shall be borne equally by the parties. The trial shall be conducted without a jury on consecutive dates, as opposed to being conducted piecemeal on various dates separated by postponements or adjournments. The trial shall be conducted in a courtroom or in surroundings with formality as close to a courtroom as possible. The Referee shall set the matter for hearing within sixty (60) days after the Claim Date and try all issues of law or fact and report a statement of decision upon them, if possible, within ninety (90) days of the Claim Date.
(f) Decision of Referee . The Referee shall be empowered to enter equitable as well as legal relief, to provide all temporary and/or provisional remedies and to enter equitable orders that will be binding upon the parties. The Referee shall issue a single judgment at the close of the proceeding that shall dispose of all of the claims of the parties that are the subject of the reference. Any decision rendered by the Referee shall be final, binding and conclusive and judgment shall be entered pursuant to Section 644 of the Code of Civil Procedure in any court in the State of California having jurisdiction.
(g) Attorneys Fees . The prevailing party shall be entitled to costs and reasonable attorneys fees, including without limitation costs and fees incurred upon any appeal, as awarded by the court.
(h) Appeal . The judgment entered upon the decision of the Referee shall be subject to all post-trial procedures and to appeal in the same manner as an appeal from any order or judgment in a civil action.
13. Miscellaneous .
(a) Assignment . This Agreement is for the unique personal services of Employee and may not be assigned by Employee without the express written consent of Company and its affiliates. Except as so provided, this Agreement shall be binding upon and inure to the benefit of the respective heirs, personal representatives, successors and assigns of the parties hereto,
(b) Real Estate License . Employee hereby agrees to maintain his real estate license in the State of California and in any other jurisdiction in which he is presently licensed. During any period that Employee does not have such a license in good standing, he will not be required to perform acts within a given jurisdiction for which a license is required in such jurisdiction, and Employee hereby agrees not to take any such actions for which a license is required until he has obtained the requisite license for such jurisdiction.
(c) Severability . Each provision, sub-provision or term of this Agreement is intended to be severable and shall continue in full force and effect although other provisions herein may be determined invalid or void for any reason.
(d) Entire Agreement; Amendments . This Agreement contains the entire agreement of the parties with respect to the subject matter covered hereby and may be amended, waived or terminated only by an instrument in writing signed by the parties hereto. This Agreement shall be interpreted according to its fair meaning and not for or against the party which drafted same.
(e) Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
(f) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
|
|
THE COMPANY: |
|
|
|
KENNEDY-WILSON INTERNATIONAL |
|
|
|
a California corporation |
|
|
|
Name: |
William McMorrow |
|
|
Title: |
Chairman/ CEO |
|
|
/s/ William J. McMorrow |
|
|
|
|
|
|
|
EMPLOYEE: |
|
|
|
/s/ Robert E. Hart |
Exhibit 10.85
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (the First Amendment) is made and entered into as of August 1, 2006 by and between KW Multi-Family Management Group, Ltd. a Delaware corporation (the Company), having an address of 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210 and Robert E. Hart (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 1, 2006 (the Agreement) providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Compensation.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiently of which are hereby acknowledged, the parties hereby amend the Agreement, effective as of August 1, 2006 as follows:
1. Section 5 (a) Compensation is deleted in its entirety and the following is added in lieu thereof:
Section 5 (a) Compensation . The Company shall pay Employee a salary equal to $19,230.77 per pay period ($500,000.00 annualized) payable in equal installments every two weeks (based on 26 pay periods per year) and subject to such deductions and withholdings as Company may from time to time be required to make pursuant to applicable law, governmental regulation or order.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written above.
COMPANY: |
|
EMPLOYEE: |
|
KW Multi-Family Management Group, Ltd. |
|
|
|
a Delaware corporation |
|
|
|
|
|
|
|
Name: |
/s/ William J. McMorrow |
|
/s/ Robert E. Hart |
Exhibit 10.86
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement (the Second Amendment) is made and entered into as of January 1, 2007 by and between KW Multi-Family Management Group, Ltd. a Delaware corporation (The Company), and Robert E. Hart (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 1, 2006 and amended August 1, 2006 (the Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, as follows:
1. The term of this Agreement is extended to December 31, 2007. Therefore, Section 3 of the Agreement is amended such that the termination date of December 31, 2006 is deleted and the termination date of December 31, 2007 is inserted in lieu thereof:
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.
COMPANY: |
|
EMPLOYEE: |
|
KW Multi-Family Management Group, Ltd. |
|
|
|
a Delaware corporation |
|
|
|
|
|
|
|
Name: |
/s/ William J. McMorrow |
|
/s/ Robert E. Hart |
Exhibit 10.87
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Third Amendment to Employment Agreement (the Third Amendment) is made and entered into as of January 1, 2008 by and between KW Multi-Family Management Group, Ltd. a Delaware corporation (The Company), and Robert E. Hart (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 1, 2006 and amended August 1, 2006, and January 1, 2007 (the Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company. and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term and Compensation.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, as follows:
1. The term of this Agreement is extended to December 31, 2008. Therefore, Section 3 of the Agreement is amended such that the termination date of December 31, 2007 is deleted and the termination date of December 31, 2008 is inserted in lieu thereof:
2. Section 5 (a) Compensation is deleted in its entirety and the following is added in lieu thereof:
Section 5 (a) Compensation . The Company shall pay Employee a salary equal to $23,076.93 per pay period ($600,000.00 annualized) payable in equal installments every two weeks (based on 26 pay periods per year) and subject to such deductions and withholdings as Company may from time to time be required to make pursuant to applicable law, governmental regulation or order.
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.
COMPANY: |
|
EMPLOYEE: |
|
KW Multi-Family Management Group, Ltd. |
|
|
|
a Delaware corporation |
|
|
|
|
|
|
|
Name: |
/s/ William J. McMorrow |
|
/s/ Robert E. Hart |
Exhibit 10.88
FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Fourth Amendment to Employment Agreement (the Fourth Amendment) is made and entered into as of January 1, 2009 by and between KW Multi-Family Management Group, Ltd. a Delaware corporation (The Company), and Robert E. Hart (Employee).
RECITALS
WHEREAS, Company and Employee have entered into that certain Employment Agreement dated as of January 1, 2006 and amended August 1, 2006, January 1, 2007, and January 1, 2008 (the Agreement), providing for the employment of Employee by Company pursuant to the terms of such Agreement; and
WHEREAS, Company and Employee have agreed that the terms of the Employment Agreement should be modified to change the Term.
AMENDMENT TO AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement, as follows:
1. The term of this Agreement is extended to December 31, 2009. Therefore, Section 3 of the Agreement is amended such that the termination date of December 31, 2008 is deleted and the termination date of December 31, 2009 is inserted in lieu thereof:
Subject to the foregoing, the Employment Agreement remains in full force and effect, and Company and Employee hereby ratify and affirm the Employment Agreement in each and every respect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.
COMPANY: |
|
EMPLOYEE: |
|
KW Multi-Family Management Group, Ltd. |
|
|
|
a Delaware corporation |
|
|
|
|
|
|
|
Name: |
/s/ William J. McMorrow |
|
/s/ Robert E. Hart |
Exhibit 10.89
PROMISSORY NOTE
$3,543,127.00 |
|
Beverly Hills, California |
|
April 10, 2006 |
The undersigned promises to pay to Kennedy-Wilson, Inc., a Delaware corporation (Holder) at 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210, the principal sum of Three Million Five Hundred Forty Three Thousand One Hundred Twenty Seven Dollars ($3,543,127.00) together with simple interest thereon at the rate of 7.5% per annum from and after the date hereof. Principal and accrued interest shall be due and payable in full on April 9, 2011 (the Maturity Date). Principal and accrued interest may be prepaid in whole or in part without penalty. The principal amount of this loan together with accrued interest thereon shall be forgiven in full if, prior to the Maturity Date, the undersigned dies, becomes disabled or is involuntarily terminated as Holders CEO or upon any change in control of Holder as defined in the Tenth Amendment to the undersigneds employment contract with Holder.
Executed as of the day and year first above written.
|
/s/ William J. McMorrow |
|
William J. McMorrow |
Exhibit 10.90
BUSINESS LOAN AGREEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
Loan Date |
|
Maturity |
|
Loan No |
|
Call / Coll |
|
Account |
|
Officer |
|
Initials |
$28,000,000.00 |
|
07-29-2009 |
|
08-12-2014 |
|
406268713 |
|
|
|
Port #115131 |
|
710 |
|
|
References in the boxes above are for Lenders use only and do not limit the applicability of this document to any particular loan or item. Any item above containing **** has been omitted due to text length limitations.
Borrower: |
|
Kennedy-Wilson, Inc., a Delaware corporation
|
|
Lender: |
|
Pacific Western Bank
|
THIS BUSINESS LOAN AGREEMENT dated July 29, 2009, is made and executed between Kennedy-Wilson, Inc., a Delaware corporation (Borrower) and Pacific Western Bank (Lender) on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A) in granting, renewing. or extending any Loan, Lender is relying upon Borrowers representations, warranties, and agreements as set forth In this Agreement; (B) the granting, renewing. or extending of any Loan by Lender at all times shall be subject to Lenders sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement
TERM. This Agreement shall be effective as of July 29, 2009, and shall continue in full force and effect until such time as all of Borrowers Loans in favor of Lender have been paid in full, including principal, Interest, costs, expenses, attorneys fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.
CONDITIONS PRECEDENT TO EACH ADVANCE . Lenders obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lenders satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.
Loan Documents . Borrower shall provide to Lender the following documents for the Loan: (1) the Note: (2) together with all such Related Documents as Lender may require for the Loan, all in form and substance satisfactory to Lender and Lenders counsel.
Borrowers Authorization . Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents, In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.
Payment of Fees and Expenses . Borrower shell have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document.
Representations and Warranties . The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.
REPRESENTATIONS AND WARRANTIES . Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any indebtedness exists:
Organization . Borrower is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Delaware. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower Is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. Borrower maintains an office at 9601 Wilshire Boulevard, Suite 220, Beverly Hills, CA 90210. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender prior to any change in the location of Borrowers state of organization or any change in Borrowers name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Borrowers business activities.
Assumed Business Names . Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None .
Authorization. Borrowers execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result In a violation of, or constitute a default under (I) any provision of (a) Borrowers articles of incorporation or organization, or bylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrowers properties.
Loan No. 406268713 |
|
|
Financial Information . Each of Borrowers financial statements supplied to Lender truly and completely disclosed Borrowers financial condition as of the date of the statement, and there has been no material adverse change in Borrowers financial condition subsequent to the dale of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.
Properties . Except as contemplated by this Agreement or as previously disclosed in Borrowers financial statements or in writing to Lender and as accepted by Lender, and except for properly tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Burrowers properties Free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrowers properties are titled in Borrowers legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.
Hazardous Substances . Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) during the period of Borrowers ownership of the Collateral, there has been no use, operation, manufacture, storage, treatment, and disposal. release or threatened release of any Hazardous Substance by any person on, under, about or from arty of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters, (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations. And ordinances, including without imitation all Environmental Laws, Borrower authorizes Lender and its agents to enter upon the collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrowers expense and for Lenders purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrowers due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lenders acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.
Litigation and Claims . No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrowers financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrowers knowledge, all of Borrowers tax returns and reports that are or were required to be titled, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.
Lien Priority . Unless otherwise previously disclosed to Lender in writing, Borrower has not entered Into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrowers Loan and Note, that would be prior or that may in any way be superior to Lenders Security interests and rights in and to such Collateral.
Binding Effect . This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms,
AFFIRMATIVE COVENANTS . Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:
Notices of Claims and Litigation . Promptly inform Lender in writing of (1) all material adverse changes in Borrowers financial condition. and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.
Financial Records . Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrowers books and records at all reasonable times.
Financial Statements . Furnish Lender with the following:
Additional Requirements.
BORROWERS FINANCIAL REQUIREMENTS:
(I) Financial Statements:
ANNUAL STATEMENTS . Borrower shall provide to Lender, as soon as available, but in no event later than one hundred fifty (150) days after the end of each fiscal year end, a consolidated balance sheet and income statement for the period ended in form satisfactory to Lender, audited by a CPA acceptable to Lender. Statements may be due more often if requested by Lender.
2
INTERIM STATEMENTS. Borrower shall provide to Lender, as soon as available, but in no event later than sixty (60) days after the end of each fiscal quarter (including fiscal year end), a self-prepared consolidated balance sheet and income statement for the period ended in form satisfactory to Lender to include Detailed Asset and Expense Schedules and Reconciliation of Net Worth. Statements may be due more often if requested by Lender.
TAX RETURNS . Borrower shall provide to Lender, as soon as available, but in no event later than fifteen (15) days after the applicable filing date for the tax reporting period ended. Federal and other governmental tax returns. If extensions are flied, copies of such extensions are to be provided immediately upon filing.
(ii) Financial Covenants/Ratios:
MINIMUM LIQUIDITY . Borrower shall maintain a Minimum Liquidity of $2,600,000.00. The term Liquidity means the unencumbered aggregate of cash, U.S. Government obligations, bonds rated BBB or better plus marketable securities with minimum $5 per share values which are traded on national exchanges. This required Minimum Liquidity must be maintained at all times and may be evaluated quarterly.
ADJUSTMENT . Unrestricted liquid assets to be maintained at the greater of $2,800,000.00 or an amount that would be necessary to cover the shortfall if any, between adjusted EBITDA and Debt Service.
EFFECTIVE TANGIBLE NET WORTH. Borrower to maintain a minimum Effective Tangible Net Worth of $70,000,000.00. The term Effective Tangible Net Worth means Borrowers total assets excluding all intangible assets (i.e. goodwill, trademarks, patents, copyrights. organization expenses, and similar intangible items) arid excluding duo from related entities (e.g. affiliates, employees, subsidiaries, shareholders, etc.), less total liabilities excluding debt subordinated to Lender, This amount must be maintained at all times and may be evaluated quarterly.
DEBT/WORTH RATIO . Borrower to maintain a maximum ratio of Debt/Worth of 2.50 to 1.00. The ratio Debt/Worth means Borrowers total liabilities. excluding debt subordinated to Lender, and divided by Borrowers Effective Tangible Net Worth This ratio must be maintained at all times and may be evaluated quarterly. The term Effective Tangible Net Worth means Borrowers total assets excluding all intangible assets (I.e. goodwill, trademarks. patents, copyrights, organization expenses, and similar intangible items) and excluding due from related entities (eg. affiliates, employees, subsidiaries, shareholders. etc.). less total liabilities excluding debt subordinated to Lender.
PROFITABILITY . Borrower must be profitable each fiscal year end. if annual profitability is required, no more than one quarterly loss per fiscal year is allowed.
DEBT/EBITDA RATIO . Borrower to maintain a maximum ratio ofDebt/EBITDA of 0.80 to 1.00, this ratio must be maintained at. all times and may be evaluated quarterly. The ratio Debt/EBITDA means Borrowers prepared Proforma Consolidated income of Operation statement as follows:
*DSCR=(a) divided by (b)
(a) Defined as Total Revenues,
(b) Defined as Total Operating Expenses including Distributions, Dividends, Stock Repurchases, Interest Expense including Joint Venture Interest Expense as detailed in the Year to Date income Recap.
The DSCR shall be maintained at all times and may be evaluated on a quarterly basis,
(ill) Reports/Schedules Statements:
PRO FORMA AND YEAR TO DATE . Borrower agrees to provide to Lender within sixty (60) days of each calendar quarter-end, copies of its self prepared Pro Forma Consolidated Statement of Operations and its Year to Date Income Recap.
All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.
Additional Information . Furnish such additional information and statements, as Lender may request from time to time.
Insurance . Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrowers properties and operations. in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days prior written notice to Lender. Each insurance policy also shall Include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or Is offered a security interest for the Loans. Borrower will provide Lender with such lenders loss payable or other endorsements as Lender may require.
Insurance Reports . Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks Insured: (3) the amount of the policy; (4) the properties Insured: (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration dale of the policy. In addition, upon request of Lender (however not more often than annually). Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral, The cost of such appraisal shall be paid by Borrower.
3
Other Agreements . Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.
Loan Proceeds . Use all Loan proceeds solely for Borrowers business operations, unless specifically consented to the contrary by Lender in writing.
Taxes, Charges and Liens . Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments. taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or Its properties. income, or profits, prior to the dale on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrowers properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, lax, charge, levy, lien or claim so long as (I) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrowers books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.
Performance . Perform and comply. in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all other instruments and agreements between Borrower and Lender, Borrower shall notify Lender immediately in writing of any default In connection with any agreement.
Operations . Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel provide written notice to Lender of any change in executive and management personnel; conduct Its business affairs in a reasonable and prudent manner.
Environmental Studies , Promptly conduct and complete, at Borrowers expense, all such investigations, studies, samplings and testing as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower.
Compliance with Governmental Requirements . Comply with all laws, ordinances, and regulations, now or thereafter in effect, of all governmental authorities applicable to the conduct of Borrowers properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lenders sole opinion, Lenders interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lenders interest.
I nspection . Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrowers other properties and to examine or audit Borrowers books, accounts, and records and to make copies and memoranda of Borrowers books, accounts. and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party. Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies or any records it may request, all at Borrowers expense.
Compliance Certificates . Unless waived in writing by Lender, provide Lender within sixty (60) days after the end of each fiscal quarter, with a certificate executed by Borrowers chief financial officer, or other officer or person acceptable to Lender, certifying that time representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as if the date of the certificate, no Event of Default exists tinder this Agreement.
Environmental Compliance and Reports . Borrower shall comply In all respects with any and all Environmental Laws: not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrowers part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities: shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or ether communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrowers part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.
Additional Assurances . Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements. assignments, financing statements, instruments, documents and other agreements as Lender or Its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests.
RECOVERY OF ADDITIONAL COSTS . If the imposition of or any change in any law, rule, regulation or guideline, or the interpretation or application of any thereof by any court or administrative or governmental authority (including any request or policy not having the force of law) shall impose, modify or make applicable any taxes (except federal. state or local income or franchise taxes imposed on Lender), reserve requirements. capital adequacy requirements or ether obligations which would (A) increase the cost to Lender for extending or maintaining the credit facilities to which this Agreement relates, (B) reduce the amounts payable to Lender under this Agreement or the Related Documents, or (C) reduce the rate of return on Lenders capital as a consequence of Lenders obligations with respect to the credit facilities to which this Agreement relates, then Borrower agrees to pay Lender such additional amounts as will compensate Lender therefore, within five (5) days after Lenders written demand for such payment, which demand shall be accompanied by an explanation of such imposition or charge and a calculation In reasonable detail of the additional amounts payable by Borrower, which explanation and calculations shall be conclusive in the absence of manifest error.
LENDERS EXPENDITURES . If any action or proceeding Is commenced that would materially affect Lenders interest in the Collateral or if Borrower falls to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrowers failure to discharge or pay when due any amounts Borrower Is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrowers behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lenders option, will (A) be payable on demand; (B) be added to the balance of the Note and be
4
apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Notes maturity.
NEGATIVE COVENANTS . Borrower covenants and agrees with Lender that while this Agreement is In effect, Borrower shall not, without the prior written consent of Lender:
Indebtedness and Liens . (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money. including capital leases. (2) sell, transfer, mortgage, assign. pledge, lease, grant a security Interest in, or encumber any of Borrowers assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrowers accounts, except to Lender.
Continuity of Operations . (1) Engage in any business activities substantially different than those in which Borrower is presently engaged, (2) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, or (3) pay any dividends on Borrowers stock (other than dividends payable In Its stock), provided. however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, if Borrower Is a Subchapter S Corporation (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership or shares of Borrowers stock, or purchase or retire any of Borrowers outstanding shares or allow or amend Borrowers capital structure,
Loans, Acquisitions and Guaranties . (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2) purchase, create or acquire any Interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor other than in the ordinary course of business,
Agreement s. Borrower will not enter into any agreement containing any provisions which would be violated or breached by the performance of Borrowers obligations under this Agreement or in connection herewith.
CESSATION OF ADVANCES . If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrowers financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantors guaranty of the Loan or any other loan with Lender; or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.
RIGHT OF SETOFF . To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrowers accounts with Lender (whether checking, savings, or some ether account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would he prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the debt against any and all such accounts.
DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:
Payment Default , Borrower fails to make any payment when due under the Loan.
Other Defaults . Borrower falls to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
Default In Favor of Third Parties . Borrower or any Grantor defaults under army loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrowers or any Grantors property or Borrowers or any Grantors ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents,
False Statements . Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrowers behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.
Insolvency . The dissolution or termination of Borrowers existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part or Borrowers property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
Defective Collateralization . This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.
Creditor or Forfeiture Proceedings . Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Borrowers accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity of reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.
5
Events Affecting Guarantor . Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.
Change of Ownership . Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.
Adverse Change . A material adverse change occurs in Borrowers financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired.
Insecurity . Lender in good faith believes itself insecure.
Right to Cure . If any default, other than a default on indebtedness, is curable and if Borrower or Grantor, as the case may be, has not been given a notice of a similar default within the preceding twelve (12) months, it may be cured if Borrower or Grantor, as the case may be, after receiving written notice from Lender demanding cure of such default: (1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiate steps which Lender deems in Lenders sold discretion to be sufficient to cure the default and thereafter continue and complete all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT . If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lenders option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the Insolvency subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lenders rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lenders right to declare a default and to exercise its rights and remedies.
INTEGRATION . The parties agree that (a) this Agreement, together with all of the Related Documents, represents the final agreement between the parties, and therefore incorporates all negotiations of the panes hereto (b) there are no unwritten oral agreements between the parties, and (c) this Agreement may not be contradicted by evidence of any prior, contemporaneous, or subsequent oral agreements or understandings of the parties.
COMPLIANCE CERTIFICATES . Notwithstanding anything to the contrary above, Borrower to provide a Compliance Certification (provided by Lender) within sixty (60) days of calendar quarter-end signed by the CEO and CFO. Certificate to include, but not be limited to, confirmation that Borrowers outstanding unsecured borrowings with other Lenders did not exceed $20,000,000.00 at anytime.
DISTRIBUTIONS AND ADVANCES . Borrower shall be prohibited from making distributions or advances to Officers without prior consent from Lender. The conditions exclude bonuses paid to Officers in the normal course of business.
COMPANY COMMON STOCK . Borrower shall not repurchase Company Common Stock in excess of $3,000,000.00 without Lenders consent. Such repurchase will not cause the Borrower to be in violation of the financial covenants prior to or after such action.
PREFERRED DIVIDENDS . Borrower shall distribute annual Preferred Dividends in an amount not to exceed $3,700,000.00.
CROSS DEFAULT . An Event of Default under the Note shall also constitute a global Event of Default under any and all Notes or obligations executed by Kennedy-Wilson, Inc., a Delaware corporation or any other related entity or affiliate.
OUTSTANDING COMMITMENT . Borrower to comply with Lenders covenant limiting outstandings under its US Bank/East West Bank commitment to $20,000,000.00 at all times.
MISCELLANEOUS PROVISIONS . The following miscellaneous provisions are a part of this Agreement:
Amendments . This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth on this Agreement. No alleration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alleration or amendment.
Attorneys Fees; Expenses . Borrower agrees to pay upon demand all of Lenders costs and expenses, including Lenders attorneys fees and Lenders legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lenders attorneys fees and legal expenses whether or not there is a lawsuit, including attorneys fees end legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court.
Caption Headings . Caption headings in this Agreement are for convenience purposes only and are net to be used to interpret or define the provisions of this Agreement.
Consent to Loan Participation . Borrower agrees and consents to Lenders sale or transfer, whether nor later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset
6
or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrowers obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender.
Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions. This Agreement has been accepted by Lender In the State of California.
Choice of Venue . If there is a lawsuit. Borrower agrees upon Lenders request to submit to the jurisdiction of the courts of Los Angeles County, State of California.
No Waiver by Lender . Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lenders right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lenders rights or of any of Borrowers or any Grantors obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.
Notices . Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mall postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice Is to change the partys address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrowers current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers,
Severability . If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability or any other provision of this Agreement.
Subsidiaries and Affiliates of Borrower . To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word Borrower as used in this Agreement shall include all of Borrowers subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrowers subsidiaries or affiliates.
Successors and Assigns . All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrowers successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrowers rights under this Agreement or any interest therein, without the prior written consent of Lender.
Survival of Representations and Warranties . Borrower understands and agrees that in making the Loan, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the making of the Loan and delivery to Lender of the Related Documents, shall be continuing in nature, and shall remain in full force and effect until such time as Borrowers Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.
Time Is of the Essence . Time is of the essence in the performance of this Agreement.
DEFINITIONS . The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement:
Advance . The word Advance means a disbursement of Loan funds made, or to be made, to Borrower or on Borrowers behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement.
Agreemen t. The word Agreement means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time.
Borrower. The word Borrower means Kennedy-Wilson, Inc., a Delaware corporation and includes all co-signers and co-makers signing the Note and all their successors and assigns.
Collateral . The word Collateral means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, manufacturers lien, equipment trust,
7
conditional sale, trust receipt, lien, change, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.
Environmental Laws . The words Environmental Laws mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (CERCLA), the Superfund Amendments and Reauthorization Act of 1986, Pub, L. No. 99-499 (SARA), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code, Section 25100, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.
Event of Default. The words Event of Default mean any of the events of default set forth in this Agreement in the default section of this Agreement.
GAAP . The word GAAP means generally accepted accounting principles.
Grantor . The word Grantor means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest.
Guarantor . The word Guarantor means any guarantor, surety, or accommodation party of any or all of the Loan.
Guaranty . The word Guaranty means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.
Hazardous Substances . The words Hazardous Substances mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words Hazardous Substances are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term Hazardous Substances also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.
Indebtedness. The word Indebtedness means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.
Lender. The word Lender means Pacific Western Bank, its successors and assigns.
Loan . The word Loan means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.
Note . The word Note means the Note executed by Kennedy-Wilson, Inc., a Delaware corporation in the principal amount of $28,000,000.00 dated July 29, 2009, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement.
Permitted Liens . The words Permitted Liens mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled Indebtedness and Liens; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrowers assets.
Related Documents . The words Related Documents mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan.
Security Agreement . The words Security Agreement mean and include without limitation any agreements. promises, covenants. arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing. representing, or creating a Security Interest,
Security Interest . The words Security Interest mean without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factors lien equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.
8
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED JULY 29, 2009.
BORROWER: |
|
|
|
|
|
|
|
|
|
Kennedy-Wilson, Inc., a Delaware corporation |
|
By: |
|
|
|
|
|
Freeman A. Lyle, CFO/Secretary of Kennedy-Wilson, Inc., |
|
By: |
/s/ William J. McMorrow |
|
|
a Delaware corporation |
|
William J. McMorrow, CEO of Kennedy-Wilson, Inc. |
|
|
|
|
a Delaware corporation |
|
|
|
|
|
|
|
|
LENDER: |
|
|
|
|
|
|
|
|
|
PACIFIC WESTERN BANK |
|
|
|
|
|
|
|
|
|
By: |
|
|
|
|
|
Authorized Signer |
|
|
|
9
PROMISSORY NOTE |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
Loan Date |
|
Maturity |
|
Loan No |
|
Call / Coll |
|
Account |
|
Officer |
|
Initials |
|
$28,000,000.00 |
|
07-29-2009 |
|
08-12-2014 |
|
406268713 |
|
|
|
Port #115131 |
|
710 |
|
|
|
References in the boxes above are for Lenders use only and do not limit the applicability of this document to any particular loan or item. Any item above containing *** has been omitted due to text length limitations.
Borrower: |
|
Kennedy-Wilson, Inc., a Delaware corporation 9601 Wilshire Boulevard, Suite 220 Beverly Hills, CA 90210 |
|
Lender: |
|
Pacific Western Bank Beverly Hills Office 9454 Wilshire Boulevard Beverly Hills, CA 90212 |
Principal Amount: $28,000,000,00 |
|
Date of Note: July 29, 2009 |
PROMISE TO PAY . Kennedy-Wilson. Inc., a Delaware corporation (Borrower) promises to pay to Pacific Western Bank (Lender), or order, in lawful money of the United States of America, the principal amount of Twenty-eight Million & 00/100 Dollars ($28,000,000.00), together with interest on the unpaid principal balance from July 29, 2009, until paid in full.
PAYMENT . Subject to any payment changes resulting from changes in the Index, Borrower will pay this loan in 59 principal payments of $466,667.00 each and one final principal and interest payment of $468,254.34. Borrowers first principal payment is due September 12, 2009, and all subsequent principal payments are due on the same day of each month after that. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning September 12, 2009, with all subsequent interest payments to be due on the same day of each month after that. Borrowers final payment due August 12, 2014, will be for all principal and all accrued Interest not yet paid. Unless otherwise agreed or required by applicable law , payments will be applied first to any accrued unpaid interest; then to principal; then to any unpaid collection costs; and then to any late charges. Borrower will pay Lender at Lenders address shown above or at such other place as Lender may designate in writing.
VARIABLE INTEREST RATE . The interest rate on this Note is subject to change from time to time based on changes in an index which is the Lenders Base Rate (the Index). The Index is not necessarily the lowest rate charged by Lender on its loans and is set by Lender in its sole discretion. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrowers request. The interest rate change will not occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 4.000% per annum. Interest on the unpaid principal balance of this Note will be calculated as described in the INTEREST CALCULATION METHOD paragraph using a rate equal to the Index, resulting in an initial rate of 4.000%. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law.
INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this Note is computed using this method.
PREPAYMENT . Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrowers obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrowers making fewer payments. Borrower agrees not to send Lender payments marked paid in full, without recourse, or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lenders rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes payment in full of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Pacific Western Bank, Beverly Hills Office, 9454 Wilshire Boulevard, Beverly Hills, CA 90212.
LATE CHARGE . If a payment is 10 days or more late, Borrower will be charged 5.000% of the regularly scheduled payment or $10.00, whichever is greater.
INTEREST AFTER DEFAULT . Upon default, the interest rate on this Note shall, if permitted under applicable law, immediately increase by adding a 5.000 percentage point margin (Default Rate Margin). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no default.
DEFAULT . Each of the following shall constitute an event of default (Event of Default) under this Note:
Payment Default . Borrower falls to make any payment when due under this Note.
Other Defaults . Borrower falls to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
Default in Favor of Third Parties . Borrower or any Grantor defaults under any loan, extension of credit, security agreement. purchase or safes agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrowers property or Borrowers ability to repay this Note or perform Borrowers obligations under this Note or any of the related documents.
False Statements . Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrowers behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.
Insolvency . The dissolution or termination of Borrowers existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrowers property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
Loan No. 406268713
Creditor or Forfeiture Proceedings . Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any ether method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrowers accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor . Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.
Change In Ownership . Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.
Adverse Change . A material adverse change occurs in Borrowers financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.
Insecurity . Lender in good faith believes itself insecure.
Cure Provisions . If any default, other than a default in payment is curable arid if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured if Borrower, after Lender sends written notice to Borrower demanding cure of such default: (1) cures the default within fifteen (15) days, or (2) if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lenders sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.
LENDERS RIGHTS . Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.
ATTORNEYS FEES; EXPENSES . Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lenders attorneys fees and Lenders legal expenses, whether or not there is a lawsuit, including attorneys fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. Borrower also will pay any court costs, in addition to all other sums provided by law.
GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions. This Note has been accepted by Lender In the State of California.
CHOICE OF VENUE . If there is a lawsuit, Borrower agrees upon Lenders request to submit to the jurisdiction of the courts of Los Angeles County, State of California.
RIGHT OF SETOFF . To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrowers accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the debt against any and all such accounts.
CROSS DEFAULT . An Event of Default under the Note shall also constitute an Event of Default under any and all Notes or obligations executed by Kennedy-Wilson, Inc., a Delaware corporation or any other related entity or affiliate.
SUCCESSOR INTERESTS . The terms of this Note shall be binding upon Borrower, and upon Borrowers heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.
GENERAL PROVISIONS . If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive any applicable statute of limitations, presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fall to realize upon or perfect Lenders security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the Party with whom the modification is made. The obligations under this Note are joint and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER: |
|
|
||
|
|
|
||
Kennedy-Wilson, Inc., a Delaware corporation |
|
By: |
|
|
|
|
|
Freeman A. Lyle, CFO/Secretary of Kennedy-Wilson, Inc., |
|
By: |
/s/ William J. McMorrow |
|
|
a Delaware corporation |
|
William J. McMorrow, CEO of Kennedy-Wilson, Inc. |
|
|
|
|
a Delaware corporation |
|
|
2
CORPORATE RESOLUTION TO BORROW |
|||||||||||||||
|
|||||||||||||||
Principal |
|
Loan Date |
|
Maturity |
|
Loan No |
|
Call / Coll |
|
Account |
|
Officer |
|
Initials |
|
$28,000,000.00 |
|
07-29-2009 |
|
08-12-2014 |
|
406268713 |
|
|
|
Port #115131 |
|
710 |
|
|
|
References in the boxes above are for Lenders use only and do not limit the applicability of this document to any particular loan or item. Any item above containing *** has been omitted due to text length limitations.
Borrower: |
|
Kennedy-Wilson, Inc., a Delaware corporation 9601 Wilshire Boulevard, Suite 220 Beverly Hills, CA 90210 |
|
Lender: |
|
Pacific Western Bank Beverly Hills Office 9454 Wilshire Boulevard Beverly Hills, CA 90212 |
I, THE UNDERSIGNED. DO HEREBY CERTIFY THAT:
THE CORPORATIONS EXISTENCE . The complete and correct name of the Corporation is Kennedy-Wilson. Inc., a Delaware corporation (Corporation). The Corporation is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Delaware. The Corporation is duly authorized to transact business in the State of California and all other states in which the Corporation is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which the Corporation is doing business. Specifically, the Corporation is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. The Corporation has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. The Corporation maintains an office at 9601 Wilshire Boulevard, Suite 220, Beverly Hills, CA 90210. Unless the Corporation has designated otherwise in writing, the principal office is the office at which the Corporation keeps its books and records. The Corporation will notify Lender prior to any change in the location of the Corporations state of organization or any change in the Corporations name. The Corporation shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to the Corporation and the Corporations business activities.
RESOLUTIONS ADOPTED . At a meeting of the Directors of the Corporation, or if the Corporation is a close corporation having no Board of Directors then at a meeting of the Corporations shareholders, duly called and held on _______________, at which a quorum was present and voting, or by other duly authorized action in lieu of a meeting, the resolutions set forth in this Resolution were adopted.
OFFICERS . The following named persons are officers of Kennedy-Wilson. Inc., a Delaware corporation:
NAMES |
|
TITLES |
|
AUTHORIZED |
|
ACTUAL SIGNATURES |
||
|
|
|
|
|
|
|
||
William J. McMorrow |
|
CEO |
|
Y |
|
X |
/s/ William J. McMorrow |
(Seal) |
|
|
|
|
|
|
|
|
|
Freeman A. Lyle |
|
CFO/Secretary |
|
Y |
|
X |
|
(Seal) |
ACTIONS AUTHORIZED . Any two (2) of the authorized persons listed above may enter into any agreements of any nature with Lender, and those agreements will bind the Corporation. Specifically, but without limitation, any two (2) of such authorized persons are authorized. empowered, and directed to do the following for and on behalf of the Corporation:
Borrow Money . To borrow, as a cosigner or otherwise, from time to time from Lender, on such terms as may be agreed upon between the Corporation and Lender, such sum or sums of money as In their judgment should be borrowed, without limitation.
Execute Notes . To execute and deliver to Lender the promissory note or notes, or other evidence of the Corporations credit accommodations, on Lenders forms, at such rates of interest and on such terms as may be agreed upon, evidencing the sums of money so borrowed or any of the Corporations indebtedness to Lender, and also to execute and deliver to Lender one or more renewals, extensions, modifications, refinancings, consolidations, or substitutions for one or more of the notes, any portion of the notes, or any other evidence of credit accommodations.
Execute Security Documents . To execute and deliver to Lender the forms of mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which Lender may require and which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given; and also to execute and deliver to Lender any other written instruments, any chattel paper, or any other collateral, of any kind or nature, which Lender may deem necessary or proper in connection with or pertaining to the giving of the liens and encumbrances. Notwithstanding the foregoing, any one of the above authorized persons may execute, deliver, or record financing statements.
Negotiate Items . To draw, endorse, end discount with Lender all drafts, trade acceptances, promissory notes. or other evidences of indebtedness payable to or belonging to the Corporation or in which the Corporation may have an interest, and either to receive cash for the same or to cause such proceeds to be credited to the Corporations account with Lender, or to cause such other disposition of the proceeds derived therefrom as they may deem advisable.
Further Acts . In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances under such lines, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver such other documents and agreements as the officers may in their discretion deem reasonably necessary or proper in order to carry into effect the provisions of this Resolution.
Loan No. 406268713
ASSUMED BUSINESS NAMES . The Corporation has filed or recorded all documents or filings required by law relating to all assumed business names used by the Corporation. Excluding the name of the Corporation, the following is a complete list of all assumed business names under which the Corporation does business: None .
NOTICES TO LENDER . The Corporation will promptly notify Lender in writing at Lenders address shown above (or such other addresses as Lender may designate from time to time) prior to any (A) change in the Corporations name; (B) change in the Corporations assumed business name(s); (C) change in the management of the Corporation; (D) change in the authorized signer(s); (E) change in the Corporations principal office address; (F) change in the Corporations state of organization; (G) conversion of the Corporation to a new or different type of business entity; or (H) change in any other aspect of the Corporation that directly or indirectly relates to any agreements between the Corporation and Lender. No change in the Corporations name or state of organization will take effect until after Lender has received notice.
CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS . The officers named above are duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupy the positions set opposite their respective names. This Resolution now stands of record on the books of the Corporation, is in full force and effect, and has not been modified or revoked In any manner whatsoever.
NO CORPORATE SEAL . The Corporation has no corporate seal, and therefore, no seal is affixed to this Resolution.
CONTINUING VALIDITY . Any and all acts authorized pursuant to this Resolution and performed prior to the passage of this Resolution are hereby ratified and approved. This Resolution shall be continuing, shall remain in full force and effect and Lender may rely on it until written notice of its revocation shall have been delivered to and received by Lender at Lenders address shown above (or such addresses as Lender may designate from time to time). Any such notice shall not affect any of the Corporations agreements or commitments in effect at the time notice is given.
IN TESTIMONY WHEREOF, I have hereunto set my hand and attest that the signatures set opposite the names listed above are their genuine signatures.
I have read all the provisions of this Resolution, and I personally and on behalf of the Corporation certify that all statements and representations made in this Resolution are true and correct. This Corporate Resolution to Borrower is dated July 29, 2009.
THIS RESOLUTION IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.
|
CERTIFIED TO AND ATTESTED BY: |
||
|
|
||
|
|
||
|
X |
|
(Seal) |
|
Freeman A. Lyle, CFO/Secretary of |
||
|
Kennedy-Wilson, Inc., a Delaware corporation |
2
DISBURSEMENT REQUEST AND AUTHORIZATION |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
Loan Date |
|
Maturity |
|
Loan No |
|
Call / Coll |
|
Account |
|
Officer |
|
Initials |
|
$28,000,000.00 |
|
07-29-2009 |
|
08-12-2014 |
|
406268713 |
|
|
|
Port #115131 |
|
710 |
|
|
|
References in the boxes above are for Lenders use only and do not limit the applicability of this document to any particular loan or item. Any item above containing *** has been omitted due to text length limitations.
Borrower: |
|
Kennedy-Wilson, Inc., a Delaware corporation 9601 Wilshire Boulevard, Suite 220 Beverly Hills, CA 90210 |
|
Lender: |
|
Pacific Western Bank Beverly Hills Office 9454 Wilshire Boulevard Beverly Hills, CA 90212 |
LOAN TYPE . This is a Variable Rate Nondisclosable Loan to a Corporation far $28,000,000.00 due on August 12, 2014.
PRIMARY PURPOSE OF LOAN . The primary purpose of this loan is for:
o Personal, Family, or Household Purposes or Personal Investment.
x Business (Including Real Estate Investment).
SPECIFIC PURPOSE . The specific purpose of this loan is: Pay off of existing loans with Lender and to reduce debt at US Bank.
DISBURSEMENT INSTRUCTIONS . Borrower understands that no loan proceeds will be disbursed until all of Lenders conditions for making the loan have been satisfied. Please disburse the loan proceeds of $28,000,000.00, together with funds contributed of $38,577.74, as follows:
Other Disbursements: |
|
$ |
28,038,577.74 |
|
|
$5,014.999.99 Pay Off Loan #185255756 |
|
|
|
||
$5,009.999.99 Pay Off Loan #406267404 |
|
|
|
||
$4,013,577.76 Pay Off Loan #406267222 |
|
|
|
||
$14,000,000.00 Wire to US Bank |
|
|
|
||
|
|
|
|
||
Amount Contributed by Borrower: |
|
|
|
||
$38,577.74 Additional Funds From Borrower to pay off above loans |
|
$ |
(38,577.74 |
) |
|
|
|
|
|
||
Note Principal: |
|
$ |
28,000.000.00 |
|
|
PAYOFF VERBIAGE . Borrower agrees that, for the purposes of documentation, the payoff for existing loans #185255756, #406267404 and #406267222 was established as of July 29, 2009. After July 29, 2009, additional interest will accrue on these loans each day until the actual payoff occurs. This interest amount, as well as any unpaid applicable fees or charges, shall also be added to the actual payoff amounts.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWERS FINANCIAL CONDITION AS DISCLOSED IN BORROWERS MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS AUTHORIZATION IS DATED JULY 29, 2009.
BORROWER: |
|
|
||
|
|
|
||
Kennedy-Wilson, Inc., a Delaware corporation |
|
|
||
|
|
|
||
By: |
/s/ William J. McMorrow |
|
By: |
|
|
William J. McMorrow, CEO
of Kennedy-Wilson, Inc.
|
|
|
Freeman
A. Lyle, CFO/Secretary of Kennedy-Wilson, Inc.,
|
LIST OF DOCUMENTS SENT |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
Loan Date |
|
Maturity |
|
Loan No |
|
Call / Coll |
|
Account |
|
Officer |
|
Initials |
|
$28,000,000.00 |
|
07-29-2009 |
|
08-12-2014 |
|
406268713 |
|
|
|
Port #115131 |
|
710 |
|
|
|
References in the boxes above are for Lenders use only and do not limit the applicability of this document to any particular loan or item. Any item above containing *** has been omitted due to text length limitations.
Borrower: |
|
Kennedy-Wilson, Inc., a Delaware corporation 9601 Wilshire Boulevard, Suite 220 Beverly Hills, CA 90210 |
|
Lender: |
|
Pacific Western Bank Beverly Hills Office 9454 Wilshire Boulevard Beverly Hills, CA 90212 |
Documents sent to Branch on (07/29/09):
Business Loan Agreement
Corporate Resolution
Disbursement Request and Authorization
Promissory Note.
Exhibit 10.91
AMENDED AND RESTATED LOAN AGREEMENT
by and between
U.S. BANK NATIONAL ASSOCIATION, a national banking association, and EAST-WEST BANK, a California banking corporation,
Banks or Lenders,
U.S. BANK NATIONAL ASSOCIATION, a national banking association, Agent,
and
KENNEDY-WILSON, INC., a Delaware corporation,
Borrower
Dated as of June 5, 2008
TABLE OF CONTENTS
|
Page |
||
DEFINITIONS AND CONSTRUCTION |
1 |
||
|
1.1 |
Definitions |
1 |
|
1.2 |
Accounting Terms |
10 |
|
1.3 |
Code |
10 |
|
1.4 |
Construction |
10 |
|
1.5 |
Schedules and Exhibits |
11 |
2. LOAN AND TERMS OF PAYMENT |
11 |
||
|
2.1 |
Revolving Advances |
11 |
|
2.2 |
Interest Rates, Payments, and Calculations |
11 |
|
2.3 |
Crediting Payments; Application of Collections |
13 |
|
2.4 |
Designated Account |
14 |
|
2.5 |
Maintenance of Loan Accounts; Statements of Obligations |
14 |
|
2.6 |
Fees, Costs, and Charges |
14 |
3. |
CONDITIONS; TERM OF AGREEMENT |
15 |
|
|
3.1 |
Conditions Precedent to the Initial Advance |
15 |
|
3.2 |
Conditions Precedent to all Advances |
16 |
|
3.3 |
[Intentionally Omitted.] |
17 |
|
3.4 |
Term |
17 |
|
3.5 |
Early Termination by Borrower |
17 |
4. |
RIGHT OF INSPECTION |
17 |
|
5. |
REPRESENTATIONS AND WARRANTIES |
17 |
|
|
5.1 |
No Encumbrances |
17 |
|
5.2 |
Equipment |
17 |
|
5.3 |
Intentionally Omitted |
18 |
|
5.4 |
Schedule of Indebtedness |
18 |
|
5.5 |
Location of Chief Executive Office; FEIN |
18 |
|
5.6 |
Due Organization and Qualification; Subsidiaries |
18 |
|
5.7 |
Due Authorization; No Conflict |
18 |
|
5.8 |
Litigation |
19 |
|
5.9 |
No Material Adverse Change |
19 |
|
5.10 |
Solvency |
19 |
|
5.11 |
Employee Benefits |
19 |
|
5.12 |
Maximum Balance Sheet Leverage |
20 |
|
5.13 |
Minimum Rent Adjusted Fixed Charge Coverage Ratio |
20 |
6. |
AFFIRMATIVE COVENANTS |
20 |
|
|
6.1 |
Accounting System |
20 |
|
6.2 |
Financial Covenants |
20 |
|
6.3 |
Financial Statements, Reports, Certificates |
20 |
|
|
|
Page |
|
6.4 |
Chairman; CEO |
22 |
|
6.5 |
Title to Equipment |
22 |
|
6.6 |
Maintenance of Equipment |
22 |
|
6.7 |
Taxes |
22 |
|
6.8 |
Insurance |
22 |
|
6.9 |
No Setoffs or Counterclaims |
23 |
|
6.10 |
Dispositions at Fair Market Consideration |
23 |
|
6.11 |
CompliancewithLaws |
23 |
|
6.12 |
Employee Benefits |
23 |
|
6.13 |
Compliance with Leases |
24 |
7. NEGATIVE COVENANTS |
24 |
||
|
7.1 |
Indebtedness |
24 |
|
7.2 |
Liens |
25 |
|
7.3 |
Restrictions on Fundamental Changes |
25 |
|
7.4 |
Disposal of Assets |
25 |
|
7.5 |
Change Name |
25 |
|
7.6 |
Guaranty |
25 |
|
7.7 |
Nature of Business |
25 |
|
7.8 |
Prepayments and Amendments |
25 |
|
7.9 |
Change of Control |
26 |
|
7.10 |
Intentionally Omitted |
26 |
|
7.11 |
Accounting Methods |
26 |
|
7.12 |
Investments |
26 |
|
7.13 |
Transactions with Affiliates |
26 |
|
7.14 |
Suspension |
26 |
|
7.15 |
Intentionally Omitted |
26 |
|
7.16 |
Use of Proceeds |
27 |
|
7.17 |
Change in Location of Chief Executive Office Equipment with Bailees |
27 |
|
7.18 |
Intentionally Omitted |
27 |
|
7.19 |
Intentionally Omitted |
27 |
|
7.20 |
Downstreaming of Funds |
27 |
|
7.21 |
Excessive Acquisitions |
27 |
|
7.22 |
Intentionally Omitted |
27 |
|
7,23 |
Dividends |
27 |
|
7.24 |
Stock Repurchases |
27 |
8. |
EVENTS OF DEFAULT |
27 |
|
|
8.1 |
Failure to Make Payment |
28 |
|
8.2 |
Failure to Perform |
28 |
|
8.3 |
Material Adverse Change |
28 |
|
8.4 |
Attachment or Other Process |
28 |
|
|
|
Page |
|
8.5 |
Insolvency Proceeding by Borrower |
28 |
|
8.6 |
Insolvency Proceeding Against Borrower |
28 |
|
8.7 |
Injunction or Other Process |
28 |
|
8.8 |
Lien or Other Process |
28 |
|
8.9 |
Judgment or Claim, Lien |
28 |
|
8.10 |
Defaults in Material Agreement |
28 |
|
8.11 |
Payment on Subordinated Indebtedness |
29 |
|
8.12 |
Misstatements and Misrepresentations |
29 |
|
8.13 |
Other Events of Default |
29 |
|
8.14 |
Cure Period, Notice to Cure |
29 |
9. |
BANKS RIGHTS AND REMEDIES |
30 |
|
|
9.1 |
Rights and Remedies |
30 |
|
9.2 |
Remedies Cumulative |
31 |
|
10. |
TAXES AND EXPENSES |
31 |
|
11. |
WAIVERS; INDEMNIFICATION |
31 |
|
11.1 |
Demand; Protest; etc |
31 |
|
11.2 |
Intentionally Omitted |
31 |
|
11.3 |
Jndeninification |
31 |
12. |
NOTICES |
32 |
|
13. |
CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER |
33 |
|
14. |
DESTRUCTION OF BOflOWERS DOCUMENTS |
34 |
|
15. |
AGENCY AND GOVERNANCE PROVISIONS |
34 |
|
|
15.1 |
Actions |
34 |
|
15.2 |
Exculpation |
34 |
|
15.3 |
Successors |
35 |
|
15.4 |
Other Transactions by U.S. Bank |
35 |
|
15.5 |
Independent Credit Decision |
35 |
|
15.6 |
Copies |
35 |
|
15.7 |
Payments to be Made to Agent |
36 |
|
15.8 |
Reimbursement by Lenders |
36 |
|
15.9 |
Collateral and Guarantees Held by Agent |
36 |
|
15.10 |
Lenders Commitments Independent |
36 |
|
15.11 |
Borrower to deal with Agent |
37 |
|
15.12 |
Loans to be Funded Through Agent |
37 |
16. |
ASSIGNMENTS AND PARTICIPATIONS |
38 |
|
|
16.1 |
Assignments |
38 |
|
16.2 |
Participations |
39 |
17. |
GENERAL PROVISIONS |
39 |
AMENDED AND RESTATED LOAN AGREEMENT
THIS LOAN AGREEMENT (this Agreement) , is entered into as of June 5, 2008, between U.S. BANK NATIONAL ASSOCIATION, a national banking association (jj~ Bank), with a place of business located at 633 W. Fifth Street, 30° Floor, Los Angeles, California 90071 and EAST-WEST BANK, a California banking corporation ( East-West Bank), with its chief place of business located at 135 N. Los Robles Ave., 2~ Floor, Pasadena, California 91101 (individually, a Bank or a Lender, and collectively, Banks or Lenders), U.S. BANK NATIONAL ASSOCIATION, a national banking association, as agent for the Banks (Agent), and KENNEDY-WILSON, INC., a Delaware corporation (Borrower), with its chief place of business located at 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210. This Agreement amends and restates in its entirety that certain Loan Agreement between Borrower and Banks dated June 13, 2002, as amended by that (i) Amendment Number One to Promissory Notes and Loan Agreement dated December 30, 2002, (ii) First Amendment to Loan Agreement dated March 30, 2004, (iii) Second Amendment to Loan Agreement dated November 10, 2004, and (iv) Third Amendment to Loan Agreement dated June 16, 2005.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall have the following definitions:
Account Debtor means any Person who is or who may become obligated under, with respect to, or on account of, an Account.
Accounts means all currently existing and hereafter arising accounts (as that term is defined from time to time in the Code), contract rights, and all other forms of obligations owing to Borrower, and any and all credit insurance, guaranties, or security therefor, and specifically includes all of Borrowers rights to payments of every kind under all license agreements under which Borrower is a licensor.
Advances has the meaning set forth in Section 2.1(a).
Affiliate means, as applied to any Person, any other Person who directly or indirectly controls, is controlled by, is under common control with or is a director or officer of such Person. For purposes of this definition, control means the possession, directly or indirectly, of the power to vote 10% or more of the securities having ordinary voting power for the election of directors or the direct or indirect power to direct the management and policies of a Person.
Agent has the meaning set forth in Section 15.1.
Agreement has the meaning set forth in the preamble hereto.
Asset Access Agreement means a landlord waiver, mortgagee waiver, acknowledgment agreement of any Person in possession of, having a Lien upon, or having rights or interests in any asset of Borrower, in each case, in form and substance satisfactory to Agent.
Authorized Person means any officer or other employee of Borrower listed on Schedule A-1 , as amended from time to time. Borrower shall furnish, from time to time, a resolution of its Board of Directors, in a form acceptable to Lenders, confirming its initial appointment of, and any change in, such Authorized Persons.
Bank and Banks have the meaning set forth in the preamble to this Agreement.
Bankruptcy Code means the United States Bankruptcy Code (11 U.S.C. § 101, et seq.), as amended, and any successor statute.
Bank Expenses means, without limitation, all: reasonable costs or expenses required to be paid by Borrower under any of the Loan Documents that are paid or incurred by Banks or by Agent; fees, charges, taxes, and insurance premiums paid or incurred by Banks or by Agent in connection with Banks transactions with Borrower, including, fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, litigation, and UCC searches and including searches with any Governmental Agencies, filing, recording, publication, appraisals, costs and expenses incurred by Banks or by Agent in the disbursement of funds to Borrower (by wire transfer or otherwise); charges paid or incurred by Banks or by Agent resulting from the dishonor of checks; costs and expenses paid orincurred by Banks or by Agent to correct any default or enforce any provision of the Loan Documents; costs and expenses paid or incurred by Banks or by Agent in examining Borrowers Books; costs and expenses of third party claims or any other suit paid or incurred by Banks or by Agent in enforcing or defending the Loan Documents or in connection with the transactions contemplated by the Loan Documents or Banks relationship with Borrower and its Affiliates or Subsidiaries, and Banks or Agents reasonable attorneys fees and expenses incurred in advising, structuring, drafting, reviewing, administering, amending, terminating, enforcing, defending, or concerning the Loan Documents (including attorneys fees and expenses incurred in connection with a workout, a restructuring, or an Insolvency Proceeding concerning Borrower or any guarantor of the Obligations), irrespective of whether suit is brought. All Bank Expenses charged by Banks shall be deemed reasonable in the absence of compelling circumstances to the contrary.
Benefit Plan means a defined benefit plan (as defined in Section 3(35) of ERISA) for
2
which Borrower, any Subsidiary of Borrower, or any ERISA Affiliate has been an employer (as defined in Section 3(5) of ERISA) within the past six (6) years.
Borrower has the meaning set forth in the preamble to this Agreement.
Borrowers Books means all of Borrowers books and records including: ledgers; records indicating, summarizing, or evidencing Borrowers properties or assets or liabilities; all information relating to Borrowers business operations or financial condition; and all computer programs, disk, tape, or other media files, printouts, runs, or other computer- prepared information.
Business Day means any day that is not a Saturday, Sunday, or other day on which national banks are authorized or required to close in New York City or San Francisco, California, and if the Business Day relates to a determination of the LIBOR Rate applicable to an Advance under the credit facilities under this Agreement, it also means a day on which dealings are carried on in the London interbank market.
Change of Control shall be deemed to have occurred at such time as there is (a) any change in the Chief Executive Officer (currently William McMorrow) of the Borrower, or (b) change of ownership (whether by transfer of existing shares, issuance of new shares, or a combination, or otherwise) of more than 50% in the aggregate of the common stock of the Borrower.
Closing Date means the date all conditions precedent set forth in Section 3.1 of this Agreement have been satisfied in Agents sole determination.
Code means the California Uniform Commercial Code as it may be amended from time to time.
Collections means all cash, checks, notes, instruments, and other items of payment (including, insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds).
Commitment means the agreement of each of the Lenders to extend its Pro-Rata Share of the credit facilities called for under the terms and conditions of this Agreement and, depending upon the context, all or specified rights of such Lender in such credit facilities.
Compliance Certificate means a certificate substantially in the form of Schedule 6.3 and delivered by the Chief Financial Officer of Borrower to Agent.
Daily Balance means, with respect to each day during the term of this Agreement, the amount of an Obligation owed at the end of such day.
deems itself insecure means that the Person deems itself insecure in accordance with the provisions of Section 1208 of the Code.
Default means an event, condition, or default that, with the giving of notice, the
3
passage of time, or both, would be an Event of Default, except and then solely to the extent provided in Section 8.14.
Advance Request Form and Disbursement Letter means an instructional letter in the form of Schedule 1.1-1 executed and delivered by Borrower to Agent for each Advance, the form and substance of which shall be satisfactory to Agent.
Dollars or $ means dollars of the United States of America.
EBITDA means the net income of Borrower (excluding extraordinary items), for the applicable period, plus all interest expense, income tax expense, depreciation and amortization (including amortization of any goodwill or other intangibles) for the period.
Effective Tangible Net Worth means stockholders equity, less Intangible Assets.
Equipment means all of Borrowers present and hereafter acquired machinery, office and other equipment, furniture, furnishings, fixtures, vehicles (including motor vehicles and trailers), and tools, and goods, wherever located, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing.
ERISA means the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1000, et seq., amendments thereto, successor statutes, and regulations or guidance promulgated thereunder.
ERISA Affiliate means (a) any corporation subject to ERISA whose employees are treated as employed by the same employer as the employees of Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the same employer as the employees of Borrower under IRC Section 4 14(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service group of which Borrower is a member under IRC Section 4 14(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any party subject to ERISA that is a party to an arrangement with Borrower and whose employees are aggregated with the employees of Borrower under IRC Section 4 14(o).
ERISA Event means (a) a Reportable Event with respect to any Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which it was a substantial employer (as defined in Section 4001 (a)(2) of ERISA), (c) the providing of notice of intent to terminate a Benefit Plan in a distress termination (as described in Section 404 1(c) of ERISA), (d) the institution by the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e) any event or condition (i) that provides a basis under Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing any security to any Plan under Section 40l(a)(29) of the IRC by Borrower or its
4
Subsidiaries or any of their ERISA Affiliates.
Equity Infusion shall mean and refer to Bank-funded investment capital to be used by Borrower for investments and! or acquisitions.
Event of Default has the meaning set forth in Section 8.
Facility A means a credit facility in the maximum amount of Twenty Five Million Dollars ($25,000,000), to be furnished to Borrower by Banks under the terms of this Agreement for purposes of financing Borrowers acquisition of real property. In no event shall U.S. Bank be required to make Advances totaling more than Twelve Million Five Hundred Thousand Dollars ($12,500,000) of such facility. In no event shall East-West Bank be required to make Advances totaling more than Twelve Million Five Hundred Thousand Dollars ($12,500,0000) of such facility.
Facility B means a credit facility in the maximum amount of Five Million Dollars ($5,000,000), to be furnished to Borrower by Banks under the terms of this Agreement for purposes of providing working capital to Borrower. In no event shall U.S. Bank be required to make Advances totaling more than Two Million Five Hundred Thousand Dollars ($2,500,000) of such facility. In no event shall East-West Bank be required to make Advances totaling more than Two Million Five Hundred Thousand Dollars ($2,500,0000) of such facility.
FEIN means Federal Employer Identification Number.
GAAP means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.
General Intangibles means all of Borrowers present and future general intangibles (as that term is defined from time to time in the Code), payment intangibles and other personal property (including without limitation contract rights, rights arising under common law, statutes, or regulations, choses or things in action, goodwill, patents, trade names, trademarks, service marks, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, rights to payment and other rights under any royalty or licensing agreements, infringement claims, software, computer programs, information contained on computer disks, tapes, or other media, literature, reports, catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax refund claims), other than goods, Accounts, and Negotiable Collateral as applicable.
Governing Documents means the certificate or articles of incorporation, by-laws, operating agreement, partnership agreement, or other organizational or governing documents of any Person.
Governmental Authority means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government.
5
Indebtedness means: (a) all obligations of Borrower for borrowed money, (b) all obligations of Borrower evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations of Borrower in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products, (e) all obligations of Borrower under capital leases, (d) all obligations or liabilities of others secured by a Lien on any property or asset of Borrower, irrespective of whether such obligation or liability is assumed, and (e) any obligation of Borrower guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with recourse to Borrower) any indebtedness, lease, dividend, letter of credit, or other obligation of any other Person.
Indenmified Liabilities has the meaning set forth in Section 11.3.
Indemnified Person has the meaning set forth in Section 11.3.
Insolvency Proceeding means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code, Title 11, United States Code, or under any other bankruptcy or insolvency law of any jurisdiction, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.
Intangible Assets means, with respect to any Person, that portion of the book value of all of such Persons assets, net of amortization, that would be treated as intangibles under GAAP, including, without limitation, property management contracts, capitalized loan fees, and Affiliate or stockholder loans.
Investment Property means all of Borrowers presently existing and hereafter acquired or arising investment property (as that term is defined form time to time in the Code).
IRC means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.
Lender and Lenders have the meaning set forth in the preamble to this Agreement.
LIBOR Notice means the written notice from Borrower to Agent indentifying the Advances that are to bear interest at the LIBOR Rate for the Loan Period selected in the form set forth on Schedule 2.2 hereto, the terms and conditions of which supplement and are made a part of this agreement.
LIBOR Rate means, with respect to the Loan Period applicable to any Advance hereunder, the LIBOR rate for such period quoted by Agent from Reuters Screen LIBOROI Page or any successor thereto, adjusted for any reserve requirement and any subsequent costs to Lenders arising from any change in government requirements. The LIBOR Rate for the Loan Period for each such Advance shall be determined by Agent prior to the first day of such Loan Period.
LIBOR Rate Loan has the meaning set forth in the Notes. No more than five (5)
6
LIBOR Rate Loans may be outstanding at any one time.
Lien means any interest in property securing an obligation owed to, or a claim by, any Person other than the owner of the property, whether such interest shall be based on the common law, statute, or contract, whether such interest shall be recorded or perfected, and whether such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, including the Lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, adverse claim or charge, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes.
Loan Accounts has the meaning set forth in Section 2.5.
Loan Documents means this Agreement, the Advance Request Form and Disbursement Letter, any Note or Notes executed by Borrower and payable to Banks, and any other agreement entered into, now or in the future, in connection with this Agreement.
Loan Period means the period commencing on the Advance date of the applicable LIBOR Rate Loan and ending on the numerically corresponding day 1, 2, 3, 6, or 12 months thereafter matching the interest rate term selected by the Borrower; provided, however, (a) if any Loan Period would otherwise end on a day which is not a New York Banking Day, then the Loan Period shall end on the next succeeding New York Banking Day unless the next succeeding New York Banking Day falls in another calendar month, in which case the Loan Period shall end on the immediately preceding New York Banking Day; or (b) if any Loan Period begins on the last New York Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of the Loan Period), then the Loan Period shall end on the last New York Banking Day of the calendar month at the end of such Loan Period.
Loans means the credit facilities to be extended by Lenders to Borrower subject to the terms and conditions of this Agreement.
Material Adverse Change means (a) a material adverse change in the business, prospects, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Borrower, or (b) the material impairment of Borrowers ability to perform its obligations under the Loan Documents to which it is a party or of Banks to enforce the Obligations.
Maturity Date means July 1, 2011, unless extended in writing by Banks in their sole discretion. The Maturity Date is the date on or before which all obligations of Borrower under the credit facilities to be furnished under this Agreement shall be paid in full, subject to the terms and conditions of this Agreement.
Maximum Balance Sheet Leverage means total debt divided by Effective Tangible Net Worth.
Maximum Revolving Amount means, in the case of Facility A, Twenty Five Million
7
Dollars ($25,000,000), and in the case of Facility B, Five Million Dollars ($5,000,000).
Minimum Rent Adjusted Fixed Charge Coverage Ratio means, as of the end of the most recently concluded fiscal quarter of Borrower, and/or as of any other date specified in this Agreement, as applicable, (i) EBITDA for that portion of the fiscal year of Borrower then concluded, minus cash taxes, cash dividends, cash used to repurchase corporate stock, and the higher of un-financed capital expenditures or maintenance capital expenditures plus rental/lease expense, divided by (ii) interest expense plus current portion of long term debt (CPLTD) secured by any property held by Borrower in excess of three (3) years (excluding those properties listed in Schedule 1.1-2 ) plus rental lease expense. CPLTD shall exclude balloon payments due on real estate indebtedness of Borrower and lump sum principal payments required by Facility A. (Borrower shall include in its financial statements, or a side letter thereto, provided to Banks hereunder, in addition to all other information required under this Agreement, information sufficiently detailed to enable Banks to verify the financial elements described in this paragraph.)
Multiemployer Plan means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any ERISA Affiliate has contributed, or was obligated to contribute, within the past six (6) years.
New York Banking Day means any day (other than a Saturday or Sunday) on which commercial banks are open for business in New York, New York.
Note or Notes means the promissory note or notes to be executed by Borrower in favor of Lenders to evidence the indebtedness incurred pursuant to this Agreement.
Obligstions means all loans, Advances, debts, principal, interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), liabilities (including all amounts charged to Borrowers Loan Accounts pursuant hereto), obligations, fees, charges, costs, or Bank Expenses (including any fees or expenses that, but for the provisions of the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants, and duties owing by Borrower to Banks of any kind and description (whether pursuant to or evidenced by the Loan Documents or pursuant to any other agreement between Banks and Borrower, and irrespective of whether for the payment of money), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including any debt, liability, or obligation owing from Borrower to others that Banks may have obtained by assignment or otherwise, and further including all interest not paid when due and all Bank Expenses that Borrower is required to pay or reimburse by the Loan Documents, by law, or otherwise.
Participant means any Person to which Banks or either of them have at any time sold a participation interest in their or either of their rights under the Loan Documents.
PBGC means the Pension Benefit Guaranty Corporation as defined in Title IV of ERISA, or any successor thereto.
Permitted Liens means (a) Liens held by Banks or either of them, (b) Liens for unpaid
8
taxes that either (i) are not yet due and payable or (ii) are the subject of Permitted Protests, (c) Liens set forth on Schedule P-1 , (d) the interests of lessors under operating leases and purchase money security interests so long as the Lien only attaches to the asset purchased or acquired and only secures the purchase price of the asset, (e) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business of Borrower and not in connection with the borrowing of money, and which Liens either (i) are for sums not yet due and payable, or (ii) are the subject of Permitted Protests, (f) Liens arising from deposits made in connection with obtaining workers compensation or other unemployment insurance, (g) Liens or deposits to secure performance of bids, tenders, or leases (to the extent permitted under this Agreement), incurred in the ordinary course of business of Borrower and not in connection with the borrowing of money, (h) Liens arising by reason of security for surety or appeal bonds in the ordinary course of business of Borrower, and (i) Liens of or resulting from any judgment or award that would not cause a Material Adverse Change and as to which the time for the appeal or petition for rehearing of which has not yet expired, or in respect of which Borrower is in good faith prosecuting an appeal or proceeding for a review, and in respect of which a stay of execution pending such appeal or proceeding for review has been secured.
Permitted Protest means the right of Borrower to protest any Lien (other than any such Lien that secures the Obligations), tax (other than payroll taxes or taxes that are the subject of a United States federal tax Lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on the books of Borrower in an amount that is reasonably satisfactory to Agent, (b) any such protest is instituted and diligently prosecuted by Borrower in good faith, and (e) Agent is satisfied that, while any such protest is pending, there will be no impairment of the enforceability, validity, or priority of any of the Banks rights under or in connection with this Agreement.
Person means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and Governmental Authorities and agencies and political subdivisions thereof means any employee benefit plan, program, or arrangement maintained or contributed to by Borrower or with respect to which it may incur liability.
Prime Rate means the rate of interest announced from time to time by U.S. Bank National Association in New York, New York as its prime rate. In the event the Prime Rate is changed from time to time hereafter, the applicable rate of interest hereunder and under the Notes automatically and immediately shall be increased or decreased by an amount equal to such change in the Prime Rate.
Prime Rate Loan has the meaning given in the Notes.
Pro-Rata Share means each Lenders percentage share of the total credit to be extended pursuant to the Loan Documents. Initially, U.S. Banks Pro-Rata Share is 50% and East-West Banks Pro-Rata Share is 50%.
9
Reportable Event means any of the events described in Section 4043(c) of ERISA or the regulations thereunder other than a Reportable Event as to which the provision of thirty (30) days notice to the PBGC is waived under applicable regulations.
Retiree Health Plan means an employee welfare benefit plan within the meaning of Section 3(1) of ERISA that provides benefits to individuals after termination of their employment, other than as required by Section 601 of ERISA.
Solvent means, with respect to any Person on a particular date, that on such date (a) at fair valuations, all of the properties and assets of such Person are greater than the sum of the debts, including contingent liabilities, of such Person, (b) the present fair salable value of the properties and assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its properties and assets and pay its debts and other liabilities, contingent obligations, and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts beyond such Persons ability to pay as such debts mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Persons properties and assets would constitute unreasonably small capital after giving due consideration to the prevailing practices in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that reasonably can be expected to become an actual or matured liability.
Subsidiary of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the shares of stock or other ownership interests having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership, limited liability company, or other entity.
Voidable Transfer has the meaning set forth in Section 17.8 .
1.2 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. When used herein, the term financial statements shall include the notes and schedules thereto. Whenever the term Borrower is used in respect of a financial covenant or a related definition, it shall be understood to mean Borrower on a consolidated basis unless the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code, as it is amended from time to time, unless otherwise defined herein.
1.4 Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term including is not limiting, and the term or has, except where otherwise
10
indicated, the inclusive meaning represented by the phrase and/or. The words hereof, herein, hereby, hereunder, and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. An Event of Default shall continue or be continuing until such Event of Default has been waived in writing by Agent. Section, subsection, clause, schedule, and exhibit references are to this Agreement unless otherwise specified. Any reference in this Agreement or in the Loan Documents to this Agreement or any of the Loan Documents shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, and supplements, thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances.
(a) From the Closing Date to the Maturity Date (unless extended in writing by Banks in their sole discretion), subject to the terms and conditions of this Agreement, Banks agree to make advances (Advances) to Borrower in an amount outstanding not to exceed at any one time (i) the Maximum Revolving Amount of Facility A, and (ii) the Maximum Revolving Amount of Facility B, determined separately for each such Facility A and B. No Advance, or combination of Advances under Facility A for one purpose or property, shall exceed Five Million Dollars ($5,000,000). Advances shall be made by the Borrowers delivery to the Agent of an Advance Request Form and Disbursement Letter not later than 11:00 a.m. (Los Angeles time) on the Business Day before the date on which the Borrower requests the Advance.
(b) Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement.
(c) No Advance shall be made in an amount less than One Hundred Thousand Dollars ($100,000).
2.2 Interest Rates, Payments, and Calculations.
(a) Facility A Interest Rate. Except as provided in clause (c) below, Advances under Facility A shall bear interest on the Daily Balance at a per annum rate equal to Borrowers choice of(A) the sum of 0.50% plus the Prime Rate, or (B) the sum of(a) 3.00% and (b) the one (1), two (2), three (3), six (6) or twelve (12) month LIBOR Rate. Borrower shall identify in writing, from time to time, which of such interest rates Borrower desires to apply with respect to all or any portion of the Facility A outstanding balance by completing and submitting to Agent a LIBOR Notice.
(b) Facility B Interest Rate. Except as provided in clause (e) below,
11
Advances under Facility B shall bear interest on the Daily Balance at a per annum rate equal to Borrowers choice of (A) the Prime Rate, or (B) the sum of (a) 2.50% and (b) the one (1), two (2), three (3), six (6) or twelve (12) month LIBOR Rate. Borrower shall identify in writing, from time to time, which of such interest rates Borrower desires to apply with respect to all or any portion of the Facility B outstanding balance by completing and submitting to Agent a LIBOR Notice.
(c) Default Rate. Upon the occurrence and during the continuation of an Event of Default, all Obligations shall bear interest on the Daily Balance at a per annum rate equal to 5.00% above the Reference Rate.
(d) Payments.
(i) Interest payable hereunder on each of Facility A and Facility B shall be due and payable, in arrears, on the fifth ( 5 th) day of each calendar month during the term hereof Borrower hereby authorizes Banks, at their option, without prior notice to Borrower, to charge such interest, all Bank Expenses (as and when incurred), the fees and charges provided for in Section 2.6 and elsewhere in this Agreement (as and when accrued or incurred), and all other payments due under any Loan Document to Borrower as an Advance under this Agreement, which amounts thereafter shall accrue interest at the rate then applicable to Advances hereunder. Any interest not paid when due shall be compounded and shall thereafter accrue interest at the rate then applicable to Advances hereunder.
(ii) Advance Limits; Principal Repayment . No Advance or combinations of Advances under Facility A for one (1) purpose or property shall exceed the amount of Five Million Dollars ($5,000,000) and shall be conditioned on and subject to a repayment schedule (which includes the source and timing of such repayment) mutually agreed upon by Borrower and Agent (the Repayment Schedule ) with respect to each Advance. Principal under the Facility A Note shall be repaid on the earlier of:
(A) The date required by the applicable Repayment Schedule for each Advance;
(B) Upon the closing of any sale, refinance or Equity Infusion with respect to any asset purchased with Facility A Advances in an amount equal to such Advances;
(C) Twenty-four (24) months after the date of each Advance made by Banks; or
(D) The Maturity Date.
(iii) Without notice, Borrower shall repay the entire principal balance of Facility B at least once each calendar year and shall maintain such Facility B at a zero balance for at least thirty (30) consecutive calendar days thereafter.
12
(iv) Prepayment. If a LIBOR Rate Loan is prepaid prior to the end of the Loan Period for such loan, whether voluntarily or because prepayment is required due to the Note maturing or due to acceleration of the Note upon default or otherwise, the Borrower agrees to pay all of the Bank Costs, expenses and Interest Differential (as determined by the Agent) incurred as a result of such prepayment. The term Interest Differential shall mean that sum equal to the greater of zero or the financial loss incurred by the Banks resulting from prepayment, calculated as the difference between the amount of interest the Banks would have earned (from like investments in the money markets, as determined by Agent, as of the first day of the LIBOR Rate Loan) had prepayment not occurred and the interest the Banks will actually earn (from like investments in the money markets as of the date of prepayment) as a result of the redeployment of funds from the prepayment. Because of the short-term nature of this facility, the Borrower agrees that the Interest Differential shall not be discounted to its present value. Any prepayment of a LIBOR Rate Loan shall be in an amount equal to the remaining entire principal balance of such Loan.
(e) LIBOR Rate Unavailable or Unascertainable. If for any reason (i) deposits are not available to the Lenders in the relevant market or, (ii) by reasons of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate, or (iii) it becomes unlawful or impracticable to make or maintain Advances accruing interest at the LIBOR Rate, or (iv) as a result of any change in law, the cost to any Lender of making or maintaining Advances accruing at the LIBOR Rate is increased, or (v) at any time that an Event of Default of exists, or (vi) an insufficient number of days remain from the date the Advance is requested to be made or continued until the Maturity Date to constitute a Loan Period, then in each such ease, upon the Borrowers receipt of notice thereof from the Agent, the rate of interest thereafter applicable to outstanding Advances shall be, (x) with respect to Facility A, the sum of 0.30% plus the Prime Rate, or (y) with respect to Facility B, the Prime Rate.
(f) Computation. All interest and fees chargeable under the Loan Documents shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. Borrower and Banks, in executing and delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided, however , that, anything contained herein to the contrary notwithstanding, if said rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, ipso facto as of the date of this Agreement, Borrower is and shall be liable only for the payment of such maximum as allowed by law, and all payment received from Borrower in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess.
2.3 Crediting Payments; Application of Collections. The receipt of any payments by Banks from Borrower shall be applied provisionally to reduce the Obligations
13
outstanding under Section 2.1 , but shall not be considered a payment on account unless such payment item is a wire transfer of immediately available federal funds and is made to Banks in accordance with wiring instructions issued by Banks to Borrower or unless and until such payment is honored when presented for payment. Should any payment to Banks not be honored when presented for payment, then Borrower shall be deemed not to have made such payment, and interest shall be recalculated accordingly. Anything to the contrary contained herein notwithstanding, any payment shall be deemed received by Banks only if it is received by Agent on a Business Day on or before (i) 11:00 a.m. (Los Angeles time) for regular payments or deposits and (ii) 9:30 a.m. California time for payments or deposits covering overdrafts. If any payment is received by Agent on a non-Business Day or after the time specified on a Business Day, it shall be deemed to have been received by Agent as of the opening of business on the immediately following Business Day.
2.4 Designated Account. The Agent is authorized to make the Advances under this Agreement based upon faxed or other written instructions received from anyone purporting to be an Authorized Person, or without instructions if pursuant to Section 2.2(d) . Borrower agrees to establish and maintain an account with the Agent for the purpose of receiving the proceeds of the Advances requested by Borrower and made by the Agent hereunder. Unless otherwise agreed by the Agent and Borrower, any Advance requested by Borrower and made by Banks hereunder shall be credited to Borrowers account with Agent.
2.5 Maintenance of Loan Accounts; Statements of Obligations. Banks shall maintain accounts on their books in the name of Borrower (the Loan Accounts ) on which Borrower will be charged with all Advances made by Banks to Borrower or for Borrowers account, including, accrued interest, Bank Expenses, and any other payment Obligations of Borrower. In accordance with Section 2.3 , the Loan Accounts will be credited with all payments received by Banks from Borrower or for Borrowers account. Banks shall render statements regarding the Loan Accounts to Borrower, including principal, interest, and fees, and including an itemization of all charges and expenses constituting Bank Expenses owing, and such statements shall be conclusively presumed to be correct and accurate and constitute an account stated between Borrower and Banks absent manifest error and unless, within thirty (30) days after receipt thereof by Borrower, Borrower shall deliver to Banks written objection thereto describing the error or errors claimed to be contained in any such statements.
2.6 Fees, Costs, and Charges. Borrower shall pay to the Agent the following fees:
(a) Annual Fee. On the Closing Date, and, beginning July 1, 2009 and annually thereafter on July 1 of each succeeding year during the term of this Agreement, a fee equal to 0.50% of the Maximum Revolving Amount on each of Facility A and Facility B.
(b) Financial Examination, and Documentation Fees. (i) Banks out of pocket expenses for each auditor or other personnel, whether employed by or an independent contractor to Banks or either of them, plus out-of-pocket expenses for each financial analysis and examination (i.e., audits or otherwise) of Borrower and its Subsidiaries or Affiliates in connection therewith.
14
(c) Other Costs and Charges. All Bank Expenses and other costs, fees, and charges of every description payable by Borrower to Banks or either of them under this Agreement.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Advance. The obligation of Banks under this Agreement is subject to the fulfillment, to the satisfaction of Banks and their counsel, of each of the following conditions on or before July 1, 2008:
(a) Banks shall have received each of the following documents, duly executed, and each such document shall be in full force and effect:
(i) this Agreement duly executed by Borrower;
(ii) the Advance Request Form and Disbursement Letter;
(iii) any Notes required or provided by Banks for execution by Borrower to document Facility A and/or Facility B; and
(iv) any other instruments required or provided by Banks for execution by Borrower to document Facility A and/or Facility B.
(b) Banks shall have received a certificate from an Authorized Person attesting to the corporate authorization of Borrower authorizing the execution, delivery, and performance of this Agreement and the other Loan Documents to which Borrower is a party and authorizing specific individuals associated with and authorized by Borrower to execute the same.
(c) Banks shall have received copies of Borrowers Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by an Authorized Person.
(d) Banks shall have received a certificate of insurance, together with the endorsements thereto, as are required by Section 6.8 , the form and substance of which shall be satisfactory to Banks and their counsel;
(e) Banks shall have received satisfactory evidence that all tax returns required to be filed by Borrower have been timely filed and all taxes upon Borrower or its properties, assets, income, and franchises (including real property taxes and payroll taxes) have been paid prior to delinquency, except such taxes that are the subject of a Permitted Protest; such satisfactory evidence shall be provided in the form of written certification by Borrowers Chief Financial Officer to the effect that the foregoing matters in this paragraph have been fully satisfied, unless Banks in their discretion shall request further evidence thereof
(f) Borrower shall have paid (i) the fees payable on the Closing Date
15
and (ii) all expenses of Banks incurred in connection with the transactions contemplated by this Agreement, including without limitation asset searches, credit reports, and the fees and expenses of its outside counsel, as of the Closing Date;
(g) all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Banks and their counsel;
(h) Banks shall have given, in their sole discretion, final credit approval of the credit facilities set forth in this Agreement;
(i) Banks shall have been satisfied, in their sole discretion, with the results of a review of Borrowers most recent interim financial statement;
(i) No adverse changes in Borrowers most recent interim financial statement, or in Borrowers profits, property, business prospects, or financial condition, shall have occurred since the Banks review of Borrowers most recent financial statement for the period ending March 31, 2008;
(k) Banks shall have completed and been satisfied, in Banks sole discretion, with Borrowers trade, credit, and background cheeks, conducted by or for Banks, utilizing resources and data bases selected by Banks;
(1) Banks shall have received the written opinion of counsel for Borrower, in form and substance satisfactory to Banks; and
3.2 Conditions Precedent to all Advances. The following shall be conditions precedent to all Advances hereunder:
(a) the representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all respects on and as of the date of each such Advance, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be continuing on the date of such Advance, nor shall either result from the making thereof;
(e) no injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the extending of such credit shall have been issued and remain in force by any governmental authority against Borrower, Banks, or any of their Affiliates;
(d) no Change of Control shall have occurred after the date of this Agreement; and
(e) With respect to Advances under Facility A, Borrower shall have furnished to Banks, as and when required, such documentation as may be specified by Banks, by
16
notice given to Borrower, to be furnished in connection with Advances, including without limitation the items set forth in Schedule 3.2 .
3.3 Intentionally Omitted.]
3.4 Term. This Agreement shall become effective upon the execution and delivery hereof by Borrower and Banks and shall continue in full force and effect for a term ending on the Maturity Date, unless sooner terminated or extended in writing pursuant to the terms hereof. The foregoing notwithstanding, Banks shall have the right to terminate their obligations under this Agreement immediately and without notice upon the occurrence and during the continuation of an Event of Default.
3.5 Early Termination by Borrower. Borrower has the option, at any time, upon thirty (30) days prior written notice to Banks, to terminate this Agreement by paying to Banks, in cash, the Obligations in full.
4. RIGHT OF INSPECTION.
Banks (through any of their respective officers, employees, or agents) shall have the right, at any time and from time to time, during of the term of the transactions contemplated by this Agreement and/or at any time there is any balance owed to Banks under or in connection with such transactions, upon not less than 24 hours advance written notice, to inspect Borrowers Books and to check, test, and evaluate Borrowers assets in order to verify Borrowers financial condition or the amount, quality, value, condition of, or any other matter relating to, Borrowers assets of every description.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Banks to enter into this Agreement, Borrower makes the following representations and warranties which shall be true, correct, and complete in all respects as of the date hereof, and as of the Closing Date, and as of the date of the making of each Advance, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement:
5.1 No Encumbrances. Borrower has good and indefeasible title to or leasehold interest in, as the case may be, its assets, free and clear of Liens except for Permitted Liens.
5.2 Equipment. All of the Equipment is used or held for use in Borrowers business and is fit for such purposes.
17
5.3 Intentionally Omitted.
5.4 Schedule of Indebtedness. The Schedule of Indebtedness attached hereto as Schedule 5.4 contains a true, correct, and complete listing of Borrowers unsecured indebtedness and guarantees of unsecured indebtedness, including all secured indebtedness and all guaranties of secured indebtedness for which the amount of the debt exceeds the fair market value of the security property (i.e., partially secured indebtedness and guarantees of partially secured indebtedness).
5.5 Location of Chief Executive Office; FEIN. The chief executive office of Borrower is located at the address indicated in the preamble to this Agreement and Borrowers FEIN is 95-4364537.
5.6 Due Organization and Qualification; Subsidiaries.
(a) Borrower is duly organized and existing and in good standing under the laws of Delaware and is qualified and licensed to do business in, and in good standing in, California and all other states where such qualification and licensing is required andlor where the failure to be so qualified or licensed reasonably could be expected to cause a Material Adverse Change.
(b) Set forth on Schedule 5.6 , is a complete and accurate list of Borrowers direct and indirect Subsidiaries, showing: (i) the jurisdiction of their incorporation or formation; (ii) the number of shares of each class of common and preferred stock authorized for each of such Subsidiaries; and (iii) the number and the percentage of the outstanding shares of each such class owned directly or indirectly by Borrower. All of the outstanding capital stock or other capital ownership interest of each such Subsidiary has been validly issued and is fully paid and non-assessable.
(c) Except as set forth on Schedule 5.6 , no capital stock (or any securities, instruments, warrants, options, purchase rights, conversion or exchange rights, calls, commitments or claims of any character convertible into or exercisable for capital stock) of any direct or indirect Subsidiary of Borrower is subject to the issuance of any security, instrument, warrant, option, purchase right, conversion or exchange right, call, commitment or claim of any right, title, or interest therein or thereto.
5.7 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by Borrower of this Agreement and the Loan Documents to which it is a party have been duly authorized by all necessary corporate action.
(b) The execution, delivery, and performance by Borrower of this Agreement and the Loan Doeun1ents to which it is a party do not and will not (i) violate any provision of federal, state, or local law or regulation (including Regulations T, U, and X of the Federal Reserve Board) applicable to Borrower, the Governing Documents of Borrower, or any
18
order, judgment, or decree of any court or other Governmental Authority binding on Borrower, (ii) conflict with, result in a breach of; or constitute (with due notice or lapse of time or both) a default under any material contractual obligation or material lease of Borrower, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of Borrower, other than Permitted Liens, or (iv) require any approval of stockholders or any approval or consent of any Person under any material contractual obligation of Borrower.
(e) The execution, delivery, and performance by Borrower of this Agreement and the Loan Documents to which Borrower is a party do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any federal, state, foreign, or other Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which Borrower is a party, and all other documents contemplated hereby and thereby, when executed and delivered by Borrower will be the legally valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors rights generally.
5.8 Litigation. There are no actions or proceedings pending by or against Borrower or its directors, officers, or senior executives before any court or administrative agency and Borrower does not have knowledge or belief of any pending, threatened, or imminent litigation, governmental investigations, or claims, complaints, actions, or prosecutions involving Borrower, any of its partners or any guarantor of the Obligations, except for: (a) ongoing collection matters in which Borrower is the plaintiff; (b) matters disclosed on Schedule 5.8 and (c) matters arising after the date hereof that, if decided adversely to Borrower, would not cause a Material Adverse Change.
5.9 No Material Adverse Change. All financial statements relating to Borrower that have been delivered by Borrower to Banks have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and fairly present Borrowers financial condition as of the date thereof and Borrowers results of operations for the period then ended. There has not been a Material Adverse Change with respect to Borrower since the date of the latest financial statements submitted to Banks on or before the Closing Date.
5.10 Solvency. Borrower is Solvent. No transfer of property is being made by Borrower and no obligation is being incurred by Borrower in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of Borrower.
5.11 Employee Benefits. None of Borrower, any of its Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any Benefit Plan, other than those listed on Schedule 5.11 . Borrower, each of its Subsidiaries and each ERISA Affiliate have satisfied the minimum funding standards of ERISA and the IRC with respect to each Benefit Plan to which it is obligated to contribute. No ERISA Event has occurred nor has any other event occurred that
19
may result in an ERISA Event that reasonably could be expected to result in a Material Adverse Change. None of Borrower or its Subsidiaries, any ERISA Affiliate, or any fiduciary of any Plan is subject to any direct or indirect liability with respect to any Plan under any applicable law, treaty, rule, regulation, or agreement. None of Borrower or its Subsidiaries or any ERISA Affiliate is required to provide security to any Plan under Section 401(a)(29) of the IRC.
5.12 Maximum Balance Sheet Leverage. Borrowers Maximum Balance Sheet Leverage was 0.97:1 as of December 31,2007.
5.13 Minimum Rent Adjusted Fixed Charge Coverage Ratio. Borrowers Minimum Rent Adjusted Fixed Charge Coverage Ratio was 2.74:1 as of December 31, 2007.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Borrower shall do all of the following:
6.1 Accounting System. Maintain a standard and modem system of accounting that enables Borrower to produce financial statements in accordance with GAAP, and maintain records pertaining to the assets of Borrower and its Subsidiaries or Affiliates that contain information as from time to time may be requested by Banks. Borrower also shall keep a modern asset reporting system that shows all purchases, additions, sales, and dispositions of Borrowers assets.
6.2 Financial Covenants. Borrower shall at all times maintain the following financial covenants:
(a) Minimum Rent Adjusted Fixed Charge Coverage Ratio. A Minimum Rent Adjusted Fixed Charge Coverage Ratio of not less than 1.75:1, measured on a four (4) quarter rolling average basis;
(b) Minimum Liquidity. The Borrower shall maintain cash, cash equivalents and marketable securities in the aggregate amount of at least Seven Million Five Hundred Thousand dollars ($7,500,000), tested quarterly;
(c) Maximum Balance Sheet Leverage. Maximum Balance Sheet leverage not greater than 2.50:1, measured at the end of each calendar quarter; and
(d) Minimum Net Worth. As determined in accordance with GAAP, Net Worth equal to or greater than Thirty Million Dollars ($30,000,000), measured at the end of each calendar quarter.
6.3 Financial Statements, Reports, Certificates. Deliver or cause to be delivered, to Banks: (a) as soon as available, but in any event within ninety (90) days after the end of each fiscal year of Borrower, consolidated and separate financial statements including a balance sheet, income statement, and statement of cash flow of Borrower and its Subsidiaries or
20
Affiliates during such period, prepared and audited by a certified public accounting firm whose identity is approved in advance by Banks; (b) as soon as available, but in any event within ninety (90) days after the end of each fiscal quarter of Borrower, consolidated and separate financial statements of Borrower and its Subsidiaries or Affiliates, prepared by Borrower or by a certified public accountant firm whose identity is approved in advance by Banks; (c) as soon as available, but in any event within thirty (30) days prior to the commencement of each fiscal year of Borrower, an annual financial projection for such succeeding fiscal year, including a balance sheet, income statement, and statement of cash flow of Borrower and its Subsidiaries, or Affiliates during such period, prepared by Borrower or by a certified public accounting firm whose identity is approved in advance by Banks; (d) as soon as available, but in any event within fifteen (15) days after filing with the Securities Exchange Commission, copies of all filings made by Borrower under the Securities Act of 1934 and the regulations and rules promulgated thereunder, in electronic and paper form. Each of the items in subsections (a) through (d), inclusive, above shall be accompanied by a certificate, without any qualifications, by such accountants or by Borrower (as applicable to the each document) to have been prepared in accordance with GAAP, together with a certificate of such accountants addressed to Banks stating that such accountants do not have knowledge of the existence of any Default or Event of Default. Such audited financial statements shall include a balance sheet, profit and loss statement, and statement of cash flow and, if prepared, such accountants letter to management. In addition to the financial statements referred to above, Borrower agrees to deliver to Banks, within the specified time periods, financial statements prepared on a consolidated basis so as to present Borrower and each of Borrowers Subsidiaries or Affiliates on a consolidated basis, and each such related entity separately.
Each quarter, together with the financial statements provided pursuant to this Section 6.3 , Borrower shall deliver to Banks a Compliance Certificate signed by its chief financial officer to the effect that: (i) all financial statements delivered or caused to be delivered to Banks hereunder have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and fairly present the financial condition of Borrower, (ii) the representations and warranties of Borrower contained in this Agreement and the other Loan Documents are true and correct in all material respects on and as of the date of such certificate, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date), (iii) Borrower is in compliance at the end of such period with the applicable financial covenants contained in Section 7.19 (and demonstrating such compliance in reasonable detail), and (iv) on the date of delivery of such certificate to Banks there does not exist any condition or event that constitutes a Default or Event of Default (or, in the case of clauses (i), (ii), or (iii), to the extent of any non-compliance, describing such non-compliance as to which he or she may have knowledge and what action Borrower has taken, is taking, or proposes to take with respect thereto).
Borrower shall have issued written instructions to its independent certified public accountants authorizing them to communicate with Banks and to release to Banks whatever financial information concerning Borrower that Banks may request. Borrower hereby irrevocably authorizes and directs all auditors, accountants, or other third parties to deliver to Banks, at Borrowers expense, copies of Borrowers financial statements, papers related thereto, and other
21
accounting records of any nature in their possession, and to disclose to Banks any information they may at any time have regarding Borrowers business affairs and financial conditions.
6.4 Chairman; CEO. William McMorrow shall at all times remain the Chairman of the Board and Chief Executive Officer of Borrower.
6.5 Title to Equipment. Upon Banks request, Borrower immediately shall deliver to Banks, properly endorsed, any and all evidences of ownership of, certificates of title, or applications for title to any items of Equipment.
6.6 Maintenance of Equipment. Maintain the Equipment in good operating condition and repair (ordinary wear and tear excepted), and make all necessary replacements thereto so that the value and operating efficiency thereof shall at all times be maintained and preserved. Other than those items of Equipment that constitute fixtures on the Closing Date, Borrower shall not permit any item of Equipment to become a fixture to real estate or an accession to other property, and such Equipment shall at all times remain personal property.
6.7 Taxes. Cause all assessments and taxes, whether real, personal, or otherwise, due or payable by, or imposed, levied, or assessed against, Borrower or any of its property to be paid in full, before delinquency or before the expiration of any extension period, except to the extent that the validity of such assessment or tax shall be the subject of a Permitted Protest. Borrower shall make due and timely payment or deposit of all such federal, state, and local taxes, assessments, or contributions required of it by law, and will execute and deliver to Banks, on demand, appropriate certificates attesting to the payment thereof or deposit with respect thereto. Borrower will make timely payment or deposit of all tax payments and withholding taxes required of it by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Banks with proof satisfactory to Banks indicating that Borrower has made such payments or deposits.
6.8 Insurance.
(a) (i) At its expense, keep the assets of Borrower and its Subsidiaries or Affiliates insured against loss or damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts, as are ordinarily insured against by other owners in similar businesses. (ii) Borrower also shall maintain business interruption, and product liability insurance relating to Borrowers ownership and use of such assets, as well as insurance against larceny, embezzlement, and criminal misappropriation. (iii) Borrower shall also maintain commercial general liability insurance with minimum limits of Ten Million Dollars ($10,000,000) per occurrence and in the aggregate.
(b) All such policies of insurance shall be in such form, with such companies, with such deductibles or retention amounts, and such endorsements, and in such amounts, as may be reasonably satisfactory to Banks. All insurance required herein shall be written by companies which are acceptable to Banks. Borrower shall deliver to Banks certified copies of such policies of insurance, and all renewals and replacements thereof, and evidence of
22
the payment of all premiums therefore.
6.9 No Setoffs or Counterclaims. Make payments hereunder and under the other Loan Documents by or on behalf of Borrower without setoff or counterclaim and free and clear of, and without deduction or withholding for or on account of, any federal, state, or local taxes.
6.10 Dispositions at Fair Market Consideration. Sell or otherwise dispose of property of the Borrower only for fair market consideration.
6.11 Compliance with Laws. Substantially comply with the requirements of all applicable laws, rules, regulations, and orders of any governmental authority, including the Fair Labor Standards Act and the Americans With Disabilities Act, other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, would not have and could not reasonably be expected to cause a Material Adverse Change.
6.12 Employee Benefits.
(a) Deliver to Banks: (i) promptly, and in any event within ten (10) Business Days after Borrower or any of its Subsidiaries knows or has reason to know that an ERISA Event has occurred that reasonably could be expected to result in a Material Adverse Change, a written statement of the chief financial officer of Borrower describing such ERISA Event and any action that is being taking with respect thereto by Borrower, any such Subsidiary or ERJSA Affiliate, and any action taken or threatened by the IRS, Department of Labor, or PBGC. Borrower or such Subsidiary, as applicable, shall be deemed to know all facts known by the administrator of any Benefit Plan of which it is the plan sponsor, (ii) promptly, and in any event within three (3) Business Days after the filing thereof with the IRS, a copy of each funding waiver request filed with respect to any Benefit Plan and all communications received by Borrower, any of its Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate with respect to such request, and (iii) promptly, and in any event within three (3) Business Days after receipt by Borrower, any of its Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate, of the PBGCs intention to terminate a Benefit Plan or to have a trustee appointed to administer a Benefit Plan, copies of each such notice.
(b) Cause to be delivered to Banks, upon Banks or either of their request, each of the following: (i) a copy of each Plan (or, where any such plan is not in writing, complete description thereof) (and if applicable, related trust agreements or other funding instruments) and all amendments thereto, all written interpretations thereof and written descriptions thereof that have been distributed to employees or former employees of Borrower or its Subsidiaries; (ii) the most recent determination letter issued by the IRS with respect to each Benefit Plan; (iii) for the three (3) most recent plan years, annual reports on Form 5500 Series required to be filed with any governmental agency for each Benefit Plan; (iv) all actuarial reports prepared for the last three (3) plan years for each Benefit Plan; (v) a listing of all Multiemployer Plans, with the aggregate amount of the most recent annual contributions required to be made by Borrower or any ERISA Affiliate to each such plan and copies of the collective bargaining agreements requiring such contributions; (vi) any information that has been provided to
23
Borrower or any ERISA Affiliate regarding withdrawal liability under any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual payments made to former employees of Borrower or its Subsidiaries under any Retiree Health Plan.
6.13 Compliance with Leases. Pay when due all rents and other amounts payable under any leases to which Borrower is a party or by which Borrowers properties and assets are bound, unless such payments are the subject of a Permitted Protest. To the extent that Borrower fails timely to make payment of such rents and other amounts payable when due under its leases, Banks shall be entitled, in their discretion, to reserve an amount equal to such unpaid amounts against Facility A or Facility B.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Borrower will not do any of the following:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness set forth on Schedule 5.4
(c) Indebtedness fully secured by Permitted Liens or by Liens described in Section 7.2(u )
(d) a guarantee obligation in connection with an exchange permitted under Section 1031 of the IRC;
(e) refinancings, renewals, or extensions of Indebtedness permitted under clauses (b), (e), (f), or (g) of this Section 7.1 (and continuance or renewal of any Permitted Liens associated therewith) so long as: (i) the terms and conditions of such refinancings, renewals, or extensions do not materially impair the prospects of repayment of the Obligations by Borrower, (ii) to the extent that the Indebtedness that is refinanced was subordinated in right of payment to the Obligations, then the subordination terms and conditions of the refinancing Indebtedness must be at least as favorable to Banks as those applicable to the refinanced Indebtedness, and (iii) if and to the extent any such refinancings, renewals or extensions are for assets acquired, sold, refinanced, or funded by an Equity Infusion, the original amount of the Advance corresponding to such asset shall be repaid to Lender concurrently with such refinancing, extension or renewal;
(1) non-recourse debt incurred by Borrower as a portion of Borrowers purchase price of (i) real property, or (ii) pools of notes fully secured by liens on real property; and(g) debt which is recourse to or guaranteed by Borrower, where such debt is incurred or assumed by Borrower or Borrowers Subsidiaries or Affiliates and fully secured by (i) real property, or (ii) pools of notes fully secured by liens on real property;
(g) financing or refinancing of any real property or pool of notes now
24
or hereafter owned by Borrower, and fully secured thereby;
(h) additional senior indebtedness up to One Million Dollars ($1,000,000), so long as all such additional senior indebtedness is for a term which extends beyond the Maturity Date, provided, that all indebtedness permitted by this paragraph shall satisfy all other applicable requirements of this Agreement;
(i) a guaranty of any indebtedness of any Person or Persons up to One Million Dollars ($1,000,000) in the aggregate, provided, that all guaranties permitted by this paragraph shall satisfy all other applicable requirements of this Agreement; and
All indebtedness described in subsections (a) through (i) above must also satisfy all other applicable requirements of this Agreement.
7.2 Liens. Create, incur, or permit to exist, directly or indirectly, any Lien on or with respect to any of its property or assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for (i) Permitted Liens (including Liens that are replacements of Permitted Liens to the extent that the original Indebtedness is refinanced under Section 7.1(e) and so long as the replacement Liens only encumber those assets or property that secured the original Indebtedness), or (ii) Liens given to vendors or lenders to enable Borrower to acquire real property or pools of notes secured by real property after the date of this Agreement and fully secured exclusively by the property so acquired.
7.3 Restrictions on Fundamental Changes. Enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its capital stock, or liquidate, wind up, or dissolve itself (or suffer any such event), or reincorporate in a different jurisdiction or (except as otherwise provided in Section 7.4 ) convey, sell, assign, lease, transfer, or otherwise dispose of, in a single transaction or a series of transactions, all or any substantial part of its property or assets.
7.4 Disposal of Assets. Sell, lease, assign, transfer, or otherwise dispose of any of Borrowers properties or assets other than sales in the ordinary course of Borrowers business as currently conducted.
7.5 Change Name. Change Borrowers name, FEIN, corporate structure (within the meaning of the Code), or identity.
7.6 Guaranty. Guaranty or otherwise become in any way liable with respect to the obligations of any third Person except (a) by endorsement of instruments or items of payment for deposit to the account of Borrower or which are transmitted or turned over to Banks, or (b) as permitted by Section 7.1 .
7.7 Nature of Business. Make any change in the principal nature of Borrowers business.
7.8 Prepayments and Amendments.
25
(a) Except in connection with (i) a refinancing permitted by Section 7.1(e) , or (ii) a purchase (for investment or sale) of pools of notes secured by real property, prepay, redeem, retire, defease, purchase, or otherwise acquire any Indebtedness owing to any third Person, other than the Obligations in accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter, increase, or change, materially and adversely, any of the terms or conditions of any agreement, instrument, document, indenture, or other writing evidencing or concerning Indebtedness permitted under Sections 7.1(b), (c), (d\ or (e) .
7.9 Change of Control. Cause, permit, or suffer, directly or indirectly, any Change of Control.
7.10 Intentionally Omitted.
7.11 Accounting Methods. Modify or change its method of accounting or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the preparation or storage of Borrowers accounting records without said accounting firm or service bureau agreeing to provide Banks information regarding the assets of Borrower and its Subsidiaries or Affiliates or Borrowers financial condition. Borrower waives the right to assert a confidential relationship, if any, it may have with any accounting firm or service bureau in connection with any information requested by Banks pursuant to or in accordance with this Agreement, and agrees that Banks may contact directly any such accounting firm or service bureau in order to obtain such information.
7.12 Investments. Directly or indirectly make, acquire, or incur any liabilities (including contingent obligations), other than those under this Agreement, for or in connection with (a) the acquisition of the securities (whether debt or equity) of, or other interests in, a Person, (b) loans, advances, capital contributions, or transfers of property to a Person; provided , that such loans, advances and capital contributions would be permitted so long as immediately before and after each such loan, advance, or capital contribution no Event of Default exists or results, or (c) the acquisition of all or substantially all of the properties or assets of a Person.
7.13 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for transactions that are in the ordinary course of Borrowers business, upon fair and reasonable terms, that are fully disclosed to Banks, and that are no less favorable to Borrower than would be obtained in an arms length transaction with a non-Affiliate.
7.14 Suspension. Suspend or go out of a substantial portion of its business.
7.15 Intentionally Omitted.
26
7.16 Use of Proceeds. Use the proceeds of the Advances made hereunder for any purpose other than (i) on the Closing Date, to pay sums due the Banks for transactional costs and expenses under or in connection with this Agreement, and (ii) thereafter, consistent with the terms and conditions hereof, in the case of Facility A, to finance Borrowers acquisition of real property or pools of notes secured by real property, and in the case of Facility B, to provide working capital for Borrower.
7.17 Change in Location of Chief Executive Office Equipment with Bailees. Relocate its chief executive office to a new location without providing thirty (30) days prior written notification thereof to Banks and so long as, at the time of such written notification, Borrower also provides to Banks an Asset Access Agreement with respect to such new location. The Equipment shall not at any time now or hereafter be stored with a bailee, warehouseman, or similar party without Banks prior written consent.
7.18 Intentionally Omitted.
7.19 Intentionally Omitted.
7.20 Downstreaming of Funds. Borrower shall not (i) pay, apply, transfer, disburse, credit, or otherwise permit any portion of Facility A or Facility B nor (ii) make or extend any loan or guaranty, to or for the benefit of Kennedy-Wilson Japan and subsidiaries (including without limitation Kennedy-Wilson Japan Co., Ltd. and Kennedy-Wilson Japan K.K.).
7.21 Excessive Acquisitions. Borrower shall make no corporate acquisitions without the prior written consent of Banks; provided, that any such acquisitions approved by Banks shall satisfy all other applicable requirements of this Agreement.
7.22 Intentionally Omitted.
7.23 Dividends. Borrower shall not declare or pay corporate dividends without the prior written consent of Banks; provided that any corporate dividends approved by Banks shall satisfy all other applicable requirements of this Agreement.
7.24 Stock Repurchases. Borrower shall not purchase or repurchase any corporate stock of Borrower or Borrowers Subsidiaries or Affiliates, unless, at the time of any such repurchase (i) there exists no Event of Default, (ii) Borrower is in strict compliance with all covenants contained herein, (iii) Borrower demonstrates, to the reasonable satisfaction of Bank, that Borrower shall remain in compliance with the covenants contained herein for the twelve (12) months following such repurchase, and (iv) Borrower provides the Agent with such updated financial projections as the Agent shall reasonably require, which projections shall be reasonably satisfactory to the Agent in all material respects.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of default (each, an Event of Default ) under this Agreement:
27
8.1 Failure to Make Payment. If Borrower fails to pay when due and payable, or when declared due and payable, any portion of the Obligations (whether of principal, interest (including any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts), fees and charges due Banks, reimbursement of Bank Expenses, or other amounts constituting Obligations);
8.2 Failure to Perform. If Borrower fails to perform, keep, or observe any material term, provision, condition, covenant, or agreement contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between Borrower and Banks or either of them;
8.3 Material Adverse Change. If there is a Material Adverse Change;
8.4 Attachment or Other Process. If any material portion of Borrowers properties or assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any third Person;
8.5 Insolvency Proceeding by Borrower. If an Insolvency Proceeding is commenced by Borrower;
8.6 Insolvency Proceeding Against Borrower. If an Insolvency Proceeding is commenced against Borrower and any of the following events occur: (a) Borrower consents to the institution of the Insolvency Proceeding against it; (b) the petition commencing the Insolvency Proceeding is not timely controverted; (c) the petition commencing the Insolvency Proceeding is not dismissed within forty five (45) calendar days of the date of the filing thereof; provided, however , that, during the pendency of such period, Banks shall be relieved of their obligation to extend credit hereunder; (d) an interim trustee is appointed to take possession of all or a substantial portion of the properties or assets of, or to operate all or any substantial portion of the business of, Borrower; or (e) an order for relief shall have been issued or entered therein;
8.7 Injunction or Other Process. If Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs;
8.8 Lien or Other Process. If a notice of Lien, levy, or assessment is filed of record with respect to any of Borrowers properties or assets by the United States Government, or any federal, state, local, or other Governmental Agency, or if any taxes or debts owing at any time hereafter to any one or more of such entities becomes a Lien, whether choate or otherwise, upon any of Borrowers properties or assets and the same is not paid on the payment due date thereof;
8.9 Judgment or Claim, Lien. If a judgment or other claim becomes a material Lien or encumbrance upon any portion of Borrowers properties or assets;
8.10 Defaults in Material Agreement. If there is a default in any material
28
agreement to which Borrower is a party with one or more third Persons and such default (a) occurs at the final maturity of the obligations thereunder, or (b) results in a right by such third Person(s), irrespective of whether exercised, to accelerate the maturity of Borrowers obligations thereunder;
8.11 Payment on Subordinated Indebtedness. If Borrower makes any payment on account of Indebtedness that has been contractually subordinated in right of payment to the payment of the Obligations, except to the extent such payment is permitted by the terms of the subordination provisions applicable to such Indebtedness; or
8.12 Misstatements and Misrepresentations. If any material misstatement or misrepresentation exists now or hereafter in any warranty, representation, statement, or report made to Banks by Borrower or any officer, employee, agent, or director of Borrower, or if any such warranty or representation is withdrawn.
8.13 Other Events of Default. If an Event of Default as defined elsewhere in the Loan Documents shall occur.
8.14 Cure Period, Notice to Cure.
(a) Notwithstanding anything contained in this Article 8 to the contrary, Banks shall refrain from exercising their rights and remedies and an Event of Default shall not be deemed to have occurred by reason of the occurrence of any of the events set forth in Sections 8.3, 8.4, 8.7. 8.8. 8.9 , or 8.10 if, within fifteen (15) calendar days from the date thereof (the Cure Period) , the same is released, discharged, dismissed, bonded against or satisfied.
(b) In addition, with respect to an Event of Default set forth in Sections 8.3. 8.4. 8.7 , or 8.8, and provided the Borrower has given Notice ( Notice of Occurrence ) to Banks not later than three (3) Business Days after the occurrence of one or more of the Events of Default set forth in those subsections, the Cure Period shall begin on the date the Agent or the Banks, or either of them, gives to the Borrower a Notice to cure such Event of Default (the Notice to Cure) . Provided, however, that if Borrower fails for any reason to give such Notice of Occurrence within such three (3) Business Day period, no Notice to Cure shall be required and the Agent or the Banks, or either of them, may pursue all available remedies without Notice.
(c) No Notice to Cure shall be applicable or required with respect to an Event of Default under this Agreement except as specified in Section 8.14(b) , and shall specifically not be required with respect to an Event of Default specified in Section 8.1. 8.2. 8.5, 8.6, 8.9, 8,10, 8.11 , or 8.12.
(d) No Cure Period shall be applicable or required with respect to any Event of Default under this Agreement except as specified in Section 8.6 or 8.I4(b \ and shall specifically not be applicable or required with respect to an Event of Default specified in Section 8.1, 8.2, 8.5. 8.6 (except as specified therein), 8.11, or
(e) Notwithstanding any other provision of this Agreement, any Event
29
of Default specified in Section 8.1, 8.2. 8.4, 8.5. 8.6 (except as specified therein), or jfl shall conclusively be deemed a material default.
(I) With regard (i) the date Notice to cure ( Notice to Cure Default ) is sent to Borrower by Agent or Banks, or either of them, provided Borrower has given Notice ( Notice of Occurrence ) to Banks not later than three (3) business days after the occurrence of one or more of the events set forth in those subsections, the fifteen (15) day period shall begin to run. In the event Borrower fails to give such Notice of Occurrence within such three (3) day period, Agent and Banks shall not be required to give Notice to Cure Default and may immediately proceed with all available remedies.
9. BANKS RIGIITS AND REMEDIES.
9.1 Rights and Rcmedies. Upon the occurrence, and during the continuation, of an Event of Default Banks may, at their or either of their election, without notice of such election and without demand, do any one or more of the following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease making Advances or extending credit to or for the benefit of Borrower under this Agreement, under any of the Loan Documents, or under any other agreement between Borrower and Banks;
(c) Terminate this Agreement and any of the other Loan Documents as to any future liability or obligation of Banks, but without affecting Banks rights and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account Debtors for amounts and upon tenns which Banks considers advisable, and in such cases, Banks will credit Borrowers Loan Accounts with only the net amounts received by Banks in payment of such disputed Accounts after deducting all Bank Expenses incurred or expended in connection therewith;
(e) Without notice to or demand upon Borrower or any guarantor, make such payments and do such acts as Banks considers necessary or reasonable to protect Banks rights. Borrower agrees to make available for inspection, at any time during regular business hours on a Business Day, by Banks or Banks designees any of the assets of Borrower and its Subsidiaries or Affiliates. With respect to any of Borrowers owned or leased properties, Borrower hereby grants Banks a license to enter into and inspect any such premises and to exercise any of Banks rights or remedies provided herein, at law, in equity, or otherwise; and
(1) Without notice to Borrower (such notice being expressly waived), and without constituting a retention of any collateral in satisfaction of an obligation (within the meaning of the Code), set off and apply to the Obligations any and all (i) balances and deposits
30
of Borrower held by Banks, or (ii) indebtedness at any time owing to or for the credit or the account of Borrower held by Banks.
9.2 Remedies Cumulative. Banks rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be emulative. Banks shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Banks of any right or remedy shall be deemed an election, and no waiver by Banks of any Event of Default shall be deemed a continuing waiver. No delay by Banks shall constitute a waiver, election, or acquiescence by them.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments, insurance premiums, or, in the case of leased properties or assets, rents or other amounts payable under such leases) due to third Persons, or fails to make any deposits or furnish any required proof of payment or deposit, all as required under the terms of this Agreement, then, to the extent that Banks determine that such failure by Borrower could result in a Material Adverse Change, in its discretion and without prior notice to Borrower, Banks may do any or all of the following: (a) make payment of the same or any part thereof~ (b) set up such reserves in Borrowers Loan Accounts as Banks or either of them deem necessary to protect Banks from the exposure created by such failure; or (c) obtain and maintain insurance policies of the type described in Section 6.8 , and take any action with respect to such policies as Banks deem prudent. Any such amounts paid by Banks shall constitute Bank Expenses. Any such payments made by Banks shall not constitute an agreement by Banks to make similar payments in the future or a waiver by Banks of any Event of Default under this Agreement. Banks need not inquire as to, or contest the validity of, any such expense, tax, or Lien and the receipt of the usual official notice for the payment thereof shall be conclusive evidence that the same was validly due and owthg.
11. WAIVERS; INDEMNIFICATION,
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees at any time held by Banks on which Borrower may in any way be liable.
11.2 Intentionally Omitted.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and hold Banks, each Participant, and each of their respective officers, directors, employees, counsel, agents, and attorneys-in-fact (each, an Indemnified Person ) harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, and damages, and all reasonable attorneys fees and disbursements and other costs and expenses actually incurred in connection therewith (as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them in connection with or as a result of or related to the execution, delivery, enforcement,
31
performance, and administration of this Agreement and any other Loan Documents or the transactions contemplated herein, and with respect to any investigation, litigation, or proceeding related to this Agreement, any other Loan Document, or the use of the proceeds of the credit provided hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act, omission, event or circumstance in any manner related thereto (all the foregoing, collectively, the Indemnified Liabilities) . Borrower shall have no obligation to any Indemnified Person under this Section 11.3 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person. This provision shall survive the termination of this Agreement and the repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other Loan Document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail postage prepaid, return receipt requested), overnight courier, or telefacsimile to Borrower or to Banks, as the case may be, at its address set forth below:
If to Borrower: |
|
KENNEDY-WILSON, INC. |
|
|
9601 Wilshire Boulevard, Suite 220 |
|
|
Beverly Hills, California 90210 |
|
|
Attn: Freeman Lyle, EVP/CFO/Seeretary |
|
|
Fax No. (310) 887-6454 |
|
|
|
with copies to: |
|
KULLK, GOTTESMAN & MOUTON, LLP |
|
|
15303 Ventura Boulevard, Suite 1400 |
|
|
Sherman Oaks, California 91403 |
|
|
Attn: Kent Y. Mouton, Esq. |
|
|
Fax No. (310) 557-0224 |
|
|
|
If to U.S. Bank: |
|
U.S. BANK NATIONAL ASSOCIATION |
|
|
633 West 5th Street |
|
|
30 th Floor |
|
|
Los Angeles, California 90071 |
|
|
Attn: Linda Morgan, Vice President |
|
|
Fax No. (213) 615-6792 |
|
|
|
with copies to: |
|
RUTAN AND TUCKER LLP |
|
|
611 Anton Blvd., Suite 1400 |
|
|
Costa Mesa, CA 92626 |
|
|
Atm: Bob L. Hagle, Esq. |
|
|
Fax No. (714) 546-9035 |
|
|
|
If to East-West Bank: |
|
EAST-WEST BANK |
|
|
135 N. Los Robles Avenue |
|
|
2 nd Floor |
|
|
Pasadena, CA 91101 |
|
|
Atth: Kathy Kwan, Vice President |
|
|
Fax No. (626) 817-8869 |
32
with copies to: |
|
NEVERS, PALAZZO, MADDUX & PACKARD |
|
|
3 1248 Oak Crest Drive, Suite 100 |
|
|
Westlake Village, California 91361 |
|
|
Attn: Carisle Packard, Esq. |
|
|
Fax No.: (818) 879-9680 |
The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other. All notices or demands sent in accordance with this Section 12 shall be deemed received on the earlier of the date of actual receipt or three (3) days after the deposit thereof in the U.S. mail or, where applicable, two (2) days after deposit with a nationally recognized overnight carrier, all with postage and charges prepaid, or two (2) days after the latter of transmission by telefacsimile with an electronic transmission receipt and deposit of a copy into the U.S. mail by first class U.S. mail.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE PARTIES HERETO AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF BANKS, IN ANY OTHER COURT IN WHICH BANKS SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND BANKS WAIVES TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13 . BORROWER AND BANKS HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF BORROWER AND BANKS REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
33
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWERS DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered to Banks may be destroyed or otherwise disposed of by Banks one (1) year after they are delivered to or received by Agent or Banks, unless Borrower requests, in writing, the return of said documents, schedules, or other papers and makes arrangements, at Borrowers expense, for their return.
15. AGENCY AND GOVERNANCE PROVISIONS.
15.1 Actions. Each Lender hereby appoints U.S. BANK NATIONAL ASSOCIATION as its Agent (in such capacity, together with its successors and assigns, Agent) under and for purposes of this Agreement and each other Loan Document. Each Lender authorizes Agent to act on behalf of such Lender under this Agreement and each other Loan Document and, in the absence of other written instructions from the Lenders received from time to time by Agent (with respect to which Agent agrees that it will comply, except as otherwise provided in this Article 15 or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of Agent by the term is hereof and thereof, together with such powers as may reasonably be incidental thereto. Each Lender hereby indenmifies (which indemnity shall survive any termination of this Agreement) Agent, pro rata according to such Lenders Pro-Rata Share, from and against any all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, Agent in any way relating to or arising out of this Agreement and any other Loan Document, including reasonable attorneys fees, and as to which Agent is not reimbursed by Borrower; provided, however , that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from Agents gross negligence or willful misconduct. Agent shall not be required to take any action hereunder, or under any other Loan Document, or prosecute or defend any suit in respect of this Agreement or any other Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of Agent shall be or become, in Agents determination, inadequate, Agent may call for additional indemnification from the Lenders and cease to do the acts indenmified against hereunder until such additional indemnity is given.
15.2 Exculpation. Neither Agent nor any of its directors, officers, employees, or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity, or due execution of this Agreement or any other Loan Document, nor for the creation, perfection, or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value, or sufficiency of any collateral security, not to make any inquiry respecting the
34
performance by Borrower or any of its Subsidiaries or Affiliates of their respective obligations under the Loan Documents. Any such inquiry which may be made by Agent shall not obligate it to make any further inquiry or to take any action. Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement, or writing which Agent believes to be genuine and to have been presented by a proper Person.
15.3 Successors. Agent may resign as such at any time upon at least thirty (30) days prior notice to Borrower and all Lenders. If Agent at any time shall resign, the Lenders may appoint another Lender as a successor Agent which shall upon acceptance of such appointment, thereupon become Agent hereunder. If no successor Agent shall have been so appointed by the Lenders, and shall have accepted such appointment, within thirty (30) days after the retiring Agents giving notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a Lender or a commercial banking institution organized under the laws of the United States (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having a combined capital and surplus of at least Five Hundred Million Dollars ($500,000,000). Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall be entitled to receive from the retiring Agent such documents of transfer and assignment as such successor Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agents resignation hereunder as Agent, the provisions of this Article 15 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.
15.4 Other Transactions by U.S. Bank. U.S. Bank shall have the same rights and powers with respect to (x) Facility A and Facility B made by it or any of its Affiliates, and (y) the Notes held by it or any of its Affiliates as any other Lender and may exercise the same as if it were not Agent. U.S. Bank and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with Borrower, any of its Subsidiaries or any of their Affiliates as if U.S. Bank were not Agent hereunder.
15.5 Independent Credit Decision. Each Lender acknowledges that it has, independently of Agent and each other Lender, and based on such Lenders review of the financial information of Borrower and its Subsidiaries and Affiliates, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision in regard to Facility A and Facility B. Each Lender also acknowledges that it will, independently of Agent and each other Lender, and based on such other documents, information, and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document.
15.6 Copies. Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to Agent by Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by Borrower). Agent will distribute to each Lender each document or instrument received for its account and copies of all other
35
communications received by Agent from Borrower for distribution to the Lenders by Agent in accordance with the terms of this Agreement.
15.7 Payments to be Made to Agent. All payments of principal, interest, fees, costs, expenses, and other amounts made by the Borrower pursuant to this Agreement and the other Loan Documents shall be made by the Borrower to Agent, on behalf of the Lenders. Whenever Agent receives any payment or prepayment from or on behalf of the Borrower pursuant to this Agreement or any other Loan Document, Agent shall promptly pay over to each Lender an amount equal to its Pro-Rata Share of such payment or repayment, as the case may be. Any determination by Agent as to the allocation of any payment or prepayment to a particular Loan, or to interest, principal, fees or any other amount payable in respect of this Agreement or the other, Loan Documents shall be final and conclusive absent manifest error.
15.8 Reimbursement by Lenders. Each Lender shall on demand reimburse Agent for its Pro-Rata Share of any and all costs, expenses and disbursements (other than normal overhead costs and expenses) which Agent may incur or sustain in connection with the Loans or any action which may be taken by Agent to administer or collect the same on behalf of the Lenders and for which Agent is not otherwise reimbursed by the Borrower, including, without limitation, all expenses incurred or sustained in connection with the enforcement of rights or remedies against the Borrower, all court costs, disbursements and accountants fees and disbursements, filing and recording fees, title investigation and insurance charges, appraisal fees, and expenses of special examinations and audits.
15.9 Collateral and Guarantees Held by Agent. All collateral security mortgaged, pledged, assigned, transferred, or in the possession of Agent and all guarantees of the Borrowers obligations under the Loan Documents which Agent holds or which may hereafter come into its possession as collateral security for or guarantees of the Loans shall be held by Agent in its own name for the ratable benefit of the Lenders in accordance with their Pro-Rata Shares. However, neither Agent (in its capacity as Agent) nor any Lender shall have any interest in any property that may at any time be taken as collateral security for any other loan or loans made to the Borrower by U.S. Bank, or in any property now or hereafter in the possession or control of U.S. Bank which may be or become collateral security for such loans by reason of the general description contained in any general loan or collateral agreement or collateral note held at any time by U.S. Bank, or by reason of any right or set-off, counterclaim, bankers lien, or otherwise, except that if such property or the proceeds thereof are applied in reduction of any amounts outstanding under this Agreement, the Notes, or any other Loan Document, then each Lender shall be entitled to its Pro-Rata Share of such application.
15.10 Lenders Commitments Independent. All advances of loan funds under this Agreement shall be made by the Lenders proportionately in accordance with their Pro-Rata Shares, and no Lender shall be obligated to fund more than its Pro-Rata Share of any requested Advance. All collateral security at any time mortgaged, pledged, assigned, transferred, or in the possession of Agent and all guarantees of the Borrowers obligations under the Loan Documents which Agent at any time holds as collateral security for or guarantees of the Loans shall be held by Agent in its own name for the ratable benefit of the Lenders based upon their respective Pro-Rata Shares. However, neither Agent (in its capacity as Agent) nor any Lender shall have any
36
interest in any property that may be taken as collateral security for any other loan or loans made to the Borrower by U.S. Bank, or in any property now or hereafter in the possession or control of U.S. Bank which may be or become collateral security for such loans by reason of the general description contained in any general loan or collateral agreement or collateral note held by U.S. Bank or by reason of any right or set-off, counterclaim, bankers lien, or otherwise, except that if such property or the proceeds thereof are applied in reduction of any amounts outstanding under this Agreement, the Notes, or any other Loan Document, then each Lender shall be entitled to its Pro-Rata Share of such application.
15.11 Borrower to deal with Agent. Borrower shall deal solely and directly with Agent, as Agent for the Lenders, for all purposes under the Loan Documents and shall deliver all notices, communications, and other information required or desired to be delivered under the Loan Documents, and make all payments due thereunder, directly to Agent.
15.12 Loans to be Funded Through Agent. Promptly upon receipt of notice of each proposed Advance of Loan funds, the Agent shall notify each Lender of the date and amount of each such Advance and each Pro-Rata Share thereof and provide each Lender with a copy of the Advance Request Form and Disbursement Letter reflecting the Borrowers request for such Advance. Each Lender shall, on or before 10:00 a.m. California time on the date of each such Advance, pay to the Agent, at its office at 633 West 5 th Street, 30 th Floor, Los Angeles, California 90071, Account No. 6517339330 , Reference: Kennedy-Wilson, Inc., Attention: Linda Morgan, Vice President, Telephone (213) 615-6683, its Pro-Rata Share thereof in lawful money of the United States of America and in immediately available funds. All Advances of Loan funds shall be made by the Lenders simultaneously and proportionately in accordance with their respective Pro-Rata Shares, but each Lender may, at its option, fulfill its Commitments with respect to any LIBOR Rate portion of such Loans, if applicable, by causing a foreign branch or Affiliate to make the requested Advance, provided that any exercise of that option does not result in increased costs to the Borrower. Subject to the satisfaction of the conditions specified in Article 3 hereof, Agent shall make the proceeds of the Advance available to the Borrower on the required funding date by causing an amount equal to such proceeds to be credited to Borrowers Account; it is understood, however, that the Agent shall only be required to credit to the Borrowers Account such proceeds of such Advance as are actually received by it from the Lenders. Unless the Agent has been notified by a Lender prior to the required funding date that such Lender will not make its Pro-Rata Share of the applicable Advance available to the Agent, the Agent may assume that the Lender has made its portion available on the funding date, and the Agent may in reliance upon such assumption make a corresponding amount available to the Borrower. No Lender shall be relieved of its obligation to make its Pro-Rata Share of any requested Advance under this Agreement available to the Agent by the failure of any other Lender to make its Pro-Rata Share of that Advance available to the Agent. However, no Lender shall be responsible for any such default by any other Lender; nor shall the Commitment of any Lender be increased as a result of any such default by any other Lender; nor shall the Agent be responsible for any such default by a Lender. If and to the extent a Lender does not make its Pro-Rata Share of a requested Advance available to the Agent, that Lender shall repay to the Agent, on demand, the amount of its Pro-Rata Share of that Advance together with interest thereon at the Federal Funds Effective Rate for each day from the date the amount is made available to the Borrower until the date the amount is repaid to the Agent, and the Agent may exercise any and
37
all voting rights otherwise accorded to that Lender under this Agreement until all required payments are received by the Agent. If a Lender so repays its Pro-Rata Share of that Advance to the Agent, the amount so repaid shall constitute that Lenders Pro-Rata Share of the Advance for all purposes of this Agreement. Federal Funds Effective Rate means the rate per annum equal to the Agents cost of obtaining overnight funds in the New York Federal Funds Market, as in effect from time to time.
16. ASSIGNMENTS AND PARTICIPATIONS.
16.1 Assignments. Either Bank may at any time, with notice to Borrower and Agent, assign and delegate to one or more commercial banks or other financial institutions
reasonably acceptable to Agent (each Person to whom such assignment and delegation is to be made, being hereinafter referred to as an Assignee Lender) , all or any fraction of such Banks Commitment (which assignment and delegation shall be of a constant, and not a varying, percentage of all the assigning Lenders Commitment) (each Lender from whom such assignment and delegation is to be made, being hereinafter referred to as an Assignor Lender) , but not less than an aggregate principal amount of Five Million Dollars ($5,000,000) and an integral multiple of Five Hundred Thousand Dollars ($500,000) in excess thereof; provided, however , that Borrower and Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until (a) written notice of such as assignment; and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to Borrower and Agent by such Lender and such Assignee Lender, and (b) Agent shall have received a processing fee of Three Thousand Dollars ($3,000) from such Lender or Assignee Lender and an executed assignment agreement in form and substance satisfactory to Agent.
From and after the date that an assignment becomes effective as provided in the preceding paragraph, (a) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such assignment, shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (b) the Assignor Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such assignment, shall be released from its obligations hereunder, and under the Loan Documents. Within five (5) Business Days after its receipt of notice of such assignment and associated documentation reasonably required by the Agent, Borrower shall execute and deliver to Agent (for delivery to the relevant Assignee Lender) new Notes (if requested by Agent in its sole discretion) evidencing such Assignee Lenders assigned Commitments and, if the Assignor Lender has retained any portion of its Commitment hereunder, replacement Notes evidencing such Assignor Lenders retained portion of the Commitments (each such Note to be in exchange for, but not in payment of, the Note then held by such Assignor Lender). Each such replacement Note shall be dated the date of the predecessor Note. Accrued interest on that part of the predecessor Note evidenced by the replacement Note, and accrued fees, shall be paid as provided in the documentation effecting the Assignment. Accrued interest on that part of the predecessor Note shall be paid by the Agent, following its
38
receipt from the Borrower, to the Assignor Lender. Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Note and in this Agreement. Any attempted assignment and delegation not made in accordance with this Section 16.1 shall be null and void.
16.2 Participations. Any Lender may at any time sell to one or more
commercial banks or other Persons (each of such commercial banks and other Persons being herein called a Participant ) participating interests in any of its Commitment; provided, however , that:
(a) no participation contemplated in this Section 16.2 shall relieve such Lender from its Commitment or its other obligations hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the performance of its Commitment and such other obligations;
(c) Borrower and Agent shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement and each of the other Loan Documents;
(d) No Participant, unless such Participant is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document.
17. GENERAL PROVISIONS.
17.1 Effectiveness. This Agreement shall be binding and deemed effective when executed by Borrower and Banks.
17.2 Successors and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, that Borrower may not assign this Agreement or any rights or duties hereunder without Agents prior written consent and any prohibited assignment shall be absolutely void. No consent to an assignment by Banks shall release Borrower from its Obligations hereunder. Banks may assign this Agreement and its rights and duties hereunder and no consent or approval by Borrower is required in connection with any such assignment. Banks and each of them reserve the right to sell, assign, transfer, negotiate, or grant participations in all or any part of, or any interest in Banks rights and benefits hereunder. In connection with any such assignment or participation, Banks may disclose to a prospective or actual purchaser or participant all documents and information which Banks now or hereafter may have relating to Borrower or Borrowers business. To the extent that Banks or either of them assign their rights and obligations hereunder to a third Person, Banks thereafter shall be released from such assigned obligations to Borrower and such assignment shall effect a novation between Borrower and such third Person.
17.3 Section Headings. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each
39
section applies equally to this entire Agreement.
17.4 Interpretation. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Banks or Borrower, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.
17.5 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.
17.6 Amendments in Writing. This Agreement can only be amended by a writing signed by both Banks and Borrower.
17.7 Counterparts; Telefacsimile Execution. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement or of any of the Loan Documents..
17.8 Revival and Reinstatement of Obligations. If the incurrence or payment
of the Obligations by Borrower or any guarantor of the Obligations or the transfer by either or both of such parties to Banks of any property of either or both of such parties should for any reason subsequently be declared to be void or voidable under any state or federal law relating to creditors rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, and other voidable or recoverable payments of money or transfers of property (collectively, a Voidable Transfer) , and if Banks are required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of their counsel, then, as to any such Voidable Transfer, or the amount thereof that Banks or either of them is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of Banks related thereto, the liability of Borrower or such guarantor automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made.
17.9 Integration. This Agreement, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof
17.10 Attorneys Fees. If any action or proceeding, at law, in equity, or
40
otherwise, including any action for declaratory relief, is brought by or on behalf of any party hereunder, or is required by any court of competent jurisdiction, as the case may be, which is in any manner related to this Agreement or any other Loan Document or its or their breach, interpretation, or enforcement, the prevailing party in any final judgment or award shall be entitled to recover from the non-prevailing party or parties to such and or proceeding the full amount of all reasonable expenses, including all court costs and actual attorneys fees paid or incurred in good faith (including, without limitation, fees incurred pursuant to Title 11, United States Code, by such prevailing party, in addition to any other relief to which it may be entitled.
[SIGNATURE PAGE FOLLOWS]
41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in Los Angeles, California.
|
|
Borrower: |
||
|
|
|
||
|
|
KENNEDY-WILSON, INC., |
||
|
|
/s/ William J. McMorrow |
||
|
|
/s/ Freeman Lyle, CFO |
||
|
|
|||
|
U.S. BANK NATIONAL ASSOCIATION, |
|||
|
a national banking association |
|||
|
|
|||
|
By |
/s/ Linda Morgan |
||
|
Title: Vice President |
|||
|
|
|||
|
East-West Bank: |
|||
|
|
|||
|
EAST-WEST BANK, |
|||
|
a California corporation |
|||
|
By |
|||
|
Title: |
|||
|
|
|||
|
Agent: |
|||
|
|
|||
|
U.S. BANK NATIONAL ASSOCIATION, |
|||
|
a national banking association |
|||
|
By |
/s/ Linda Morgan |
||
|
Title: Vice President |
|||
42
Schedule A-1
Authorized Persons
Name |
|
Title |
|
|
|
William J. McMorrow |
|
Chairman and Chief Executive Officer |
Freeman Lyle |
|
Executive Vice President, Chief Financial Officer, and Secretary |
Schedule P-1
Permitted Liens
None
Schedule 1.1-1
Advance Request Form and Disbursement Letter
[SEE ATTACHED]
U.S. BANK
AD VANCE REQUEST FORM
(Advances made same day if request is received before 11:00 Am. . Monday through Friday, except holidays )
BORROWER NAME: KENNEDY-WILSON, INC. |
DATE: |
LOAN NUMBER |
|
|
AMOUNT OF REQUEST: |
|
|
|
|
|
|
ADVANCE |
|
PAYOFF |
PAYDOWN |
|
IF ADVANCE ON ACQUISITION FACILITY, PLEASE DETAIL:
PROJECT NAME DESCRIPTION:
ASSOCIATED DEBT TERMS:
MATURITY OF ADVANCE:
(not to exceed time periods set forth in Loan Documents)
FUNDS DEPOSITED TO! TAKEN FROM: TO BE DETERMINED
ACCOUNT NUMBER: TO BE DETERMINED
PERSON AUTHORIZING REQUEST: (signature)
FOR QUESTIONS REGARDING THIS REQUEST, PLEASE CALL:
NAME: FREEMAN LYLE, EVP/CFO/ SECRETARY PHONE NUMBER: (310) 887-6453
COMMENTS:
REQUESTS RECEIVED AFTER 11:00 A.AL WILL BE PROCESSED THE NEXT BUSINESS DAY.
PLEASE FAX REQUEST TO: (213) 615-6792
ATTN: LINDA MORGAN
[Borrowers letterhead]
DISBURSEMENT LETTER
U.S. Bank National Association, as Agent
633 West 5 th Street, 30 th Floor
Los Angeles, California 90071
Attention: Linda Morgan
Re: Loan Agreement dated as of June 5, 2008 among U.S. Bank National Association and East-West Bank, U.S. Bank National Association, as agent, and Kennedy-Wilson, Inc. (the Loan Agreement )
Dear Mr. Mitchell:
This is an Advance Request Form and Disbursement Letter (as defined in the Loan Agreement). All capitalized terms not otherwise defined are used in this Advance Request Form and Disbursement Letter with the meanings given them in the Loan Agreement.
Borrower requests an Advance from Facility choose one: [A] [B] in the amount of $ .
Borrower certifies to the Banks as follows with respect to the Advance requested above:
I. The amount requested above, when aggregated with all other Advances outstanding under Facility choose the applicable Facility: [A] [B], does not exceed the amount available to be advanced under the Loan Agreement;
2. All of the representations and warranties contained in the Loan Agreement and the other Loan Documents are true and correct in all respects;
3. No Default or Event of Default has occurred and is continuing nor shall result from the making of the Advance requested above;
4. All of the other conditions to the Banks making the requested Advance set forth in the Loan Agreement have been satisfied.
5. If Borrower has elected that the Advance bear interest at an interest rate based on the LIBOR Rate, Borrower has delivered to Agent an appropriately completed LIBOR Notice in the form of Schedule 2.2 to the Loan Agreement.
6. The repayment date for the requested Advance in accordance with Section 2.2(d) of the Loan Agreement is .
|
|
Very truly yours, |
|
|
|
|
|
KENNEDY-WILSON, INC. |
|
|
|
|
By: |
|
|
|
Authorized Officer |
Schedule 1.1-2
Excluded Properties
None
Schedule 2.2
LIBOR Notice
[SEE ATTACHED]
Schedule 2.2
LIBOR NOTICE
To: |
U.S. Bank National Association |
|
633 West 5 th Street, 30 Eh Floor |
|
Los Angeles, California 90071 |
|
Attn: Linda Morgan |
|
Facsimile: (213) 615-6683 |
This LIBOR Notice is given pursuant to Section 2.2 of that certain Loan Agreement, dated as of June 5, 2008 (the Agreement) , between KENNEDY-WILSON, INC. (Borrower), EAST-WEST BANK and U.S. BANK NATIONAL BANK (Bank). All initially capitalized terms used but not defined in this Notice of Conversion or Continuation shall have the meanings assigned to them in the Agreement.
In connection with the Advances, the undersigned hereby requests that you:
1. Convert $ in principal amount of the Prime Rate Loans on 200 , to a LIBOR Rate Loan with an Loan Period of [1, 2 or 3] months and expiring on , 200 ($500,000 minimum with incremental increases of $100,000 in excess thereof);
2. Convert $ in principal amount of LIBOR Rate Loans on the expiration of the Loan Period applicable thereto, to a Prime Rate Loan;
3. Continue as LIBOR Rate Loans $ in principal amount of presently outstanding LIBOR Rate Loans commencing on the expiration of the Loan Period applicable thereto, with a new Loan Period of [1, 2, 3, 6 or 12] months and expiring on , 200 .
The undersigned certifies that, as of the date hereof:
(a) the representations and warranties of Borrower contained in the Agreement are true and correct on and as of such date, except to the extent such representations and warranties expressly relate solely to an earlier date;
(b) no Event of Default has occurred or is continuing;
(c) after giving effect to the continuation or conversion requested hereby, there shall be no more than five (5) LIBOR Rate Loans outstanding;
(d) Borrower has satisfied in all respects all conditions under the Agreement to be performed or satisfied by it on or before such date.
Schedule 3.2
Documentation to Be Furnished to Banks in Connection with
Each Facility A or Facility B Advance
Document
1. Advance Request Form and Disbursement Letter, in the form attached as Schedule 1.1-1 .
2. Such additional documentation as may from time to time be requested by Banks.
Schedule 5.4
Schedule of Indebtedness
None.
Schedule 5.6
Borrower Subsidiaries
Kennedy-Wilson, Inc.
K-W Properties
Kennedy-Wilson International
Kennedy-Wilson Properties, Ltd
Kennedy-Wilson Properties Ltd
Kennedy-Wilson Austin Inc.
Kennedy-Wilson International of New York Inc.
Kennedy Wilson Capital
Kennedy-Wilson Tech, Ltd
Techsource Services, Inc.
Kennedy-Wilson Properties Northwest, Ltd
Kennedy-Wilson Properties of Dallas
Kennedy-Wilson Florida Management Inc.
Kennedy-Wilson Nevada Management, Inc.
Kennedy-Wilson Ohio Management, Inc.
Kennedy-Wilson Pennsylvania Management, Inc.
Kennedy-Wilson Properties of Arizona Ltd.
Kennedy-Wilson Properties of Missouri Ltd.
Kennedy-Wilson Properties of Texas Ltd.
Kennedy-Wilson Virginia Management Inc.
Kennedy-Wilson Wisconsin Management, Inc.
KWP Financial, Inc.
KWP Financial I
KWP Financial II
KWP Financial IV
KWP Financial VI (formerly Falcon Crest)
KWP Servicer, LLC
KWP REO, LLC
KWP Financial IX, Inc.
KWP Financial X, Inc. (formerly NLS 187 Corp)
KWP Financial XI LP, Inc.
KW Seattle Fund I, LLC
KWP Marina Club, LP
KWP Marina Club, UP, Inc.
KWP Marina Club Executives, LLC
K-W Santiago Inc.
KW Ravenswood LLC
KW Ravenswood Member LLC
KW Ravenswood Equity LLC
KW Ravenswood Executives LLC
KW/WDC Vista, LLC
KW Vista Land Partners LLC
KW Vista Executives LLC
KW Napa LLC
KW Napa Equity LLC
KW Davis LLC
KW Davis Equity LLC
KW Davis Executives, LLC
KW Pinole LLC
KW Pinole Equity LLC
KW Pinole Executives, LLC
KW-MSK San Jose LLC
KW San Jose Member LLC
KW San Jose Executives, LLC
KW/WDC La Mesa, LLC
KW La Mesa Land Partners, LLC
Japan Ventures, LLC
Chipwell, LLC
Kennedy Wilson Overseas Investments, LLC
Kennedy Wilson Overseas Investments, Inc
KW Multi-Family Management Group Ltd
Fairways 340,LLC
Fairways 340 Corp
Hokkaido Apartments LLC
1KW Hawaii Development LLC
KW Hawaii Executives LLC
KW/WDC Apartment Portfolio LLC
KW/WDC Portfolio Member LLC
KW/WDC Beaverton LLC
KW/WDC Norwalk LLC
KW/WDC Sacramento LLC
KW/WDC Vallejo LLC
KW/WDC Executives LLC
KW-M5K Anaheim LLC
KW Anaheim Manager LLC
KW Anaheim Land Partners LLC
KW Anaheim Executives LLC
KW Hidden Creek, LLC
KW Western Fund II, LLC
KW Western Fund Manager, LLC
KW Western Fund Executives, LLC
KW Federal Way, LLC
KW Federal Way Equity, LLC
1KW Federal Way Executives
Kenedix UP, LLC
KW/HFC Paramount, LP
KW Paramount GP, LLC
KW/HFC Paramount, LLC
KW Paramount Member, LLC
KW Paramount Investors, LLC
Dillingham Ranch Ama LLC
68-540 Farrington LLC
1KW Dillingham Ama LLC
KW Dillingham Ama Investors LLC
Mokuleia Water LLC
North Shores Water company LLC
Mokuleia Farmington shores, LLC
Mokuleia shores Holder LLC
Panako LLC
Kennedy Capital Trust I
KW Palisades Center, LLC
1KW Palisades Center Manager, LLC
1KW Palisades Executives, LLC
KWI America Multifamily, LLC
KW America Multifamily Manager, LLC
1KW America Multifamily Executives, LLC
KW/WDC Westmoreland, LLC
KW/WDC West Campus, LLC
900 Fourth Avenue Property LLC
KW Portfolio XI Manager, LLC
1KW Portfolio 900 Fourth Property Manager, LLC
KW 900 Fourth Property Executives, LLC
Fifth and Madison LLC
KW Portfolio XII Manager, LLC
KW Portfolio Fifth and Madison Property Manager, LLC
KW Fifth and Madison Property Executives, LLC
300 California Partners LLC
KW 300 California Manager LLC
KW 300 California LLC
1KW Fund II 300 California, LLC
KW Portfolio XIII, LLC
KW Portfolio XIII Manager, LLC
KW Portfolio XIII Executives, LLC
KW - RAR3 Mill Creek, LLC
KW - RAR3 Mill Creek Manager, LLC
KW Mill Creek Property Manager, LLC
1KW Mill Creek Executives, LLC
KW Fruitdale, LLC
KW Fruitdale Equity, LLC
KW Fruitdale Executives, LLC
Glendora Partners
KW James Street, LLC
1KW James Street Manager, LLC
1KW James Street Executives, LLC
KW Fund I - I Carlsbad, General Partner LLC
KW Fund I - 1 Carlsbad, LP
KW Fund I - Hegenberger General Partner LLC
1KW Fund I - Hegenberger LP
1KW Fund I - Fifth and Madison, LLC
KW Fund I - 900 Fourth LLC
1KW Fund I - 300 California
KW Fund I - Baxter Way LLC (Formely 201 Figueroa)
KW Fund I - One Tech LLC
Kennedy-Wilson Property Services, Inc.
Kennedy-Wilson Property Equity, Inc.
Kennedy-Wilson Property Special Equity, Inc
KWI Property Fund I, LP
KWI Continental Building, General Partner LLC
KWI Briareroft Building, General Partner LLC
KWI Briarcroft Building, LP
KWI Continental Building, LP
KWI Ashford Westchase Buildings General Partner LLC
KWT Ashford Westchase Buildings, LP
1KW Property Fund II LP
Kennedy-Wilson Property Services II, Inc.
Kennedy-Wilson Property Special Equity II, Inc.
Kennedy-Wilson Property Equity II, Inc.
1KW Fund II Executives LLC
1KW Fund II Howe CC LP
KW Fund II Howe CC General Partner LLC
1860 Howe Avenue Corp
1KW Fund II - 1860 Howe LP
1KW Fund II - 1860 Howe General Partner LLC
KW Fund II Metro Center General Partner
KW Fund II Metro Center LP
KW Fund II - 300 California LLC
KW Fund II -303 North Glenoaks, LLC
1KW Fund II - 333 North Glenoaks, LLC
1KW Fund II - 7060 Hollywood, LLC
1KW Fund IT - Burbank Executive Plaza, LLC
KW Fund II Executives LLC
1KW Fund II - One Tech LLC
1KW Fund III - 333 North Glenoaks, LLC
KW Fund III - Burbank Executive Plaza, LLC
KW Fund II- Baxter Way LLC
1KW Fund II- Palm desert LLC
1KW Fund III - 303 North Glenoaks, LLC
1KW Funds - Burbank Executive Plaza LLC
1KW Fund III-Woodstone, LLC
KW Fund III-Woodstone Manager, LLC
1KW Funds - 303 North Glenoaks, LLC
1KW Funds - 333 North Glenoaks, LLC
KW BASGF II Manager LLC
Schedule 5.8
Litigation
None.
Schedule 5.11
Benefit Plans
KENNEDY-WILSON. INC. 1992 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
Schedule 6.3
Compliance Certificate
[To Be Furnished]
Exhibit 10.92
Execution Copy
JUNIOR
SUBORDINATED INDENTURE
between
KENNEDY-WILSON, INC.
and
THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION,
as
Trustee
Dated as of January 31, 2007
SCHEDULES
Schedule ADetermination of LIBOR
Exhibit AForm of Officers Financial Certificate
JUNIOR SUBORDINATED INDENTURE, dated as of January 31, 2007, between KENNEDY-WILSON, INC., a Delaware corporation (the Company ), and THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as Trustee (in such capacity, the Trustee).
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of its unsecured junior subordinated notes (the Securities) issued to evidence loans made to the Company of the proceeds from the issuance by Kennedy-Wilson Capital Trust I, a Delaware statutory trust (the Trust ), of undivided preferred beneficial interests in the assets of the Trust (the Preferred Securities ) and undivided common beneficial interests in the assets of the Trust (the Common Securities and, together with the Preferred Securities, the Trust Securities ), and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered; and
WHEREAS, all things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.
Now, THEREFORE, this Indenture Witnesseth:
For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:
SECTION 1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
Act when used with respect to any Holder, has the meaning specified in Section 1.4 .
Administrative Trustee means, with respect to the Trust, each Person identified as an Administrative Trustee in the Trust Agreement, solely in its capacity as Administrative Trustee of the Trust under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Administrative Trustee appointed as therein provided.
Additional Interest means the interest, if any, that shall accrue on any amounts payable on the Securities, the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the rate per annum specified or determined as specified in such Security, in each case to the extent legally enforceable.
Additional Tax Sums has the meaning specified in Section 10.5 .
Additional Taxes means taxes, duties or other governmental charges imposed on the Trust as a result of a Tax Event (which, for the sake of clarity, does not include amounts required to be deducted or withheld by the Trust from payments made by the Trust to or for the benefit of the Holder of, or any Person that acquires a beneficial interest in, the Securities).
Affiliate of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, control, when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms controlling and controlled have meanings correlative to the foregoing.
Applicable Depositary Procedures means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time.
Authenticating Agent means any Person authorized by the Trustee pursuant to Section 6.11 to act on behalf of the Trustee to authenticate the Securities.
Board of Directors means the board of directors of the Company or any duly authorized committee of that board.
2
Board Resolution means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification.
Breakage Costs means any and all reasonable costs and fees of any holder of Preferred Securities (including, without limitation, the reasonable fees and expenses of any counsel engaged by such holder to enforce the obligations of the Company hereunder) (as determined by such holder) directly associated or incurred in connection with the unwinding, terminating, modifying or otherwise breaking of any interest rate swap or other interest rate hedging arrangement entered into with respect to the interest rate on the Preferred Securities prior to the expiration of the Fixed Rate Period where such unwinding, termination, modification or breaking is caused by the payment of principal on the Securities prior to the expiration of the Fixed Rate Period.
Business Day means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee is closed for business.
Calculation Agent has the meaning specified in Section 10.4 .
Code means the Internal Revenue Code of 1986, as amended.
Common Securities has the meaning specified in the first recital of this Indenture.
Commission has the meaning specified in Section 7.3(c) .
Company means the Person named as the Company in the first paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter Company shall mean such successor Person.
Company Request and Company Order mean, respectively, the written request or order signed in the name of the Company by its Chairman of the Board of Directors, its Vice Chairman of the Board of Directors, its Chief Executive Officer, President or a Vice President, and by its Chief Financial Officer, its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. Notwithstanding the foregoing, a Company Order for the purposes of authentication and delivery of the Securities pursuant to Section 3.3(a) shall require the signature of only one of the above referenced officers of the Company.
Corporate Trust Office means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of this Indenture is located at 601 Travis, 16 th Floor, Houston, Texas 77002 Attn.: Global Corporate TrustCDO Group. Initially, all notices and correspondence shall be addressed to Mudassir Mohamed, telephone number (713) 483-6029.
Debt means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person, whether currently existing or hereafter incurred and whether or not contingent and without duplication, (i) every obligation of such Person for money borrowed; (ii)
3
every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or other accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; (vi) all indebtedness of such Person, whether incurred on or prior to the date of this Indenture or thereafter incurred, for claims in respect of derivative products, including interest rate, foreign exchange rate and commodity forward contracts, options and swaps and similar, arrangements; (vii) every obligation of the type referred to in clauses (i) through (vi) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor or otherwise; and (viii) any renewals, extensions, refundings, amendments or modifications of any obligation of the type referred to in clauses (i) through (vii).
Defaulted Interest has the meaning specified in Section 3.1(e) .
Defeasance has the meaning specified in Section 13.1 .
Defeasance Election has the meaning specified in Section 13.1 .
Delaware Trustee means, with respect to the Trust, the Person identified as the Delaware Trustee in the Trust Agreement, solely in its capacity as Delaware Trustee of the Trust under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Delaware Trustee appointed as therein provided.
Depositary means an organization registered as a clearing agency under the Exchange Act that is designated as Depositary by the Company or any successor thereto. DTC will be the initial Depositary.
Depositary Participant means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Depositary effects book-entry transfers and pledges of securities deposited with the Depositary.
Distributions means amounts payable in respect of the Trust Securities as provided in the Trust Agreement and referred to therein as Distributions.
Dollar or $ means the currency of the United States of America that, as at the time of payment, is legal tender for the payment of public and private debts.
DTC means The Depository Trust Company, a New York corporation, or any successor thereto.
EBITDA means, for any period, all as determined in accordance with GAAP on a consolidated basis for the Company and its consolidated subsidiaries, without duplication:
4
(a) the sum of the following amounts attributable to such period: (i) Net Income, plus (ii) interest expense, (iii) charges against income for all federal, state and local taxes, (iv) depreciation expense, (v) amortization expense, (vi) other non-cash charges and expenses (including non-cash charges resulting from accounting changes), and (vii) any losses arising outside of the ordinary course of business which have been included in the determination of Net Income, minus
(b) any gains arising outside the ordinary course of business which have been included in the determination of Net Income.
EDGAR has the meaning specified in Section 7.3(c) .
Equity Interests means (a) the partnership interests (general or limited) in a partnership, (b) the membership interests in a limited liability company and (c) the shares or stock interests (both common stock and preferred stock) in a corporation..
Event of Default has the meaning specified in Section 5.1 .
Exchange Act means the Securities Exchange Act of 1934 or any statute successor thereto, in each case as amended from time to time.
Expiration Date has the meaning specified in Section 1.4(h) .
FIN 46(R) shall mean Interpretation No. 46(R) of the Financial Accounting Standards Board (Consolidation of Variable Interest Entities),
Fixed Rate Period shall have the meaning in the form of Security set forth in Section 2 .1.
GAAP means United States generally accepted accounting principles, consistently applied, from time to time in effect.
Global Security means a Security that evidences all or part of the Securities, the ownership and transfers of which shall be made through book entries by a Depositary.
Government Obligation means (a) any security that is (i) a direct obligation of the United States of America of which the full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America or the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (b) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any Government Obligation that is specified in clause (a) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any Government Obligation that is so specified and held, provided, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount
5
received by the custodian in respect of the Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt.
Holder means a Person in whose name a Security is registered in the Securities Register.
Indenture means this instrument as originally executed or as it may from time to time be amended or supplemented by one or more amendments or indentures supplemental hereto entered into pursuant to the applicable provisions hereof.
Interest Charges means for any period, without duplication, the aggregate amount of interest which, in accordance with GAAP, would be included on an income statement for the Company and its consolidated subsidiaries on a consolidated basis as interest expense, together with all interest capitalized or deferred during such period.
Interest Payment Date means January 30, April 30, July 30 and October 30 of each year, commencing on April 30, 2007, during the term of this Indenture.
Investment Company Act means the Investment Company Act of 1940 or any successor statute thereto, in each case as amended from time to time.
Investment Company Event means the receipt by the Company of an Opinion of Counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation (including any announced prospective change) or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within ninety (90) days of the date of such opinion will be, considered an investment company that is required to be registered under the Investment Company Act, which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Securities.
LIBOR has the meaning specified in Schedule A .
LIBOR Business Day has the meaning specified in Schedule A .
LIBOR Determination Date has the meaning specified in Schedule A .
Liquidation Amount has the meaning specified in the Trust Agreement.
Maturity means, when used with respect to any Security, the date on which the principal of such Security or any installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.
Net Income means, with reference to any period, the net income (or loss) of the Company and its consolidated subsidiaries for such period (taken as a cumulative whole), as determined in accordance with GAAP, after eliminating all offsetting debits and credits between the Company and its consolidated subsidiaries and all other items required to be eliminated in the
6
course of the preparation of consolidated financial statements of the Company and its consolidated subsidiaries in accordance with GAAP.
Net Worth means, at any time,
(a) the total assets of the Company and its consolidated subsidiaries which would be shown as assets on a consolidated balance sheet of the Company and its consolidated subsidiaries as of such time prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of subsidiaries, minus
(b) Total Liabilities.
Notice of Default means a written notice of the kind specified in Section 5.1(c) .
Officers Certificate means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the President or a Vice President, and by the Chief Financial Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company and delivered to the Trustee.
Opinion of Counsel means a written opinion of counsel, who may be counsel for or an employee of the Company or any Affiliate of the Company.
Optional Redemption Price has the meaning set forth in Section 11.1 .
Original Issue Date means the date of original issuance of each Security.
Outstanding means, when used in reference to any Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Securities; provided, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and
(iii) Securities that have been paid or in substitution for or in lieu of which other Securities have been authenticated and delivered pursuant to the provisions of this Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Company;
provided, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be
7
Outstanding unless the Company shall hold all Outstanding Securities, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities that a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgees right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. Notwithstanding anything herein to the contrary, Securities initially issued to the Trust that are owned by the Trust shall be deemed to be Outstanding. notwithstanding the ownership by the Company or an Affiliate of any beneficial interest in the Trust.
Paying Agent means the Trustee or any Person (other than the Company or any Affiliate of the Company) authorized by the Company to pay the principal of or any premium or interest on, or other amounts in respect of, any Securities on behalf of the Company.
Person means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, company, limited liability company, trust, unincorporated association, or government, or any agency or political subdivision thereof, or any other entity of whatever nature.
Place of Payment means, with respect to the Securities, the Corporate Trust Office of the Trustee.
Preferred Securities has the meaning specified in the first recital of this Indenture.
Predecessor Security of any particular Security means every previous Security evidencing al/ or a portion of the same debt as that evidenced by such particular Security, For the purposes of this definition, any security authenticated and delivered under Section 3.6 in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.
Proceeding has the meaning specified in Section 12.2(b) .
Property Trustee means the Person identified as the Property Trustee in the Trust Agreement, solely in its capacity as Property Trustee of the Trust under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Property Trustee appointed as therein provided.
Purchase Agreement means the Purchase Agreement or Purchase Agreements (whether one or more) executed and delivered contemporaneously with this Indenture by the Trust, the Company and the purchaser(s) named therein, as the same may be amended from time to time.
Redemption Date means, when used with respect to any Security to be redeemed, the date fixed for such redemption by or pursuant to this Indenture.
8
Redemption Price means, when used with respect to any Security to be redeemed, in whole or in part, the Special Redemption Price or the Optional Redemption Price, as applicable, at which such Security or portion thereof is to be redeemed as fixed by or pursuant to this Indenture.
Reference Banks has the meaning specified in Schedule A .
Regular Record Date for the interest payable on any Interest Payment Date with respect to the Securities means the date that is fifteen (15) days preceding such Interest Payment Date (whether or not a Business Day).
Responsible Officer means, when used with respect to the Trustee, the officer in the Global Corporate Trust department of the Trustee having direct responsibility for the administration of this Indenture.
Rights Plan means a plan of the Company providing for the issuance by the Company to all holders of its Equity Interests of rights entitling the holders thereof to subscribe for or purchase Equity Interests or any class or series of Equity Interests in the Company which rights (i) are deemed to be transferred with such Equity Interests and (ii) are also issued in respect of future issuances of such Equity Interests, in each case until the occurrence of a specified event or events.
Securities or Security means any debt securities or debt security, as the case may be, authenticated and delivered under this Indenture.
Securities Act means the Securities Act of 1933 or any successor statute thereto, in each case as amended from time to time.
Securities Register and Securities Registrar have the respective meanings specified in Section 3.5 .
Senior Debt means the principal of and any premium and interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company, whether or not such claim for post-petition interest is allowed in such proceeding) all Debt of the Company, whether incurred on or prior to the date of this Indenture or thereafter incurred, unless it is provided in the instrument creating or evidencing the same or pursuant to which the same is outstanding, that such obligations are not superior in right of payment to the Securities issued under this Indenture; provided , that Senior Debt shall not be deemed to include any (i) debt or (ii) other debt securities (and guarantees, if any, in respect of such debt securities) issued to any trust other than the Trust (or a trustee of any such trust), partnership or other entity affiliated with the Company that is a financing vehicle of the Company (a financing entity) in connection with the issuance by such financing entity of equity securities or other securities, in each case of (1) or (ii) pursuant to an instrument that ranks pari passe with or junior in right of payment to this Indenture.
Special Event means the occurrence of an Investment Company Event or a Tax Event.
9
Special Record Date for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.1(e)(i).
Special Redemption Price has the meaning set forth in Section 11.2 .
Stated Maturity means April 30, 2037.
Subsidiary of a Person means (a) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person and/or by one or more of its Subsidiaries or (b) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person and/or by one or more of its Subsidiaries. Unless otherwise expressly provided, all references herein to a Subsidiary shall mean a Subsidiary of the Company.
Tangible Net Worth means, at any time,
(a) the total assets of the Company and its consolidated subsidiaries which would be shown as assets on . a consolidated balance sheet of the Company and its consolidated subsidiaries as of such time prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of subsidiaries, minus
(b) Total Liabilities, minus
(c) the net book value of all assets, after deducting any reserves applicable thereto, which would be treated as intangible under GAAP, including, without limitation, good will, trademarks, trade names, service marks, brand names, copyrights, patents and amortized debt discount and expense, and organizational expenses.
Tax Event means the receipt by the Company of an Opinion of Counsel experienced in such matters to the effect that, as a result of (a) any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein or (b) any judicial decision or any official administrative pronouncement (including any private letter ruling, technical advice memorandum or field service advice) or regulatory procedure, including any notice or announcement of intent to adopt any such pronouncement or procedure (an Administrative Action ), regardless of whether such judicial decision or Administrative Action is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, change, judicial decision or Administrative Action is enacted, promulgated or announced, in each case, on or after the date of issuance of the Securities, there is more than an insubstantial risk that (1) the Trust is, or will be within ninety (90) days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Securities, (ii) interest payable by the Company on the Securities is not, or within ninety (90) days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes, or (iii) the Trust is, or will be within ninety (90) days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges.
10
Total Debt means the total debt of the Company and its consolidated subsidiaries which would be shown as liabilities on a consolidated balance sheet of the Company and its consolidated subsidiaries as of such time prepared in accordance with GAAP.
Total Liabilities means the total liabilities of the Company and its consolidated subsidiaries which would be shown as liabilities on a consolidated balance sheet of the Company and its consolidated subsidiaries as of such time prepared in accordance with GAAP.
Trust has the meaning specified in the first recital of this Indenture.
Trust Agreement means the Amended and Restated Trust Agreement executed and delivered by the Company, the Property Trustee, The Bank of New York (Delaware), as Delaware Trustee and the Administrative Trustees named therein, contemporaneously with the execution and delivery of this Indenture, for the benefit of the holders of the Trust Securities, as amended or supplemented from time to time.
Trustee means the Person named as the Trustee in the first paragraph of this instrument, solely in its capacity as such and not in its individual capacity, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and, thereafter, Trustee shall mean or include each Person who is then a Trustee hereunder.
Trust Indenture Act means the Trust Indenture Act of 1939, as amended and as in effect on the date as of this Indenture.
Trust Securities has the meaning specified in the first recital of this Indenture.
SECTION 1.2 Compliance Certificate and Opinions.
11
SECTION 1.3 Forms of Documents Delivered to Trustee.
SECTION 1.4 Acts of Holders.
12
13
SECTION 1.5 Notices, Etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver, Act of Holders, or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with:
14
SECTION 1.6 Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first class, postage prepaid, to each Holder affected by such event to the address of such Holder as it appears in the Securities Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. If, by reason of the suspension of or irregularities in regular mail service or for any other reason, it shall be impossible or impracticable to mail notice of any event to Holders when said notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
SECTION 1.7 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction of this Indenture.
SECTION 1.8 Successors and Assigns.
This Indenture shall be binding upon and shall inure to the benefit of any successor to the Company and the Trustee, including any successor by operation of law. Except in connection with a transaction involving the Company that is permitted under Article VIII and pursuant to which the assignee agrees in writing to perform the Companys obligations hereunder, the Company shall not assign its obligations hereunder.
SECTION 1.9 Separability Clause.
If any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue.
SECTION 1.10 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns, the holders of Senior Debt, the Holders of the Securities and, to the extent expressly provided in Sections 5.2 , 5.8 , 5.9 , 5.11 , 5.12 , 5.13 , 9.2 and 10.7 , the holders of Preferred Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture.
15
SECTION 1.11 Governing Law.
This Indenture and the rights and obligations of each of the Holders, the Company and the Trustee shall be construed and, enforced in accordance with and governed by the laws of the State of New York without reference to its conflict of laws provisions (other than section 5-1401 of the General Obligations Law).
SECTION 1.12 Submission to Jurisdiction.
ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH RESPECT TO OR ARISING OUT OF THIS INDENTURE MAY BE BROUGHT IN OR REMOVED TO THE COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN THE BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF THIS INDENTURE, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS INDENTURE.
SECTION 1.13 Non-Business Days.
If any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest, premium, if any, or principal or other amounts in respect of such Security shall not be made on such date, but shall be made on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, until such next succeeding Business Day) except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity.
SECTION 2.1 Form of Security.
Any Security issued hereunder shall be in substantially the following form:
16
KENNEDY-WILSON, INC.
Junior Subordinated Note due 2037
No. |
$ |
Kennedy-Wilson, Inc., a corporation organized and existing under the laws of Delaware (hereinafter called the Company , which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to The Bank of New York Trust Company, National Association, not in its individual capacity, but solely as Property Trustee for Kennedy-Wilson Capital Trust I, or registered assigns, the principal sum of or such other principal amount represented hereby as may be set forth in the records of the Securities Registrar hereinafter referred to in accordance with the Indenture on April 30, 2037. The Company further promises to pay interest on said principal sum from January 31, 2007, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears on January 30, April 30, July 30 and October 30 of each year, commencing April 30, 2007 or if any such day is not a Business Day, on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date until such next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date, at a fixed rate equal to 9.06% per annum through the interest payment date in April 2017 ( Fixed Rate Period ) and thereafter at a variable rate equal to LIBOR plus 3.70% per annum, together with Additional Tax Sums, if any, as provided in Section 10.5 of the Indenture, until the principal hereof is paid or duly provided for or made available for payment; provided, further , that any overdue principal, premium, if any, or Additional Tax Sums and any overdue installment of interest shall bear Additional Interest a fixed rate equal to 9.06% per annum during the Fixed Rate Period and thereafter at a variable rate equal to LIBOR plus 3.70% per annum (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand.
During the Fixed Rate Period, the amount of interest payable shall be computed on the basis of a 360-day year of twelve 30-day months and the amount payable for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. Upon expiration of the Fixed Rate Period, the amount of interest payable for any interest payment period will be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall
17
be given to Holders of Securities not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture.
Payment of principal of, premium, if any, and interest on this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal, premium, if any, and interest due at the Maturity of this Security shall be made at the Place of Payment upon surrender of such Securities to the Paying Agent, and payments of interest shall be made, subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written, transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of this Security is the Property Trustee, the payment of the principal of (and premium, if any) and interest (including any overdue installment of interest and Additional Tax Sums, if any) on this Security will be made at such place and to such account as may be designated by the Property Trustee.
The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Debt, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Debt, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.
Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
[FORM OF REVERSE OF SECURITY]
This Security is one of a duly authorized issue of securities of the Company (the Securities ) issued under the Junior Subordinated Indenture, dated as of January 31, 2007 (the Indenture ), between the Company and The Bank of New York Trust Company, National Association, as Trustee (in such capacity, the Trustee , which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Debt, the Holders of the Securities and the holders of the Preferred Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered.
18
All terms used in this Security that are defined in the Indenture or in the Amended and Restated Trust Agreement, dated as of January 31, 2007 (as modified, amended or supplemented from time to time, the Trust Agreement ), relating to the Kennedy-Wilson Capital Trust I (the Trust ) among the Company, as Depositor, the Trustees named therein and the Holders from time to time of the Trust Securities issued pursuant thereto, shall have the meanings assigned to them in the Indenture or the Trust Agreement, as the case may be.
The Company may, on any Interest Payment Date, at its option, upon not less than thirty (30) days nor more than sixty (60) days written notice to the Holders of the Securities (unless a shorter notice period shall be satisfactory to the Trustee) on or after April 30, 2012 and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time at a Redemption Price equal to one hundred percent (100%) of the principal amount hereof; together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date.
In addition, upon the occurrence and during the continuation of a Special Event, the Company may, at its option, upon not less than thirty (30) days nor more than sixty (60) days written notice to the Holders of the Securities (unless a shorter notice period shall be satisfactory to the Trustee), redeem this Security, in whole but not in part, subject to the terms and conditions of Article XI of the Indenture at a Redemption Price equal to one hundred seven and one half percent (107.5%) of the principal amount hereof; together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date.
In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security.
The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay
19
the principal of and any premium, if any, and interest, including any Additional Interest (to the extent legally enforceable), on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is restricted to transfers to (1) the Company, (ii) Qualified Institutional Buyers (as defined in Rule 144A under the Securities Act of 1933, as amended (the Securities Act )) who are also Qualified Purchasers (as such term is darned in the Investment Company Act of 1940, as amended), (iii) outside the United States in an offshore transaction in accordance with Regulation S under the Securities Act, (iv) pursuant to an effective registration statement under the Securities Act or (v) pursuant to another exemption from registration under the Securities Act and is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar and duly executed by, the Holder hereof or such Holders attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
The Company and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that, for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness.
20
This Security shall be construed and enforced in accordance with and governed by the laws of the State of New York, without reference to its conflict of laws provisions (other than section 5-1401 of the General Obligations Law).
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on this day of , 20 .
|
KENNEDY-WILSON, INC. |
|
|
|
|
|
|
|
|
By |
|
|
Name: |
|
|
Title : |
|
SECTION 2.2 Restricted Legend.
[ IF THIS SECURITY IS A GLOBAL SECURITY INSERT : THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ( DTC ) OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. ]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT ), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
21
OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.
THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A OF THE SECURITIES ACT) AND A QUALIFIED PURCHASER (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED), (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (V) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.
THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AT TEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.
THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ( ERISA ), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE CODE ) (EACH A PLAN ), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF ANY PLANS INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING PLAN ASSETS OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE
22
REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE.
SECTION 2.3 Form of Trustees Certificate of Authentication.
The Trustees certificate of authentication shall be in , substantially the following form:
This is one of the Securities referred to in the within-mentioned Indenture.
Dated: |
By: |
|
|
|
Authenticating Agent |
|
|
|
|
By: |
|
|
|
Authorized Signatory |
SECTION 2.4 Temporary Securities.
23
SECTION 2.5 Definitive Securities.
The Securities issued on the Original Issue Date shall be in definitive form. The definitive Securities shall be printed, lithographed or engraved, or produced by any combination of these methods, if required by any securities exchange on which the Securities may be listed, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities.
SECTION 3.1 Payment of Principal and Interest.
24
25
SECTION 3.2 Denominations.
The Securities shall be in registered form without coupons and shall be issuable in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof.
SECTION 3.3 Execution, Authentication, Delivery and Dating.
26
SECTION 3.4 Global Securities.
27
28
SECTION 3.5 Registration, Transfer and Exchange Generally.
29
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Securities.
30
SECTION 3.7 Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the Trustee shall treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any interest on such Security and for all other purposes whatsoever, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.
SECTION 3.8 Cancellation.
All Securities surrendered for payment, redemption, transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and Securities surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section 3.8 , except as expressly permitted by this Indenture. All canceled Securities shall be retained or disposed of by the Trustee in accordance with its
31
customary practices and the Trustee shall deliver to the Company a certificate of such disposition,
SECTION 3.9 Reserved.
SECTION 3.10 Reserved .
SECTION 3.11 Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Company and, by its acceptance or acquisition of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a direct or indirect beneficial interest in, such Security, intend and agree to treat such Security as indebtedness of the Company for United States Federal, state and local tax purposes and to treat the Preferred Securities (including but not limited to all payments and proceeds with respect to the Preferred Securities) as an undivided beneficial ownership interest in the Securities (and any other Trust property) (and payments and proceeds therefrom, respectively) for United States Federal, state and local tax purposes. The provisions of this Indenture shall be interpreted to further this intention and agreement of the parties.
SECTION 3.12 CUSIP Numbers.
The Company in issuing the Securities may use CUSIP numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption and other similar or related materials as a convenience to Holders; provided , that any such notice or other materials may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption or other materials and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers.
SECTION 4.1 Satisfaction and Discharge of Indenture.
This Indenture shall, upon Company Request, cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for and as otherwise provided in this Section 4.1 ) and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when
(a) either
32
and the Company, in the case of subclause (ii)(A), (B) or (C) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose (x) an amount in the currency or currencies in which the Securities are payable, (y) Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due date of any payment, money in an amount or (z) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest (including any Additional Interest) to the date of such deposit (in the case of Securities that have become due and payable) or to the Stated Maturity (or any date of principal repayment upon early maturity) or Redemption Date, as the case may be;
Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.6 , the obligations of the Company to any Authenticating Agent under Section 6.11 , and, if money shall have been deposited with the Trustee pursuant to subclause (a)(ii) of this Section 4.1 , the obligations of the Trustee under Section 4.2 and Section 10.2(d) shall survive.
SECTION 4.2 Application of Trust Money.
Subject to the provisions of Section 10.2(d) , all money deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment in accordance with Section 3.1 , either directly or through any Paying Agent as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest (including any Additional Interest) for the
33
payment of which such money or obligations have been deposited with or received by the Trustee. Moneys held by the Trustee under this Section 4.2 shall not be subject to the claims of holders of Senior Debt under Article XII .
SECTION 5.1 Events of Default.
Event of Default means, wherever used herein with respect to the Securities, any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
34
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.
35
provided, that if the Holders of such Securities fail to annul such declaration and waive such default, the holders of not less than a majority in aggregate Liquidation Amount of the Preferred Securities then outstanding shall also have the right to rescind and annul such declaration and its consequences by written notice to the Property Trustee, the Company and the Trustee, subject to the satisfaction of the conditions set forth in paragraph (b) of this Section 5.2 . No such rescission shall affect any subsequent default or impair any right consequent thereon.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.
the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest (including any Additional Interest) and, in addition thereto, all amounts owing the Trustee under Section 6.6 .
SECTION 5.4 Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or similar judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions
36
authorized hereunder in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to first pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts owing the Trustee, any predecessor Trustee and other Persons under Section 6.6 .
SECTION 5.5 Trustee May Enforce Claim Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, subject to Article XII and after provision for the payment of all the amounts owing the Trustee, any predecessor Trustee and other Persons under Section 6.6 , be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered.
SECTION 5.6 Application of Money Collected.
Any money or property collected or to be applied by the Trustee with respect to the Securities pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal or any premium or interest (including any Additional Interest), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee, any predecessor Trustee and other Persons under Section 6.6;
SECOND: To the payment of all Senior Debt of the Company if and to the extent required by Article XII ;
THIRD: Subject to Article XII , to the payment of the amounts then due and unpaid upon the Securities for principal and any premium and interest (including any Additional Interest) in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and any premium and interest (including any Additional Interest), respectively; and
FOURTH: The balance, if any, to the Person or Persons entitled thereto.
SECTION 5.7 Limitation on Suits.
Subject to Section 5.8 , no Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a
37
custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless:
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing itself of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Securities, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders.
SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium, if any, and Interest; Direct Action by Holders of Preferred Securities.
Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium on such Security at its Maturity and payment of interest (including any Additional Interest) on such Security when due and payable and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. Any registered holder of the Preferred Securities shall have the right, upon the occurrence of an Event of Default described in Section 5.1(a) or Section 5.1(b) , to institute a suit directly against the Company for enforcement of payment to such holder of principal of and any premium and interest (including any Additional Interest) on the Securities having a principal amount equal to the aggregate Liquidation Amount of the Preferred Securities held by such holder.
SECTION 5.9 Restoration of Rights and Remedies.
If the Trustee, any Holder or any holder of Preferred Securities has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee, such Holder or such holder of Preferred Securities, then and in every such case the Company, the Trustee, such Holders and such holder of Preferred Securities shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder,
38
and thereafter all rights and remedies of the Trustee, such Holder and such holder of Preferred Securities shall continue as though no such proceeding had been instituted.
SECTION 5.10 Rights and Remedies Cumulative.
Except as otherwise provided in Section 3.6(f) , no right or remedy herein conferred upon or reserved to the Trustee or the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
SECTION 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee, any Holder of any Securities or any holder of any Preferred Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver a any such Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Holders and the right and remedy given to the holders of Preferred Securities . by Section 5.8 may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Holders or the holders of Preferred Securities, as the case may be.
SECTION 5.12 Control by Holders.
The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities (or, as the case may be, the holders of a majority in aggregate Liquidation Amount of Preferred Securities) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided , that:
SECTION 5.13 Waiver of Past Defaults.
39
SECTION 5.14 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by his or her acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.14 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than ten percent (10%) in aggregate principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or any premium on the Security after the Stated Maturity or any interest (including any Additional Interest) on any Security after it is due and payable.
SECTION 5.15 Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
40
SECTION 6.1 Corporate Trustee Required.
There shall at all times be a Trustee hereunder with respect to the Securities. The Trustee shall be a corporation or national banking association organized and doing business under the laws of the United States or of any state thereof, authorized to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or state authority and having an office within the United States. If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then, for the purposes of this Section 6.1 , the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.1 , it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI.
SECTION 6.2 Certain Duties and Responsibilities.
Except during the continuance of an Event of Default:
41
42
SECTION 6.3 Notice of Defaults.
Within ninety (90) days after the occurrence of any default actually known to the Trustee, the Trustee shall give the Holders notice of such default unless such default shall have been cured or waived; provided , that except in the case of a default in the payment of the principal of or any premium or interest on any Securities, the Trustee shall be fully protected in withholding the notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that withholding the notice is in the interest of holders of Securities; and provided , further , that in the case of any default of the character specified in Section 5.1(c) , no such notice to Holders shall be given until at least thirty (30) days after the occurrence thereof. For the purpose of this Section 6.3 , the term default means any event which is, or after notice or lapse of time or both would become, an Event of Default.
SECTION 6.4 Certain Rights of Trustee.
Subject to the provisions of Section 6.2 :
43
44
SECTION 6.5 May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Securities Registrar or such other agent.
SECTION 6.6 Compensation; Reimbursement; Indemnity.
45
SECTION 6.7 Resignation and Removal; Appointment of Successor.
46
SECTION 6.8 Acceptance of Appointment by Successor.
SECTION 6.9 Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided, that such Person shall be otherwise qualified and eligible under this Article VI . In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation or as otherwise provided above in this Section 6.9 to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated, and in case any Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor Trustee or in the name of such
47
successor Trustee, and in all cases the certificate of authentication shall have the full force which it is provided anywhere in the Securities or in this Indenture that the certificate of the Trustee shall have.
SECTION 6.10 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustees certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of the Securities or the proceeds thereof.
SECTION 6.11 Appointment of Authenticating Agent.
48
This is one of the Securities referred to in the within mentioned Indenture.
Dated: |
THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Trustee |
|
|
|
|
|
|
|
|
By: |
|
|
|
Authenticating Agent |
|
|
|
|
By: |
|
|
|
Authorized Signatory |
SECTION 7.1 Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
49
SECTION 7.2 Preservation of Information, Communications to Holders.
SECTION 7.3 Reports by Company.
50
SECTION 8.1 Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and no Person shall consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless:
SECTION 8.2 Successor Company Substituted.
51
SECTION 9.1 Supplemental Indentures without Consent of Holders,
Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form reasonably satisfactory to the Trustee, for any of the following purposes:
52
SECTION 9.2 Supplemental Indentures with Consent of Holders.
provided , further , that, so long as any Preferred Securities remain outstanding, no amendment under this Section 9.2 shall be effective until the holders of a majority in Liquidation Amount of the Preferred Securities shall have consented to such amendment; provided , further, that if the consent of the Holder of each Outstanding Security is required for any amendment under this Indenture, such amendment shall not be effective until the holder of each Outstanding Preferred Security shall have consented to such amendment.
53
SECTION 9.3 Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in conclusively relying upon, an Officers Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent herein provided for relating to such action have been complied with The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustees own rights, duties, indemnities or immunities under this Indenture or otherwise. Copies of the final form of each supplemental indenture shall be delivered by the Trustee at the expense of the Company to each Holder, and, if the Trustee is the Property Trustee, to each holder of Preferred Securities, promptly after the execution thereof.
SECTION 9.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article IX , this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities and every holder of Preferred Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 9.5 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities.
SECTION 10.1 Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders of the Securities that it will duly and punctually pay the principal of and any premium and interest (including any Additional Interest) on the Securities in accordance with the terms of the Securities and this Indenture.
54
SECTION 10.2 Money for Security Payments to be Held in Trust.
55
SECTION 10.3 Statement as to Compliance.
The Company shall deliver to the Trustee, within ninety (90) days after the end of each fiscal year of the Company ending after the date hereof, an Officers Certificate covering the preceding calendar year, stating whether or not to the knowledge of the signers thereof the Company is in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder), and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. The delivery requirements of this Section 10.3 may be satisfied by compliance with Section 8.16(a) of the Trust Agreement.
SECTION 10.4 Calculation Agent.
56
SECTION 10.5 Additional Tax Sums.
So long as no Event of Default has occurred and is continuing, if (a) the Trust is the Holder of all of the Outstanding Securities and (b) a Tax Event described in clause (i) or (iii) in the definition of Tax Event in Section 1.1 hereof has occurred and is continuing, the Company shall pay to the Trust (and its permitted successors or assigns under the related Trust Agreement) for so long as the Trust (or its permitted successor or assignee) is the registered holder of the Outstanding Securities, such amounts as may be necessary in order that the amount of Distributions (including any Additional Interest Amount (as defined in the Trust Agreement)) then due and payable by the Trust on the Preferred Securities and Common Securities that at any time remain outstanding in accordance with the terms thereof shall not be reduced as a result of any Additional Taxes arising from such Tax Event (additional such amounts payable by the Company to the Trust, the Additional Tax Sums ). Whenever in this Indenture or the Securities there is a reference in any context to the payment of principal of or interest on the Securities, such mention shall be deemed to include mention of the payments of the Additional Tax Sums provided for in this Section 10.5 to the extent that, in such context, Additional Tax Sums are, were or would be payable in respect thereof pursuant to the provisions of this Section 10.5 and express mention of the payment of Additional Tax Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Tax Sums in those provisions hereof where such express mention is not made.
SECTION 10.6 Additional Covenants.
57
SECTION 10.7 Waiver of Covenants.
The Company may omit in any particular instance to comply with any covenant or condition contained in Section 10.6 if, before or after the time for such compliance, the Holders of at least a majority in aggregate principal amount of the Outstanding Securities shall, by Act of such Holders, and at least a majority of the aggregate Liquidation Amount of the Preferred Securities then outstanding, by consent of such holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company in respect of any such covenant or condition shall remain in full force and effect.
SECTION 10.8 Treatment of Securities.
The Company will treat the Securities as indebtedness, and the amounts, other than payments of principal, payable in respect of the principal amount of such Securities as interest, for all United States federal income tax purposes. All payments in respect of the Securities will be made free and clear of United States withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W-9 or W-8BEN (or any substitute or successor form) establishing its U.S. or non-U.S. status for United States federal income tax purposes, or any other applicable form establishing a complete exemption from United States withholding tax.
SECTION 10.9 Financial Covenants
58
SECTION 11.1 Optional Redemption.
The Company may, at its option, on any Interest Payment Date, on or after April 30, 2012, redeem the Securities in whole at any time or in part from time to time, at a Redemption Price equal to one hundred percent (100%) of the principal amount thereof (or of the redeemed portion thereof, as applicable), together, in the case of any such redemption, with accrued and unpaid interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date (the Optional Redemption Price ).
SECTION 11.2 Special Event Redemption.
Prior to April 30, 2012, upon the occurrence and during the continuation of a Special Event, the Company may, at its option, redeem the Securities, in whole but not in part, at a Redemption Price equal to one hundred seven and one half percent (107.5%) of the principal amount thereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date (the Special Redemption Price ).
SECTION 11.3 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities, in whole or in part, shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company, the Company shall, not less than forty-five (45) days and not more than seventy-five (75) days prior to the Redemption Date (unless a shorter notice shall be satisfactory to, the Trustee), notify the Trustee and the Property Trustee under the Trust Agreement in writing of such date and of the principal amount of the Securities to be redeemed and provide the additional information required to be included in the notice or notices contemplated by Section 11.5 . In the case of any redemption of Securities, in whole or in part, (a) prior to the expiration of any restriction on such redemption provided in this Indenture or the Securities or (b) pursuant to an election of the Company which is subject to a condition specified in this Indenture or the Securities, the Company shall furnish the Trustee with an Officers Certificate and an Opinion of Counsel evidencing compliance with such restriction or condition.
SECTION 11.4 Selection of Securities to be Redeemed.
59
SECTION 11.5 Notice of Redemption.
60
SECTION 11.6 Deposit of Redemption Price.
Prior to 10:00 a.m., New York City time, on the Redemption Date specified in the notice of redemption given as provided in Section 11.5 , the Company will deposit with the Trustee or with one or more Paying Agents an amount of money sufficient to pay the Redemption Price of, and any accrued interest (including any Additional Interest) on, all the Securities (or portions thereof) that are to be redeemed on that date.
SECTION 11.7 Payment of Securities Called or Redemption.
SECTION 12.1 Securities Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article XII , the payment of the principal of and any premium and interest (including any Additional Interest) on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Debt.
61
SECTION 12.2 No Payment When Senior Debt in Default; Payment Over of Proceeds Upon Dissolution, Etc.
SECTION 12.3 Payment Permitted If No Default.
Nothing contained in this Article XII or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Company, at any time, except during the pendency of the conditions described in paragraph (a) of Section 12.2 or of any Proceeding referred to in Section 12.2 , from making payments at any time of principal of and any premium or interest (including any Additional Interest) on the Securities or (b) the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal of and any premium or interest (including any Additional Interest) on the Securities or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge (in accordance with Section 12.8 ) that such payment would have been prohibited by the provisions of this Article MI, except as provided in Section 12.8 .
SECTION 12.4 Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all amounts due or to become due on all Senior Debt, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Debt pursuant to the provisions of this Article XII (equally and ratably with the holders of all indebtedness of the Company that by its express terms is subordinated to Senior Debt of the Company to substantially the same extent as the Securities are subordinated to the Senior Debt and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Debt) to the rights of the holders of such Senior Debt to receive payments and distributions of cash,
63
property and securities applicable to the Senior Debt until the principal of and any premium and interest (including any Additional Interest) on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Debt of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article XII , and no payments made pursuant to the provisions of this Article XII to the holders of Senior Debt by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Debt, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Debt.
SECTION 12.5 Provisions Solely to Define Relative Rights.
The provisions of this Article XII are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Debt on the other hand. Nothing contained in this Article XII or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as between the Company and the Holders of the Securities, the obligations of the Company, which are absolute and unconditional, to pay to the Holders of the Securities the principal of and any premium and interest (including any Additional Interest) on the Securities as and when the same shall become due and payable in accordance with their terms, (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than their rights in relation to the holders of Senior Debt or (c) prevent the Trustee or the Holder of any Security (or to the extent expressly provided herein, the holder of any Preferred Security) from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, including filing and voting claims in any Proceeding, subject to the rights, if any, under this Article XII of the holders of Senior Debt to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder.
SECTION 12.6 Trustee to Effectuate Subordination.
Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article XII and appoints the Trustee his or her attorney-in-fact for any and all such purposes.
SECTION 12.7 No Waiver of Subordination Provisions.
SECTION 12.8 Notice to Trustee.
SECTION 12.9 Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to in this Article XII , the Trustee and the Holders of the Securities shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the
65
benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XII .
SECTION 12.10 Trustee Not Fiduciary for Holders of Senior Debt.
The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to -which any holders of Senior Debt shall be entitled by virtue of this Article XII or otherwise.
SECTION 12.11 Rights of Trustee as Holder of Senior Debt; Preservation of Trustees Rights.
The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XII with respect to any Senior Debt that may at any time be held by it, to the same extent as any other holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.
SECTION 12.12 Article Applicable to Paying Agents.
If at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term Trustee as used in this Article XII shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article XII in addition to or in place of the Trustee. For the avoidance of doubt, the Company shall not be permitted to appoint itself or any Affiliate as a Paying Agent hereunder.
SECTION 13.1 Defeasance and Discharge.
Upon notification by the Company to the Trustee, on or prior to April 30, 2012, of its election to cause the Defeasance of the Securities (the Defeasance Election ), the Company shall, within thirty (30) days following receipt of the Defeasance Election by the Trustee (the Defeasance Maturity Date ), satisfy the conditions set forth in Section 13.2 . The Company shall be deemed to have been discharged from its obligations with respect to the Securities as provided in this Section 13.1 on and after the date the conditions set forth in Section 13.2 are satisfied (hereinafter called Defeasance ). For this purpose, such Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Securities and to have satisfied all of its other obligations under the Securities and this Indenture (and the Trustee, upon request and at the expense of the Company, shall execute proper
66
instruments acknowledging the same), subject to the following, which shall survive until otherwise terminated or discharged hereunder: (1) the rights of Holders to receive, solely from the trust fund described in Section 13.2 and as more fully set forth in such Section 13.2 , payments in respect of the principal of, premium, if any, and interest on such Securities when payments are due through April 30, 2012, (2) the Companys obligations with respect to such Securities under Sections 2.4 , 3.5 , 3.6 , 10.2 , (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (4) this Article XIII .
SECTION 13.2 Conditions to Defeasance.
The following shall be the conditions to application of Section 13.1 to the Securities:
SECTION 13.3 Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of Section 10.2(d) , all money and Government Obligations (including the proceeds thereof) deposited with the Trustee or other qualifying trustee (solely for purposes of this Section 13.3 and Section 13.4 , the Trustee and any such other trustee are referred to collectively as the Trustee ) pursuant to Section 13.2 in respect of the Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of this Indenture, to the payment, either directly or through any such Paying Agent (including the
67
Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of the Securities, of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but money so held in trust need not be segregated from other fluids except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 13.2 or the principal and interest received in respect thereof other than any such tax, fee or other charge that by law is for the account of the Holders of the Securities.
Anything in this Article XIII to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or Government Obligations held by it as provided in Section 13.2 with respect to the Securities that, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Defeasance with respect to the Securities.
SECTION 13.4 Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in accordance with this Article XIII with respect to the Securities by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Companys obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article XIII with respect to Securities until such time as the Trustee or Paying Agent is permitted to apply all money held in trust pursuant to Section 13.3 with respect to the Securities in accordance with this Article XIII ; provided, however, that if the Company makes any payment of principal of, premium, if any, or interest on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of Securities to receive such payment from the money so held in trust.
* * *
This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
* * *
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.
|
KENNEDY-WILSON, INC. |
|
|
|
|
|
|
|
|
By: |
/s/ Freeman Lyle |
|
|
Freeman Lyle |
|
|
Executive Vice President and Chief Financial Officer |
68
|
THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION, |
|
|
as Trustee |
|
|
|
|
|
|
|
|
By: |
/s/ Shelly A. Sterling |
|
|
Shelly A. Sterling |
|
|
Vice President |
69
Schedule A
DETERMINATION OF LIBOR
With respect to the Securities, the London interbank offered rate ( LIBOR ) shall be determined by the Calculation Agent in accordance with the following provisions (in each case rounded to the nearest .000001%):
(1) On the second LIBOR Business Day (as defined below) prior to a Distribution Date (each such day, a LIBOR Determination Date ), LIBOR for any given security shall for the following interest payment period equal the rate (expressed as a percentage per annum) for U.S. dollar deposits in Europe, for a three (3) month period, that appears on Dow Jones Telerate (as defined in the International Swaps and Derivatives Association, Inc. 2000 Interest Rate and Currency Exchange Definitions) Page 3750, or such other page as may replace such Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date, as reported by Bloomberg Financial Market Commodities News or any successor service. If such rate is superseded on Telerate Page 3750 by a corrected rate before 12:00 noon (London time) on such LIBOR Determination Date, the corrected rate as so substituted will be LIBOR for such LIBOR Determination Date.
(2) If on any LIBOR Determination Date such rate does not appear on Dow Jones Telerate Page 3750 or such other page as may replace such Page 3750, the Calculation Agent shall determine the arithmetic mean of the offered quotations (expressed as a percentage per annum) of the Reference Banks (as defined below) to leading banks in the London interbank market for U.S. dollar deposits in Europe, for a three (3) month period, for an amount determined by the Calculation Agent (but not less than U.S. $1,000,000) by reference to requests for quotations as of approximately 11:00 A.M. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If on any LIBOR Determination Date at least two of the Reference Banks provide such quotations, LIBOR shall equal such arithmetic mean of such quotations. If on any LIBOR Determination Date only one or none of the Reference Banks provide such quotations, LIBOR shall be deemed to be the arithmetic mean of the offered quotations (expressed as a percentage per annum) that two (2) leading banks in The City of New York selected by the Calculation Agent are quoting on the relevant LIBOR Determination Date for U.S. dollar deposits in Europe, for a three (3) month period, for an amount determined by the Calculation Agent (but not less than U.S. $1,000,000); provided , that if the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be LIBOR as determined on the previous LIBOR Determination Date.
(3) As used herein: Reference Banks means four major banks in the London interbank market selected by the Calculation Agent; and LIBOR Business Day means a day (a) on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London and (b) is not a Saturday, Sunday or other day on which commercial banking institutions in New York, New York or Wilmington, Delaware are authorized or obligated by law or executive order to be closed.
70
Schedule A
Form of Officers Financial Certificate
The undersigned, the [Chairman/Vice Chairman/Chief Executive Officer/President/Vice President/Chief Financial Officer/Treasurer/Assistant Treasurer], hereby certifies, pursuant to Section 7.3(b) of the Junior Subordinated Indenture, dated as of January 31, 2007, among Kennedy-Wilson, Inc. (the Company ) and The Bank of New York Trust Company, National Association, as trustee, that, as of [date], [20 ], the Company, if applicable, and its subsidiaries had the following ratios and balances:
As of [Quarterly/Annual Financial Date], 20
Senior secured indebtedness for borrowed money (Debt) |
|
$ |
|
|
|
Senior unsecured Debt |
|
$ |
|
|
|
Subordinated Debt |
|
$ |
|
|
|
Total Debt |
|
$ |
|
|
|
Ratio of (x) senior secured and unsecured Debt to (y) total Debt |
|
% |
* A table describing the quarterly report calculation procedures is provided on page
[FOR FISCAL YEAR END: Attached hereto are the audited consolidated financial statements (including the balance sheet, income statement and statement of cash flows, and notes thereto, together with the report of the independent accountants thereon) of the Company and its consolidated subsidiaries for the three years ended [date], 20 and all required Financial Statements (as defined in the Purchase Agreement) for the year ended [date], 20 ]
[FOR FISCAL QUARTER END: Attached hereto are the unaudited consolidated and consolidating financial statements (including the balance sheet and income statement) of the Company and its consolidated subsidiaries and all required Financial Statements (as defined in the Purchase Agreement) for the year ended [date], 20 ] for the fiscal quarter ended [date], 20 .]
The financial statements fairly present in all material respects, in accordance with U.S. generally accepted accounting principles (GAAP), the financial position of the Company and its consolidated subsidiaries, and the results of operations and changes in financial condition as of the date, and for the [quarterly] [annual] period ended [date], 20 , and such financial statements have been prepared in accordance with GAAP consistently applied throughout the period involved (except as otherwise noted therein).
There has been no monetary default with respect to any indebtedness owed by the Company and/or its subsidiaries (other than those defaults cured within 30 days of the occurrence of the same).
71
I, the undersigned, the [Chairman/Vice Chairman/Chief Executive Officer/President/ Vice President/Chief Financial Officer/Treasurer/Assistant Treasurer], hereby certify that I have reviewed the terms of the Indenture and I have made, or have caused to be made under my supervision, a detailed review of (i) the covenants of the Company set forth therein, in particular, Section 10.9 (the Financial Covenants) and (ii) the transactions and conditions of the Company and its subsidiaries during the accounting period ended as of [ ] (the Accounting Period), which Accounting Period is covered by the financial statements attached hereto. The examinations described in the preceding sentence did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Default or an Event of Default (each as defined in the Indenture) during or at the end of the Accounting Period or as of the date of this certificate.
Page attached hereto sets forth the financial data and computations evidencing the Companys compliance with the Financial Covenants, all of which data and computations are true, complete and correct.
IN WITNESS WHEREOF, the undersigned has executed this Officers Financial Certificate as of this day of , 20 .
|
KENNEDY-WILSON, INC. |
|
|
|
|
|
By: |
|
|
Name: |
|
|
|
|
|
Kennedy-Wilson, Inc. |
|
|
9601 Wilshire Blvd., Suite 220 |
|
|
Beverly Hills, CA 90210 |
|
|
(310) 887-6453 |
72
Exhibit 10.93
KENNEDYWILSON, INC .
1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Section 1. P urpose of Plan .
The purpose of this 1992 Non-Employee Director Stock Option Plan (the Plan) of Kennedy-Wilson, Inc., a Delaware corporation (the Company), is to provide present and prospective directors of the Company who are not employed by the Company with the opportunity to obtain equity ownership interests in the Company through the exercise of stock options.
Section 2. Persons Eligible Under Plan .
Participation in this Plan is limited to non employee directors. A nonemployee director (referred to herein as a Director) is a director of the Company who, at the time stock options are granted to him or her under the Plan, is not an employee of the Company or of any subsidiary of the Company.
Section 3. Administration .
This Plan shall be administered by the Board of Directors (the Board) of the Company. The grant of options (the Options) to purchase shares of Common Stock, par value $.01 per share, of the Company (the Common Shares) under this Plan and the amount, price and nature of the awards shall be automatic as described in section 4. However, subject to the provisions of this Plan, the Board, in its sole and absolute discretion, is authorized to do all things necessary or desirable in connection with the administration of this Plan, including, without limitation, the following:
(i) subject to section 8, adopt, amend and rescind rules and regulations relating to this Plan;
(ii) determine whether, and the extent to which, adjustments are required pursuant to Section 7 hereof; and
(iii) I interpret and construe this Plan and the terms and conditions of any Option granted hereunder.
Section 4. Terms and Conditions of Options .
(a) Amount, Exercise Price and Exercisability of Initial Grants . Each Director shall automatically be granted on the date of the adoption of the Plan by the Companys stockholders or on the date of such Directors election to the Board of Directors, whichever occurs later (the Date of Initial Grant) an Option to purchase 25,000 Common Shares (subject to adjustment as provided in Section 7). The exercise price for each Option granted pursuant to this Section 4(a) shall be (i) if the Option is granted on the date of adoption of the Plan, the value of the Common Shares calculated using the initial public offering price of the Common Shares, or (ii) if granted upon such Directors election to the Board of Directors, the Fair Market Value
(as defined in section 4(b) below) of the Common Shares at the close of business on the date preceding the Date of Initial Grant (the Exercise Price).
(b) Amount. Exercise Price and Exercisability of Automatic Annual Grants . Each Director shall automatically be granted, on the date of such Directors reelection to the Board of Directors (the Date of Grant) at the Companys annual meeting of stockholders (the Annual Meeting) an Option to purchase 1,000 Common shares (subject to adjustment as provided in Section 7). The exercise price for each Option granted pursuant to this Section 4(b) shall be the Fair Market Value (as defined below) of the Common Shares at the close of business on the date preceding the Date of Grant (the Exercise Price). The Fair Market Value of a Common Share on any day shall be equal to the last sale price per Common Share on such day or, in case no such sale takes place on such day, the average of the closing bid and asked prices in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NASDAQ National Market System (NMS), or, if the Common Shares are not listed or admitted to trading on the NNS, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Shares are listed or admitted to trading or, if the Common Shares are not listed or admitted to trading on any national securities exchange or the NMS, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the overthecounter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or such other system then in use or, if on any such date the Common Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Shares who is selected in good faith by the Board of Directors of the Company.
(c) Vesting . An Option granted under Section 4(a) of this Plan shall vest and become exercisable on the first anniversary of the Date of Initial Grant, but only if the recipient of such Option (the Optionee) continues to serve as a Director for at least one year from the Date of Initial Grant. An Option granted under section 4(b) of this Plan shall vest and become exercisable on the date of the Annual Meeting following the Date of - Grant of such Option, but only if the Optionee continues to serve as a Director until at least the date of the Annual Meeting following the Date of Grant of such Option.
(d) Manner of Exercise . Any vested and exercisable Option may be exercised by the holder thereof by giving written notice, signed by such holder, to the Company stating the number of Common shares with respect to which the Option is being exercised, accompanied by payment in full of the aggregate Exercise Price in cash or by check payable to the Company. No Option may be exercised with respect to any fractional share; cash shall be paid in lieu of fractional shares. As promptly as practicable following the receipt of a notice hereunder, the Company shall issue a stock certificate registered in the name of the Director exercising such Option, representing the number of Common Shares issued to such Director upon exercise of the Option.
(e) Termination or Expiration . Each Option shall expire on the earlier of the tenth anniversary of the Date of Grant or ninety (90) days after the date the Optionee ceases to be a Director of the Company, whichever comes first.
(f) Transferability . Neither the Option nor any interest therein may be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred in any manner other than by will or the laws of descent and distribution. During the recipients lifetime, an Option may only be exercised by the Optionee or the optionees guardian or legal representative.
(g) Payment of Withholding Taxes . If the Company is obligated by law to withhold an amount on account of any Federal, state or local tax imposed as a result of the exercise of the Option (such amount shall be referred to herein as the Withholding Liability), the Optionee shall, on the first date upon which the Company becomes obligated to pay the Withholding Liability to the appropriate taxing authority pay the Withholding Liability to the Company in full in cash or by check.
(h) Stock Exchange Requirements; Applicable Laws . Notwithstanding anything to the contrary in this Plan, no Common Shares purchased upon exercise of the Option, and no certificate representing all or any part of such shares, shall be issued or delivered if (a) such shares have not been admitted to listing upon official notice of issuance on the NMS or on each stock exchange upon which shares of that class are then listed or (b) in the opinion of counsel to the Company, such issuance or delivery would~ cause the Company to be in violation of or to incur liability under any Federal, state or other securities law, or any requirement of any listing agreement to which the Company is a party, or any other requirement of law or of any administrative or regulatory body having jurisdiction over the Company. It is the Companys intent that this Plan comply in all respects with Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the Act), and any regulations promulgated thereunder. If any provision of this Plan is later found not to be in compliance with Rule 16b3, such provision shall be deemed null and void. All grants and exercises of Options under this Plan shall be executed in accordance with the requirements of section 16 of the Act and any regulations promulgated thereunder.
(i) Stock Option Agreement . Each grant of an option under this Plan shall be evidenced by an agreement duly executed on behalf of the Company and the Optionee, dated as of the applicable Date of Grant. Each such agreement shall set forth the number of Common Shares subject to the Option, the Exercise Price and the date upon which the Option becomes exercisable and shall incorporate by reference the terms and conditions of this Plan.
Section 5. Stock Subject to Plan .
(a) The maximum number of Common Shares that may be issued pursuant to all Options granted under this Plan is 150,000, subject to adjustment as provided in Section 7 hereof (such maximum number, as so adjusted, shall be referred to herein as the Share Limitation).
(b) Notwithstanding Section 4 of this Plan, no Option shall be granted under this Plan unless, on the date of grant, the sum of (i) the maximum number of Common Shares issuable at any time pursuant to such Option, plus (ii) the number of Common Shares that have previously been issued · pursuant to the exercise of Options granted under this Plan, plus (iii) the
maximum number of Common Shares that may be issued at any time thereafter pursuant to the exercise of Options granted under this Plan that are outstanding on such date, does not exceed the Share Limitation.
Section 6. Duration of Plan .
(a) No Options shall be granted under this Plan after May 11, 2002. Although Common Shares may be issued after May 11, 2002 pursuant to Options granted prior to such date, no Common Shares shall be issued under this Plan after May 11, 2Q12.
Section 7. Adjustments for Changes in Capitalization .
If the outstanding securities of the class then subject to this Plan are increased, decreased, changed into or exchanged for a different number or kind of shares of the Company through reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split, upon proper authorization of the Board of Directors, an appropriate and proportionate adjustment shall be made in (a) the number and type of shares or other securities or cash or other property that may be acquired pursuant to Options theretofore granted under this Plan and (b) the maximum number and type of shares or other securities that may be issued pursuant to Options thereafter granted under this Plan.
Section 8. Amendment and Termination of Plan .
The Board may amend or terminate this Plan at any time and in any manner. However, (a) no such amendment or termination shall deprive the recipient of any Option theretofore granted under this Plan, without the consent of such recipient, of any of his or her rights thereunder or with respect thereto, (b) no such amendment shall be effective without the approval of the stockholders of the Company, if stockholder approval of the amendment is then required pursuant to Rule 16b3 under the Act, or the applicable rules of any securities exchange, and (c) to the extent prohibited by Rule 16b-3(c) (2) (ii) (B) under the Act, this Plan may not be amended more than once every six months.
Section 9. Effective Date of Plan .
This Plan shall be effective as of May 11, 1992, the date upon which it was approved by the Board; provided, however, that no Common Shares may be issued under this Plan until it has been approved, directly or indirectly, by the affirmative votes of the holders of a majority of the securities of the Company present, or represented, and entitled to vote at a meeting duly held in accordance with the laws of the State of Delaware or by the unanimous written consent of such holders.
Section 10. No Rights as Stockholder and Rights of Directors .
Neither an Optionee nor an Optionees successor or successors in interest shall have rights as a stockholder of the Company with respect to any Common Shares subject to an Option granted to such person until the date of issuance of a stock certificate for such Common
Shares. Neither this Plan, nor the granting of an Option hereunder, nor any other action taken pursuant to this Plan shall constitute or be evidence of any agreement or understanding, express or implied, that a Director has a right to continue as a Director for any period of time or at any particular rate · of compensation.
Section 11. Governing Law .
This Plan and all rights and obligations under this Plan shall be construed in accordance with and governed by the laws of the State of Delaware.
EXHIBIT A
AMENDMENT NUMBER 1
TO THE KENNEDY-WILSON, INC. 1992 NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN
WHEREAS, Kennedy-Wilson, Inc., a Delaware corporation (the Company) , has adopted the Kennedy-Wilson, Inc. 1992 Non-Employee Director Stock Option Plan (the Plan); and
WHEREAS, Sections 3 and 8 of the Plan permit the Board of Directors of the Company to amend the Plan, subject to certain limitations; and
WHEREAS, the Board of Directors of the Company has passed a resolution to amend the Plan to permit additional circumstances under which shares of the Companys common stock, $.O 1 par value, may be awarded under the Plan (the Amendment) .
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section 3 of the Plan is hereby amended by deleting the word automatic in the first paragraph thereof.
2. Section 4 of the Plan is hereby amended by deleting Section 4(c) through and including Section 4(i) and inserting the following:
(c) Amount, Exercise Price and Exercisability of Discretionary Grants The Chief Executive Officer of the Company shall have authority, subject to the express provisions and restrictions in this Plan, to award Options to such Directors as he or she shall determine and, shall have authority, subject to the express provisions and restrictions in this Plan, to determine the time when such Options will be granted, if any, the terms and conditions of each such Option other than those terms and conditions fixed under this Plan and the number of shares which may be issued upon exercise of each such Option. The exercise price for each Option granted pursuant to this Section 4(c) shall be the Fair Market Value of the Common Shares at the close of business on the date preceding the Date of Grant (the Exercise Price).
(d) Vesting . An Option granted under Section 4(a) of this Plan shall vest and become exercisable on the first anniversary of the Date of Initial Grant, but only if the recipient of such Option (the Optionee) continues to serve as a Director for at least one year from the Date of Initial Grant. An Option granted under Section 4(b) of this Plan shall vest and become exercisable on the date of the Annual Meeting following the Date of Grant of such option, but only if the Optionee continues to serve as a Director until at least the date of the Annual Meeting following the Date of Grant of such Option. An
Option granted under Section 4(c) of this Plan shall vest and become exercisable at such times and in such installments (which may be cumulative) as the Chief Executive Officer shall provide in the terms of each individual Option; provided, however, that no Common Shares acquired by an Optionee pursuant to an exercise of an Option granted under Section 4(c) of this Plan may be disposed of in whole or in part until one (1) year after the date on which the Option is granted; provided, further, that an Option granted under Section 4(c) of this Plan shall vest and become exercisable only if the Optionee continues to serve as a Director from the date of grant through the one year anniversary of the date of grant.
(e) Manner of Exercise . Any vested and exercisable Option may be exercised by the holder thereof by giving written notice, signed by such holder, to the Company stating the number of Common Shares with respect to which the Option is being exercised, accompanied by payment in full of the aggregate Exercise Price in cash or by check payable to the Company. No Option may be exercised with respect to any fractional share; cash shall be paid in lieu of fractional shares. As promptly as practicable following the receipt of a notice hereunder, the Company shall issue a stock certificate registered in the name of the Director exercising such Option, representing the number of Common Shares issued to such Director upon exercise of the Option.
(I) Termination or Expiration . Each Option shall expire on the earlier of the tenth anniversary of the Date of Grant or ninety (90) days after the date the Optionee ceases to be a Director of the Company, whichever comes first.
(g) Transferability . Neither the Option nor any interest therein may be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred in any manner other than by will or the laws of descent and distribution. During the recipients lifetime, an Option may only be exercised by the Optionee or the Optionees guardian or legal representative.
(h) Payment of Withholding Taxes . If the Company is obligated by law to withhold an amount on account of any Federal, state or local tax imposed as a result of the exercise of the option (such amount shall be referred to herein as the Withholding Liability), the Optionee shall, on the first date upon which the Company becomes obligated to pay the Withholding Liability to the appropriate taxing authority pay the Withholding Liability to the Company in full in cash or by check.
(i) Stock Exchange Requirements; Applicable Law . Notwithstanding anything to the contrary in this Plan, Po Common Shares purchased upon exercise of the Option, and no certificate representing all or any part of such shares, shall be issued or delivered if(a) such shares have not been admitted to listing upon official notice of issuance on the NMS or on each stock exchange upon which shares of that class are then
2
listed or (b) in the opinion of counsel to the Company, such issuance or delivery would cause the Company to be in violation of or to incur liability under any Federal, state or other securities law, or any requirement of any listing agreement to which the Company is a party, or any other requirement of law or of any administrative or regulatory body having jurisdiction over the Company. It is the Companys intent that this Plan comply in all respects with Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the Act), and any regulations promulgated thereunder. If any provision of this Plan is later found not to be in compliance with Rule 16b-3, such provision shall be deemed null and void. Ml grants and exercises of Options under this Plan shall be executed in accordance with the requirements of Section 16 of the Act and any regulations promulgated thereunder.
(j) Stock Option Agreement . Each grant of an Option under this Plan shall be evidenced by an agreement duly executed on behalf of the Company and the Optionee, dated as of the applicable Date of Grant. Each such agreement shall set forth the number of Common Shares subject to the Option, the Exercise Price and the date upon which the Option becomes exercisable and shall incorporate by reference the terms and conditions of this Plan.
3. The provisions of this Amendment shall be effective as of the date the Amendment is approved by the Board of Directors of the Company.
4. Except as expressly amended herein, the Plan shall continue to be, and shall remain, in full force and effect in accordance with its terms.
* * *
3
Exhibit 10.94
SHAREHOLDERS AGREEMENT
This SHAREHOLDERS AGREEMENT (as the same may hereafter be amended, supplemented, restated or otherwise modified, this Shareholders Agreement) is entered into as of this 3rd day of November, 2008 by and among (a) KENNEDY-WILSON, INC., a Delaware corporation (together with any successors and assigns who become such in accordance herewith, the Company), (b) THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA (together with its successors and assigns, Guardian) and (c) each Person holding Securities of the Company listed on Schedule 1 hereto and each other Person who becomes a party hereto pursuant to Section 7.5 hereof (together with Guardian, collectively, the Shareholders).
RECITALS
A. The Company is a party to that certain Securities Purchase Agreement, dated as of October 31, 2008 (the Securities Purchase Agreement), by and among the Company and Guardian pursuant to which the Company has agreed to issue and sell $30,000,000.00 aggregate principal amount of its 7% Convertible Subordinated Notes due November 3, 2018 (the Notes).
B. The Company has issued to the Shareholders, either directly or indirectly, the number of shares of Preferred Stock, Common Stock or other Securities set forth opposite their respective names on Schedule 1 attached hereto.
C. To induce Guardian to enter into the Securities Purchase Agreement and consummate the transactions contemplated therein, the Company and the Shareholders have agreed to enter into this Shareholders Agreement with Guardian to create and define certain rights as among and between themselves as further specified herein.
NOW THEREFORE, in consideration of the foregoing and the mutual promises herein contained, the Company, Guardian and the Shareholders mutually agree as follows.
Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in the Securities Purchase Agreement. As used in this Shareholders Agreement, the following terms have the following meanings:
Notwithstanding the foregoing, no Permitted Transfer shall be effective unless and until the transferee of the Securities so Transferred, if such transferee is not a party to this Shareholders Agreement, executes and delivers to the Company a Joinder Agreement in substantially the form attached hereto as Exhibit A .
The Company represents and warrants to each of the Shareholders and Guardian as follows:
Each of the Shareholders severally (but not jointly) represents and warrants to, and covenants and agrees with, the Company and Guardian that:
Each Shareholder acknowledges and agrees that Securities issued by the Company pursuant to a stock dividend, stock split, reclassification or like action, or pursuant to the exercise of a right granted by the Company to all holders of Securities to purchase Securities on a proportionate basis, will be treated for all purposes in the same manner as, and be subject to the same options and have the same rights and limitations on Transfer as, the Securities which were split or reclassified or with respect to which a stock dividend was paid or rights to purchase stock on a proportionate basis were granted. In the event of a merger of or exchange involving the Company where this Shareholders Agreement does not terminate, partnership units, membership units, shares of common stock or similar equity interests (and/or securities convertible into such units, shares or similar equity interests) which are issued in exchange for Securities will thereafter be deemed to be Securities subject to the terms of this Shareholders Agreement.
Guardian may rescind its designation and redesignate another individual at any time by delivering a written notice to the Company setting forth any such recission and identifying the other individual chosen by Guardian to fill such position on such Board of Directors (or its election to leave such position vacant); promptly upon receipt of such notice, the Shareholders shall cause such prior designee to be removed as a director and such subsequent designee to be elected as a director of the Company.
If any director designated by Guardian shall for whatever reason resign or be removed as a director of the Company, Guardian may submit the name of a new individual to hold such directorship and the Shareholders shall promptly vote for such individual to fill such vacancy.
The rights conferred in this Section 5.1(a) are personal to Guardian (and any of its Affiliates) and shall not pass to any other holder of Purchaser Securities including any transferees or assignees of Guardian (other than an Affiliate of Guardian).
The Company and the Shareholders agree that the remedies of Guardian at law in respect of any breach by any of the Shareholders or the Company of their respective obligations pursuant to this Section 5 would be inadequate and that, upon any finding by any court of competent
6
jurisdiction that any of the Shareholders or the Company has breached any such obligation, Guardian shall be entitled to, and the Company and the Shareholders agree that they will not contest, upon any such finding of any such breach, the award of specific performance and injunctive relief in favor of Guardian and compelling the Company and the Shareholders to comply with such obligations.
If McMorrow proposes, at any time or from time to time, to Transfer any Securities to any Person (including the Company) (the Proposed Buyer ) in a transaction or in a series of related transactions which would result in McMorrow owning less than 40% of the Common Stock of the Company (determined on a Fully-Diluted Basis) after giving effect to such Transfer (any such transaction or series of transactions, a Tag-Along Sale ), then, as part of such transaction or series of transactions, Guardian shall have the right (but not the obligation) to Transfer a Proportionate Amount of Common Stock then held by Guardian (including any shares of Common Stock issuable upon conversion of the Notes to the extent the Notes have not then been converted) at the same price and on the same terms and conditions, and to the same purchaser or purchasers (in the case of a private sale) or to the public (in the case of a public sale), in accordance with this Section 6.
For purposes of this Section . 6, the Proportionate Amount which Guardian shall be entitled to sell with respect to any Tag-Along Sale shall be equal to the product (calculated as of the date of such proposed Tag-Along Sale) of:
Notwithstanding anything herein to the contrary, the number of shares of Common Stock permitted to be sold by McMorrow hereunder is equal to (x) the number of shares of Common Stock specified in clause (a) above minus (y) the aggregate number of shares of Common Stock to be sold in such transaction by Guardian pursuant to this Section 6.
If McMorrow intends to Transfer any Securities in a Tag-Along Sale, then McMorrow shall provide written notice to Guardian of such intention not less than thirty (30) days prior to
7
the closing of such proposed Tag-Along Sale. Such written notice (the Notice of Sale ) shall state (i) the date upon which such proposed Tag-Along Sale is scheduled to close, (ii) the name and address of the Proposed Buyer, (iii) the proposed amount of consideration and the terms and conditions offered by such Proposed Buyer (and, if the proposed consideration is not all cash, the Tag-Along Notice shall describe the terms of the proposed consideration), and (iv) that the Proposed Buyer has been informed of the rights and obligations provided for in this Section 6 and has agreed to purchase Securities in accordance with the terms of this Shareholders Agreement. A complete and accurate copy of the Proposed Buyers offer to purchase the Securities from McMorrow shall be attached to any such Notice of Sale.
Upon receipt of a Notice of Sale, Guardian shall have twenty (20) days to deliver written notice of its election to participate in such Tag-Along Sale and the number of shares of Common Stock (including any shares of Common Stock issuable upon conversion of the Notes) which Guardian is electing to Transfer, which number shall not exceed Guardians Proportionate Amount. If Guardian delivers such notice within said twenty (20) day period, then it shall sell the shares of Common Stock specified therein upon the same terms and conditions as are applicable to the sale by McMorrow and, to the extent necessary for such sale, shall convert the Notes into Common Stock prior to the consummation thereof. If such notice is not received from Guardian within the twenty (20) day period specified above, McMorrow shall have the right to Transfer the Securities to the Proposed Buyer without any participation by Guardian, but only (i) on the terms and conditions stated in the Notice of Sale and (ii) if the sale of such Common Stock is consummated not later than sixty (60) days after the end of such twenty (20) day period.
All expenses and costs incurred by any Shareholder in connection with any Tag-Along Sale, including, without limitation, the fees and expenses of any legal counsel retained by such Shareholder in connection with such Tag-Along Sale, shall be borne by such Shareholder individually.
Notwithstanding anything to the contrary contained in this Section 6, neither (a) a Transfer which constitutes a Permitted Transfer, nor (b) a sale pursuant to an effective registration statement under the Securities Act, shall be deemed a sale subject to the rights and restrictions contained in this Section 6.
All communications hereunder shall be in writing, shall be delivered by nationwide overnight courier, or facsimile transmission (confirmed by delivery by nationwide overnight courier sent on the day of the sending of such facsimile transmission), and
8
Kennedy-Wilson, Inc.
9601 Wilshire Boulevard, Suite 220
Beverly Hills, California 90210
Attention: Chairman and Chief Executive Officer
with a copy to:
Kent Y. Mouton, Esq.
Kulik, Gottesman, Mouton & Siegel, LLP
15303 Ventura Boulevard, Suite 1400
Sherman Oaks, California 91403
Facsimile: (310) 557-0224
or such other address as the Company shall designate to Guardian and the Shareholders in writing; and
Any communication addressed and delivered as herein provided shall be deemed to be received when actually delivered to the address of the addressee (whether or not delivery is accepted) or received by the facsimile machine of the recipient. Any communication not so addressed and delivered shall be ineffective.
The Company, upon the written request of any holder of Securities, will promptly supply such holder with a list of the names and addresses of each party hereto at such time.
This Shareholders Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
Any amendment to this Shareholders Agreement shall be in writing and shall require the written consent of (i) the Company, (ii) Guardian and (iii) if materially adverse to the interests of a particular Shareholder or group of Shareholders (other than Guardian), of that Shareholder or the holders of a majority of the Common Stock, on a Fully-Diluted Basis, at the time held by that group, as the case may be.
From and after the date that a Shareholder ceases to own any Securities (including any shares of Common Stock issuable upon conversion of the Notes), such Shareholder will no
9
longer be deemed to be a Shareholder for purposes of this Shareholders Agreement and all rights and obligations such Shareholder may have under this Shareholders Agreement will terminate.
Any Person who is not a party to this Shareholders Agreement and who acquires Securities from a Shareholder shall, on or before the Transfer of such Securities, execute and deliver to the Company a Joinder Agreement in substantially the form attached hereto as Exhibit A (and, if the transferee is a married individual, cause the transferees spouse to execute and deliver to the Company a Spousal Consent). No Securities shall be Transferred on the Companys books and records, and no Transfer of Securities shall be otherwise effective, unless any such Transfer is made in accordance with the terms and conditions of this Shareholders Agreement, and the Company is hereby authorized by all of the Shareholders to enter appropriate stop transfer notations on its transfer records to give effect to this Shareholders Agreement. The Company shall not issue Securities to any Person that has not executed such a Joinder Agreement (and, if such Person is a married individual, has not caused such Persons spouse to execute and deliver a Spousal Consent).
Descriptive headings of the several sections of this Shareholders Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
The fact that any given provision of this Shareholders Agreement is found to be unenforceable, void or voidable under the laws of any jurisdiction shall not affect the validity of the remaining provisions of this Shareholders Agreement in such jurisdiction, and shall not affect the enforceability of the entire Shareholders Agreement under the laws of any other jurisdiction.
This Shareholders Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
Except as expressly set forth in Section 5 hereof, all covenants and other agreements contained in this Shareholders Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns whether so expressed or not.
10
The parties hereto hereby waive trial by jury in any action brought on or with respect to this Shareholders Agreement, the Notes or any other document executed in connection herewith or therewith.
Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. For the avoidance of doubt, all Schedules and Exhibits attached to this Shareholders Agreement shall be deemed to be a part hereof.
[Remainder of page intentionally left blank. Next page is signature page.)
11
IN WITNESS WHEREOF, the parties hereto have caused this Shareholders Agreement to be duly executed and delivered, all as of the date and year first above written.
|
KENNEDY-WILSON, INC. |
|
|
|
|
|
By: |
/s/ Freeman Lyle |
|
Name: |
FREEMAN LYLE |
|
Title: |
Executive Vice President, CFO |
|
|
|
|
|
|
|
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA |
|
|
|
|
|
By: |
/s/ Thomas G. Sorell |
|
Name: |
THOMAS G. SORRELL |
|
Title: |
Executive Vice President and Chief Investment Officer |
|
|
|
|
|
|
|
OTHER SHAREHOLDERS |
|
|
|
|
|
/s/ William J. McMorrow |
|
|
WILLIAM J. MCMORROW |
|
|
|
|
|
/s/ Mary Ricks |
|
|
MARY RICKS |
|
|
|
|
|
/s/ Lyle Freeman |
|
|
LYLE FREEMAN |
12
SCHEDULE 1
SCHEDULE OF HOLDERS
Name and Address |
Securities Held |
William J. McMorrow
c/o Kennedy-Wilson, Inc.
9601 Wilshire Boulevard
Suite 220
Beverly Hills, California 90210
Mary Ricks
c/o Kennedy-Wilson, Inc.
9601 Wilshire Boulevard
Suite 220
Beverly Hills, California 90210
Freeman Lyle
c/o Kennedy-Wilson, Inc.
9601 Wilshire Boulevard
Suite 220
Beverly Hills, California 90210
The Guardian Life Insurance Company of America
7 Hanover Square
New York, New York 10004-2616
EXHIBIT A
[FORM OF JOINDER AGREEMENT]
[Letterhead of Transferee]
FORM OF JOINDER AGREEMENT
The undersigned hereby agrees, effective as of the date hereof, to become a party to that certain Shareholders Agreement (the Shareholders Agreement ) dated as of November 3, 2008 and as may be amended from time to time by and among Kennedy-Wilson, Inc., a Delaware corporation (the Company ), and the other parties named therein. Capitalized terms used but not defined in this Joinder Agreement shall have the meanings ascribed to such terms in the Shareholders Agreement. The undersigned acknowledges and agrees that (a) the Securities Transferred to the undersigned shall continue to be subject to the Shareholders Agreement, (b) as to such Securities the undersigned shall be bound by the restrictions of the Shareholders Agreement and shall take such other actions and execute such other documents as the Company reasonably requests, and (c) for all purposes of the Shareholders Agreement, the undersigned shall be included within the term Shareholders. The address and facsimile number to which notices may be sent to the undersigned are as follows:
|
Name: |
|
|
||
|
Address: |
|
|
||
|
|
|
|||
|
|
|
|||
|
Facsimile No: |
|
|
||
Date: |
|
[Signature Block to be provided] |
EXHIBIT B
FORM OF SPOUSAL CONSENT
I acknowledge that I have read the foregoing Shareholders Agreement and that I know its contents. I acknowledge and agree that capitalized terms used and not defined in this spousal consent shall have the meanings ascribed to such terms in the Shareholders Agreement. I am aware that by the provisions of the Shareholders Agreement, my spouse agrees, among other things, to the imposition of certain restrictions on the Transfer of Securities, including my community interest therein (if any), which rights and restrictions may survive my spouses death. I hereby consent to such rights and restrictions, approve of the provisions of the Shareholders Agreement, and agree that I will bequeath any interest which I may have in said Securities or any of them, including my community interest, if any, or permit any such interest to be purchased, in a manner consistent with the provisions of the Shareholders Agreement. I direct that any residuary clause in my will not be deemed to apply to my community interest (if any) in such Securities except to the extent consistent with the provisions of the Shareholders Agreement.
I further agree that in the event of a dissolution of the marriage between myself and my spouse, in connection with which I secure or am awarded any Securities or any interest therein through property settlement agreement or otherwise, (a) I will receive and hold said Securities subject to all the provisions and restrictions contained in the Shareholders Agreement, and (b) I hereby irrevocably constitute and appoint my spouse, as true and lawful attorney and proxy (the Proxy) of my Securities with full power of substitution, to vote (at any annual or special meeting or by written consent) such Securities which I would be entitled to vote as a Shareholder, together with any and all Securities issued in replacement or in respect of such Securities by dividend, distribution, stock split, reorganization, recapitalization or otherwise.
I also acknowledge that I have been advised to obtain independent counsel to represent my interests with respect to this spousal consent.
Date: |
|
|
|
||
|
|
||||
|
Name of Spouse: |
|
|||
|
|
|
|||
|
Name of Shareholder: |
|
|||
Exhibit 10.95
OFFICE LEASE
between
WILSHIRE-CAMDEN ASSOCIATES,
a California limited partnership
(Landlord)
and
KENNEDY-WILSON INC.
a California corporation
(Tenant)
TABLE OF CONTENTS
OFFICE LEASE
Article |
|
Title |
|
|
|
|
Definitions |
|
2 |
2 |
|
Premises |
|
3 |
3 |
|
Term |
|
3 |
4 |
|
Rental |
|
3 |
5 |
|
Security Deposit |
|
8 |
6 |
|
Use of Premises |
|
8 |
7 |
|
Utilities and Services |
|
9 |
8 |
|
Maintenance and Repairs |
|
10 |
9 |
|
Alterations, Additions and Improvements |
|
11 |
10 |
|
Indemnification and Insurance |
|
12 |
11 |
|
Damage or Destruction |
|
15 |
12 |
|
Condemnation |
|
15 |
13 |
|
Relocation |
|
16 |
14 |
|
Assignment and Subletting |
|
16 |
15 |
|
Default and Remedies |
|
18 |
16 |
|
Attorneys Fees; Costs of Suits |
|
20 |
17 |
|
Subordination and Attornment |
|
21 |
18 |
|
Quiet Enjoyment |
|
22 |
19 |
|
Rules and Regulations |
|
22 |
20 |
|
Estoppel Certificates |
|
22 |
21 |
|
Entry by Landlord |
|
23 |
22 |
|
Landlords Lease Undertakings-Exculpation from Personal Liability; Transfer of Landlords Interest |
|
23 |
23 |
|
Holdover Tenancy |
|
24 |
24 |
|
Notices |
|
24 |
25 |
|
Brokers |
|
24 |
26 |
|
Electronic Services |
|
24 |
27 |
|
Miscellaneous |
|
27 |
Rider One |
|
Parking Commitment |
|
|
Rider Two |
|
Renewal Option |
|
|
|
|
|
|
|
EXHIBITS |
||||
|
|
|
|
|
Exhibit A |
|
Floor Plan |
|
|
Exhibit B |
|
Work Letter Agreement |
|
|
Exhibit C |
|
Rules and Regulations |
|
|
Exhibit D |
|
Intentionally Omitted |
|
|
Exhibit E |
|
Suite Acceptance Agreement |
|
|
1
OFFICE LEASE
THIS OFFICE LEASE (Lease), dated August 19, 1998, is made and entered into by and between WILSHIRE-CAMDEN ASSOCIATES, a California limited partnership (Landlord) and KENNEDY-WILSON INC., a California corporation (Tenant) upon the following terms and conditions:
ARTICLE I - DEFINITIONS
Unless the context otherwise specifies or requires, the following terms shall have the meanings specified herein;
1.01 Building . The term Building shall mean that certain office building located at 9601 Wilshire Boulevard in Beverly Hills, California, commonly known as HEITMAN CENTRE BEVERLY HILLS together with any related land, improvements, parking facilities, common areas, driveways, sidewalks and landscaping.
1.02 Premises . The term Premises shall mean Suite 200 in the Building, as more particularly outlined on the drawing attached hereto as Exhibit A and incorporated herein by reference. As used herein, Premises shall not include any storage area in the Building, which shall be leased or rented pursuant to separate agreement.
1.03 Rentable Area of the Premises . The term Rentable Area of the Premises shall mean 26,057 square feet, which Landlord and Tenant have stipulated as the Rentable Area of the Premises. Tenant acknowledges that the Rentable Area of the Premises includes the usable area, without deduction for columns or projections, multiplied by a load factor to reflect a share of certain areas, which may include lobbies, corridors, mechanical, utility, janitorial, boiler and service rooms and closets, restrooms and other public, common and service areas of the Building.
1.04 Lease Term . The term Lease Term shall mean the period between the Commencement Date and the Expiration Date (as such terms are hereinafter defined), unless sooner terminated as otherwise provided in this Lease.
1.05 Commencement Date . Subject to adjustment as provided in Article 3, the term Commencement Date shall mean September 1, 1998.
1.06 Expiration Date . Subject to adjustment as provided in Article 3, the term Expiration Date shall mean August 31, 2003.
1.07 Base Rent . Subject to adjustment as provided in Article 4, the term Base Rent shall mean Sixty-five Thousand One Hundred Forty-two and 50/100 Dollars ($65,142.50) per month for months one through eighteen; Seventy-one Thousand Six Hundred Fifty-six and 75/100 Dollars ($71,656.75) per month for months nineteen through thirty-six; and Seventy-six Thousand Five Hundred Forty-two and 44/100 Dollars ($76,542.44) per month for months thirty-seven through sixty.
1.08 Tenants Percentage Share . The term Tenants Percentage Share shall mean Nine and Sixty-four One Hundredths percent (9.64%) with respect to increases in Property Taxes and Operating Expenses (as such terms are hereinafter defined). Landlord may reasonably redetermine Tenants Percentage Share from time to time to reflect reconfigurations, additions or modifications to the Building.
1.09 Security Deposit . The term Security Deposit shall mean None. ($0).
1.10 Tenants Permitted Use . The term Tenants Permitted Use shall mean general, administrative, and executive non-medical offices and no other use.
1.11 Business Hours . The term Business Hours shall mean the hours of 7:00 A.M. to 6:00 P.M., Monday through Friday (federal and state holidays excepted). Holidays are defined as the following: New Years
2
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day, and to the extent of utilities or services provided by union members engaged at the Building, such other holidays observed by such unions.
1.12 Landlords Address For Notices . The term Landlords Address for Notices shall mean Kennedy-Wilson Properties Ltd., 9601 Wilshire Boulevard, Beverly Hills, California 90210, Attn: Property Manager, with a copy to Heitman Properties Ltd., 180 North LaSalle Street, Suite 3600, Chicago, Illinois 60601,
Attn: Property Management.
1.13 Tenants Address for Notices . The term Tenants Address for Notices shall mean 9601 Wilshire Boulevard, Suite 200, Beverly Hills, CA 90210
1.14 Broker . The term Broker shall mean: None.
1.15 Guarantor . The term Guarantor shall mean: None.
ARTICLE II- PREMISES
2.01 Lease of Premises . Landlord hereby leases the Premises to Tenant, and Tenant hereby leases the Premises from Landlord, upon all of the terms, covenants and conditions contained in this Lease. On the Commencement Date described herein, Landlord shall deliver the Premises to Tenant in substantial conformance with the Work Letter Agreement attached hereto as Exhibit B.
2.02 Acceptance of Premises . Tenant acknowledges that Landlord has not made any representation or warranty with respect to the condition of the Premises or the Building or with respect to the suitability or fitness of either for the conduct of Tenants Permitted Use or for any other purpose. Prior to Tenants taking possession of the Premises, Landlord or its designee and Tenant will walk the Premises for the purpose of reviewing the condition of the Premises (and the condition of completion and workmanship of any tenant improvements which Landlord is required to construct in the Premises pursuant to this Lease); after such review, Tenant shall execute a Suite Acceptance Letter, in the form of Exhibit E attached hereto, accepting the Premises. Except as is expressly set forth in this Section 2.02 or the Work Letter Agreement attached hereto, if any, or as may be expressly set forth in Suite Acceptance Letter, Tenant agrees to accept the Premises in its as is said physical condition without any agreements, representations, understandings or obligations on the part of Landlord to perform any alterations, repairs or improvements (or to provide any allowance for same).
ARTICLE III - TERM
3.01 Except as otherwise provided in this Lease, the Lease Term shall be for the period described in Section 1.04 of this Lease, commencing on the Commencement Date described in Section 1.05 of this Lease and ending on the Expiration Date described in Section 1.06 of this Lease; provided, however, that, if, for any reason, Landlord is unable to deliver possession of the Premises on the date described in Section 1.05 of this Lease, Landlord shall not be liable for any damage caused thereby, nor shall the Lease be void or voidable, but, rather, the Lease Term shall commence upon, and the Commencement Date shall be the date that possession of the Premises is so tendered to Tenant (except for Tenant-caused delays which shall not be deemed to delay commencement of the Lease Term), and, unless Landlord elects otherwise, the Expiration Date described in Section 1.06 of this Lease shall be extended by an equal number of days.
ARTICLE IV - RENTAL
4.01 Definitions . As used herein,
(A) Base Year shall mean calendar year 1998.
3
(B) Property Taxes shall mean the aggregate amount of all real estate taxes, assessments (whether they be general or special), sewer rents and charges, transit taxes, taxes based upon the receipt of rent and any other federal, state or local governmental charge, general, special, ordinary or extraordinary (but not including income or franchise taxes, capital stock, inheritance, estate, gift, or any other taxes imposed upon or measured by Landlords gross income or profits, unless the same shall be imposed in lieu of real estate taxes or other ad valorem taxes), which Landlord shall pay or become obligated to pay in connection with the Building, or any part thereof. Property Taxes shall also include all fees and costs, including attorneys fees, appraisals and consultants fees, incurred by Landlord in seeking to obtain a reassessment, reduction of, or a limit on the increase in, any Property Taxes, regardless of whether any reduction or limitation is obtained. Property Taxes for any calendar year shall be Property Taxes which are due for payment or paid in such year, rather than Property Taxes which are assessed or become a lien during such year. Property Taxes shall include any tax, assessment, levy, imposition or charge imposed upon Landlord and measured by or based in whole or in part upon the Building or the rents or other income from the Building, to the extent that such items would be payable if the Building was the only property of Landlord subject to same and the income received by Landlord from the Building was the only income of Landlord. Property Taxes shall also include any personal property taxes imposed upon the furniture, fixtures, machinery, equipment, apparatus, systems and appurtenances of Landlord used in connection with the Building.
(C) Operating Expenses shall mean all costs, fees, disbursements and expenses paid or incurred by or on behalf of Landlord in the operation, ownership, maintenance, insurance, management, replacement and repair of the Building (excluding Property Taxes) including without limitation:
(i) Premiums for property, earthquake, casualty, liability, rent interruption or other types of insurance carried by Landlord.
(ii) Salaries, wages and other amounts paid or payable for personnel including the Building manager, superintendent, operation and maintenance staff, and other employees of Landlord involved in the maintenance and operation of the Building, including contributions and premiums towards fringe benefits, unemployment, disability and workers compensation insurance, pension plan contributions and similar premiums and contributions and the total charges of any independent contractors or property managers engaged in the operation, repair, care, maintenance and cleaning of any portion of the Building.
(iii) Cleaning expenses, including without limitation janitorial services, window cleaning, and garbage and refuse removal.
(iv) Landscaping expenses, including without limitation irrigating, trimming, mowing, fertilizing, seeding, and replacing plants.
(v) Heating, ventilating, air conditioning and steam/utilities expenses, including fuel, gas, electricity, water, sewer, telephone, and other services.
(vi) Subject to the provisions of Section 4.01(C)(xii) below, the cost of maintaining, operating, repairing and replacing components of equipment or machinery, including without limitation heating, refrigeration, ventilation, electrical, plumbing, mechanical, elevator, escalator, sprinklers, fire/life safety, security and energy management systems, including service contracts, maintenance contracts, supplies and parts.
(vii) Other items of repair or maintenance of elements of the Building.
(viii) The costs of policing, security and supervision of the Building.
(ix) Fair market rental and other costs with respect to the management office for the Building.
4
(x) The cost of the rental of any machinery or equipment and the cost of supplies used in the maintenance and operation of the Building (xi) Audit fees and the cost of accounting services incurred in the preparation of statements referred to in this Lease and financial statements, and in the computation of the rents and charges payable by tenants of the Building.
(xii) Capital expenditures (a) made primarily to reduce Operating Expenses, or to comply with any laws or other governmental requirements, or (b) for replacements (as opposed to additions or new improvements) of non-structural items located in the common areas of the property required to keep such areas in good condition; provided, all such permitted capital expenditures (together with reasonable financing charges) shall be amortized for purposes of this Lease over the shorter of (i) their useful lives, (ii) the period during which the reasonably estimated savings in Operating Expenses equals the expenditures, or (iii) three (3) years.
(xiii) Legal fees and expenses.
(xiv) Payments under any easement, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs in any planned development.
(xv) A fee for the administration and management of the Building as reasonably determined by Landlord from time to time.
(xvi) A fee charged by the City of Beverly Hills, sometimes referred to as the Beverly Hills Business Rental Tax, which shall not have a Base Year applicable to it.
Operating Expenses shall not include costs of alteration of the premises of tenants of the Building, depreciation charges, interest and principal payments on mortgages, ground rental payments, real estate brokerage and leasing commissions, expenses incurred in enforcing obligations of tenants of the Building, salaries and other compensation of executive officers of the managing agent of the Building senior to the Building manager, costs of any special service provided to any one tenant of the Building but not to tenants of the Building generally, and costs of marketing or advertising the Building.
(D) If the Building does not have one hundred percent (100%) occupancy during an entire calendar year, including the Base Year, then the variable cost component of Property Taxes and Operating Expenses shall be equitably adjusted so that the total amount of Property Taxes and Operating Expenses equals the total amount which would have been paid or incurred by Landlord had the Building been one hundred percent (100%) occupied for the entire calendar year. In no event shall Landlord be entitled to receive from Tenant and any other tenants in the Building an aggregate amount in excess of actual Property Taxes and Operating Expenses as a result of the foregoing provision.
4.02 Base Rent .
(A) During the Lease Term, Tenant shall pay to Landlord as rental for the Premises the Base Rent described in Section 1.07 above, subject to the following annual adjustments (herein called the Rent Adjustments):
(B) During each calendar year, the Base Rent payable by Tenant to Landlord, shall be increased by (collectively, the Tax and Operating Expense Adjustment): (i) Tenants Percentage Share of the dollar increase, if any, in Property Taxes for such year over Property Taxes for the Base Year; and (H) Tenants Percentage Share of the dollar increase, if any, in any category of Operating Expenses paid or incurred by Landlord during such year over the respective category of Operating Expenses paid or incurred by Landlord during the Base Year. A decrease in Property Taxes or Operating Expenses below the Base Year amounts shall not decrease the amount of the Base Rent due hereunder or give rise to a credit in favor of Tenant.
5
(C) Notwithstanding the foregoing, Tenant shall not pay, or be responsible for, any Tax and Operating Expense Adjustments during the first twelve (12) months of the Lease Term.
4.03 Adjustment Procedure; Estimates . The Tax and Operating Expense Adjustment specified in Section 4.02(B) shall be determined and paid as follows:
(A) During each calendar year subsequent to the Base Year, Landlord shall give Tenant written notice of its estimate of any increased amounts payable under Section 4.02(B) for that calendar year. On or before the first day of each calendar month during the calendar year, Tenant shall pay to Landlord one-twelfth (1/12th) of such estimated amounts; provided, however, that, not more often that quarterly, Landlord may, by written notice to Tenant, revise its estimate for such year, and subsequent payments by Tenant for such year shall be based upon such revised estimate.
(B) Within one hundred twenty (120) days after the close of each calendar year or as soon thereafter as is practicable, Landlord shall deliver to Tenant a statement of that years Property Taxes and Operating Expenses, and the actual Tax and Operating Expense Adjustment to be made pursuant to Section 4.02(B) for such calendar year, as determined by Landlord (the Landlords Statement) and such Landlords Statement shall be binding upon Tenant, except as provided in Section 4.04 below. If the amount of the actual Tax and Operating Expense Adjustment is more that the estimated payments for such calendar year made by Tenant, Tenant shall pay the deficiency to Landlord upon receipt of Landlords Statement. If the amount of the actual Tax and Operating Expense Adjustment is less than the estimated payments for such calendar year made by Tenant, any excess shall be credited against Rent (as hereinafter defined) next payable by Tenant under this Lease or, if the Lease Term has expired, any excess shall be paid to Tenant. No delay in providing the statement described in this subparagraph (B) shall act as a waiver of Landlords right to payment under Section 4.02(B) above.
(C) If this Lease shall terminate on a day other than the end of a calendar year, the amount of the Tax and Operating Expense Adjustment to be paid pursuant to Section 4.02(B) that is applicable to the calendar year in which such termination occurs shall be prorated on the basis of the number of days from January 1 of the calendar year to the termination date bears to 365. The termination of this Lease shall not affect the obligations of Landlord and Tenant pursuant to Section 4.03(B) to be performed after such termination.
4.04 Review of Landlords Statement . Provided that Tenant is not then in default beyond any applicable cure period of its obligations to pay Base Rent, additional rent described in Section 4.02(B), or any other payments required to be made by it under this Lease and provided further that Tenant strictly complies with the provisions of this Section 4.04, Tenant shall have the right, once each calendar year, to reasonably review supporting data for any portion of a Landlords Statement (provided, however, Tenant may not have an audit right to all documentation relating to Building operations as this would far exceed the relevant information necessary to properly document a pass-through billing statement, but real estate tax statements, and information on utilities, repairs, maintenance and insurance will be available), in accordance with the following procedure:
(A) Tenant shall, within ten (10) business days after any such Landlords Statement is delivered, deliver a written notice to Landlord specifying the portions of the Landlords Statement that are claimed to be incorrect, and Tenant shall simultaneously pay to Landlord all amounts due from Tenant to Landlord as specified in the Landlords Statement. Except as expressly set forth in subsection (C) below, in no event shall Tenant be entitled to withhold, deduct, or offset any monetary obligation of Tenant to Landlord under the Lease (including, without limitation, Tenants obligation to make all payments of Base Rent and all payments of Tenants Tax and Operating Expense Adjustment) pending the completion of and regardless of the results of any review of records under this Section 4.04. The right of Tenant under this Section 4.04 may only be exercised once for any Landlords Statement, and if Tenant fails to meet any of the above conditions as a prerequisite to the exercise of such right, the right of Tenant under this Section 4.04 for a particular Landlords Statement shall be deemed waived.
(B) Tenant acknowledges that Landlord maintains its records for the Building at Landlords managers corporate offices presently located at the address set forth in Section 1.12 and Tenant agrees that any review of records under this Section 4.04 shall be at the sole expense of Tenant and shall be conducted by an
6
independent firm of certified public accountants of national standing. Tenant acknowledges and agrees that any records reviewed under this Section 4.04 constitute confidential information of Landlord, which shall not be disclosed to anyone other than the accountants performing the review and the principals of Tenant who receive the results of the review. The disclosure of such information to any other person, whether or not caused by the conduct of Tenant, shall constitute a material breach of this Lease.
(C) Any errors disclosed by the review shall be promptly corrected by Landlord, provided, however, that if Landlord disagrees with any such claimed errors, Landlord shall have the right to cause another review to be made by an independent firm of certified public accountants of national standing. In the event of a disagreement between the two accounting firms, the review that discloses the least amount of deviation from the Landlords Statement shall be deemed to be correct. In the event that the results of the review of records (taking into account, if applicable, the results of any additional review caused by Landlord) reveal that Tenant has overpaid obligations for a preceding period, the amount of such overpayment shall be credited against Tenants subsequent installment obligations to pay the estimated Tax and Operating Expense Adjustment. In the event that such results show that Tenant has underpaid its obligations for a preceding period, Tenant shall be liable for Landlords actual accounting fees, and the amount of such underpayment shall be paid by Tenant to Landlord with the next succeeding installment obligation of estimated Tax and Operating Expense Adjustment.
4.05 Payment . Concurrently with the execution hereof, Tenant shall pay Landlord Base Rent for the first calendar month of the Lease Term. Thereafter the Base Rent described in Section 1.07, as adjusted in accordance with Section 4.02, shall be payable in advance on the first day of each calendar month. If the Commencement Date is other than the first day of a calendar month, the prepaid Base Rent for such partial month shall be prorated in the proportion that the number of days this Lease is in effect during such partial month bears to the total number of days in the calendar month. All Rent, and all other amounts payable to Landlord by Tenant pursuant to the provisions of this Lease, shall be paid to Landlord, without notice, demand, abatement, deduction or offset, in lawful money of the United States at Landlords office in the Building or to such other person or at such other place as Landlord may designate from time to time by written notice given to Tenant. No payment by Tenant or receipt by Landlord of a lesser amount than the correct Rent due hereunder shall be deemed to be other than a payment on account; nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed to effect or evidence an accord and satisfaction; and Landlord may accept such check or payment without prejudice to Landlords right to recover the balance or pursue any other remedy in this Lease or at law or in equity provided.
4.06 Late Charge; Interest . Tenant acknowledges that the late payment of Base Rent or any other amounts payable by Tenant to Landlord hereunder (all of which shall constitute additional rental to the same extent as Base Rent) will cause Landlord to incur administrative costs and other damages, the exact amount of which would be impracticable or extremely difficult to ascertain. Landlord and Tenant agree that if Landlord does not receive any such payment on or before five (5) days after the date the payment is due, Tenant shall pay to Landlord, as additional rent, (a) a late charge equal to five percent (5%) of the overdue amount to cover such additional administrative costs; and (b) interest on the delinquent amounts at the lesser of the maximum rate permitted by law if any or twelve percent (12%) per annum from the date due to the date paid.
4.07 Additional Rent . For purposes of this Lease, all amounts payable by Tenant to Landlord pursuant to this Lease, whether or not denominated as such, shall constitute Base Rent. Any amounts due Landlord shall sometimes be referred to in this Lease as Rent.
4.08 Additional Taxes . Notwithstanding anything in Section 4.0 1(B) to the contrary, Tenant shall reimburse Landlord upon demand for any and all taxes payable by or imposed upon Landlord upon or with respect to: any fixtures or personal property located in the Premises; any leasehold improvements made in or to the Premises by or for Tenant; the Rent payable hereunder, including, without limitation, any gross receipts tax, license fee or excise tax levied by any governmental authority; the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy of any portion of the Premises (including without limitation any applicable possessory interest taxes); or this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises.
7
ARTICLE V - SECURITY DEPOSIT
5.01 Intentionally omitted.
ARTICLE VI- USE OF PREMISES
6.01 Tenants Permitted Use . Tenant shall use the Premises only for Tenants Permitted Use as set forth in Section 1.10 above and shall not use or permit the Premises to be used for any other purpose. Tenant shall, at its sole cost and expense, obtain all governmental licenses and permits required to allow Tenant to conduct Tenants Permitted Use. Landlord disclaims any warranty that the Premises are suitable for Tenants use and Tenant acknowledges that it has had a full opportunity to make its own determination in this regard.
6.02 Compliance With Laws and Other Requirements .
(A) Tenant shall cause the Premises to comply in all material respects with all laws, ordinances, regulations and directives of any governmental authority having jurisdiction including, without limitation, any certificate of occupancy and any law, ordinance, regulation, covenant, condition or restriction affecting the Building or the Premises which in the future may become applicable to the Premises (collectively Applicable Laws).
(B) Tenant shall not use the Premises, or permit the Premises to be used, in any manner which:
(a) violates any Applicable Law; (b) causes or is reasonably likely to cause damage to the Building or the Premises; (c) violates a requirement or condition of any fire and extended insurance policy covering the Building and/or the Premises, or increases the cost of such policy; (d) constitutes or is reasonably likely to constitute a nuisance, annoyance or inconvenience to other tenants or occupants of the Building or its equipment, facilities or systems; (e) interferes with, or is reasonably likely to interfere with, the transmission or reception of microwave, television, radio, telephone or other communication signals by antennae or other facilities located in the Building; or (f) violates the Rules and Regulations described in Article XIX.
6.03 Hazardous Materials .
(A) No Hazardous Materials, as defined herein, shall be Handled, as also defined herein, upon, about, above or beneath the Premises or any portion of the Building by or on behalf of Tenant, its subtenants or its assignees, or their respective contractors, clients, officers, directors, employees, agents, or invitees. Any such Hazardous Materials so Handled shall be known as Tenants Hazardous Materials. Notwithstanding the foregoing, normal quantities of Tenants Hazardous Materials customarily used in the conduct of general administrative and executive office activities (e.g., copier fluids and cleaning supplies) may be handled at the Premises without Landlords prior written consent. Tenants Hazardous Materials shall be Handled at all times in compliance with the manufacturers instructions therefore and all applicable Environmental Laws, as defined herein.
(B) Notwithstanding the obligation of Tenant to indemnify Landlord pursuant to this Lease, Tenant shall, at its sole cost and expense, promptly take all actions required by any Regulatory Authority, as defined herein, or necessary for Landlord to make full economic use of the Premises or any portion of the Building, which requirements or necessity arises from the Handling of Tenants Hazardous Materials upon, about, above or beneath the Premises or any portion of the Building. Such actions shall include, but not be limited to, the investigation of the environmental condition of the Premises or any portion of the Building, the preparation of any feasibility studies or reports and the performance of any cleanup, remedial, removal or restoration work. Tenant shall take all actions necessary to restore the Premises or any portion of the Building to the condition existing prior to the introduction of Tenants Hazardous Materials, notwithstanding any less stringent standards or remediation allowable under applicable Environmental Laws. Tenant shall nevertheless obtain Landlords written approval prior to undertaking any actions required by this Section, which approval shall not be unreasonably withheld so long as such actions would not potentially have a material adverse long-term or short-term effect on the Premises or any portion of the Building.
8
(C) Tenant agrees to execute affidavits, representations, and the like from time to time at Landlords request stating Tenants best knowledge and belief regarding the presence of Hazardous Materials on the Premises.
(D) Environmental Laws means and includes all now and hereafter existing statutes, laws, ordinances, codes, regulations, rules, rulings, orders, decrees, directives, policies and requirements by any Regulatory Authority regulating, relating to, or imposing liability or standards of conduct concerning public health and safety or the environment.
(E) Hazardous Materials means: (a) any material or substance: (i) which is defined or becomes defined as a hazardous substance, hazardous waste, infectious waste, chemical mixture or substance, or air pollutant under Environmental Laws; (ii) containing petroleum, crude oil or any fraction thereof; (iii) containing polychlorinated biphenyls (PCBs); (iv) containing asbestos; (v) which is radioactive; (vi) which is infectious; or (b) any other material or substance displaying toxic, reactive, ignitable or corrosive characteristics, as all such terms are used in their broadest sense, and are defined, or become defined by Environmental Laws; or (c) materials which cause a nuisance upon or waste to the Premises or any portion of the Building.
(F) Handle, handle, Handled, handled, Handling, or handling shall mean any installation, handling, generation, storage, treatment, use, disposal, discharge, release, manufacture, refinement, presence, migration, emission, abatement, removal, transportation, or any other activity of any type in connection with or involving Hazardous Materials.
(G) Regulatory Authority shall mean any federal, state or local governmental agency, commission, board or political subdivision.
ARTICLE VII- UTILITIES AND SERVICES
7.01 Building Services . As long as Tenant is not in monetary default under this Lease, Landlord agrees to furnish or cause to be furnished to the Premises the following utilities and services, subject to the conditions and standards set forth herein:
(A) Non-attended automatic elevator service (if the Building has such equipment serving the Premises), in common with Landlord and other tenants and occupants and their agents and invitees.
(B) During Business Hours, such air conditioning, heating and ventilation as, in Landlords reasonable judgment, are required for the comfortable use and occupancy of the Premises. Landlord may make available to Tenant heating, ventilation or air conditioning in excess of that which Landlord shall be required to provide hereunder upon such conditions as shall be determined by Landlord from time to time. Landlords fee for any such additional heating, ventilation or air conditioning provided to Tenant, to be set by Landlord from time to time, will be separate from and in addition to the Tax and Operating Expenses Adjustment provide in Article IV and is currently $100 per hour with a minimum usage of one hour.
(C) Water for drinking and rest room purposes.
(D) Reasonable janitorial and cleaning services, provided that the Premises are used exclusively for office purposes and are kept reasonably in order by Tenant. If the Premises are not used exclusively as offices, Landlord, at Landlords sole discretion, may require that the Premises be kept clean and in order by Tenant, at Tenants expense, to the satisfaction of Landlord and by persons approved by Landlord; and, in all events, Tenant shall pay to Landlord the cost of removal of Tenants refuse and rubbish, to the extent that the same exceeds the refuse and rubbish attendant to normal office usage.
9
(E) At all reasonable times, electric current of not less than 3.5 watts per square foot for building standard lighting and fractional horsepower office machines; provided, however, that (i) without Landlords consent, Tenant shall not install, or permit the installation, in the Premises of any computers, word processors, electronic data processing equipment or other type of equipment or machines which will increase Tenants use of electric current in excess of that which Landlord is obligated to provide hereunder (provided, however, that the foregoing shall not preclude the use of personal computers or similar office equipment); (ii) if Tenant shall require electric current which may disrupt the provision of electrical service to other tenants, Landlord may refuse to grant its consent or may condition its consent upon Tenants payment of the cost of installing and providing any additional facilities required to furnish such excess power to the Premises and upon the installation in the Premises of electric current meters to measure the amount of electric current consumed, in which latter event Tenant shall pay for the cost of such meter(s) and the cost of installation, maintenance and repair thereof, as well as for all excess electric current consumed at the rates charged by the applicable local public utility, plus a reasonable amount to cover the additional expenses incurred by Landlord in keeping account of the electric current so consumed; and (iii) if Tenants increased electrical requirements will materially affect the temperature level in the Premises or the Building, Landlords consent may be conditioned upon Tenants requirement to pay such amounts as will be incurred by Landlord to install and operate any machinery or equipment necessary to restore the temperature level to that otherwise required to be provided by Landlord, including but not limited to the cost of modifications to the air conditioning system. Landlord shall not, in any way, be liable or responsible to Tenant for any loss or damage or expense which Tenant may incur or sustain if, for any reasons beyond Landlords reasonable control, either the quantity or character of electric service is changed or is no longer available or suitable for Tenants requirements. Tenant covenants that at all times its use of electric current shall never exceed the capacity of the feeders, risers or electrical installations of the Building. If submetering of electricity in the Building will not be permitted under future laws or regulations, the Rent will then be equitably and periodically adjusted to include an additional payment to Landlord reflecting the cost to Landlord for furnishing electricity to Tenant in the Premises.
Any amounts which Tenant is required to pay to Landlord pursuant to this Section 7.01 shall be payable upon demand by Landlord and shall constitute additional rent.
7.02 Interruption of Services . Landlord shall not be liable for any failure to furnish, stoppage of, or interruption in furnishing any of the services or utilities described in Section 7.01, when such failure is caused by accident, breakage, repairs, strikes, lockouts, labor disputes, labor disturbances, governmental regulation, civil disturbances, acts of war, moratorium or other governmental action, or any other cause beyond Landlords reasonable control, and, in such event, Tenant shall not be entitled to any damages nor shall any failure or interruption abate or suspend Tenants obligation to pay Base Rent and additional rent required under this Lease or constitute or be construed as a constructive or other eviction of Tenant. Further, in the event any governmental authority or public utility promulgates or revises any law, ordinance, rule or regulation, or issues mandatory controls or voluntary controls relating to the use or conservation of energy, water, gas, light or electricity, the reduction of automobile or other emissions, or the provision of any other utility or service, Landlord may take any reasonably appropriate action to comply with such law, ordinance, rule, regulation, mandatory control or voluntary guideline and Tenants obligations hereunder shall not be affected by any such action of Landlord. The parties acknowledge that safety and security devices, services and programs provided by Landlord, if any, while intended to deter crime and ensure safety, may not in given instances prevent theft or other criminal acts, or ensure safety of persons or property. The risk that any safety or security device, service or program may not be effective, or may malfunction, or be circumvented by a criminal, is assumed by Tenant with respect to Tenants property and interests, and Tenant shall obtain insurance coverage to the extent Tenant desires protection against such criminal acts and other losses, as further described in this Lease. Tenant agrees to cooperate in any reasonable safety or security program developed by Landlord or required by Law.
ARTICLE VIII- MAINTENANCE AND REPAIRS
8.01 Landlords Obligations . Except as provided in Sections 8.02 and 8.03 below, Landlord shall maintain the Building in reasonable order and repair throughout the Lease Term; provided, however, that Landlord shall not be liable for any failure to make any repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after written notice of the need for such repairs or maintenance is given to Landlord by
10
Tenant. Except as provided in Article XI, there shall be no abatement of Rent, nor shall there be any liability of Landlord, by reason of any injury or inconvenience to, or interference with, Tenants business or operations arising from the making of, or failure to make, any maintenance or repairs in or to any portion of the Building.
8.02 Tenants Obligations . During the Lease Term, Tenant shall, at its sole cost and expense, maintain the Premises in good order and repair (including, without limitation, the carpet, wall-covering, ~doors, plumbing and other fixtures, equipment, alterations and improvements, whether installed by Landlord or Tenant). Further, Tenant shall be responsible for, and upon demand by Landlord shall promptly reimburse Landlord for, any damage to any portion of the Building or the Premises caused by (a) Tenants activities in the Building or the Premises; (b) the performance or existence of any alterations, additions or improvements made by Tenant in or to the Premises; (c) the installation, use, operation or movement of Tenants property in or about the Building or the Premises; or (d) any act or omission by Tenant or its officers, partners, employees, agents, contractors or invitees.
8.03 Landlords Rights . Landlord and its contractors shall have the right, at all reasonable times and upon prior oral or telephonic notice to Tenant at the Premises, other than in the case of any emergency in which case no notice shall be required, to enter upon the Premises to make any repairs to the Premises or the Building reasonably required or deemed reasonably necessary by Landlord and to erect such equipment, including scaffolding, as is reasonably necessary to effect such repairs.
ARTICLE IX - ALTERATIONS, ADDITIONS AND IMPROVEMENTS
9.01 Landlords Consent Conditions . Tenant shall not make or permit to be made any alterations, additions, or improvements in or to the Premises (Alterations) without the prior written consent of Landlord, which consent, with respect to non-structural alterations, shall not be unreasonably withheld. Landlord may impose as a condition to making any Alterations such requirements as Landlord in its sole discretion deems necessary or desirable including without limitation: Tenants submission to Landlord, for Landlords prior written approval, of all plans and specifications relating to the Alterations; Landlords prior written approval of the time or times when the Alterations are to be performed; Landlords prior written approval of the contractors and subcontractors performing work in connection with the Alterations; employment of union contractors and subcontractors who shall not cause labor disharmony; Tenants receipt of all necessary permits and approvals from all governmental authorities having jurisdiction over the Premises prior to the construction of the Alterations; Tenants delivery to Landlord of such bonds and insurance as Landlord shall reasonably require; and Tenants payment to Landlord of all costs and expenses incurred by Landlord because of Tenants Alterations, including but not limited to costs incurred in reviewing the plans and specifications for, and the progress of, the Alterations. Tenant is required to provide Landlord written notice of whether the Alterations include the Handling of any Hazardous Materials and whether these materials are of a customary and typical nature for industry practices. Upon completion of the Alterations, Tenant shall provide Landlord with copies of as-built plans. Neither the approval by Landlord of plans and specifications relating to any Alterations nor Landlords supervision or monitoring of any Alterations shall constitute any warranty by Landlord to Tenant of the adequacy of the design for Tenants intended use or the proper performance of the Alterations.
9.02 Performance of Alterations Work . All work relating to the Alterations shall be performed in compliance with the plans and specifications approved by Landlord, all applicable laws, ordinances, rules, regulations and directives of all governmental authorities having jurisdiction (including without [imitation Title 24 of the California Administrative Code) and the requirements of all carriers of insurance on the Premises and the Building, the Board of Underwriters, Fire Rating Bureau, or similar organization. All work shall be performed in a diligent, first class manner and so as not to unreasonably interfere with any other tenants or occupants of the Building. All costs incurred by Landlord relating to the Alterations shall be payable to Landlord by Tenant as additional rent upon demand. No asbestos-containing materials shall be used or incorporated in the Alterations. No lead-containing surfacing material, solder, or other construction materials or fixtures where the presence of lead might create a condition of exposure not in compliance with Environmental Laws shall be incorporated in the Alterations.
11
9.03 Liens . Tenant shall pay when due all costs for work performed and materials supplied to the Premises. Tenant shall keep Landlord, the Premises and the Building free from all liens, stop notices and violation notices relating to the Alterations or any other work performed for, materials furnished to or obligations incurred by or for Tenant and Tenant shall protect, indemnify, hold harmless and defend Landlord, the Premises and the Building of and from any and all loss, cost, damage, liability and expense, including attorneys fees, arising out of or related to any such liens or notices. Further, Tenant shall give Landlord not less then seven (7) business days prior written notice before commencing any Alterations in or about the Premises to permit Landlord to post appropriate notices of non-responsibility. Tenant shall also secure, prior to commencing any Alterations, at Tenants sole expense, a completion and lien indemnity bond satisfactory to Landlord for such work. During the progress of such work, Tenant shall, upon Landlords request, furnish Landlord with sworn contractors statements and lien waivers covering all work theretofore performed. Tenant shall satisfy or otherwise discharge all liens, stop notices or other claims or encumbrances within ten (10) days after Landlord notifies Tenant in writing that any such lien, stop notice, claim or encumbrance has been filed, If Tenant fails to pay and remove such lien, claim or encumbrance within such ten (10) days, Landlord, at its election, may pay and satisfy the same and in such event the sums so paid by Landlord, with interest from the date of payment at the rate set forth in Section 4.06 hereof for amounts owed Landlord by Tenant shall be deemed to be additional rent due and payable by Tenant at once without notice or demand.
9.04 Lease Termination . Except as provided in this Section 9.04, upon expiration or earlier termination of this Lease Tenant shall surrender the Premises to Landlord in the same condition as existed on the date Tenant first occupied the Premises, (whether pursuant to this Lease or an earlier lease), subject to reasonable wear and tear. All Alterations shall become a part of the Premises and shall become the property of Landlord upon the expiration or earlier termination of this Lease, unless Landlord shall, by written notice given to Tenant, require Tenant to remove some or all of Tenants Alterations, in which event Tenant shall promptly remove the designated Alterations and shall promptly repair any resulting damage, all at Tenants sole expense. All business and trade fixtures, machinery and equipment, furniture, movable partitions and items of personal property owned by Tenant or installed by Tenant at its expense in the Premises shall be and remain the property of Tenant; upon the expiration or earlier termination of this Lease, Tenant shall, at its sole expense, remove all such items and repair any damage to the Premises or the Building caused by such removal. If Tenant fails to remove any such items or repair such damage promptly after the expiration or earlier termination of the Lease, Landlord may, but need not, do so with no liability to Tenant, and Tenant shall pay Landlord the cost thereof upon demand. Notwithstanding the foregoing to the contrary, in the event that Landlord gives its consent, pursuant to the provisions of Section 9.01 of this Lease, to allow Tenant to make an Alteration in the Premises, Landlord agrees, upon Tenants written request, to notify Tenant in writing at the time of the giving of such consent whether Landlord will require Tenant, at Tenants cost, to remove such Alteration at the end of the Lease Term.
ARTICLE X - INDEMNIFICATION AND INSURANCE
10.01 Indemnification .
(A) Tenant agrees to protect, indemnify, hold harmless and defend Landlord and any Mortgagee, as defined herein, and each of their respective partners, directors, officers, agents and employees, successors and assigns, (except to the extent of the losses described below are caused by the gross negligence of Landlord, its agents and employees), from and against:
(I) any and all loss, cost, damage, liability or expense as incurred (including but not limited to reasonable attorneys fees and legal costs) arising out of or related to any claim, suit or judgment brought by or in favor of any person or persons for damage, loss or expense due to, but not limited to, bodily injury, including death, or property damage sustained by such person or persons which arises out of, is occasioned by or is in any way attributable to the use or occupancy of the Premises or any portion of the Building by Tenant or the acts or omission of Tenant or its agents, employees, contractors, clients, invitees or subtenants except that caused by the sole active
12
negligence or willful misconduct of Landlord or its agents or employees. Such loss or damage shall include, but not be limited to, any injury or damage to, or death of, Landlords employees or agents or damage to the Premises or any portion of the Building.
(ii) any and all environmental damages which arise from: (i) the Handling of any Tenants Hazardous Materials, as defined in Section 6.03 or (ii) the breach of any of the provisions of this Lease. For the purpose of this Lease, environmental damages shall mean (a) all claims, judgments, damages, penalties, fines, costs, liabilities, and losses (including without limitation, diminution in the value of the Premises or any portion of the Building, damages for the loss of or restriction on use of rentable or usable space or of any amenity of the Premises or any portion of the Building, and from any adverse impact of Landlords marketing of space); (b) all reasonable sums paid for settlement of claims, attorneys fees, consultants fees and experts fees; and (c) all costs incurred by Landlord in connection with investigation or remediation relating to the Handling of Tenants Hazardous Materials, whether or not required by Environmental Laws, necessary for Landlord to make full economic use of the Premises or any portion of the Building, or otherwise required under this Lease. To the extent that Landlord is held strictly liable by a court or other governmental agency of competent jurisdiction under any Environmental Laws, Tenants obligation to Landlord and the other indemnities under the foregoing indemnification shall likewise be without regard to fault on Tenants part with respect to the violation of any Environmental Law which results in liability to the indemnity. Tenants obligations and liabilities pursuant to this Section 10.01 shall survive the expiration or earlier termination of this Lease.
(B) Landlord agrees to protect, indemnify, hold harmless and defend Tenant from and against any and all loss, cost, damage, liability or expense, including reasonable attorneys fees, with respect to any claim of damage or injury to persons or property at the Premises, caused by the gross negligence of Landlord or its authorized agents or employees.
(C) Notwithstanding anything to the contrary contained herein, nothing shall be interpreted or used to in any way affect, limit, reduce or abrogate any insurance coverage provided by any insurers to either Tenant or Landlord.
(D) Notwithstanding anything to the contrary contained in this Lease, nothing herein shall be construed to infer or imply that Tenant is a partner, joint venturer, agent, employee, or otherwise acting by or at the direction of Landlord.
10.02 Property Insurance .
(A) At all times during the Lease Term, Tenant shall procure and maintain, at its sole expense, all-risk property insurance, for damage or other loss caused by fire or other casualty or cause including, but not limited to, vandalism and malicious mischief, theft, water damage of any type, including sprinkler leakage, bursting of pipes, explosion, in an amount not less than one hundred percent (100%) of the replacement cost covering (a) all Alterations made by or for Tenant in the Premises; and (b) Tenants trade fixtures, equipment and other personal property from time to time situated in the Premises. The proceeds of such insurance shall be used for the repair or replacement of the property so insured, except that if not so applied or if this Lease is terminated following a casualty, the proceeds applicable to the leasehold improvements shall be paid to Landlord and the proceeds applicable to Tenants personal property shall be paid to Tenant.
(B) At all times during the Lease Term, Tenant shall procure and maintain business interruption insurance in such amount as will reimburse Tenant for direct or indirect loss of earnings attributable to all perils insured against in Section 10.02(A).
13
(C) Landlord shall, at all times during the Lease Term, procure and maintain all-risk property insurance in the amount not less than ninety percent (90%) of the insurable replacement cost covering the Building in which the Premises are located and such other insurance as may be required by a Mortgagee or otherwise desired by Landlord.
10.03 Liability Insurance .
(A) At all times during the Lease Term, Tenant shall procure and maintain, at its sole expense, commercial general liability insurance applying to the use and occupancy of the Premises and the business operated by Tenant. Such insurance shall have a minimum combined single limit of liability of at least Two Million Dollars ($2,000,000) per occurrence and a general aggregate limit of at least Two Million Dollars ($2,000,000). All such policies shall be written to apply to all bodily injury, property damage, personal injury losses and shall be endorsed to include Landlord and its agents, beneficiaries, partners, employees, and any deed of trust holder or mortgagee of Landlord or any ground lessor as additional insureds. Such liability insurance shall be written as primary policies, not excess or contributing with or secondary to any other insurance as may be available to the additional insureds.
(B) Prior to the sale, storage, use or giving away of alcoholic beverages on or from the Premises by Tenant or another person, Tenant, at its own expense, shall obtain a policy or policies of insurance issued by a responsible insurance company and in a form acceptable to Landlord saving harmless and protecting Landlord and the Premises against any and all damages, claims, liens, judgments, expenses and costs, including actual attorneys fees, arising under any present or future law, statute, or ordinance of the State of California or other governmental authority having jurisdiction of the Premises, by reason of any storage, sale, use or giving away of alcoholic beverages on or from the Premises. Such policy or policies of insurance shall have a minimum combined single limit of One Million ($1,000,000) per occurrence and shall apply to bodily injury, fatal or nonfatal; injury to means of support; and injury to property of any person. Such policy or policies of insurance shall name Landlord and its agents, beneficiaries, partners, employees and any mortgagee of Landlord or any ground lessor of Landlord as additional insureds.
(C) Landlord shall, at all times during the Lease Term, procure and maintain commercial general liability insurance for the Building in which the Premises are located. Such insurance shall have minimum combined single limit of liability of at least Two Million Dollars ($2,000,000) per occurrence, and a general aggregate limit of at least Two Million Dollars ($2,000,000).
10.04 Workers Compensation Insurance . At all times during the Lease Term, Tenant shall procure and maintain Workers Compensation Insurance in accordance with the laws of the State of California, and Employers Liability insurance with a limit not less than One Million Dollars ($1,000,000) Bodily Injury Each Accident; One Million Dollars ($1,000,000) Bodily Injury By Disease - Each Person; and One Million Dollars ($1,000,000) Bodily Injury to Disease - Policy Limit.
10.05 Policy Requirements . All insurance required to be maintained by Tenant shall be issued by insurance companies authorized to do insurance business in the State of California and rated not less than A-Vu in Bests Insurance Guide. A certificate of insurance (or, at Landlords option, copies of the applicable policies) evidencing the insurance required under this Article X shall be delivered to Landlord not less than thirty (30) days prior to the Commencement Date. No such policy shall be subject to cancellation or modification without thirty (30) days prior written notice to Landlord and to any deed of trust holder, mortgagee or ground lessor designated by Landlord to Tenant. Tenant shall furnish Landlord with a replacement certificate with respect to any insurance not less than thirty (30) days prior to the expiration of the current policy. Tenant shall have the right to provide the insurance required by this Article X pursuant to blanket policies, but only if such blanket policies expressly provide coverage to the Premises and Landlord as required by this Lease.
10.06 Waiver of Subrogation . Each party hereby waives any right of recovery against the other for injury or loss due to hazards covered by insurance or required to be covered, to the extent of the injury or loss covered thereby. Any policy of insurance to be provided by Tenant or Landlord pursuant to this Article X shall contain a clause denying the applicable insurer any right of subrogation against the other party.
14
10.07 Failure to Insure . If Tenant fails to maintain any insurance which Tenant is required to maintain pursuant to this Article X, Tenant shall be liable to Landlord for any loss or cost resulting from such failure to maintain. Tenant may not self-insure against any risks required to be covered by insurance without Landlords prior written consent.
ARTICLE XI- DAMAGE OR DESTRUCTION
11.01 Total Destruction . Except as provided in Section 11.03 below, this Lease shall automatically terminate if the Building is totally destroyed.
11.02 Partial Destruction of Premises . If the Premises are damaged by any casualty and, in Landlords opinion, the Premises (exclusive of any Alterations made to the Premises by Tenant) can be restored to its pre-existing condition within two hundred seventy (270) days after the date of the damage or destruction, Landlord shall, upon written notice from Tenant to Landlord of such damage, except as provided in Section 11.03, promptly and with due diligence repair any damage to the Premises (exclusive of any Alterations to the Premises made by Tenant, which shall be promptly repaired by Tenant at its sole expense) and, until such repairs are completed, the Rent shall be abated from the date of damage or destruction in the same proportion that the rentable area of the portion of the Premises which is unusable by Tenant in the conduct of its business bears to the total rentable area of the Premises. If such repairs cannot, in Landlords opinion, be made within said two hundred seventy (270) day period, then Landlord may, at its option, exercisable by written notice given to Tenant within thirty (30) days after the date of the damage or destruction, elect to make the repairs within a reasonable time after the damage or destruction, in which event this Lease shall remain in full force and effect but the Rent shall be abated as provided in the preceding sentence; if Landlord does not so elect to make the repairs, then either Landlord or Tenant shall have the right, by written notice given to the other within sixty (60) days after the date of the damage or destruction, to terminate this Lease as of the date of the damage or destruction.
11.03 Exceptions to Landlords Obligations . Notwithstanding anything to the contrary contained in this Article XI, Landlord shall have no obligation to repair the Premises if either: (a) the Building in which the Premises are located is so damaged as to require repairs to the Building exceeding twenty percent (20%) of the full insurable value of the Building; or (b) Landlord elects to demolish the Building in which the Premises are located; or (c) the damage or destruction occurs less than two (2) years prior to the Termination Date, exclusive of option periods. Further, Tenants Rent shall not be abated if either (i) the damage or destruction is repaired within five (5) business days after Landlord receives written notice from Tenant of the casualty, or (ii) Tenant, or any officers, partners, employees, agents or invitees of Tenant, or any assignee or subtenant of Tenant, is, in whole or in part, responsible for the damage or destruction.
11.04 Waiver . The provisions contained in this Lease shall supersede any contrary laws (whether statutory, common law or otherwise) now or hereafter in effect relating to damage, destruction, self-help or termination, including California Civil Code Sections 1932 and 1933.
ARTICLE XII - CONDEMNATION
12.01 Taking . If the entire Premises or so much of the Premises as to render the balance unusable by Tenant shall be taken by condemnation, sale in lieu of condemnation or in any other manner for any public or quasi-public purpose (collectively Condemnation), and if Landlord, at its option, is unable or unwilling to provide substitute premises containing at least as much rentable area as described in Section 1.02 above, then this Lease shall terminate on the date that title or possession to the Premises is taken by the condemning authority, whichever is earlier.
12.02 Award . In the event of any Condemnation, the entire award for such taking shall belong to Landlord. Tenant shall have no claim against Landlord or the award for the value of any unexpired term of this Lease or otherwise. Tenant shall be entitled to independently pursue a separate award in a separate proceeding for Tenants relocation costs directly associated with the taking, provided such separate award does not diminish Landlords award.
15
12.03 Temporary Taking . No temporary taking of the Premises shall terminate this Lease or entitle Tenant to any abatement of the Rent payable to Landlord under this Lease; provided, further, that any award for such temporary taking shall belong to Tenant to the extent that the award applies to any time period during the Lease Term and to Landlord to the extent that the award applies to any time period outside the Lease Term.
ARTICLE XIII - RELOCATION
13.01 Relocation . Landlord shall have the right, at its option upon not less than thirty (30) days prior written notice to Tenant, to relocate Tenant and to substitute for the Premises described above other space in the Building containing at least as much rentable area as the Premises described in Section 1.02 above. If Tenant is already in occupancy of the Premises, then Landlord shall approve in advance the relocation expenses for purposes of reimbursement for Tenants reasonable moving and telephone relocation expenses and for reasonable quantities of new stationery upon submission to Landlord of receipts for such expenditures incurred by Tenant.
ARTICLE XIV - ASSIGNMENT AND SUBLETTING
14.01 Restriction . Without the prior written consent of Landlord, Tenant shall not, either voluntarily or by operation of law, assign, encumber, or otherwise transfer this Lease or any interest herein, or sublet the Premises or any part thereof, or permit the Premises to be occupied by anyone other than Tenant or Tenants employees (any such assignment, encumbrance, subletting, occupation or transfer is hereinafter referred to as a Transfer). For purposes of this Lease, the term Transfer shall also include (a) if Tenant is a partnership, the withdrawal or change, voluntary, involuntary or by operation of law, of a majority of the partners, or a transfer of a majority of partnership interests, within a twelve month period, or the dissolution of the partnership, (b) if Tenant is a closely held corporation (i.e. whose stock is not publicly held and not traded through an exchange or over the counter) or a limited liability company, the dissolution, merger, consolidation, division, liquidation or other reorganization of Tenant, or within a twelve month period: (i) the sale or other transfer of more than an aggregate of 50% of the voting securities of Tenant (other than to immediate family members by reason of gift or death) or (ii) the sale, mortgage, hypothecation or pledge of more than an aggregate of 50% of Tenants net assets, and (c) any change by Tenant in the form of its legal organization under applicable state law (such as, for example, a change from a general partnership to a limited partnership or from a corporation to a limited liability company). An assignment, subletting or other action in violation of the foregoing shall be void and, at Landlords option, shall constitute a material breach of this Lease. Notwithstanding anything contained in this Article XIV to the contrary, Tenant shall have the right to assign the Lease or sublease the Premises, or any part thereof, to an Affiliate without the prior written consent of Landlord, but upon at least twenty (20) days prior written notice to Landlord, provided that said Affiliate is not in default under any other lease for space in a property that is managed by Heitman Properties Ltd. or any of its affiliates. For purposes of this provision, the term Affiliate shall mean any corporation or other entity controlling, controlled by, or under common control with (directly or indirectly) Tenant, including, without limitation, any parent corporation controlling Tenant or any subsidiary that Tenant controls. The term control, as used herein, shall mean the power to direct or cause the direction of the management and policies of the controlled entity through the ownership of more than fifty percent (50%) of the voting securities in such controlled entity. Notwithstanding anything contained in this Article XIV to the contrary, Tenant expressly covenants and agrees not to enter into any lease, sublease, license, concession or other agreement for use, occupancy or utilization of the Premises which provides for rental or other payment for such use, occupancy or utilization based in whole or in part on the net income or profits derived by any person from the property leased, used, occupied or utilized (other than an amount based on a fixed percentage or percentages of receipts or sales), and that any such purported lease, sublease, license, concession or other agreement shall be absolutely void and ineffective as a conveyance of any right or interest in the possession, use, occupancy or utilization of any part of the Premises.
14.02 Notice to Landlord . If Tenant desires to assign this Lease or any interest herein, or to sublet all or any part of the Premises, then at least thirty (30) days but not more than one hundred eighty (180) days prior to the effective date of the proposed assignment or subletting, Tenant shall submit to Landlord in connection with Tenants request for Landlords consent:
16
(A) A statement containing (i) the name and address of the proposed assignee or subtenant; (ii) such financial information with respect to the proposed assignee or subtenant as Landlord shall reasonably require; (iii) the type of use proposed for the Premises; and (iv) all of the principal terms of the proposed assignment or subletting; and
(B) Four (4) originals of the assignment or sublease on a form approved by Landlord and four (4) originals of the Landlords Consent to Sublease or Assignment and Assumption of Lease and Consent.
(C) Landlord acknowledges and approves that Tenant intends to sublease a portion of the Premises to Heitman Financial Ltd. upon the same terms and conditions as are contained in this Lease.
14.03 Landlords Recapture Rights . At any time within twenty (20) business days after Landlords receipt of all (but not less than all) of the information and documents described in Section 14.02 above, Landlord may, at its option by written notice to Tenant, elect to: (a) sublease the Premises or the portion thereof proposed to be sublet by Tenant upon the same terms as those offered to the proposed subtenant; or (b) take an assignment of the Lease upon the same terms as those offered to the proposed assignee hereunder.. If Landlord does not exercise any of the options described in the preceding sentence, then, during the above-described twenty (20) business day period, Landlord shall either consent or deny its consent to the proposed assignment or subletting.
14.04 Landlords Consent; Standards . Landlords consent to a proposed assignment or subletting shall not be unreasonably withheld; but, in addition to any other grounds for denial, Landlords consent shall be deemed reasonably withheld if, in Landlords good faith judgment: (i) the proposed assignee or subtenant does not have the financial strength to perform its obligations under this Lease or any proposed sublease; (ii) the business and operations of the proposed assignee or subtenant are not of comparable quality to the business and operations being conducted by other tenants in the Building; (iii) the proposed assignee or subtenant intends to use any part of the Premises for a purpose not permitted under this Lease; (iv) either the proposed assignee or subtenant, or any person which directly or indirectly controls, is controlled by, or is under common control with the proposed assignee or subtenant occupies space in the Building, or is negotiating with Landlord to lease space in the Building; (v) the proposed assignee or subtenant is disreputable; or (vi) the use of the Premises or the Building by the proposed assignee or subtenant would, in Landlords reasonable judgment, impact the Building in a negative manner including but not limited to significantly increasing the pedestrian traffic in and out of the Building or requiring any alterations to the Building to comply with applicable laws; (vii) the subject space is not regular in shape with appropriate means of ingress and egress suitable for normal renting purposes; (viii) the transferee is a government (or agency or instrumentality thereof) or (ix) Tenant has failed to cure a default at the time Tenant requests consent tot the proposed Transfer.
14.05 Additional Rent . If Landlord consents to any such assignment or subletting, one-half (1/2) of the amount by which all sums or other economic consideration received by Tenant in connection with such assignment or subletting, whether denominated as rental or otherwise, exceeds, in the aggregate, the total sum which Tenant is obligated to pay Landlord under this Lease (prorated to reflect obligations allocable to less than all of the Premises under a sublease) shall be paid to Landlord promptly after receipt as additional Rent under the Lease without affecting or reducing any other obligation of Tenant hereunder.
14.06 Landlords Costs . If Tenant shall Transfer this Lease or all or any part of the Premises or shall request the consent of Landlord to any Transfer, Tenant shall pay to Landlord as additional rent Landlords costs related thereto, including Landlords reasonable attorneys fees and a minimum fee to Landlord of Five Hundred Dollars (3500,00).
14.07 Continuing Liability of Tenant . Notwithstanding any Transfer, including an assignment or sublease to an affiliate, Tenant shall remain as fully and primarily liable for the payment of Rent and for the performance of all other obligations of Tenant contained in this Lease to the same extent as if the Transfer had not occurred; provided, however, that any act or omission of any transferee, other than Landlord, that violates the terms of this Lease shall be deemed a violation of this Lease by Tenant.
17
14.08 Non-Waiver . The consent by Landlord to any Transfer shall not relieve Tenant, or any person claiming through or by Tenant, of the obligation to obtain the consent of Landlord, pursuant to this Article XIV, to any further Transfer. In the event of an assignment or subletting, Landlord may collect rent from the assignee or the subtenant without waiving any rights hereunder and collection of the rent from a person other than Tenant shall not be deemed a waiver of any of Landlords rights under this Article XIV, an acceptance of assignee or subtenant as Tenant, or a release of Tenant from the performance of Tenants obligations under this Lease. If Tenant shall default under this Lease and fail to cure within the time permitted, Landlord is irrevocably authorized, as Tenants agent and attorney-in-fact, to direct any transferee to make all payments under or in connection with the Transfer directly to Landlord (which Landlord shall apply towards Tenants obligations under this Lease) until such default is cured.
ARTICLE XV - DEFAULT AND REMEDIES
15.01 Events of Default By Tenant . The occurrence of any of the following shall constitute a material default and breach of this Lease by Tenant:
(A) The failure by Tenant to pay Base Rent or make any other payment required to be made by Tenant hereunder as and when due.
(B) The abandonment of the Premises by Tenant or the vacation of the Premises by Tenant for fourteen (14) consecutive days (with or without the payment of Rent).
(C) The making by Tenant of any assignment of this Lease or any sublease of all or part of the Premises, except as expressly permitted under Article XIV of this Lease.
(D) The failure by Tenant to observe or perform any other provision of this Lease to be observed or performed by Tenant, other than those described in Sections 15.01(A), 15.01(B) or 15.01 (C) above, if such failure continues for ten (10) days after written notice thereof by Landlord to Tenant; provided, however, that if the nature of the default is such that it cannot be cured within the ten (10) day period, no default shall exist if Tenant commences the curing of the default within the ten (10) day period and thereafter diligently prosecutes the same to completion. The ten (10) day notice described herein shall be in lieu of, and not in addition to, any notice required under Section 1161 of the California Civil Code of Procedure or any other law now or hereafter in effect requiring that notice of default be given prior to the commencement of an unlawful detainer or other legal proceeding.
(E) The making by Tenant or its Guarantor of any general assignment for the benefit of creditors, the filing by or against Tenant or its Guarantor of a petition under any federal or state bankruptcy or insolvency laws (unless, in the case of a petition filed against Tenant or its Guarantor the same is dismissed within thirty (30) days after filing); the appointment of a trustee or receiver to take possession of substantially all of Tenants assets at the Premises or Tenants interest in this Lease or the Premises, when possession is not restored to Tenant within thirty (30) days; or the attachment, execution or other seizure of substantially all of Tenants assets located at the Premises or Tenants interest in this Lease or the Premises, if such seizure is not discharged within thirty (30) days.
(F) Any material misrepresentation herein, or material misrepresentation or omission in any financial statements or other materials provided by Tenant or any Guarantor in connection with negotiating or entering into this Lease or in connection with any Transfer under Section 14.01.
15.02 Landlords Right to Terminate Upon Tenant Default In the event of any default by Tenant as provided in Section 15.01 above, Landlord shall have the right to terminate this Lease and recover possession of the Premises by giving written notice to Tenant of Landlords election to terminate this Lease, in which event Landlord shall be entitled to receive from Tenant:
(A) The worth at the time of award of any unpaid Rent which had been earned at the time of such termination; plus
18
(B) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss Tenant proves could have been reasonably avoided; plus
(C) The worth at the time of award of the amount by which the unpaid Rent for the balance of the term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; plus
(D) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenants failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom; and
(E) At Landlords election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law.
As used in subparagraphs (A) and (B) above, worth at the time of award shall be computed by allowing interest on such amounts at the then highest lawful rate of interest, but in no event to exceed one percent (1%) per annum plus the rate established by the Federal Reserve Bank of San Francisco on advances made to member banks under Sections of the Federal Reserve Act (discount rate) prevailing at the time of the award. As used in paragraph (C) above, worth at the time of award shall be computed by discounting such amount by (i) the discount rate of the Federal Reserve Bank of San Francisco prevailing at the time of award plus (ii) one percent (1%).
15.03 Mitigation of Damages . If Landlord terminates this Lease or Tenants right to possession of the Premises, Landlord shall have no obligation to mitigate Landlords damages except to the extent required by applicable law. If Landlord has not terminated this Lease or Tenants right to possession of the Premises, Landlord shall have no obligation to mitigate under any circumstances and may permit the Premises to remain vacant or abandoned. If Landlord is required to mitigate damages as provided herein: (i) Landlord shall be required only to use reasonable efforts to mitigate, which shall not exceed such efforts as Landlord generally uses to lease other space in the Building, (ii) Landlord will not be deemed to have failed to mitigate if Landlord or its affiliates lease any other portions of the Building or other projects owned by Landlord or its affiliates in the same geographic area, before reletting all or any portion of the Premises, and (iii) any failure to mitigate as described herein with respect to any period of time shall only reduce the Rent and other amounts to which Landlord is entitled hereunder by the reasonable rental value of the Premises during such period. In recognition that the value of the Building depends on the rental rates and terms of leases therein, Landlords rejection of a prospective replacement tenant based on an offer of rentals below Landlords published rates for new leases of comparable space at the Building at the time in question, or at Landlords option, below the rates provided in this Lease, or containing terms less favorable than those contained herein, shall not give rise to a claim by Tenant that Landlord failed to mitigate Landlords damages.
15.04 Landlords Right To Continue Lease Upon Tenant Default . In the event of a default of this Lease and abandonment of the Premises by Tenant, if Landlord does not elect to terminate this Lease as provided in Section 15.02 above, Landlord may from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease. Without limiting the foregoing, Landlord has the remedy described in California Civil Code Section 1951.4 (Landlord may continue this Lease in effect after Tenants default and abandonment and recover Rent as it becomes due, if Tenant has the right to Transfer, subject to reasonable limitations). In the event Landlord re-lets the Premises, to the fullest extent permitted by law, the proceeds of any reletting shall be applied first to pay to Landlord all costs and expenses of such reletting (including without limitation, costs and expenses of retaking or repossessing the Premises, removing persons and property therefrom, securing new tenants, including expenses for redecoration, alterations and other costs in connection with preparing the Premises for the new tenant, and if Landlord shall maintain and operate the Premises, the costs thereof) and receivers fees incurred in connection with the appointment of and performance by a receiver to protect the Premises and Landlords interest under this Lease and any necessary or reasonable alterations; second, to the payment of any indebtedness of Tenant to Landlord other than Rent due and unpaid hereunder; third, to the payment of Rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of other or future obligations of Tenant to Landlord as the same may become due and payable, and Tenant shall not be entitled to receive any portion of such revenue.
19
15.05 Right of Landlord to Perform . All covenants and agreements to be performed by Tenant under this Lease shall be performed by Tenant at Tenants sole cost and expense. If Tenant shall fail to pay any sum of money, other than Rent, required to be paid by it hereunder or shall fail to perform any other act on its part to be performed hereunder, Landlord may, but shall not be obligated to, make any payment or perform any such other act on Tenants part to be made or performed, without waiving or releasing Tenant of its obligations under this Lease. Any sums so paid by Landlord and all necessary incidental costs, together with interest thereon at the lesser of the maximum rate permitted by law if any or twelve percent (12%) per annum from the date of such payment, shall be payable to Landlord as additional rent on demand and Landlord shall have the same rights and remedies in the event of nonpayment as in the case of default by Tenant in the payment of Rent.
15.06 Default Under Other Leases . If the term of any lease, other than this Lease, heretofore or hereafter made by Tenant for any office space in the Building shall be terminated or terminable after the making of this Lease because of any default by Tenant under such other lease, such fact shall empower Landlord, at Landlords sole option, to terminate this Lease by notice to Tenant or to exercise any of the rights or remedies set forth in Section 15.02.
15.07 Non-Waiver . Nothing in this Article shall be deemed to affect Landlords rights to indemnification for liability or liabilities arising prior to termination of this Lease or Tenants right to possession of the Premises for personal injury or property damages under the indemnification clause or clauses contained in this Lease. No acceptance by Landlord of a lesser sum than the Rent then due shall be deemed to be other than on account of the earliest installment of such rent due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlords right to recover the balance of such installment or pursue any other remedy in the Lease provided. The delivery of keys to any employee of Landlord or to Landlords agent or any employee thereof shall not operate as a termination of this Lease or a surrender of the Premises.
15.08 Cumulative Remedies . The specific remedies to which Landlord may resort under the terms of the Lease are cumulative and are not intended to be exclusive of any other remedies or means of redress to which it may be lawfully entitled in case of any breach or threatened breach by Tenant of any provisions of the Lease. In addition to the other remedies provided in the Lease, Landlord shall be entitled to a restraint by injunction of the violation or attempted or threatened violation of any of the covenants, conditions or provisions of the Lease or to a decree compelling specific performance of any such covenants, conditions or provisions.
15.09 Default by Landlord . Landlords failure to perform or observe any of its obligations under this Lease shall constitute a default by Landlord under this Lease only if such failure shall continue for a period of thirty (30) days (or the additional time, if any, that is reasonably necessary to promptly and diligently cure the failure) after Landlord receives written notice from Tenant specifying the default. The notice shall give in reasonable detail the nature and extent of the failure and shall identify the Lease provision(s) containing the obligation(s). If Landlord shall default in the performance of any of its obligations under this Lease (after notice and opportunity to cure as provided herein), Tenant may pursue any remedies available to it under the law and this Lease, except that, in no event, shall Landlord be liable for punitive damages, lost profits, business interruption, speculative, consequential or other such damages. In recognition that Landlord must receive timely payments of Rent and operate the Building, Tenant shall have no right of self-help to perform repairs or any other obligation of Landlord, and shall have no right to withhold, set-off, or abate Rent.
ARTICLE XVI - ATTORNEYS FEES: COSTS OF SUIT
16.01 Attorneys Fees . If either Landlord or Tenant shall commence any action or other proceeding against the other arising out of, or relating to, this Lease or the Premises, the prevailing party shall be entitled to recover from the losing party, in addition to any other relief, its actual attorneys fees irrespective of whether or not the action or other proceeding is prosecuted to judgment and irrespective of any court schedule of reasonable
20
Attorneys fees. In addition, Tenant shall reimburse Landlord, upon demand, for all reasonable attorneys fees incurred in collecting Rent, resolving any actual default by Tenant, securing indemnification as provided in Article X and paragraphs, 16.02, 23.01 and 25.01 herein or otherwise seeking enforcement against Tenant, its sublessees and assigns, of Tenants obligations under this Lease.
16.02 Indemnification . Should Landlord be made a party to any litigation instituted by Tenant against a party other than Landlord, or by a third party against Tenant, Tenant shall indemnify, hold harmless and defend Landlord from any and all loss, cost, liability, damage or expense incurred by Landlord, including attorneys fees, in connection with the litigation.
ARTICLE XVII- SUBORDINATION AND ATTORNMENT
17.01 Subordination . This Lease, and the rights of Tenant hereunder, are and shall be subject and subordinate to the interest of (i) all present and future ground leases and master leases of all or any part of the Building; (ii) present and future mortgages and deeds of trust encumbering all or any part of the Building; (iii) all past and future advances made under any such mortgages or deeds of trust; and (iv) all renewals, modifications, replacements and extensions of any such ground leases, master leases, mortgages and deeds of trust; provided, however, that any lessor under any such ground lease or master lease or any mortgagee or beneficiary under any such mortgage or deed of trust ( any such lessor, mortgagee or beneficiary is hereinafter referred to as a Mortgagee) shall have the right to elect, by written notice given to Tenant, to have this Lease made superior in whole or in part to any such ground lease, master lease, mortgage or deed of trust (or subject and subordinate to such ground lease, master lease, mortgage or deed of trust but superior to any junior mortgage or junior deed of trust). Upon demand, Tenant shall execute, acknowledge and deliver any instruments reasonably requested by Landlord or any such Mortgagee to effect the purposes of this Section 17.01. Such instruments may contain, among other things, provisions to the effect that such Mortgagee (hereafter, for the purposes of this Section 17.01, a Successor Landlord) shall (i) not be liable for any act or omission of Landlord or its predecessors, if any, prior to the date of such Successor Landlords succession to Landlords interest under this Lease; (ii) not be subject to any offsets or defenses which Tenant might have been able to assert against Landlord or its predecessors, if any, prior to the date of such Successor Landlords succession to Landlords interest under this Lease; (iii) not be liable for the return of any security deposit under the Lease unless the same shall have actually been deposited with such Successor Landlord; (iv) be entitled to receive notice of any Landlord default under this Lease plus a reasonable opportunity to cure such default prior to Tenant having any right or ability to terminate this Lease as a result of such Landlord default; (v) not be bound by any rent or additional rent which Tenant might have paid for more than the current month to Landlord; (vi) not be bound by any amendment or modification of the Lease or any cancellation or surrender of the same made without Successor Landlords prior written consent; (vii) not be bound by any obligation to make any payment to Tenant which was required to be made prior to the time such Successor Landlord succeeded to Landlords interest and (viii) not be bound by any obligation under the Lease to perform any work or to make any improvements to the demised Premises. Any obligations of any Successor Landlord under its respective lease shall be non-recourse as to any assets of such Successor Landlord other than its interest in the Premises and improvements.
17.02 Attornment . If the interests of Landlord under the Lease shall be transferred to any superior Mortgagee or other purchaser or person taking title to the Building by reason of the termination of any superior lease or the foreclosure of any superior mortgage or deed of trust, Tenant shall be bound to such Successor Landlord under all of the terms, covenants and conditions of the Lease for the balance of the term thereof remaining and any extensions or renewals thereof which may be effected in accordance with any option therefore in the Lease, with the same force and effect as if Successor Landlord were the landlord under the Lease, and Tenant shall attorn to and recognize as Tenants landlord under this Lease such Successor Landlord, as its landlord, said attornment to be effective and self-operative without the execution of any further instruments upon Successor Landlords succeeding to the interest of Landlord under the Lease. Tenant shall, upon demand, execute any documents reasonably requested by any such person to evidence the attornment described in this Section 17.02. Concurrently, upon written request from Tenant, and provided Tenant is not in default under this Lease, Landlord agrees to use diligent,
21
commercially reasonable efforts to obtain a Non-Disturbance Agreement from the Successor Landlord. Such Non-Disturbance Agreement may be embodied in the Mortgagees customary form of Subordination and Non-Disturbance Agreement. If, after exerting diligent, commercially reasonable efforts, Landlord is unable to obtain a Non-Disturbance Agreement from any such Mortgagee, Landlord shall have no further obligation to Tenant with respect thereto.
17.03 Mortgagee Protection . Tenant agrees to give any Mortgagee, by registered or certified mail, a copy of any notice of default served upon Landlord by Tenant, provided that prior to such notice Tenant has been notified in writing (by way of service on Tenant of a copy of Assignment of Rents and Leases, or otherwise) of the address of such Mortgagee (hereafter the Notified Party). Tenant further agrees that if Landlord shall have failed to cure such default within twenty (20) days after such notice to Landlord (or if such default cannot be cured or corrected within that time, then such additional time as may be necessary if Landlord has commenced within such twenty (20) days and is diligently pursuing the remedies or steps necessary to cure or correct such default), then the Notified Party shall have an additional thirty (30) days within which to cure or correct such default (or if such default cannot be cured or corrected within that time, then such additional time as may be necessary if the Notified Party has commenced within such thirty (30) days and is diligently pursuing the remedies or steps necessary to cure or correct such default). Until the time allowed, as aforesaid, for the Notified Party to cure such default has expired without cure, Tenant shall have no right to, and shall not, terminate this Lease on account of Landlords default.
ARTICLE XVIII- OUIET ENJOYMENT
18.01 Provided that Tenant performs all of its obligations hereunder, Tenant shall have and peaceably enjoy the Premises during the Lease Term free of claims by or through Landlord, subject to all of the terms and conditions contained in this Lease.
ARTICLE XIX - RULES AND REGULATIONS
19.01 The Rules and Regulations attached hereto as Exhibit C are hereby incorporated by reference herein and made a part hereof. Tenant shall abide by, and faithfully observe and comply with the Rules and Regulations and any reasonable and non-discriminatory amendments, modifications and or additions thereto as may hereafter be adopted and published by written notice to tenants by Landlord for the safety, care, security, good order And/or cleanliness of the Premises and/or the Building. Landlord shall not be liable to Tenant for any violation of such rules and regulations by any other tenant or occupant of the Building.
ARTICLE XX - ESTOPPEL CERTIFICATES
20.01 Tenant agrees at any time and from time to time upon not less than ten (10) days prior written notice from Landlord to execute, acknowledge and deliver to Landlord a statement in writing addressed and certifying to Landlord, to any current or prospective Mortgagee or any assignee thereof, to any prospective purchaser of the land, improvements or both comprising the Building, and to any other party designated by Landlord, that this Lease is unmodified and in full force and effect (of if there have been modifications, that the same is in full force and effect as modified and stating the modifications); that Tenant has accepted possession of the Premises, which are acceptable in all respects, and that any improvements required by the terms of this Lease to be made by Landlord have been completed to the satisfaction of Tenant; that Tenant is in full occupancy of the Premises; that no rent has been paid more than thirty (30) days in advance; that the first months Base Rent has been paid; that Tenant is entitled to no free rent or other concessions except as stated in this Lease; that Tenant has not been notified of any previous assignment of Landlords or any predecessor landlords interest under this Lease; the dates to which Base Rent, additional rental and other charges have been paid; that Tenant, as of the date of such certificate, has no charge, lien or claim of setoff under this Lease or otherwise against Base Rent, additional rental or other charges due or to become due under this Lease; that Landlord is not in default in performance of any covenant, agreement or condition contained in this Lease; or any other matter relating to this Lease or the Premises or, if so, specifying each such default. If there is a Guaranty under this Lease, said Guarantor shall confirm the validity of the
22
Guaranty by joining in the execution of the Estoppel Certificate or other documents so requested by Landlord or Mortgagee. In addition, in the event that such certificate is being given to any Mortgagee, such statement may contain any other provisions customarily required by such Mortgagee including, without limitation, an agreement on the part of Tenant to furnish to such Mortgagee, written notice of any Landlord default and a reasonable opportunity for such Mortgagee to cure such default prior to Tenant being able to terminate this Lease. Any such statement delivered pursuant to this Section may be relied upon by Landlord or any Mortgagee, or prospective purchaser to whom it is addressed and such statement, if required by its addressee, may so specifically state. If Tenant does not execute, acknowledge and deliver to Landlord the statement as and when required herein, Landlord is hereby granted an irrevocable power-of-attorney, coupled with an interest, to execute such statement on Tenants behalf, which statement shall be binding on Tenant to the same extent as if executed by Tenant.
ARTICLE XXI - ENTRY BY LANDLORD
21.01 Landlord may enter the Premises at all reasonable times to: inspect the same; exhibit the same to prospective purchasers, Mortgagees or tenants; determine whether Tenant is complying with all of its obligations under this Lease; supply janitorial and other services to be provided by Landlord to Tenant under this Lease; post notices of non-responsibility; and make repairs or improvements in or to the Building or the Premises; provided, however, that all such work shall be done as promptly as reasonably possible and so as to cause as little interference to Tenant as reasonably possible. Tenant hereby waives any claim for damages for any injury or inconvenience to, or interference with, Tenants business, any loss of occupancy or quiet enjoyment of the Premises or any other loss occasioned by such entry. Landlord shall at all times have and retain a key with which to unlock all of the doors in, on or about the Premises (excluding Tenants vaults, safes and similar areas designated by Tenant in writing in advance), and Landlord shall have the right to use any and all means by which Landlord may deem proper to open such doors to obtain entry to the Premises, and any entry to the Premises obtained by Landlord by any such means, or otherwise, shall not under any circumstances be deemed or construed to be a forcible or unlawful entry into or a detainer of the Premises or an eviction, actual or constructive, of Tenant from any part of the Premises. Such entry by Landlord shall not act as a termination of Tenants duties under this Lease. If Landlord shall be required to obtain entry by means other than a key provided by Tenant, the cost of such entry shall by payable by Tenant to Landlord as additional rent.
ARTICLE XXII
LANDLORDS LEASE UNDERTAKINGS-EXCULPATION FROM PERSONAL LIABILITY;
TRANSFER OF LANDLORDS INTEREST
22.01 Landlords Lease Undertakings . Notwithstanding anything to the contrary contained in this Lease or in any exhibits, Riders or addenda hereto attached (collectively the Lease Document?), it is expressly understood and agreed by and between the parties hereto that: (a) the recourse of Tenant or its successors or assigns against Landlord with respect to the alleged breach by or on the part of Landlord of any representation, warranty, covenant, undertaking or agreement contained in any of the Lease Documents or otherwise arising out of Tenants use of the Premises or the Building (collectively, Landlords Lease Undertakings) shall extend only to Landlords interest in the real estate of which the Premises demised under the Lease Documents are a part (Landlords Real Estate) and not to any other assets of Landlord or its constituent partners; and (b) except to the extent of Landlords interest in Landlords Real Estate, no personal liability or personal responsibility of any sort with respect to any of Landlords Lease Undertakings or any alleged breach thereof is assumed by, or shall at any time be asserted or enforceable against, Landlord, its constituent partners, Heitman Capital Management Corporation or Heitman Properties Ltd., or against any of their respective directors, officers, employees, agents, constituent partners, beneficiaries, trustees or representatives.
22.02 Transfer of Landlords Interest . In the event of any transfer of Landlords interest in the Building, Landlord shall be automatically freed and relieved from all applicable liability with respect to performance of any covenant or obligation on the part of Landlord, provided any deposits or advance rents held by Landlord are turned over to the grantee and said grantee expressly assumes, subject to the limitations of this Section 22, all the
23
terms, covenants and conditions of this Lease to be performed on the part of Landlord, it being intended hereby that the covenants and obligations contained in this Lease on the part of Landlord shall, subject to all the provisions of this Section 22, be binding on Landlord, its successors and assigns, only during their respective periods of ownership.
ARTICLE XXIII - HOLDOVER TENANCY
23.01 If Tenant holds possession of the Premises after the expiration or termination of the Lease Term, by lapse of time or otherwise, Tenant shall become a tenant at sufferance upon all of the terms contained herein, except as to Lease Term and Rent. During such holdover period, Tenant shall pay to Landlord a monthly rental equivalent to two hundred percent (200%) of the Rent Payable by Tenant to Landlord with respect to the last month of the Lease Term. The monthly rent payable for such holdover period shall in no event be construed as a penalty or as liquidated damages for such retention of possession. Without limiting the foregoing, Tenant hereby agrees to indemnify, defend and hold harmless Landlord, its beneficiary, and their respective agents, contractors and employees, from and against any and all claims, liabilities, actions, losses, damages (including without limitation, direct, indirect, incidental and consequential) and expenses (including, without limitation, court costs and reasonable attorneys fees) asserted against or sustained by any such party and arising from or by reason of such retention of possession, which obligations shall survive the expiration or termination of the Lease Term.
ARTICLE XXIV - NOTICES
24.01 All notices which Landlord or Tenant may be required, or may desire, to serve on the other may be served, as an alternative to personal service, by mailing the same by registered or certified mail, postage prepaid, addressed to Landlord at the address for Landlord set forth in Section 1.12 above and to Tenant at the address for Tenant set forth in Section 1.13 above, or, from and after the Commencement Date, to Tenant at the Premises whether or not Tenant has departed from, abandoned or vacated the Premises, or addressed to such other address or addresses as either Landlord or Tenant may from time to time designate to the other in writing. Any notice shall be deemed to have been served at the time the same was posted.
ARTICLE XXV - BROKERS
25.01 The parties recognize as the broker(s) who procured this Lease the firm(s) specified in Section 1.14 and agree that Landlord shall be solely responsible for the payment of any brokerage commissions to said broker(s), and that Tenant shall have no responsibility therefore unless written provision to the contrary has been made a part of this Lease. If Tenant has dealt with any other person or real estate broker in respect to leasing, subleasing or renting space in the Building, Tenant shall be solely responsible for the payment of any fee due said person or firm and Tenant shall protect, indemnify, hold harmless and defend Landlord from any liability in respect thereto. Notwithstanding the foregoing, there shall be no leasing commissions due to any parties under the terms of this Lease.
ARTICLE XXVI- ELECTRONIC SERVICES
26.01 Tenants Lines . Tenant may, in a manner consistent with the provisions and requirements of this Lease, install, maintain, replace, remove or use any communications or computer or other electronic service wires, cables and related devices (collectively the Lines) at the Building in or serving the Premises, provided: (a) Tenant shall obtain Landlords prior written consent, which consent may be conditioned as required by Landlord, (b) if Tenant at any time uses any equipment that may create an electromagnetic field exceeding the normal insulation ratings of ordinary twisted pair riser cable or cause radiation higher than normal background radiation, the Lines therefore (including riser cables) shall be appropriately insulated to prevent such excessive electromagnetic fields or radiation, and (c) Tenant shall pay all costs in connection therewith. Landlord reserves the right to require that Tenant remove any Lines which are installed in violation of these provisions. Tenant shall not, without the prior written consent of Landlord in each instance, grant to any third party a security interest or lien in or on the Lines, and any such security interest or lien granted without Landlords written consent shall be null and void.
24
26.02 Definition of Electronic Services . As used herein Electronic Services Provide? means a business which provides telephone, telegraph, telex, video, other telecommunications or other services which permit Tenant to receive or transmit information by the use of electronics and which require the use of wires, cables, antennas or similar devices in or on the Building. The services of Electronic Services Providers are sometime referred to herein as Electronic Services.
26.03 No Right to Specific Services . Landlord shall have no obligation (i) to install any Electronic Services equipment or facilities, (ii) to make available to Tenant the services of any particular Electronic Services Provider, (iii) to allow any particular Electronic Services Provider access to the Building, (iv) to continue to grant access to an Electronic Services Provider once such provider has been given access to the Building. Landlord may (but shall not have the obligation to): (x) install new Lines at the property, (y) create additional space for Lines at the property, and (z) adopt reasonable and uniform rules and regulations with respect to Lines.
26.04 Limitation of Landlords Responsibility . Tenant acknowledges and agrees that all Electronic Services desired by Tenant shall be ordered and utilized at the sole expense of Tenant. Unless Landlord otherwise requests or consents in writing, all of Tenants Electronic Services equipment shall be and remain solely in the Tenants premises and the telephone closet(s) on the floor(s) on which the Tenants premises is located, in accordance with rules and regulations adopted by Landlord from time to time. Unless otherwise specifically agreed to in writing, Landlord shall have no responsibility for the maintenance of Tenants Electronic Services equipment, including Lines; nor for any Lines or other infrastructure to which Tenants Electronic Services equipment may be connected. Tenant agrees that, to the extent any Electronic Services are interrupted, curtailed or discontinued, Landlord shall have no obligation or liability with respect thereto and it shall be the sole obligation of Tenant at its own expense to obtain substitute service. Except to the extent arising from the intentional or grossly negligent acts of Landlord or Landlords agents or employees, Landlord shall have no liability for damages arising from, and Landlord does not warrant that Tenants use of any Lines will be free from the following (collectively called Line Problems): (x) any eavesdropping or wire-tapping by unauthorized parties, (y) any failure of any Lines to satisfy Tenants requirements, or (z) any shortages, failures, variations, interruptions, disconnections, loss or damage caused by the installation, maintenance, replacement, use or removal of Lines by or for other tenants or occupants at the property. Under no circumstances shall any Line Problems be deemed an actual or constructive eviction of Tenant, render Landlord liable to Tenant for abatement of Rent, or relieve Tenant from performance of Tenants obligations under this Lease. Landlord in no event shall be liable for damages by reason of loss of profits, business interruption or other consequential damage arising from any Line Problems.
26.05 Necessary Service Interruptions . Landlord shall have the right, upon reasonable prior notice to Tenant, to interrupt or turn off Electronic Services facilities in the event of emergency or as necessary in connection with maintenance, repairs or construction at the Building or installation of Electronic Services equipment for other Tenants of the Building or on account of violation by the Electronic Services Provider or owner of the Electronic Services equipment of any obligation to Landlord or in the event that Tenants use of the Electronic Services infrastructure of the Building materially interferes with the Electronic Services of other tenants of the Building.
26.06 Removal of Equipment, Wiring and Other Facilities . Any and all Electronic Services equipment installed in the Tenants Premises or elsewhere in the Building by or on behalf of Tenant, including Lines, or other facilities for Electronic Services reception or transmittal, shall be removed prior to the expiration or earlier termination of the Lease term, by Tenant at its sole cost or, at Landlords election, by Landlord at Tenants sole cost, with the cost thereof to be paid as additional rent. Landlord shall have the right, however, upon written notice to Tenant given no later than thirty (30) days prior to the expiration or earlier termination of the Lease term (except that the notice period shall extend to thirty (30) days beyond the date of termination of the Lease if it is terminated by either party due to a default by the other), to require Tenant to abandon and leave in place, without additional payment to Tenant or credit against rent, any and all Electronic Services Lines and related infrastructure, or selected components thereof, whether located in the Tenants premises or elsewhere in the Building.
26.07 New Provider Installations . In the event that Tenant wishes at any time to utilize the services of an Electronic Services Provider whose equipment is not then servicing the Building, no such Electronic Services Provider shall be permitted to install its Lines or other equipment within the Building without first securing the prior written approval of the Landlord. Landlords approval shall not be deemed any kind of warranty or representation by
25
Landlord, including, without limitation, any warranty or representation as to the suitability, competence, or financial strength of the Electronic Services Provider. Without limitation of the foregoing standard, unless all of the following conditions are satisfied to Landlords satisfaction, it shall be reasonable for Landlord to refuse to give its approval: (i) Landlord shall incur no current expense or risk or future expense whatsoever with respect to any aspect of the Electronic Services Providers provision of its Electronic Services, including without limitation, the costs of installation, materials and services; (ii) prior to commencement of any work in or about the Building by the Electronic Services Provider, the Electronic Services Provider shall supply Landlord with such written indemnities, insurance, financial statements, and such other items as Landlord reasonably determines to be necessary to protect its financial interests and the interests of the Building relating to the proposed activities of the Electronic Services Provider; (iii) the Electronic Services Provider agrees to abide by such rules and regulations, Building and other codes, job site rules and such other requirements as are reasonably determined by Landlord to be necessary to protect the interests of the Building, the Tenants in the Building and Landlord, in the same or similar manner as Landlord has the right to protect itself and the Building with respect to proposed alterations as described in Article IX of this Lease; (iv) Landlord reasonably determines that, considering other potential uses for space in the Building, there is sufficient space in the Building for the placement of all of the providers equipment, conduit, Lines and other materials; (v) the Electronic Services Provider agrees to abide by Landlords requirements, if any, that provider use existing Building conduits and pipes or use Building contractors (or other contractors approved by Landlord); (vi) Landlord receives from the Electronic Services Provider such compensation as is reasonably determined by Landlord to compensate it for space used in the Building for the storage and maintenance of the Electronic Services Providers equipment, for the fair market value of a Electronic Services Providers access to the Building, for the use of common or core space within the Building and the costs which may reasonably be expected to be incurred by Landlord; (vii) the provider agrees to deliver to Landlord detailed as built plans immediately after the installation of the providers equipment is complete; and (viii) all of the foregoing matters are documented in a written license agreement between Landlord and the provider, the form and content of which is reasonably satisfactory to Landlord.
26.08 Limit of Default or Breach . Notwithstanding any provision of the proceeding paragraphs to the contrary, the refusal of Landlord to grant its approval to any prospective Electronic Services Provider shall not be deemed a default or breach by Landlord of its obligation under this Lease unless and until Landlord is adjudicated to have acted recklessly or maliciously with respect to Tenants request for approval, and in that event, Tenant shall still have no right to terminate the Lease or claim an entitlement to rent abatement, but may as Tenants sole and exclusive recourse seek a judicial order of specific performance compelling Landlord to grant its approval as to the prospective provider in question. The provisions of this paragraph may be enforced solely by Tenant and Landlord, are not for the benefit of any other party, and specifically but without limitation, no telephone or other Electronic Services Provider shall be deemed a third party beneficiary of this Lease.
26.09 Installation and Use of Wireless Technologies . Tenant shall not utilize any wireless Electronic Services equipment (other than usual and customary cellular telephones), including antennae and satellite receiver dishes, within the Tenants premises, within the Building or attached to the outside walls or roof of the Building, without Landlords prior written consent. Such consent may be conditioned in such a manner so as to protect Landlords financial interests and the interests of the Building, and the other tenants therein, in a manner similar to the arrangements described in the immediately preceding paragraphs.
26.10 Limitation of Liability For Equipment Interference . In the event that Electronic Services equipment, Lines and facilities or satellite and antennae equipment of any type installed by or at the request of Tenant within the Tenants premises, on the roof, or elsewhere within or on the Building causes interference to equipment used by another party, Tenant shall cease using such equipment, Lines and facilities or satellite and antennae equipment until the source of the interference is identified and eliminated and Tenant shall assume all liability related to such interference. Tenant shall cooperate with Landlord and other parties, to eliminate such interference promptly. In the event that Tenant is unable to do so, Tenant will substitute alternative equipment which remedies the situation. If such interference persists, Tenant shall, at Landlords sole discretion, remove such equipment.
26
ARTICLE XXVII- MISCELLANEOUS
27.01 Entire Agreement . This Lease contains all of the agreements and understandings relating to the leasing of the Premises and the obligations of Landlord and Tenant in connection with such leasing. Landlord has not made, and Tenant is not relying upon, any warranties, or representations, promises or statements made by Landlord or any agent of Landlord, except as expressly set forth herein. This Lease supersedes any and all prior agreements and understandings between Landlord and Tenant and alone expresses the agreement of the parties.
27.02 Amendments . This Lease shall not be amended, changed or modified in any way unless in writing executed by Landlord and Tenant. Landlord shall not have waived or released any of its rights hereunder unless in writing and executed by Landlord.
27.03 Successors . Except as expressly provided herein, this Lease and the obligations of Landlord and Tenant contained herein shall bind and benefit the successors and assigns of the parties hereto.
27.04 Force Majeure . Landlord shall incur no liability to Tenant with respect to, and shall not be responsible for any failure to perform, any of Landlords obligations hereunder if such failure is caused by any reason beyond the control of Landlord including, but not limited to, strike, labor trouble, governmental rule, regulations, ordinance, statute or interpretation, or by fire, earthquake, civil commotion, or failure or disruption of utility services. The amount of time for Landlord to perform any of Landlords obligations shall be extended by the amount of time Landlord is delayed in performing such obligation by reason of any force majeure occurrence whether similar to or different from the foregoing types of occurrences.
27.05 Survival of Obligations . Any obligations of Tenant accruing prior to the expiration of the Lease shall survive the expiration or earlier termination of the Lease, and Tenant shall promptly perform all such obligations whether or not this Lease has expired or been terminated.
27.06 Light and Air . No diminution or shutting off of any light, air or view by any structure now or hereafter erected shall in any manner affect this Lease or the obligations of Tenant hereunder, or increase any of the obligations of Landlord hereunder.
27.07 Governing Law . This Lease shall be governed by, and construed in accordance with, the laws of the State of California.
27.08 Severability . In the event any provision of this Lease is found to be unenforceable, the remainder of this Lease shall not be affected, and any provision found to be invalid shall be enforceable to the extent permitted by law. The parties agree that in the event two different interpretations may be given to any provision hereunder, one of which will render the provision unenforceable, and one of which will render the provision enforceable, the interpretation rendering the provision enforceable shall be adopted.
27.09 Captions . All captions, headings, titles, numerical references and computer highlighting are for convenience only and shall have no effect on the interpretation of this Lease.
27.10 Interpretation . Tenant acknowledges that it has read and reviewed this Lease and that it has had the opportunity to confer with counsel in the negotiation of this Lease. Accordingly, this Lease shall be construed neither for nor against Landlord or Tenant, but shall be given a fair and reasonable interpretation in accordance with the meaning of its terms and the intent of the parties.
27.11 Independent Covenants . Each covenant, agreement, obligation or other provision of this Lease to be performed by Tenant are separate and independent covenants of Tenant, and not dependent on any other provision of the Lease.
27.12 Number and Gender . All terms and words used in this Lease, regardless of the number or gender in which they are used, shall be deemed to include the appropriate number and gender, as the context may require.
27
27.13 Time is of the Essence . Time is of the essence of this Lease and the performance of all obligations hereunder.
27.14 Joint and Several Liabilities . If Tenant comprises more than one person or entity, or if this Lease is guaranteed by any party, all such persons shall be jointly and severally liable for payment of rents and the performance of Tenants obligations hereunder. If Tenant comprises more than one person or entity and fewer than all of the persons or entities comprising Tenant abandon the Premises, Landlord, at its sole option, may treat the abandonment by such person or entities as an event of default and exercise with respect to such persons the rights and remedies provided in Article XV without affecting the right or obligations of the persons or entities comprising Tenant which have not abandoned the property.
27.15 Exhibits . Exhibits A (Outline of Premises), B (Work Letter Agreement), C (Rules and Regulations), E (Suite Acceptance Letter), Rider One (Parking Commitment), and Rider Two (Renewal Option) are incorporated into this Lease by reference and made a part hereof.
27.16 Offer to Lease . The submission of this Lease to Tenant or its broker or other agent, does not constitute an offer to Tenant to lease the Premises. This Lease shall have no force and effect until (a) it is executed and delivered by Tenant to Landlord and (b) it is fully reviewed and executed by Landlord; provided, however, that, upon execution of this Lease by Tenant and delivery to Landlord, such execution and delivery by Tenant, shall, in consideration of the time and expense incurred by Landlord in reviewing the Lease and Tenants credit, constitute an offer by Tenant to lease the Premises upon the terms and conditions set forth herein (which offer to Lease shall be irrevocable for twenty (20) business days following the date of delivery).
27.17 No Counterclaim; Choice of Laws . It is mutually agreed that in the event Landlord commences any summary proceeding for non-payment of Rent, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding. In addition, Tenant hereby submits to local jurisdiction in the State of California and agrees that any action by Tenant against Landlord shall be instituted in the State of California and that Landlord shall have personal jurisdiction over Tenant for any action brought by Landlord against Tenant in the State of California.
27.18 Electrical Service to the Premises . Anything set forth in Section 7.01 or elsewhere in this Lease to the contrary notwithstanding, electricity to the Premises shall not be furnished by Landlord, but shall be furnished by the approved electric utility company serving the Building. Landlord shall permit Tenant to receive such service directly from such utility company at Tenants cost (except as otherwise provided herein) and shall permit Landlords wire and conduits, to the extent available, suitable and safely capable, to be used for such purposes.
27.19 Rights Reserved by Landlord . Landlord reserves the following rights exercisable without notice (except as otherwise expressly provided to the contrary in this Lease) and without being deemed an eviction or disturbance of Tenants use or possession of the Premises or giving rise to any claim for set-off or abatement of Rent: (i ) to change the name or street address of the Building; (ii) to install, affix and maintain all signs on the exterior and/or interior of the Building; (iii) to designate and/or approve prior to installation, all types of signs, window shades, blinds, drapes, awnings or other similar items, and all internal lighting that may be visible from the exterior of the Premises and, notwithstanding the provisions of Article IX, the design, arrangement, style, color and general appearance of the portion of the Premises visible from the exterior, and contents thereof, including, without limitation, furniture, fixtures, signs, art work, wall coverings, carpet and decorations, and all changes, additions and removals thereto, shall, at all times have the appearance of premises having the same type of exposure and used for substantially the same purposes that are generally prevailing in comparable office buildings in the area. Any violation of this provision shall be deemed a material breach of this Lease; (iv) to change the arrangement of entrances, doors, corridors, elevators and/or stairs in the Building, provided no such change shall materially adversely affect access to the Premises; (v) to grant any party the exclusive right to conduct any business or render any service in the Building, provided such exclusive right shall not operate to prohibit Tenant from using the Premises for the purposes permitted under this Lease; (vi) to prohibit the placement of vending or dispensing
28
machines of any kind in or about the Premises other than for use by Tenants employees; (vii) to prohibit the placement of video or other electronic games in the Premises; (viii) to have access for Landlord and other tenants of the Building to any mail chutes and boxes located in or on the Premises according to the rules of the United States Post Office and to discontinue any mail chute business in the Building; (ix) to close the Building after normal business hours, except that Tenant and its employees and invitees shall be entitled to admission at all times under such rules and regulations as Landlord prescribes for security purposes; (x) to install, operate and maintain security systems which monitor, by close circuit television or otherwise, all persons entering or leaving the Building; (xi) to install and maintain pipes, ducts, conduits, wires and structural elements located in the Premises which serve other parts or other tenants of the Building; and (xii) to retain at all times master keys or pass keys to the Premises.
IN WITNESS WHEREOF, the parties hereto have executed this lease as of the date first above written.
LANDLORD: |
|
TENANT: |
|
Its: |
|
|
|
WILSHIRE-CAMDEN ASSOCIATES, |
|
KENNEDY-WILSON, INC. |
|
A California limited partnership |
|
a California corporation |
|
|
|
|
|
|
|
|
|
By: HEITMAN PROPERTIES LTD., an Illinois |
|
by:: |
/s/ WILLIAM J. McMORROW |
corporation, its duly authorized agent and attorney-in-fact |
|
CEO |
|
/S/ TONY ZIMMERMAN |
|
|
|
EXECUTIVE VICE PRESIDENT |
|
|
|
|
|
|
|
|
|
By: |
/S/ FREEMAN LYLE |
|
|
CFO |
29
RIDER ONE
PARKING COMMITMENT
1. Landlord agrees to cause Century Parking. Inc., a California corporation or such other person to whom Landlord shall hereafter lease the Garage (the Garage Lessee) to enter into parking agreement (Parking Agreement) with Tenant, on the Garage Lessees standard form of parking agreement, for the use of up to seventy-eight (78 ) parking spaces in the Property Garage (referred to herein as the Garage) during the Term of this Lease, as it may be extended or as it may be terminated prior to its scheduled expiration date. Tenant shall pay Garage Lessee the monthly charges established from time to time by the Garage Lessee for parking in the Garage. The initial monthly or each such space is per the following schedule: -
P1 Reserved |
|
$ |
200.00 |
|
P1 Unreserved |
|
$ |
145.00 |
|
P2 Unreserved |
|
$ |
125.00 |
|
P3 & P4 Unreserved |
|
$ |
105.00 |
|
Notwithstanding the foregoing, Tenant shall be granted three (3) reserved spaces on the P-I level at no charge. In addition, up to 35 unreserved spaces on the P-3 and P-4 levels shall be made available to Tenant at $50.00 per month per stall and shall increase at the same rate as the rates on the balance of the garage. At such time as the space currently leased to Wells Fargo Bank becomes occupied or the average occupancy for the parking garage (monthly and transient parking) reaches 90%, the rates shall revert to the then current market rates.
2. Tenant acknowledges that the Garage Lessee is an independent contractor, not affiliated with Landlord, and further acknowledges that Landlord shall have no liability for claims arising through acts or omissions of Garage Lessee.
3. If Tenants rights under the Parking Agreement are terminated pursuant to the terms of such Agreement, Landlord shall have the right to immediately terminate Tenants rights under this Agreement.
4. It is understood and agreed that the identity of the Garage Lessee may change from time to time during the Term of the Lease and/or the Parking Agreement. Tenant hereby consents to the assignment, from time to time, of the initial or any successor Garage Lessees interest in the Parking Agreement to another Garage Lessee or, at Landlords option, Tenant shall, from time to time enter into a new parking agreement with another Garage Lessee.
|
LANDLORD: |
|
|
WILSHIRE-CAMDEN ASSOCIATES, a California limited partnership |
|
|
|
|
|
By: |
HEITMAN PROPERTIES LTD., an Illinois corporation, its duly authorized agent and attorney-in-fact |
|
|
|
|
By: |
/s/ Heitman Properties |
|
|
|
|
|
|
|
TENANT: |
|
|
KENNEDY-WILSON INC., a California corporation |
|
|
|
|
|
By: |
/s/ William J. McMorrow |
|
Its: |
CEO |
|
|
|
|
By: |
/s/ Freeman Lyle, CFO |
RIDER TWO
RENEWAL OPTION
RENEWAL OPTION . Tenant shall have an option (the Renewal Option) to renew the initial term with respect to all (but not less than all) of the Premises demised under or pursuant to this Lease as of the expiration date of the Term for one additional term (the Renewal Term) of five (5) years, commencing on the day immediately following the expiration date of the initial Term, under the following terms and conditions and subject to credit approval by Landlord:
(1) Tenant gives Landlord written notice of its election to exercise the Renewal Option no earlier than the date which is three hundred sixty-five (365) days prior to the expiration date of the initial Term and no later than the date which is two hundred seventy (270) days prior to the expiration date of the initial Term;
(2) Tenant is not in breach or default under this Lease either on the date Tenant exercises the Renewal Option or at any time through and including the proposed commencement date of the Renewal Term.
34.02 TERM . If Tenant timely and properly exercises the Renewal Option in accordance with the above provisions:
(I) The Rent payable for the Renewal Term shall be based on the then prevailing rent for similar space in this property, but in no event shall the rental rate be less than the adjusted rental rate payable under this Lease on the expiration date of the initial Term. For purposes of the preceding sentence, prevailing rental rate shall mean the total rental then being quoted by Landlord to third party tenants for reasonably comparable space in the Building for leases approximately as long, and commencing at approximately the same time, as the Renewal Term, subject to reasonable adjustment for the desirability of the applicable floor or area of the Building. If Landlord is not then quoting rental rates for comparable space, the rates used for purposes of this provision shall be those rates Landlord would have used if Landlord had quoted such rates. Landlords good faith determination of the prevailing rental rate shall be conclusive and binding as to Landlord and Tenant. If Tenant timely and properly exercises the Renewal Option, Landlord agrees to give Tenant written notice setting forth the prevailing rental rate, which notice shall be given prior to the commencement date of the Renewal Term.
(2) Tenant shall have no further options to renew the initial Term of this Lease beyond the expiration date of the Renewal Term.
(3) Landlord will not be required to give any economic concession in connection with the exercise of this option. Without limiting the generality of the foregoing, Landlord will not be obligated to perform or give an allowance for leasehold improvements.
(4) Except as otherwise provided herein, all of the terms and provisions of this Lease shall remain the same and in full force and effect during the Renewal Term.
AMENDMENT . If Tenant exercises the Renewal Option, Landlord and Tenant shall execute and deliver an amendment to this Lease (or, at Landlords option, a new lease on the form then in use for the Building) reflecting the lease of the Premises by Landlord to Tenant for the Renewal Term on the terms provided above, which amendment (or new lease, as the case may be) shall be executed and delivered prior to the commencement date of the Renewal Term.
TERMINATION . The Renewal Option shall automatically terminate and become null and void and of no force or effect upon the earlier to occur of (I) the expiration or termination of this Lease, (2) the termination of the Tenants right to possession of the Premises, (3) the assignment of this Lease by Tenant, (4) the sublease by Tenant of all of the Premises, or (5) the failure of Tenant to timely or properly exercise the Renewal Option or (6) the occurrence of an Event of Default by Tenant under the Lease.
Exhibit A
EXHIBIT B
WORK LETTER AGREEMENT
Landlord Performs Work
Allowance
This Work Letter Agreement (Work Letter) is executed simultaneously with that certain Office Lease (the Lease) between KENNEDY-WILSON INC., a California corporation as Tenant, and WILSHIRE-CAMDEN ASSOCIATES, a California limited partnership, as Landlord, relating to demised premises (Premises) at the building commonly known as HEITMAN CENTRE BEVERLY HILLS (the Building), which Premises are more fully identified in the Lease. Capitalized terms used herein, unless otherwise defined in this Work Letter, shall have the respective meanings ascribed to them in the Lease.
For and in consideration of the agreement to lease the Premises and the mutual covenants contained herein and in the Lease, Landlord and Tenant hereby agree as follows:
I. Tenants Initial Plans; the Work . Tenant desires Landlord to perform certain leasehold improvement work in the Premises in substantial accordance with the plan or plans (collectively, the Initial Plan) prepared by Architectural Charettes dated ________________________ and last revised ________________________,a copy or copies of which is/are attached hereto as Schedule I. Such work, as shown in the Initial Plan and as more fully detailed in the Working Drawings (as defined and described in Paragraph 2 below), shall be hereinafter referred to as the Work. Not later than August 15, 1998, Tenant shall furnish to Landlord such additional plans, drawings, specifications and finish details as Landlord may reasonably request to enable Landlords architects and engineers to prepare mechanical, electrical and plumbing plans and to prepare the Working Drawings, including a final telephone layout and special electrical connection requirements, if any. All plans, drawings, specifications and other details describing the Work which have been or are hereafter furnished by or on behalf of Tenant shall be subject to Landlords approval, which Landlord agrees shall not be unreasonably withheld. Landlord shall not be deemed to have acted unreasonably if it withholds its approval of any plans, specifications, drawings or other details or of any Additional Work (as defined in Paragraph 7 below) because, in Landlords reasonable opinion, the work, as described in any such item, or the Additional Work, as the case may be: (a) is likely to adversely affect Building systems, the structure of the Building or the safety of the Building and/or its occupants; (b) might impair Landlords ability to furnish services to Tenant or other tenants in the Building; (c) would increase the cost of operating the Building; (d) would violate any governmental laws, rules or ordinances (or interpretations thereof); (e) contains or uses hazardous or toxic materials or substances; (f) would adversely affect the appearance of the Building; (g) might adversely affect another tenants premises; (h) is prohibited by any ground lease affecting the Building or any mortgage, trust deed or other instrument encumbering the Building; or (i) is likely to be substantially delayed because of unavailability or shortage of labor or materials necessary to perform such work or the difficulties or unusual nature of such work. The foregoing reasons, however, shall not be the only reasons for which Landlord may withhold its approval, whether or not such other reasons are similar or dissimilar to the foregoing. Neither the approval by Landlord of the Work or Initial Plan or any other plans, drawings, specifications or other items associated with the Work nor Landlords performance, supervision or monitoring of the Work shall constitute any warranty by Landlord to Tenant of the adequacy of the design for Tenants intended use of the Premises. Landlord shall be entitled to a payment of 5% of the cost associated with the completion of Tenants buildout, which cost shall include architectural and engineering and similar fees and all costs associated with the construction of the space as charged by the general contractor selected to perform the work. This payment is for the coordination and day to day supervision performed by Landlords staff in completing Tenants buildout. This payment will be part of the Tenant Allowance package.
2. Working Drawings . If necessary for the performance of the Work and not included as part of the Initial Plan attached hereto, Landlord shall prepare or cause to be prepared final working drawings and specifications for the Work (the Working Drawings) based on and consistent with the Initial Plan and the other plans, drawings, specifications, finish details and other information furnished by Tenant to Landlord and approved by Landlord pursuant to Paragraph 1 above. So long as the Working Drawings are consistent with the Initial Plan, Tenant shall approve the Working Drawings within three (3) days after receipt of same from Landlord by initialing and returning to Landlord each sheet of the Working Drawings or by executing Landlords approval form then in use, whichever method of approval Landlord may designate.
3. Performance of the Work; Allowance . Except as hereinafter provided to the contrary, Landlord shall cause the performance of the Work using (except as may be stated or shown otherwise in the Working Drawings) building standard materials, quantities and procedures then in use by Landlord (Building Standards). Landlord shall pay for a portion of the Cost of Work (as defined below) in an amount not to exceed $390,855.00 (such amount being $15.00 per rentable square foot of the Premises which is to be improved, as described in the Working Drawings) (the Allowance), and Tenant shall pay for the entire Cost of the Work in excess of the Allowance. Tenant shall not be entitled to any credit, abatement or payment from Landlord in the event that the amount of the Allowance specified above exceeds the Cost of the Work. For purposes of this Agreement, the term Cost of the Work shall mean and include any and all costs and expenses of the Work, including, without limitation, the cost of the Working Drawings and of all labor (including overtime) and materials constituting the Work. Landlord shall also pay for one preliminary space plan at a cost not to exceed $.10 per rentable square foot of the Premises ($2,605.70) Tenant shall have until the end of the 24th month of the initial lease term to spend the tenant improvement allowance. The benefit of any portion of the Allowance that remains unspent after the twenty-fourth month of the initial Lease Term shall inure to Landlord.
4. Payment . Prior to commencing the Work, Landlord shall submit to Tenant a written statement of the total Cost of the Work (which shall include the amount of any overtime projected as necessary to substantially complete the Work by the Commencement Date specified in the Lease) as then known by Landlord, and such statement shall indicate the amount, if any, by which the total Cost of the Work exceeds the Allowance (the Excess Costs). Tenant agrees, within three (3) days after submission to it of such statement, to execute and deliver to Landlord, in the form then in use by Landlord, an authorization to proceed with the Work, and Tenant shall also then pay to Landlord an amount equal to the Excess Costs. No Work shall be commenced until Tenant has fully complied with the preceding provisions of this Paragraph 4. In the event, and each time, that any change order by Tenant, unknown field condition, delay caused by acts beyond Landlords control or other event or circumstance causes the Cost of the Work to be increased after the time that Landlord delivers to Tenant the aforesaid initial statement of the Cost of the Work, Landlord shall deliver to Tenant a revised statement of the total Cost of the Work, indicating the revised calculation of the Excess Costs, if any. Within three (3) days after submission to Tenant of any such revised statement, Tenant shall pay to Landlord an amount equal to the Excess Costs, as shown in such revised statement, less the amounts previously paid by Tenant to Landlord on account of the Excess Costs, and Landlord shall not be required to proceed further with the Work until Tenant has paid such amount. Delays in the performance of the Work resulting from the failure of Tenant to comply with the provisions of this Paragraph 4 shall be deemed to be delays caused by Tenant.
5. Substantial Completion . Landlord shall cause the Work to be substantially completed on or before the scheduled date of commencement of the term of the Lease as specified in Section 1.05 of the Lease, subject to delays caused by strikes, lockouts, boycotts or other labor problems, casualties, discontinuance of any utility or other service required for performance of the Work, unavailability or shortages of materials or other problems in obtaining materials necessary for performance of the Work or any other matter beyond the control of Landlord (or beyond the control of Landlords contractors or subcontractors performing the Work) and also subject to Tenant Delays (as defined and described in Paragraph 6 of this Work Letter). The Work shall be deemed to be substantially completed for all purposes under this Work Letter and the Lease if and when Landlords architect issues a written certificate to Landlord and Tenant, certifying that the Work has been substantially completed (i.e., completed except for punchlist items listed in such architects certificate) in substantial compliance with the Working Drawings, or when Tenant first takes occupancy of the Premises, whichever first occurs. If the Work is not deemed to be substantially completed on or before the scheduled date of the commencement of the term of the Lease as specified in Section 1.05 of the Lease, (a) Landlord agrees to use reasonable efforts to complete the Work as soon as practicable thereafter, (b) the Lease shall remain in full force and effect, (c) Landlord shall not be deemed to be in breach or default of the Lease or this Work Letter as a result thereof and Landlord shall have no liability to Tenant as a result of any delay in occupancy (whether for damages, abatement of Rent or otherwise), and (d) except in the event of Tenant Delays, and notwithstanding anything contained in the Lease to the contrary, the Commencement Date of the Lease Term as specified in Section 1.05 of the Lease shall be extended to the date on which the Work is deemed to be substantially completed and the Expiration Date of the Lease Term as specified in Section 1.06 of the Lease shall be extended by an equal number of days. At the request of either Landlord or Tenant in the event of such
2
extensions in the commencement and expiration dates of the term of the Lease, Tenant and Landlord shall execute and deliver an amendment to the Lease reflecting such extensions. Landlord agrees to use reasonable diligence to complete all punchlist work listed in the aforesaid architects certificate promptly after substantial completion.
6. Tenant Delays . There shall be no extension of the scheduled commencement or expiration date of the term of the Lease (as otherwise permissibly extended under Paragraph 5 above) if the Work has not been substantially completed on said scheduled commencement date by reason of any delay attributable to Tenant (Tenant Delays), including without limitation:
(i) the failure of Tenant to furnish all or any plans, drawings, specifications, finish details or the other information required under Paragraph 1 above on or before the date stated in Paragraph 1;
(ii) the failure of Tenant to grant approval of the Working Drawings within the time required under Paragraph 2 above;
(iii) the failure of Tenant to comply with the requirements of Paragraph 4 above;
(iv) Tenants requirements for special work or materials, finishes, or installations other than the Building Standards or Tenants requirements for special construction staging or phasing;
(v) the performance of any Additional Work (as defined in Paragraph 7 below) requested by Tenant or the performance of any work in the Premises by any person, firm or corporation employed by or on behalf of Tenant, or any failure to complete or delay in completion of such work; or
(vi) any other act or omission of Tenant that causes a delay.
7. Additional Work . Upon Tenants request and submission by Tenant (at Tenants sole cost and expense) of the necessary information and/or plans and specifications for work other than the Work described in the Working Drawings (Additional Work) and the approval by Landlord of such Additional Work, which approval Landlord agrees shall not be unreasonably withheld, Landlord shall perform such Additional Work, at Tenants sole cost and expense, subject, however, to the following provisions of this Paragraph 7. Prior to commencing any Additional Work requested by Tenant, Landlord shall submit to Tenant a written statement of the cost of such
(c) Any person signing this Work Letter on behalf of Tenant warrants and represents he/she has authority to sign and deliver this Work Letter and bind Tenant.
(d) Notices under this Work Letter shall be given in the same manner as under the Lease.
(e) The headings set forth herein are for convenience only.
(f) This Work Letter sets forth the entire agreement of Tenant and Landlord regarding the Work.
(g) In the event that the final working drawings and specifications are included as part of the Initial Plan attached hereto, or in the event Landlord performs the Work without the necessity of preparing working drawings and specifications, then whenever the term Working Drawings is used in this Agreement, such term shall be deemed to refer to the Initial Plan and all supplemental plans and specifications approved by Landlord.
II. Exculpation of Landlord and Heitman . Notwithstanding anything to the contrary contained in this Work Letter, it is expressly understood and agreed by and between the parties hereto that:
(a) The recourse of Tenant or its successors or assigns against Landlord with respect to the alleged breach by or on the part of Landlord of any representation, warranty, covenant, undertaking or agreement
3
contained in this Work Letter (collectively Landlords Work Letter Undertakings) shall extend only to Landlords interest in the real estate, of which the Premises demised under the Lease are a part (hereinafter, Landlords Real Estate) and not to any other assets of Landlord or its constituent partners; and
(b) Except to the extent of Landlords interest in Landlords Real Estate, no personal liability or personal responsibility of any sort with respect to any of Landlords Work Letter Undertakings or any alleged breach thereof is assumed by, or shall at any time be asserted or enforceable against, Landlord, its constituent partners, Heitman Capital Management Corporation or Heitman Properties Ltd., or against any of their respective directors, officers, employees, agents, constituent partners, beneficiaries, trustees or representatives.
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the 19 th Day of August,l998 .
TENANT: |
|
LANDLORD : |
|
KENNEDY-WILSON, INC. |
|
|
|
a California Corporation |
|
|
|
by: |
/s/ William J. McMorrow, CEO |
|
WILSHIRE-CAMDEN ASSOCIATES, |
|
|
a California limited partnership |
|
by: |
/s/ Freeman Lyle, CFO |
|
By: HEITMAN PROPERTIES LTD., an Illinois |
|
|
corporation, its duly authorized agent and |
|
|
|
attorney-in-fact |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
EXHIBIT C
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or used for any purpose other than ingress and egress. The halls, passages, entrances, elevators, stairways, balconies and roof are not for the use of the general public, and Landlord shall in all cases retain the right to control or prevent access thereto by all persons whose presence in the judgment of Landlord shall be prejudicial to the safety, character, reputation or interests of Landlord and its tenants, provided that nothing herein contained shall be construed to prevent such access by persons with whom the tenant normally deals in the ordinary course of its business unless such persons are engaged in illegal activities. No tenant and no employees of any tenant shall go upon the roof of the Building without the written consent of Landlord,
2. No awnings or other projections shall be attached to the outside walls or surfaces of the Building nor shall the interior or exterior of any windows be coated without the prior written consent of Landlord. Except as otherwise specifically approved by Landlord, all electrical ceiling fixtures hung in offices or spaces along the perimeter of the Building must be fluorescent and of a quality, type, design and bulb color approved by Landlord. Tenant shall not place anything or allow anything to be placed near the glass of any window, door, partition or wall which may appear unsightly from outside the Premises,
3. No sign, picture, plaque, advertisement, notice or other material shall be exhibited, painted, inscribed or affixed by any tenant on any part of, or so as to be seen from the outside of, the Premises or the Building without the prior written consent of Landlord. In the event of the violation of the foregoing by any tenant, Landlord may remove the same without any liability, and may charge the expense incurred in such removal to the tenant violating this rule. Interior signs on doors and the directory tablet shall be inscribed, painted or affixed for each tenant by Landlord at the expense of such tenant, and shall be of a size, color and style acceptable to Landlord.
4. The toilets and wash basins and other plumbing fixtures shall not be used for any purpose other than those for which they were constructed, and no sweepings, rubbish, rags or other substances shall be thrown therein. All damage resulting from any misuse of the fixtures shall be borne by tenant who, or whose servants, employees, agents, visitors or licensees, shall have caused the same.
5. No tenant or its officers, agents, employees or invitees shall mark, paint, drill into, or in any way deface any part of the Premises or the Building. No boring, cutting or stringing of wires or laying of linoleum or other similar floor coverings shall be permitted except with the prior written consent of Landlord and as Landlord may direct.
6. No bicycles, vehicles or animals of any kind shall be brought into or kept in or about the Premises and no cooking shall be done or permitted by any tenant on the Premises except that microwave cooking in a ULapproved microwave oven and the preparation of coffee, tea, hot chocolate and similar items for the tenant and its employees and business visitors shall be permitted. Tenant shall not cause or permit any unusual or objectionable odors to escape from the Premises. -
7. The Premises shall not be used for manufacturing or for the storage of merchandise except as such storage may be incidental to the use of the Premises for general office purposes. No tenant shall engage or pay any employees on the Premises except those actually working for such tenant on the Premises nor advertise for laborers giving an address at the Premises. The Premises shall not be used for lodging or sleeping or for any immoral or illegal purposes.
8. No tenant or its officers, agents, employees or invitees shall make, or permit to be made any unseemly or disturbing noises, sounds or vibrations or disturb or interfere with occupants of this or neighboring buildings or Premises or those having business with them whether by the use of any musical instrument, radio, phonograph, unusual noise, or in any other way.
9. No tenant or its officers, agents, employees or invitees shall throw anything out of doors, balconies or down the passageways.
1
10. Tenant shall not maintain armed security in or about the Premises nor possess any weapons, explosives, combustibles or other hazardous devices in or about the Building and/or Premises.
11. No tenant or its officers, agents, employees or invitees shall at any time use, bring or keep upon the Premises any flammable, combustible, explosive, foul or noxious fluid, chemical or substance, or do or permit anything to be done in the leased Premises, or bring or keep anything therein, which shall in any way increase the rate of fire insurance on the Building, or on the property kept therein, or obstruct or interfere with the rights of other tenants, or in any way injure or annoy them, or conflict with the regulations of the Fire Department or the fire laws, or with any insurance policy upon the Building, or any part thereof, or with any rules and ordinances established by the Board of Health or other governmental authority.
12. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any tenant, nor shall any changes be made in existing locks or the mechanism thereof. Each tenant must, upon the tennination of this tenancy, restore to Landlord all keys of stores, offices, and toilet rooms, either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys so furnished, such tenant shall pay to Landlord the cost of replacing the same or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such change.
13. All removals, or the carrying in or out of any safes, freight. furniture, or bulky matter of any description must take place during the hours which Landlord may determine form time to time. The moving of safes or other fixtures or bulky matter of any kind must be made upon previous notice to the manager of the Building and under his or her supervision, and the persons employed by any tenant for such work must be acceptable to Landlord. Landlord reserves the right to inspect all safes, freight or other bulky articles to be brought into the Building and to exclude from the Building all safes, freight or other bulky articles which violate any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part. Landlord reserves the right to prohibit or impose conditions upon the installation in the Premises of heavy objects which might overload the building floors. Landlord will not be responsible for loss of or damage to any safes, freight, bulky articles or other property from any cause, and all damage done to the Building by moving or maintaining any such safe or other property shall be repaired at the expense of the tenant.
14. No tenant shall purchase or otherwise obtain for use in the Premises water, ice, towel, vending machine, janitorial, maintenance or other like services, or accept barbering or boot blacking services, except from persons authorized by Landlord, and at hours and under regulations fixed by Landlord.
15. Landlord shall have the right to prohibit any advertising by any tenant which, in Landlords opinion, tends to impair the reputation of the Building or its desirability as an office building and upon written notice from Landlord any tenant shall refrain from or discontinue such advertising. No tenant shall use any graphic image of the Building or any part of the Building for advertising or public relations without Landlords written permission.
16. Landlord reserves the right to exclude from the Building between the hours of 10:00 p.m. and 7:00 a.m. and at all hours of Saturdays, Sundays and legal holidays all persons who do not present a pass signed by Landlord. Landlord shall furnish passes to persons for whom any tenant requests the same in writing. Each tenant shall be responsible for all persons for whom he requests passes and shall be liable to Landlord for all acts of such persons. Landlord shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In the case of invasion, mob, riot, public excitement or other commotion, Landlord reserves the right to prevent access to the Building during the continuance of the same, by closing of the gates and doors or otherwise, for the safety of the tenants and others and the protection of the Building and the property therein.
17. Any outside contractor employed by any tenant, shall, while in the Building, be subject to the prior written approval of Landlord and subject to the Rules and Regulations of the Building. Tenant shall be responsible for all acts of such persons and Landlord shall not be responsible for any loss or damage to property in the Premises, however occurring.
2
18. All doors opening onto public corridors shall be kept closed, except when in use for ingress and egress, and left locked when not in use.
19. The requirements of tenants will be attended to only upon application to the Office of the Building.
20. Canvassing, soliciting and peddling in the Building are prohibited and each tenant shall cooperate to prevent the same.
21. All office equipment of any electrical or mechanical nature shall be placed by tenants in the Premises in setting approved by Landlord, to absorb or prevent any vibration, noise or annoyance.
22. No air conditioning unit or other similar apparatus shall be installed or used by any tenant without the written consent of Landlord.
23. There shall not be used in any space, or in the public hails of the Building either by any tenant or others, any hand trucks except those equipped with rubber tires and side guards.
24. Landlord will direct electricians as to where and how telephone and telegraph wires are to be introduced. No boring or cutting for wires or stringing of wires will be allowed without written consent of Landlord. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Landlord. All such work shall be effected pursuant to permits issued by all applicable governmental authorities having jurisdiction.
25. No vendor with the intent of selling such goods shall be allowed to transport or carry beverages, food, food containers, etc., on any passenger elevators. The transportation of such items shall be via the service elevators in such manner as prescribed by Landlord.
26. Tenants shall cooperate with Landlord in the conservation of energy used in or about the Building, including without limitation, cooperating with Landlord in obtaining maximum effectiveness of the cooling system by closing drapes or other window coverings when the suns rays fall directly on windows of the Premises, and closing windows and doors to prevent heat loss. Tenant shall not obstruct, alter or in any way impair the efficient operation of Landlords heating, lighting, ventilating and air conditioning system and shall not place bottles, machines, parcels or any other articles on the induction unit enclosure so as to interfere with air flow. Tenant shall not tamper with or change the setting of any thermostats or temperature control valves, and shall in general use heat, gas, electricity, air conditioning equipment and heating equipment in a manner compatible with sound energy conservation practices and standards.
27. All parking ramps and areas, pedestrian walkways, plazas, and other public areas forming a part of the Building shall be under the sole and absolute control of Landlord with the exclusive right to regulate and control these areas. Tenant agrees to conform to the rules and regulations that may be established by Landlord for these areas from time to time.
28. Landlord reserves the right to exclude or expel from the Building any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Building.
29. Tenant and its employees, agents, subtenants, contractors and invitees shall comply with all applicable no-smoking ordinances and, irrespective of such ordinances, shall not smoke or permit smoking of cigarettes, cigars or pipes outside of Tenants Premises (including plaza areas) in any portions of the Building except areas specifically designated as smoking areas by Landlord. If required by applicable ordinance, Tenant shall provide smoking areas within Tenants Premises.
3
EXHIBIT D
INTENTIONALLY OMITTED
EXHIBIT E
Suite Acceptance Agreement
Building Name/Address:
Tenant Name:
Tenant Code: Suite Number:
Managements Tenant Contact: Phone:
Gentlemen:
As a representative of the above referenced tenant, I/we have physically inspected the suite noted above and its improvements with , a representative of (name of HPL Corporation). I/we accept the suite improvements as to compliance with all the requirements indicated in our lease, also including the following verified information below:
Lease Commencement Date: ,Occupancy Date
Lease Rent Start Date*: ,Actual Rent Start*:
Lease Expiration Date: ,Actual Expiration Date:
Date Keys Delivered:
Items requiring attention:
*lf these dates are not the same, attach documentation.
NOTE: This inspection is to be made prior to tenant move-in.
Very truly yours,
By: |
|
|
|
|
|
Its: |
|
|
|
|
|
Date: |
|
|
Distribution
Tenant
Tenant Lease File
Leasing Manager:
HPL Document Control:
Regional Construction Manager:
Regional Engineering Manager:
Exhibit 10.96
FIRST AMENDMENT TO LEASE
(EXPANSION)
THIS FIRST AMENDMENT TO LEASE (the First Amendment) is made as of the 5 th day of March , 1999, by and between WILSHIRE-CAMDEN ASSOCIATES, a California limited partnership (Landlord) and KENNEDY-WILSON INC., a Delaware corporation (Tenant)
RECITALS:
A. Landlord and Tenant entered into a certain Lease (the Lease) dated as of August 19, 1998, whereby Landlord leased to Tenant certain premises (the Premises) shown and designated on the floor plan attached as Exhibit A of the Lease and located on the second (2nd) floor of the certain building (the Building) known as HEITMAN CENTRE - BEVERLY HILLS (now known as 9601 WILSHIRE) and located at 9601 Wilshire Boulevard, Beverly Hills, California. The Premises contain approximately 26,057 rentable square feet.
B. Landlord and Tenant desire to amend the Lease to add certain expansion space to the Premises upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein and in the Lease contained, it is hereby agreed as follows:
I. DEFINED TERMS. Each capitalized term used as a defined term in this First Amendment but not otherwise defined in this First Amendment shall have the same meaning ascribed to such term in the Lease.
2. ADDITIONAL PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord that certain premises (the Additional Premises) consisting of approximately 1,343 square feet of rentable area located on the Garden Level of the Building, as shown on Exhibit A-1 attached hereto and known collectively as Suite GL-1SA and Suite GL-9. The Lease is hereby amended to add the Additional Premises to the Premises as demised and defined in the Lease upon the same terms and provisions specified in the Lease, except that:
(a) The Base Rent for the Additional Premises shall be Twenty-Five Thousand Seven Hundred Eighty-Five and 60/100 ($25,785.60)[an annual rate of $19.20 per square foot of Rentable Area of the Premises], payable in equal monthly installments of Two Thousand One Hundred Forty-Eight and 80/100 ($2,148.80).
(b) Intentionally omitted.
(c) The lease term for the Additional Premises shall commence on March 1, 1999 (the Additional Premises Commencement Date), and end on the last day of the Lease Term, August 31, 2003 (the Additional Premises Lease Term), unless sooner terminated as provided in the Lease.
(d) The first installment of Base Rent for the Additional Premises shall be due and payable on the Additional Premises Commencement Date, with subsequent installments of Base Rent applicable to the Additional Premises due on the first day of each month thereafter during
the Additional Premises Lease Term.
(e) The term Tenants Proportionate Share, as defined and used in the Lease, shall mean one-half of one percent (0.50%) for the Additional Premises.
(f) Base Rent for the Additional Premises shall be subject to periodic adjustment pursuant to Section 4 of the Lease.
(g) Base Rent shall mean all amounts payable by Tenant to Landlord, whether or not denominated as such. Any such amounts due Landlord shall sometimes be referred to as Rent.
(h) The Base Rent for the Premises, excluding the Additional Premises, is not affected by this Amendment.
(i) The Security Deposit for the Additional Premises shall be None ($0).
(j.) Tenant confirms that the leased premises are and will be used for general and administrative, non-medical offices and for no other purpose whatsoever, and that no toxic or hazardous materials have been or will be stored, kept or used on the leased premises.
(k) Landlord hereby acknowledges that Tenant is a Delaware corporation, although Tenant was identified as a California corporation in the Lease.
3. DEFINITION OF BASE YEAR. Anything contained in the Lease to the contrary notwithstanding, solely for purposes of calculating Rent Adjustments for the Additional Premises, Tenants Base Year shall mean calendar year 1999 for the Additional Premises.
4. CONDITION OF THE ADDITIONAL PREMISES; IMPROVEMENT ALLOWANCE. No promises by Landlord to alter, remodel, improve, repair, redecorate or clean the Additional Premises, or any part thereof, have been made, and no representation respecting the condition of the Additional Premises or the Building or with respect to the suitability or fitness of either for any purpose, has been made to Tenant, other than as defined in the attached Exhibit B (Work Letter).
5. BROKER. Tenant represents that except for Kennedy-Wilson Properties, Ltd. (Kennedy-Wilson), Tenant has not retained, contracted or otherwise dealt with any real estate broker, salesperson or finder in connection with this First Amendment, and no such person initiated or participated in the negotiation of this First Amendment. Tenant shall indemnify and hold Landlord and Kennedy-Wilson harmless from and against any and all liabilities and claims for commissions and fees arising out of a breach of the foregoing representation.
6. CONFLICT. If any conflict exists between the terms or provisions of the Lease and the terms or provisions of this First Amendment, the terms and provisions of this First Amendment shall govern and control.
7. EFFECT OF AMENDMENT. As amended by this First Amendment, the Lease shall remain in full force and effect and is ratified by Landlord and Tenant. This First Amendment contains the entire agreement of the parties with respect to the
Additional Premises, and all preliminary negotiations with respect thereto are merged into and superseded by this First Amendment.
8. EXCULPATION OF LANDLORD AND KENNEDY-WILSON.
Notwithstanding anything to the contrary contained in this First Amendment or in any exhibits, Riders or addenda hereto attached (collectively the Lease Documents), it is expressly understood and agreed by and between the parties hereto that: (a) the recourse of Tenant or its successors or assigns against Landlord with respect to the alleged breach by or on the part of Landlord of any representation, warranty, covenant, undertaking or agreement contained in any of the Lease Documents or otherwise arising out of Tenants use of the Premises or the Building (collectively, Landlords Lease Undertakings) shall extend only to Landlords interest in the real estate of which the Premises demised under the Lease Documents are a part (Landlords Real Estate) and not to any other assets of Landlord or its beneficiaries; and (b) except to the extent of Landlords interest in Landlords Real Estate, no personal liability or personal responsibility of any sort with respect to any of Landlords Lease Undertakings or any alleged breach thereof is assumed by, or shall at any time be asserted or enforceable against, Landlord, its beneficiaries, Heitman Capital Management LLC or Kennedy-Wilson Properties Ltd., or against any of their respective directors, officers, employees, agents, constituent partners, beneficiaries, trustees or representatives.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Lease to be duly executed and delivered as of the day and year first written above.
TENANT: |
|
|||
KENNEDY-WILSON [NC., |
|
|||
a Delaware corporation |
|
|||
|
|
|||
|
|
|||
By: |
/S/ FREEMAN LYLE |
|
|
|
|
|
|||
Its: |
|
|||
|
|
|||
LANDLORD: |
|
|||
|
|
|||
WILSHIRE-CAMDEN ASSOCIATES, |
|
|||
a California limited partnership |
|
|||
|
|
|||
By: |
KENNEDY-WILSON PROPERTIES, LTD., |
|
||
|
an Illinois corporation, its duly authorized agent, and attorney-in-fact |
|
||
|
|
|
||
|
/s/ Tony Zimmerman |
|
|
|
EXHIBIT B
WORK LETTER AGREEMENT
[Landlord Performs Work]
[Minor Work Only]
This AGREEMENT made as of the 5 TH day of March, 1999, between WILSHIRE-CAMDEN ASSOCIATES, a California limited partnership (Landlord) and KENNEDY-WILSON INC., a Delaware corporation (Tenant).
Reference is made to the First Amendment to Lease dated March 5 , 1999 (the Lease) for premises known as Suite 220 (the Premises), located in the property known as 9601 WILSHIRE (the Property).
Landlord agrees to perform the following items of work (the Work) in the Premises (describe work and/or refer to any drawings or plans that have been prepared, if they are final):
I. Paint the Premises using building standard paint.
2. Carpet the Premises using building standard carpet
3. Minor construction in accordance with mutually acceptable plans.
Landlord shall pay the frill cost of the Work, not to exceed $10.00 per rentable square foot or $13,430.00.
If Landlord requires further choices by Tenant respecting the above Work (e.g., color choices respecting the above items), Tenant shall promptly choose the same from such choices, if any, that Landlord makes available to Tenant as building standard. If any such further choices are required, the parties agree that Tenant has heretofore been provided an opportunity to view the available choices and Tenant agrees to make such choices by March I, 1999. If Tenant fails to do so by such date, Landlord may make such choices for Tenant.
Landlord will use reasonable efforts to complete the Work by the Commencement Date under the Lease or within 90 days thereafter, subject to further delays beyond Landlords reasonable control (as may be further described in the Lease); provided, notwithstanding anything to the contrary contained in the Lease, delays in the Work hereunder shall not postpone the commencement of Rent under any circumstances whether the delay is caused by Tenant or Tenants contractors, agents or employees, or the delay is otherwise beyond Landlords reasonable control (as may be further described in the Lease), or for any other reason whatsoever Tenant acknowledges that the Work may occur during normal business hours while Tenant is in occupancy of the Premises and that no interference to Tenants business operations in, or use of, the Premises shall entitle Tenant to any abatement of rent or any other concession, or give rise to any claim against, or liability of, Landlord.
Notwithstanding anything to the contrary contained in this Work Letter, it is expressly understood and agreed by and between the pasties hereto that: (a) The recourse of Tenant or its successors or assigns against Landlord with respect to the alleged breach by or on the past of Landlord of any representation, warranty, covenant, undertaking or agreement contained in this Work Letter (collectively, Landlords Work Letter Undertakings) shall extend only to Landlords interest in the real estate of which the Premises demised under the Lease are a part hereinafter, Landlords Real Estate) and not to any other assets of Landlord or its constituent partners; and (b) Except to the extent of Landlords interest in Landlords Real Estate, no personal liability or personal responsibility of any sort with respect to any of Landlords Work Letter Undertakings or any alleged breach thereof is assumed by, or shall at any time be asserted or enforceable against, Landlord, its constituent partners, Heitman Capital Management LLC or Kennedy-Wilson Properties lid., or against any of their respective directors, officers, shareholders, employees, agents, constituent partners, beneficiaries, trustees or representatives.
|
LANDLORD: |
|
|
|
WILSHIRE-CAMDEN ASSOCIATES, |
|
a California limited partnership |
|
By; KENNEDY-WILSON PROPERTIES LW., an Illinois |
|
corporation, its duly authorized agent and |
|
attorney-in-fact |
Exhibit 10.97
SECOND AMENDMENT TO LEASE
(EXPANSION)
THIS SECOND AMENDMENT TO LEASE (the Second Amendment) is made as of the 2 nd day of June 1999, by and between WILSHIRE-CAMDEN ASSOCIATES, a California limited partnership (Landlord) and KENNEDY-WILSON INC., a Delaware corporation (Tenant)
RECITALS:
A. Landlord and Tenant entered into a certain Lease (the Lease) dated as of August 19, 1998, whereby Landlord leased to Tenant certain premises (the Premises) shown and designated on the floor plan attached as Exhibit A of the Lease and located on the second (2nd) floor of the certain building (the Building) known as HEITMAN CENTRE - BEVERLY HILLS (now known as 9601 WILSHIRE) and located at 9601 Wilshire Boulevard, Beverly Hills, California. The Premises contain approximately 26,057 rentable square feet.
B. Landlord and Tenant entered into a certain First Amendment to Lease (the First Amendment) dated March 5, 1999 pursuant to which an additional 937 rentable square feet (the Additional Premises) was added to the Premises and certain other modifications were made.
C. The Lease and First Amendment shall be known collectively as the Lease unless specific reference is made to a specific document.
D. Landlord and Tenant desire to amend the Lease to add certain expansion space to the Premises upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein and in the Lease contained, it is hereby agreed as follows:
1. DEFINED TERMS . Each capitalized term used as a defined term in this Second Amendment but not otherwise defined in this Second Amendment shall have the same meaning ascribed to such term in the Lease.
2. ADDITIONAL PREMISES . Landlord hereby leases to Tenant and Tenant hereby leases from Landlord that certain premises (the Second Additional Premises) consisting of approximately 822 square feet of rentable area located on the Garden Level of the Building, as shown on Exhibit A-2 attached hereto and known as Suite GL-2 1. The Lease is hereby amended to add the Second Additional Premises to the Premises as demised and defined in the Lease upon the same terms and provisions specified in the Lease, except that:
(a) The Base Rent for the Second Additional Premises shall be Fifteen Thousand Seven Hundred Eighty-two and 40/100 ($15,782.40)[an annual rate of $19.20 per square foot of Rentable Area of the Premises], payable in equal monthly installments of One Thousand Three Hundred Fifteen and 20/100 ($1,315.20).
(b) Intentionally omitted.
(c) The lease term for the Second Additional Premises shall be for a twelve (12) month term commencing on June 1, 1999 (the Second Additional Premises Commencement Date), and end on May 31, 2000 as both may be extended as provided below (the Second Additional Premises Lease Term), unless sooner terminated as Page 2 of 4 provided in the Lease. Tenant acknowledges that the Second Additional Premises is currently occupied by another tenant. In the event that the Second Additional Premises Commencement Date is delayed, Landlord shall not be habit for any damages caused thereby, and the Second Additional Premises Commencement Date shall be extended-a~ possession of the Second Additional Premises is given to Tenant by Landlord and the Second Additional Premises Lease Term shall continue for a twelve (12) month term.
(d) The first installment of Base Rent for the Second Additional Premises shall be due and payable on the Second Additional Premises Commencement Date, with subsequent installments of Base Rent applicable to the Second Additional Premises due on the first day of each month thereafter during the Second Additional Premises Lease Term.
(e) The term Tenants Proportionate Share, as defined and used in the Lease, shall mean Thirty-one one hundredths percent (0.31%) for the Second Additional Premises.
(f) Base Rent for the Second Additional Premises shall be subject to periodic adjustment pursuant to Section 4 of the Lease.
(g) Base Rent shall mean all amounts payable by Tenant to Landlord, whether or not denominated as such. Any such amounts due Landlord shall sometimes be referred to as Rent.
(h) The Base Rent for the Premises and the Additional Premises, excluding the Second Additional Premises, is not affected by this Second Amendment.
(i) The Security Deposit for the Second Additional Premises shall be None ($0).
(j) Tenant confirms that the leased premises are and will be used for general and administrative, non-medical offices and for no other purpose whatsoever, and that no toxic or hazardous materials have been or will be stored, kept or used on the leased premises.
3. DEFINITION OF BASE YEAR Anything contained in the Lease to the contrary notwithstanding, solely for purposes of calculating Rent Adjustments for the Second Additional Premises, Tenants Base Year shall mean calendar year 1999.
4. CONDITION OF THE SECOND ADDITIONAL PREMISES; IMPROVEMENT ALLOWANCE . No promises by Landlord to alter, remodel, improve, repair, redecorate or clean the Second Additional Premises, or any part thereof, have been made, and no representation respecting the condition of the Second Additional Premises or the Building or with respect to the suitability or fitness of either for any purpose, has been made to Tenant. Execution of this Second Amendment shall serve as Tenants acceptance of the Second Additional Premises As Is, and Tenant shall not be entitled to receive any credit, allowance, or other concession from Landlord in respect to the Second Additional Premises.
5. BROKER . Tenant represents that except for Kennedy-Wilson Properties, Ltd. (Kennedy-Wilson), Tenant has not retained, contracted or otherwise dealt with any real estate broker, salesperson or finder in connection with this Second Amendment, and no such person initiated or participated in the negotiation of this Second Amendment. Tenant shall indemnify and hold Landlord and Kennedy-Wilson harmless from and against any and all liabilities and claims for commissions and fees arising out of a breach of the foregoing representation.
6. CONFLICT . If any conflict exists between the terms or provisions of the Lease and the terms or provisions of this Second Amendment, the terms and provisions of this Second Amendment shall govern and control.
7. EFFECT OF AMENDMENT . As amended by this Second Amendment, the Lease shall remain in fill force and effect and is ratified by Landlord and Tenant. This Second Amendment contains the entire agreement of the parties with respect to the Second Additional Premises, and all preliminary negotiations with respect thereto are merged into and superseded by this Second Amendment.
8. EXCULPATION OF LANDLORD AND KENNEDY-WILSON . Notwithstanding anything to the contrary contained in this Second Amendment or in any exhibits, Riders or addenda hereto attached (collectively the Lease Documents), it is expressly understood and agreed by and between the parties hereto that: (a) the recourse of Tenant or its successors or assigns against Landlord with respect to the alleged breach by or on the part of Landlord of any representation, warranty, covenant, undertaking or agreement contained in any of the Lease Documents or otherwise arising out of Tenants use of the Premises or the Building (collectively, Landlords Lease
Undertakings) shall extend only to Landlords interest in the real estate of which the Premises demised under the Lease Documents are a part (Landlords Real Estate) and not to any other assets of Landlord or its beneficiaries; and (b) except to the extent of Landlords interest in Landlords Real Estate, no personal liability or personal responsibility of any sort with respect to any of Landlords Lease Undertakings or any alleged breach thereof is assumed by, or shall at any time be asserted or enforceable against, Landlord, its beneficiaries, Heitman Capital Management LLC or Kennedy-Wilson Properties Ltd., or against any of their respective directors, officers, employees, agents, constituent partners, beneficiaries, trustees or representatives.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Lease to be duly executed and delivered as of the day and year first written above.
TENANT : |
|
|
|||
|
|
|
|||
KENNEDY-WILSON INC., |
|
|
|||
a Delaware corporation |
|
|
|||
|
|
|
|||
By: |
/s/ FREEMAN LYLE |
|
|
||
Its: CFO |
|
|
|||
|
|
|
|||
|
|
|
|||
LANDLORD : |
|
|
|||
|
|
|
|||
WILSHIRE-CAMDEN ASSOCIATES, |
|
|
|||
a California limited partnership |
|
|
|||
|
|
|
|||
By: |
KENNEDY-WILSON PROPERTIES, LTD., |
|
|
||
|
an Illinois corporation, its duly authorized |
|
|
||
|
agent, and attorney-in-fact |
|
|
||
|
|
|
|
||
|
By: |
/S/ LAWRENCE STEPHEN |
|
|
|
|
Its: |
Managing Director/Controller |
|
|
|
Exhibit 10.98
THIRD AMENDMENT TO OFFICE LEASE
This Third Amendment to Office Lease (the Third Amendment), dated December 20, 2002, is made by and between BRIGHTON ENTERPRISES. LLC, a California limited liability) company (Landlord), with offices at 808 Wilshire Boulevard, Suite 200. Santa Monica. California 90401, and KENNEDY-WILSON, INC., a Delaware corporation (Tenant), with offices at 9601 Wilshire Boulevard, Suites 200, and GL-15A/GL-9, Beverly Hills, California 90210.
WHEREAS,
A. Wilshire-Camden Associates. a California limited partnership (Wilshire-Camden ) Landlords predecessor-in-interest, pursuant to the provisions of that certain written Office Lease, dated August 19, 1998, as amended by that certain First Amendment to Lease (Expansion) dated March 5, 1999, that certain Second Amendment to Lease (Expansion) dated June 2, 1999, and that certain Termination Agreement dated October 19, 1999 (collectively, the Lease), leased to Tenant, and Tenant leased from Wilshire-Camden space in the property located at 9601 Wilshire Boulevard, Beverly . Hills, California 0210 (the Building), commonly known as Suites 210 (the entire second noon. and Suite GL-15A/GL-9 (the Original Premises);
B. On or about December 20, 2001, Landlord acquired all of Wilshire-Camdens interest, right and title in and to the Building, becoming successor-in-interest to Wilshire-Camden under the Lease;
C. During the initial Term of the Lease for the Original Premises, Tenant wishes to modify its occupancy within the Building. (i) to temporarily return a portion of space on the second floor (Construction Area) for Landlord to complete certain tenant improvements within the Construction Area, (ii) to surrender Suite GL-15A/G1.-9 on the Construction Area Surrender Date (as defined below I, (iii) to continue to occupy the remaining portion of space on the second door (the Suite 200 Portion) until the substantial completion of the tenant improvements in the Construction Area, and (iv) for Tenant to surrender the Suite 200 Portion upon the substantial completion of the tenant improvements within the Construction Area and thereafter occupy the Construction Area (which shall be re-named as Suite 220), which modification Landlord has conditionally permitted, contingent upon Tenants acceptance of and compliance with the provisions of this Third Amendment;
D. Landlord shall commence to construct a demising wall separating the Stine 200 Portion from the Construction Area, which Construction Area shall be renamed as Suite 22(1 as shown on Exhibit A-1 and perform certain other improvements in Suite 220, pursuant to Exhibit B attached hereto and made a part hereof;
E. The initial Term of the Lease for the Original Premises expires August 31, 2003 (Original Expiration Date);
F. Landlord and Tenant wish (i) to accelerate the expiration of the initial Term so that the Lease for the Original Premises expires one (1) day prior to the Suite 220 Effective Date (collectively, the Revised Expiration Date as defined in Paragraph 3.1 below), and (ii) to extend the Lease with respect to Suite 220 only for a seven (7) year term commencing on the Suite 220 Effective Date; and
G. Landlord and Tenant, for their mutual benefit, wish to revise certain covenants and provisions of the Lease.
NOW, THEREFORE, In consideration of the covenants and provisions contained herein, and other good and valuable consideration, the sufficiency of which Landlord and Tenant hereby., acknowledge, Landlord and Tenant agree:
2
Since Suite 220 is not yet fully demised, once the exact location of the demising walls is established and Landlord substantially completes the Improvements as set forth in Exhibit B attached hereto and made a part hereof, Landlord and Tenant agree that a recalculation of the Rentable Area of the Suite 220 shall be made by Stevenson Systems, Inc., an independent planning firm, in accordance with the June, 1996 standards set forth by BOMA. Such determination shall be determinative unless patently unreasonable.
Landlord and Tenant further agree that the Rentable Area of Suite 220 shell be calculated on the basis of 1.2277 times the estimated Usable Area, regardless of what actual common areas of the Building may be, or whether they may be more or less than 22.77% of the total estimated Usable Area of the Building, and is provided solely to give a general basis for comparison and pricing of this space in relation to other spaces in the market area.
Landlord and Tenant further agree that once the Rentable Area and Usable Area of Suite 220 has been determined as specified hereinabove, even if later either party alleges that the actual Rentable Area or Usable Area of Suite 229 is more or less than the figures stated herein; and whether or not such figures are inaccurate, for all purposes of the Lease. The Rentable and Usable figures agreed upon shall be conclusively deemed to be the Rentable Area or Usable Area of Suite 220 as the case may be.
If the Rentable Area of Suite 220 is increased or decreased pursuant to this Paragraph 2.5, then effective as of the Suite 220 Effective Date, the initial Base Monthly Rent payable for Suite 220 shall be recalculated based on $3.30 per square foot of Rentable Ares, per month.
If the Rentable Area of Suite 220 is increased or decreased, pursuant to the provisions of this Paragraph 2.5, then the increases in Base Rent shall be appropriately increased or decreased to result in an increase in said Base Rent of three percent (3%) per annum, cumulative over the Suite 220 Term.
If the Usable Area of Suite 220 is increased or decreased pursuant to this Paragraph 2.3, then Tenants Percentage Share of Property Taxes and Operating Expenses shall be increased or decreased equally, by dividing the newly calculated Usable Area of Suite 220 by the Usable Area of the Building (approximately 265,105 square feet).
Notwithstanding anything to the contrary contained herein, if the Usable Area of Suite 220 is increased or decreased, pursuant to the provisions of this Paragraph 2.5 then the total number of parking permits to which Tenant shall be entitled shall be proportionately adjusted subject the Paragraph 7 below.
3
Tenants taking possession of Suite 220 and commencing Tenants normal business operations in Suite 220 shall be deemed conclusive evidence that, as of the Suite 220 Effective Date:
4
If for any reason, (except to the extent of Tenant delays as defined in Exhibit B), Landlord is unable to deliver possession of Suite 220 within one hundred and twenty (120) days after the Construction Surrender Date (the Outside Date), the provisions of this Third Amendment shall not be void or voidable, nor shall Landlord be liable to Tenant for any damage resulting from Landlords inability to tender possession of Suite 220; provided however, (i) Tenant may continue to occupy the Suite 200 Portion, after the Outside Date, and (ii) Tenants Base Rent and Additional Rent that Tenant is required to pay hereunder for the Suite 200 Portion alter the Outside Date, shall be the agreed upon sum of $39.600 per month until Landlords substantial completion of the Improvements in Suite 220. Except for such reduction in the Base Rent for the Suite 200 Portion as set forth above, Landlords failure to substantially complete the Improvements in Suite 220 prior to the Outside Date shall in no way affect Tenants obligations hereunder.
lf, due to Force Majeure (as defined in Lease Section 27.04), Landlord is unable to tender possession of Suite 220 within one hundred fifty (150) days after the anticipated Suite 220 Effective Date, then this Third Amendment, and the rights and obligations of Landlord and Tenant hereunder, shall be deemed null and void upon ten (10) days written notice to either party, without further liability by either party to the other, and without further documentation being required.
Commencing on the Construction Area Surrender Date and continuing until the Suite 220 Effective Date, the Base Rent payable by Tenant for the Suite 200 Portion shall he $54,540.00 per month.
5
Notwithstanding anything to the contrary in the Lease, Tenant shall be entitled to a rent abatement for Suite 220 of fifty percent(50%) of the monthly Base Rent due for the second (2 1, third (31), thirteenth (13th) and fourteenth (14) months of the Suite 220 Term Except as otherwise stated, the entire monthly Base Rent for Suite 220 shall he due and payable, in advance, pursuant to Paragraph 5.2 above.
6
The initial rates to be paid by Tenant for such permits shall he: S120.0(1 per single unreserved permit, per month for garage parking levels P3 and P4; 5140.00 per single reserved permit, per month for garage parking level P2; $175.00 per single reserved permit. per month for garage parking level Pl; $175.00 per VIP Valet permit, per month; and $220.00 per single reserved permit, per month for garage parking level PI.
Said parking permits shall allow Tenant to park in the Building parking facility at the prevailing monthly parking rate then in effect, which rate may be thereafter changed from time to time, in Landlords sole discretion. Landlord shall retain reasonable discretion to designate the location of each parking space, and whether it shall be assigned, or unassigned, unless specifically agreed to otherwise in writing between Landlord and Tenant.
Guests and invitees of Tenant shall have the right to use, in common with guests and invitees of other tenants of the Building, the transient parking facilities of the Building at the then-posted parking rates and charges, or at such other rate or rates and charges as may be agreed upon from time to time between Landlord and Tenant in writing, Such rate(s) or charges may be changed by Landlord from time to time in Landlords sole discretion, and shall include, without limitation, one and all fees or taxes relating to parking assessed to Landlord for such parking facilities.
Tenant or Tenants agents, clients, contractors, directors, employees, invitees, licensees, officers, partners or shareholders continued use of said transient, as well as monthly parking, shall be contingent upon Tenant and Tenants agents, clients, contractors. directors, employees. invitees, licensees, officers, partners or shareholders continued compliance with the reasonable and non-discriminatory rules and regulations adopted by Landlord, which rules and regulations may change at any time or from time to time during the Term hereof in Landlords sole discretion.
If at any time Tenant defaults in the performance of any of its obligations under this Lease, after the expiration of notice and the opportunity to cure, then, Landlord may:
7
If, as a result of Landlords application of any portion or all of the Security Deposit. the amount held by Landlord declines to less than $47,284.47, Tenant shall, within ten (10) days after demand therefor, deposit with Landlord additional cash sufficient to bring the then-existing balance held as the Security Deposit to the amount specified hereinabove Tenants failure to deposit said amount shall constitute a material breach of this Lease.
At the expiration or earlier termination of this Lease, Landlord shall deduct from the Security Deposit being held on behalf of Tenant any unpaid sums, costs, expenses or damages payable by Tenant pursuant to the provisions of this Lease; and/or any costs required to cure Tenants default or performance of any other covenant or agreement of this Lease, and shall, within thirty (30) days after the expiration or earlier termination of this Lease, return to Tenant, without interest. all or such part of the Security Deposit as then remains on deposit with Landlord.
The term Business Hours shall mean 8:00 A.M. to 6;00 P.M., Monday through Friday, and 9:00 A.M. to 1-.00 P.M. on Saturday, any one or more Holiday(s) excepted. Holidays are defined as any federally-recognized holiday and any other holiday specified herein, which are: New Years Day, Presidents Day, Memorial Day, the 4th of July, Labor Day, Thanksgiving Day, the day after Thanksgiving, and Christmas Day (each individually a Holiday).
The term Landlords Address for Notices shall mean:
BRIGHTON
ENTPEPRISES, LLC,
c/o Douglas, Emmett and Company
Director of Property Management
808 Wilshire Boulevard, Suite 200
Santa Monica, California 90401
8
Subject to Force Majeure, Landlord shall provide Tenant with (i) access to and use of the parking facilities for persons holding valid parking permits, and (ii) access to and use of the elevators and Premises, twenty-four (24) hours per day, seven days per week
Tenant acknowledges that Landlord currently provides uniformed guard service to the Building on twenty-four (24) hours per day, seven (7) days per week basis, solely for the purposes of providing surveillance of, information and directional assistance to persons catering the Building.
Tenant acknowledges that such guard service shall not provide any measure of security or safety to the Building or the Premises, and that Tenant shall take such actions as it may deem necessary and reasonable to ensure the safety and security of Tenants property or person or the property or persons of Tenants agents, clients, contractors, directors, employees, invitees, licensees, officers, partners or shareholders. Tenant agrees and acknowledges that, except in the case of the gross negligence or willful misconduct of Landlord or its directors, employees, officers, partners or shareholders, Landlord shall not be liable to Tenant in any mariner whatsoever arising out of the failure of Landlords guard service to secure any person or property from harm,
Tenant agrees and acknowledges that Landlord, in Landlords reasonable discretion, shall have the option, but not the obligation to add, decrease, revise the hours or and/or change the level of services being provided by any guard company serving the Building. so long as the level of services so provided remains consistent with the level of services provided by landlords of comparable office projects in the Beverly Hills office markets. Tenant flintier agrees that Tenant shall not engage or hire any outside guard or security company without Landlords prior written consent, which shall be in Landlords sole discretion:.
Tenants exercise of this Option is contingent upon Tenant giving written notice to Landlord (the Option Notice) of Tenants election to exercise its rights pursuant to this Option by Certified Mail, Return Receipt Requested, no more than twelve (12) and no less than nine (9) months prior to the Termination Date.
9
Landlord and Tenant shall have thirty (30) days (the -Negotiation Period) after Landlord receives the Option Notice in which to agree on the Fair Market Value. if Landlord and Tenant agree on the Fair Market Value during the Negotiation Period, they shall immediately execute an amendment to the Lease extending the Suite 220 Term and stating the Fair Market Value,
Within thirty (30) days after the selection of the third appraiser (the Second Appraisal Period ) the Fair Market Value for the Second Extended Term shall be set by it majority of the appraisers now appointed.
If a majority of the appraisers are unable to set the Fair Market Value within the Second Appraisal Period, the three (3) appraisers shall individually render separate appraisals of the Fair Market Value, and their three (3) appraisals shall be added together, then divided by three (3); resulting in an average of the appraisals, which shall be the Fair Market Value during the Second Extended Tenn.
However, if the low appraisal or high appraisal vanes by more than ten percent 110%) from the middle appraisal, then one (1) or both shall be disregarded. If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2), and the resulting average shall be the Fair Market Value. If both the low and high appraisal are disregarded, the middle appraisal shall be the Fair Market Value for the Premises during the Second Extended Term. The appraisers shall immediately notify Landlord and Tenant of the Fair Market Value so established, and
10
Landlord and Tenant shall immediately execute an amendment to the Lease, extending the Term and revising the Basic Monthly Rent payable pursuant to the Fair Market Value so established.
Landlord or Tenants failure to execute such amendment establishing the Fair Market Value within fifteen (i5) days after the other partys request therefor shall constitute a material default under the Lease, and if Tenant is the party failing to so execute, this Option shall become null and void and of no further force or effect.
then, Landlord grants Tenant a one-time right of first offer to lease any space contiguous to Suite 220 on the second floor of the Building (the Expansion Premises) that is vacated and thereafter becomes available for rent following Tenants Expansion Notice during the Suite 220 Term of this Lease, including any extension thereof, as follows:
If any space within the Expansion Premises becomes available for lease at any time during the Suite 220 Term, of this Lease or the Second Extended Term, if any, Landlord shall give written notice thereof (the Offer Notice) to Tenant, specifying the terms and conditions upon which Landlord is willing to lease that portion of the Expansion Premises then available.
11
27.20 Signage. Tenant may not install, inscribe, paint or affix any awning, shade, sign advertisement or notice on or to any part of the outside or inside of the Building (other than building standard signage identifying Tenant on the wall adjacent to Tenants entry doors for Suite 220), or in any portion of the Premises visible to the outside of the Building or common areas without Landlords prior written consent, which shall not he unreasonably withheld, conditioned or delayed.
All building standard signage installed on behalf of Tenant in connection with Landlords construction of the Improvements for Suite 220 (the Suite 220 Signage) shall be installed by Landlord, at Landlords sole expense, provided however, all signage other than the Suite 220 Signage, and all directory listings installed on behalf of Tenant whether installed in, on or upon the public corridors, doorways, Building directory and/or parking directory (if any), or in any other location whatsoever visible outside of the Premises, shall be installed by Landlord. at Tenants sole expense.
Tenants identification on or in any common area of the Building shall be limited to Tenants name and suite designation, and in no event shall Tenant be entitled to the installation of Tenants logo in any portion of the Building or common areas. Furthermore, the size, style,
12
and placement of letters to he used in any of Tenants signage shall be determined by Landlord, in Landlords sole discretion, in full conformance with previously-established signage program for the Building.
Except as specified herein below, Tenant shall only be entitled to one (1) listing on the Building directory, or any parking directory ancillary thereto, which shall only show Tenants business Emilie and suite designation. Tenant shall also be entitled to a maximum of twelve (12) additional listings on said Building and/or parking directory, which listings shall be limited solely to Tenants officers, employees, subsidiaries, affiliates and/or sublessees. if any. All of said listings shall be subject to Landlords prior written approval, which shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the above, Tenant shall be entitled to up to eight (8) additional listings on the Building and/or parking directory, subject to availability::
If either signatory hereto is a corporation, the person(s) executing on behalf of said entity shall affix the appropriate corporate seal to each area in the document where request therefor is noted,
13
and the other party shall be entitled to conclusively presume that by doing so the entity for which said corporate seal has been affixed is attesting to and ratifying this Third Amendment.
14
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this document as of the day and year written below.
15
EXHIBIT A-1
PREMISES PLAN
SUITE 200 PORTION AND SUITE 220
at 9601 Wilshire Boulevard,
Beverly Hills, California
90210
Suite 220 Rentable Area: approximately 12,000 square feet
Suite 220 Usable Area: approximately 9,774 square feet
(Suite 220 to be remeasured pursuant to the
provisions of Paragraph 2.5 of the Third
Amendment)
A-1
EXHIBIT B
IMPROVEMENT CONSTRUCTION AGREEMENT
CONSTRUCTION TO BE PERFORMED BY LANDLORD win AN ALLOWANCE
The definition of Improvements shall include all coals associated with completing the Tenant Improvements, including but not limited to, space planning, design, architectural, and engineering fees, contracting, labor and material costs, municipal fees and permit costs, and document development and/or reproduction.
Tenant acknowledges and agrees that any change in the scope of work or details of construction after Tenants sign off of the finalized working drawings shall constitute a Tenant Change, the costs of which Tenant shall pay pursuant to the provisions of Subsection 2 (d) herein below.
B-1
Tenants failure to give written approval of such statement within ten (10) working days after submission thereof shall be conclusively deemed a disapproval of such amen-lent, and Contractor shall not commence the Improvements. Any delay of Tenant, after the expiration of ten (to) working days from receipt of Landlords statement, to provide Landlord with a revised scope of work and written approval of a revised cost statement therefor shall be considered a Tenant delay, assessable against Tenant pursuant to the provisions of Subsection 2 (e) herein below.
Tenant hereby authorizes Landlord to pay Contractor interim payments from the funds so deposited towards completion of the Improvements, except that Landlord shall retain the suns of ten percent (10%) of the total cost of Improvements. as revised by Tenant Changes, if any. until such time as:
Within thirty (30) business days after Contractor has reasonably completed the Improvements, Landlord shall provide Tenant with a final statement, indicating any difference between the estimated cost of the Improvements, the final cost of the Improvements; any initial or interim payments made by Tenant towards completion thereof; the amount of Allowance contributed and the balance owing from or to Tenant. Any balance owed to Tenant shall he returned with such statement, and any shortfall due Landlord shall be paid within five (5) days after Tenants receipt of Landlords billing.
B-2
Landlord shall give reasonable access to Tenants suppliers and contractors so as to achieve timely completion of any Tenant Work. Notwithstanding Landlords obligation to provide such access, completion of all Tenant Work shall be subject to Landlords supervision, policies and procedures, and shall be scheduled with Contractor and completed in such as manner as to not unreasonably hinder or delay completion of the Improvements.
Event |
|
Time |
|
|
|
Deadline by which Tenant shall have met with Landlords space planner. |
|
On or before November 15, 2002 |
|
|
|
Deadline for space plan approval. |
|
On or before December 29, 2002 |
|
|
|
Deadline for notifying Landlord of Tenants selection of finishes and materials. |
|
On or before January 15, 2003 |
|
|
|
Deadline for Tenants approval of final Plans, Specifications and working drawings |
|
On or before February 5, 2003 |
|
|
|
Deadline for Tenants approval of Landlords cost estimate of improvements. |
|
On or before February 19, 2003 |
B-3
Tenant shall, at Tenants sole expense, either obtain and maintain public liability and workmens compensation insurance adequate to fully protect Landlord as well as Tenant from and against any and all liability for death or injury to persons or damage to property caused in or about Suite 220 by reason completion of any Tenant Work, or shall cause Tenants contractors or subcontractors to provide such insurance.
B-4
B-5
EXHIBIT B-2
FOURTH AMENDMENT TO OFFICE LEASE
This Fourth Amendment to Office Lease (the Fourth Amendment), dated December 20, 2002, is made by and between BRIGHTON ENTERPRISES, LLC, a California limited liability company (Landlord), with offices at 808 Wilshire Boulevard, Suite 200, Santa Monica, California 90401, and KENNEDY-WILSON, INC. a Delaware corporation(-Tenant), with offices at 9601 Wilshire Boulevard, Suites 200, and GL-15A/GL-9, Beverly Hills, California 90210.
WHEREAS,
A. Wilshire-Camden Associates, a California limited partnership (Wilshire-Camden).
Landlords predecessor-in-interest, pursuant to the provisions of that certain written Office Lease, dated August 19. 1998, as amended by that certain First Amendment to Lease (Expansion) dated March 5, 1999, that certain Second Amendment to Lease (Expansion) dated June 2, 1999. and that certain Termination Agreement dated October 19, 1999, leased to Tenant, and Tenant leased from Wilshire- Camden space in the property located at 9601 Wilshire Boulevard, Beverly Hills, California 90210 (the Building), commonly known as Suites 200 (the entire second floor), and Suite GI.-15AiGL-9 (the Original Premises):
B. Pursuant to that certain Third Amendment to Office Lease between Landlord and Tenant dated , 2002 (the Third Amendment which document together with the documents described in Recital A above shall be collectively referred to as the Lease), Tenant tit shall temporarily return the Construction Area for Landlord to complete certain tenant improvements within the Construction Area, (ii) surrender Suite GL-15A/GL-9, (iii) continue to occupy the Suite 200 Portion until the substantial completion of the tenant improvements in the Construction Area, (iv) surrender the Suite 200 Portion upon the substantial completion of the tenant improvements within the Construction Area, and re-occupy of the Construction Area subsequently renamed as Suite 220;
C. The provisions of the Third Amendment to Lease specify that the Suite 220 would be re- measured upon substantial completion of the Suite 220 Improvements, and that the Suite 220 Effective Date shall be the first Monday after the date Landlord substantially completes the Suite 220 improvements:
D. The Improvements for Suite 220 were completed on;
NOW, THEREFORE, in consideration of the covenants and provisions contained herein, and other good and valuable consideration, the sufficiency of which Landlord and Tenant hereby acknowledge. Landlord and Tenant agree:
1. Confirmation of Defined Terms. Unless modified herein, all terms previously defined and capitalized in the Lease, as amended shall hold the same meaning for the purposes of this Fourth Amendment.
2. Confirmation of Usable Area of Suite 220. As of the Suite 220 Effective Date:
(i) the revised Usable Area of Suite 220 is hereby confirmed to be square feet;
B2-1
(ii) Tenants Percentage Share of Property Taxes and Operating Expenses is hereby continued to be percent ( %), derived by dividing the Usable Area of Suite 220 (approximately square feet) by the Usable Area of the Building (approximately 265,105 square feet); arid
(iii) Tenants Parking Allotment shall be
3. Confirmation of Suite 220 Effective Date and Suite 220 Term. The Suite 220 Effective Date is hereby confirmed to be and the Suite 220 Term is hereby confirmed from and including to and including .
4. Revision in Monthly Base Rent. Tenant acknowledges and agrees commencing on the Suite 220 Effective Date and continuing through , the Base Rent payable by Tenant for Suite 220 shall be $ per month. Furthermore, as of the Suite 220 Effective Date, the provisions of Paragraph 5.2 of the Third Amendment are hereby deleted in their entirety, and replaced in lieu thereof, with the following:
5.2 Suite 220. (a) Commencing on , and continuing through , the Base Rent payable by Tenant for Suite 220 shall increase from $ per month to $ per month.
(b) Commencing on , and continuing through , the Base Rent payable by Tenant for Suite 220 shall increase from $ per month to $ per month.
(c) Commencing on , and continuing through , the Base Rent payable by Tenant for Suite 220 shall increase from $ per month to $ per month.
(d) Commencing on , and continuing through , the Base Rent payable by Tenant for Suite 220 shall increase from $ per month to $ per month.
(e) Commencing on , and continuing through , the Base Rent payable by Tenant for Suite 220 shall increase from $ per month to $ per month.
(f) Commencing on , and continuing through , the Base Rent payable by Tenant for Suite 220 shall increase from $ per month to $ per month.
(g) Commencing on , and continuing through , the Base Rent payable by Tenant for Suite 220 shall increase from $ per month to $ per month.
5. Acceptance of Suite 220. Tenant acknowledges and agrees that Landlord has completed the improvements for which Landlord was obligated under Exhibit B-1 to the Third Amendment to the Lease to Tenants satisfaction, and, as of the Suite 220 Effective Date, Suite 220 was in good .order and repair.
6. Warranty of Authority. If Landlord or Tenant signs as a corporation, limited liability company or a partnership, each of the persons executing this Fourth Amendment on behalf of Landlord or Tenant hereby covenants and warrants that the entity executing herein below is a duly authorized and existing entity that is qualified to do business in California; that the person(s) signing on behalf of either Landlord or Tenant have full right and authority to enter
B2-2
into this Fourth Amendment; and that each and every person signing on behalf of either Landlord or Tenant are authorized in writing to do so.
7. Broker Representation. Landlord and Tenant represent to one another that it has dealt with no broker in connection with this Fourth Amendment other than Douglas, Emmett and Company and Kennedy-Wilson Properties, Ltd.. Landlord and Tenant shall hold one another harmless from and against any and all liability, loss, damage, expense, claim, action, demand, suit or obligation arising out of or relating to a breach by the indemnifying party of such representation. Landlord agrees to pay all commissions due to the brokers listed above created by Tenants execution of this Fourth Amendment
8. Successors and Heirs. The provisions of this Fourth Amendment shall inure to the benefit of Landlords and Tenants respective successors, assigns, heirs and all persons claiming by, through or under them.
9. Confidentiality. Landlord and Tenant agree that the covenants and provisions of tins Fourth Amendment shall not be divulged to anyone not directly involved in the management, administration; ownership, lending against, or subleasing of the Expansion Space, other than Tenants or Landlords counsel-of-record or leasing or sub-leasing broker of record.
10. Disclosure. Landlord and Tenant acknowledge that principals of Landlord have a Financial interest in Douglas Emmett Realty Advisors, Douglas Emmett and Company, and P.L.E. Builders.
11. Governing Law. The provisions of this Fourth Amendment shall be governed by the laws of the State of California.
12. Reaffirmation. Landlord and Tenant acknowledge and agree that the Lease, as amended herein. constitutes the entire agreement by and between Landlord and Tenant relating to the Expansion Space, and supersedes any and all other agreements written or oral between the parties hereto. Furthermore, except as modified herein, all other covenants and provisions of the Lease shall remain unmodified and in full force and effect.
13. Submission of Document. No expanded contractual or other rights shall exist between Landlord and Tenant with respect to the Premises, as contemplated under this Fourth Amendment, until both Landlord and Tenant have executed and delivered this Fourth Amendment, whether or not an7- additional rental or security deposits have been received by Landlord, and notwithstanding that Landlord has delivered to Tenant an unexecuted copy of this Fourth Amendment.
14. Conflict. if ay conflict exists between the terms or provisions of the Lease and terms or provisions of this Fourth Amendment, the terms and provisions of this Fourth Amendment shall govern and control.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this document as of the day and year written below.
B2-3
LANDLORD: |
|
TENANT: |
||
|
|
|
||
BRIGHTON ENTERPRISES, LLC |
|
KENNEDY-WILSON, INC. |
||
a California limited liability company |
|
a Delaware corporation |
||
|
|
|
||
By: |
DOUGLAS EMMETT AND COMPANY, |
|
|
|
|
a California corporation, |
|
|
|
|
its agent |
|
|
|
|
|
|
|
|
|
|
|
||
By: |
/s/ Michael J. Means |
|
By: |
|
|
Michael J. Means, Vice President |
|
Name: |
|
|
|
Its: |
|
|
|
|
|
|
|
Dated : |
|
|
Dated : |
|
B2-4
EXHIBIT C
FORM OF SUBORDINATION, NON DISTURBANCE AND ATTORNMENT AGREEMENT
TRIANGLE
LENDERS, LI.C,
a California limited liability company
DOUGLAS
EMMETT REALTY FUND 2000,
a California limited partnership
AND
KENNEDY-WILSON, INC. A DELAWARE CORPORATION
SUBORDINATION,
NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
Dated: December 20, 2002
Location:
9601 Wilshire Boulevard,
Beverly Hills. California 90210
EXHIBIT C
SUBORDINATION. NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
(Lease)
THIS AGREEMENT is made as of December 20. 2002 between TRIANGLE LENDERS, L.L.C., a California limited liability company, having an address at BM Wilshire Boulevard, Suite 200, Santa Monica, California 90401 (the Leasehold Mortgagee), DOUGLAS EMMETT REALTY FUND 2000, a California limited partnership, having an address at 808 Wilshire Boulevard. Suite 200, Santa Monica, California 90401 (the Ground Lessor), and KENNEDY-WILSON. INC, a Delaware corporation, having an office at 9601 Wilshire Boulevard, Suites 200, and GL-ISA/GL-9. Beverly I tills, California 90210 (the Tenant);
WITNESSETH:
WHEREAS the Ground Lessor and Brighton Enterprises. LLC, it California limited liability company, successor-in-interest to Wilshire-Camden Associates, a California limited partnership (the Ground Lessee), are the current parties to that certain Amended and Restated Ground Lease (the Ground Lease), pursuant to which the Ground Lessee is leasing Certain land located in the County of Los Angeles, City of Beverly Hills and State of California, known as 9601 Wilshire Boulevard, as more particularly described in Exhibit A attached hereto and incorporated herein by this reference (the Land) from the Ground Lessor,
WHEREAS the Leasehold Mortgagee is the present owner and holder of a certain deed of trust or deeds of trust (the Leasehold Deed of Trust) encumbering the Ground Lessees interest in the Ground Lease, as well as that certain office building together with the four-level subterranean parking garage located on the Land (the Improvements);
WHEREAS the Tenant is the holder of a leasehold estate in a portion of the improvements under and pursuant to the provisions of a certain written Office Lease, dated August 19, 1998, as amended by that certain First Amendment to Lease (Expansion) dated March 5, 1999, that certain Second Amendment to Lease (Expansion) dated June 2, 1999, that certain Termination Agreement dated October 19, 1999, and that certain Third Amendment to Office Lease dated December 20. 2002 with Ground Lessee, as landlord (collectively the Lease). and
WHEREAS the Tenant has agreed to subordinate the Lease to the Leasehold Deed of Trust and the Ground Lease, and to the lien of each of the same, and the Leasehold Mortgagee and the Ground Lessor have each agreed to grant non-disturbance to the Tenant tinder the Lease on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of Ten Dollars ($10) and other good and valuable consideration, the receipt of which is hereby acknowledged, the Leasehold Mortgagee, the Ground Lessor and the Tenant hereby covenant and agree as follows:
1 The Tenant agrees that the Lease and all of the terms, covenants and provisions thereof and all rights, remedies and options of the Tenant thereunder are and shall at all times continue to be subject and subordinate in all respects to (i) the Leasehold Deed of Trust and all of the terms, covenants and provisions thereof and to the lien thereof and to any and all increases,
C-1
renewals, modifications, spreaders, consolidations, replacements and extensions thereof, and to any and all sums secured thereby. with the same force and effect as if the Leasehold Deed of Trust had been executed, delivered and recorded prior to the execution and delivery of the Lease, and (ii) the Ground Lease and all of the terms, covenants and provisions thereof and to any and all amendments, modifications, replacements and extensions thereof, and to any and all amounts required to be paid thereunder, with the same force and effect as if the Ground Lease had been executed, delivered and recorded prior To the execution and delivery of the. Lease.
2 The Leasehold Mortgagee and the Ground Lessor, respectively, agree that provided (i) the Tern shall have commenced pursuant to the provisions thereof, (ii) the Tenant shall he in possession of the premises demised under the Lease, (iii) the Lease shall be in full force and effect. and (iv) the Tenant shall not be in material default beyond any notice and grace period under any of the terms, covenants or conditions of the Lease or of this Agreement on the part of the Tenant to be observed or performed thereunder or hereunder, the right of possession of Tenant and its rights and privileges to the teased premises shall not be terminated, affected or disturbed by (a) the Leasehold Mortgagee in the exercise of any of its rights under the Leasehold Deed of Trust and any sale of the Improvements pursuant to the exercise of any rights and remedies under the Leasehold Deed of Trust or otherwise shall be made subject to Tenants right of possession under the Lease, and (h) the Ground Lessor in the exercise of any of its rights under the Ground Lease and any termination of the Ground Lease pursuant to the exercise of any rights and remedies under the Ground Lease or otherwise shall be made subject to Tenants right of possession under the Lease. Further, the Leasehold Mortgagee and the Ground Lessor. respectively, agree not to join Tenant as a party defendant in any action or proceeding foreclosing the Leasehold Deed of Trust unless such joinder is necessary to foreclose the Leasehold Deed of Trust and then only for such purpose and not for the purpose of terminating the Lease.
3 The Tenant agrees that (i) if the Leasehold Mortgagee or any successors in interest to the Leasehold Mortgagee shall become the owner of the Improvements and the leasehold interest in the Ground Lease by reason of the foreclosure of the Leasehold Deed of Trust or the acceptance or a deed or assignment in lieu of foreclosure or otherwise, or (ii) if the Ground Lease is terminated and Ground Lessor or any successors in interest to the Ground Lessor shall become the owner of the improvements. the Lease shall not be terminated or affected thereby but shall continue in full force and effect as a direct lease between the Leasehold Mortgagee and the Ground Lessor, as applicable, and the Tenant upon all of the terms, covenants and conditions set forth it the Lease and in that event the Tenant agrees to attorn to the Leasehold Mortgagee and the Ground Lessor, as applicable, and the Leasehold Mortgagee end the Ground Lessor, as applicable, agrees to accept such attornment, provided, however, that neither the Leasehold Mortgagee or the Ground Lessor, as applicable, shall be (i) obligated to complete any construction work required to be done by the Landlord (as hereinafter defined I pursuant to the provisions of the Lease or to reimburse the Tenant for any construction work done by the Tenant, (iii liable for any accrued obligation of the Landlord, or for any act or omission of the Landlord. whether prior to or after such foreclosure, sale or termination, as applicable, (iii) liable under any indemnity provision of whatever nature contained in the Lease, including, but not limited to, any environmental indemnification, (iv) required to make any repairs to the Premises (as hereinafter defined in Paragraph l0 below) and/or to the premises demised wider the Lease as a result of fire or other casualty or by reason of condemnation except as provided under the Lease, (v) required
C-2
to make any capital improvements to the Premises and/or to the premises demised under the Lease which the Landlord may have agreed to make, but lied not completed, or to perform or provide any services not related to possession or quiet enjoyment of the premises demised under the Lease, (vi) subject to tiny offsets, claims or counterclaims which shall have accrued to the Tenant against the Landlord prior to the date (in which the Leasehold Mortgagee or the Ground Lessor, as applicable, or its respective successor in interest shall become the owner of the Premises, (vii) liable for any security deposit or other monies not actually received by the Leasehold Mortgagee or the Ground Lessor, as applicable.
4 The Tenant shall not, without the prior written consent of the Leasehold Mortgagee and the Ground Lessor (which consent shall not be unreasonably withheld) (i) enter into any agreement decreasing the amount of rent payable under the Lease, (ii) prepay any of the rents, additional rents or other sums due under the Lease for more than one (1) month in advance of the due date thereof, 0 ii voluntarily surrender the premises demised under the Lease or terminate the Lease without cause or shorten the term thereof, or (iv) assign the Lease or sublet the premises demised under the Lease or any part thereof except as expressly permitted by the terms of the Lease; and any such amendment. modification, termination, prepayment, voluntary surrender, assignment or subletting, without the prior written consent of the Leasehold Mortgagee and the Ground Lessor shall not be binding on the Leasehold Mortgagee or the Ground Lessor, respectively.
5 INTENTIONALLY OMITTED.
6 Tenant agrees to give the Leasehold Mortgagee and the Ground Lessor a copy of any notice of default served upon the Landlord by Tenant, and agrees that, notwithstanding any provisions of the Lease to the contrary, no such notice of default shall be effective unless the Leasehold Mortgagee and the Ground Lessor shall have received a copy of said notice of the material default or other circumstance giving rise to such cancellation, termination or abatement and shall have failed within sixty (60) days after receipt of such copy of said notice to cure such material default or remedy such circumstance, or if such material default cannot be cured within sixty (60) days, shall have failed within sixty (60) days after receipt of such copy of said notice to commence and to thereafter diligently pursue any action necessary to cure such material default or remedy such circumstance, as the case may Iv Upon such time being allowed to cure such default expiring without cure, Tenant shall be entitled it) all of its rights and remedies under the Lease on account of Landlords default.
7 Anything herein or in the Lease to the contrary notwithstanding, in the event that the Leasehold Mortgagee or the Ground Lessor shall acquire title to the Premises, or shall otherwise become liable for any obligations of the Landlord under the Lease, neither the Leasehold Mortgagee nor the Ground Lessor, as applicable, shall have any obligation, nor incur any liability, beyond the then interest, if any, of the Leasehold Mortgagee or the Ground Lessor, as applicable, in the Premises and the Tenant shall look exclusively to such interest of the Leasehold Mortgagee or the Ground Lessor, as applicable, if any, in the Premises for the payment and discharge of any obligations imposed upon the Leasehold Mortgagee or the Ground Lessor, as applicable, hereunder or under the Lease and the leasehold Mortgagee and the Ground Lessor, as applicable, are hereby released or relieved of any other liability hereunder and under the Lease. The Tenant agrees that with respect to any money judgment which may be obtained or
C-3
secured by the Tenant against the Leasehold Mortgagee or the Ground Lessor, as applicable, the Tenant shall look solely to the estate or interest owned by the Leasehold Mortgagee or the Ground Lessor, as applicable, in the Premises and the Tenant will not collect or attempt to collect any such judgment out of any other assets of the Leasehold Mortgagee or the Ground Lessor, as applicable.
8 Any notice, request, demand, statement, authorization, approval or consent made hereunder shall be in writing and shall be sent by Federal Express, or other reputable courier service. or by postage pre-paid registered or certified mail, return receipt requested, and shall be deemed given when received or refused (as indicated on the receipt) and addressed as follows:
If to the Leasehold Mortgagee:
Triangle
Lenders, LLC
c/o Douglas Emmett Realty Advisors
808 Wilshire Boulevard, Suite 200
Santa Monica, California 90401
Attention: Mr. Jordan Kaplan and Mr. William Kamer
If to the Ground Lessor:
Douglas
Emmett Realty Fund 2000
c/o Douglas Emmett Realty Advisors
808 Wilshire Boulevard, Suite 200
Santa Monica, California 90401
Attention: Mr. Jordan Kaplan and Mr. William Kamer
If to the Tenant:
9601
Wilshire Boulevard, Suite 200
Beverly Hills. California 90210
Attention:
w/ copy to:
Kulik,
Gottesman, & Mouton, LLP
13303 Ventura Boulevard, Suite 1400
Sherman Oaks, California 91403
Attention: Francisco Aparicio, Esq.
it being understood and agreed that each party will use reasonable efforts to send copies of any notices to the addresses marked With a copy to hereinabove set Forth: provided, however, that failure to deliver such copy or copies shall have no consequence whatsoever to the effectiveness of any notice made to the Tenant, the Leasehold Mortgagee and/or the Ground Lessor. Each party may designate a change of address by notice given, as hereinabove provided, to the other party, at least fifteen (15) days prior to the date such change of address is to become effective.
9 This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
C-4
10 The term Leasehold Mortgagee as used herein shall include the successors and assigns of the Leasehold Mortgagee and any person, party or entity which shall become the owner or the Premises by reason of a Foreclosure of the Leasehold Deed of Trust or the acceptance of a deed or assignment in lieu of foreclosure or otherwise. The term Ground Lessor as used herein shall include the successors and assigns of the Ground Lessor and any person, party or entity which shall become the owner of the improvements by reason of a termination of the Ground Lease. The term Landlord as used herein shall mean and include the present landlord under the Lease and such landlords predecessors and successors in interest under the Lease. The term Premises as used herein shall mean the Land, the improvements, any other improvements now or hereafter located on the Land and/or the estates therein encumbered by the Leasehold Deed of Trust and/or the Ground Lease.
11 This Agreement may not be modified in any manner or terminated except by an instrument in writing executed by the parties hereto.
12 l2. This Agreement shall be governed by and construed under the laws of the Slate in which the Premises are located.
13 This Agreement shall have no force and effect until all parties to the Agreement have executed and notarized the Agreement and fully executed originals have been delivered to all parties to the Agreement.
[INTENTIONALLY LEFT BLANK]
C-5
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.
C-6
STATE OF ) |
||
|
) ss: |
|
|
|
|
COUNTY OF ) |
On , before me, a Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed In the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies). and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
|
|
Notary Public in and for said County and State |
|
|
|
|
|
My Commission Expires: |
|
|
|
STATE OF ) |
||
|
) ss: |
|
|
|
|
COUNTY OF ) |
On , before me, a Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed In the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies). and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
|
|
Notary Public in and for said County and State |
|
|
|
|
|
My Commission Expires: |
|
|
|
STATE OF ) |
||
|
) ss: |
|
|
|
|
COUNTY OF ) |
On , before me, a Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed In the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies). and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
|
|
Notary Public in and for said County and State |
|
|
|
|
|
My Commission Expires: |
|
|
|
EXHIBIT A
LEGAL DESCRIPTION
Lots 8, 9, I0, 11, 12, 13 and 14, in Block 18, of Beverly, in the City of Beverly Hills, County of Los Angeles, State of California, as per map recorded in Book 11, Pages 94 and 95 of Maps in the Office of the County Recorder of said County.
Exhibit 10.99
FOURTH AMENDMENT TO OFFICE LEASE
This Fourth Amendment to Office Lease (the Fourth Amendment), dated September 11, 2003, is made by and between BRIGHTON ENTERPRISES, LLC, a California limited liability company (Landlord), with offices at 808 Wilshire Boulevard, Suite 200, Santa Monica, California 90401, and KENNEDY-WILSON, INC. a Delaware corporation (Tenant), with offices at 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210.
WHEREAS,
A. Wilshire-Camden Associates, a California limited partnership (Wilshire-Camden), Landlords predecessor-in-interest, pursuant to the provisions of that certain written Office Lease, dated August 19, 1998, as amended by that certain First Amendment to Lease (Expansion) dated March 5, 1999, that certain Second Amendment to Lease (Expansion) dated June 2, 1999, and that certain Termination Agreement dated October 19, 1999, leased to Tenant, and Tenant leased from Wilshire- Camden space in the property located at 9601 Wilshire Boulevard, Beverly Hills, California 90210 (the Building), commonly known as Suite 200 (the entire second floor), and Suite GL- I 5A/GL-9 (the Original Premises);
B. Pursuant to that certain Third Amendment to Office Lease between Landlord and Tenant dated December 20, 2002 (the Third Amendment which document together with the documents described in Recital A above shall be collectively referred to as the Lease), Tenant (i) shall temporarily return the Construction Area for Landlord to complete certain tenant improvements within the Construction Area, (ii) surrender Suite GL-15A/GL-9, (iii) continue to occupy the Suite 200 Portion until the substantial completion of the tenant improvements in the Construction Area, (iv) surrender the Suite 200 Portion upon the substantial completion of the tenant improvements within the Construction Area, and re-occupy of the Construction Area subsequently renamed as Suite 220;
C. The provisions of the Third Amendment to Lease specify that the Suite 220 would be re- measured upon substantial completion of the Suite 220 Improvements, and that the Suite 220 Effective Date shall be the first Monday after the date Landlord substantially completes the Suite 220 Improvements;
D. The Improvements for Suite 220 were completed on June 13, 2003;
NOW, THEREFORE, in consideration of the covenants and provisions contained herein, and other good and valuable consideration, the sufficiency of which Landlord and Tenant hereby acknowledge, Landlord and Tenant agree:
1. Confirmation of Defined Terms. Unless modified herein, all terms previously defined and capitalized in the Lease, as amended shall hold the same meaning for the purposes of this Fourth Amendment.
2. Confirmation of Usable Area of Suite 220. As of the Suite 220 Effective Date:
(i) the revised Usable Area of Suite 220 is hereby confirmed to be 9,731 square feet;
(ii) Tenants Percentage Share of Property Taxes and Operating Expenses is hereby confirmed to be three point sixty-seven percent (3.67%), derived
by dividing the Usable Area of Suite 220 (approximately 9,731 square feet) by the Usable Area of the Building (approximately 265,105 square feet); and
(iii) Tenants Parking Allotment shall be twenty-nine (29) unreserved permits and two (2) reserved permits for a total of thirty-one (31) permits.
3. Confirmation of Suite 220 Effective Date and Suite 220 Term. The Suite 220 Effective Date is hereby confirmed to be June 16, 2003 and the Suite 220 Term is hereby confirmed from and including June 16, 2003 to and including June 30, 2010.
4. Revision in Monthly Base Rent. Tenant acknowledges and agrees commencing June 16, 2003 and continuing through June 30, 2004, the Base Rent payable by Tenant for Suite 220 shall be $39,425.10 per month. Furthermore, as of the Suite 220 Effective Date, the provisions of Paragraph 5.2 of the Third Amendment are hereby deleted in their entirety, and replaced in lieu thereof, with the following:
5.2 Suite 220. (a) Commencing on July 1, 2004 and continuing through June 30, 2005, the Base Rent payable by Tenant for Suite 220 shall increase from $39,425.10 per month to $40,607.85 per month.
(a) Commencing on July 1, 2005 and continuing through June 30, 2006, the Base Rent payable by Tenant for Suite 220 shall increase from $40,607.85 per month to $41,826.09 per month.
(b) Commencing on July I, 2006 and continuing through June 30, 2007, the Base Rent payable by Tenant for Suite 220 shall increase from $41,826.09 per month to $43,080.87 per month.
(c) Commencing on July 1, 2007 and continuing through June 30, 2008, the Base Rent payable by Tenant for Suite 220 shall increase from $43,080.87 per month to $44,373.30 per month.
(d) Commencing on July 1, 2008 and continuing through June 30, 2009, the Base Rent payable by Tenant for Suite 220 shall increase from $44,373.30 per month to $45,704.50 per month.
(e) Commencing on July 1, 2009 and continuing throughout the remainder of the Suite 220 Term, the Base Rent payable by Tenant for Suite 220 shall increase from $45,704.50 per month to $47,075.64 per month.
Notwithstanding the foregoing, Tenant shall be entitled to a rent abatement of fifty percent (50%) of the Base Rent due for Suite 220 for the months of July 2003, August 2003, July 2004 and August 2004.
5. Acceptance of Suite 220. Tenant acknowledges and agrees that Landlord has completed the Improvements for which Landlord was obligated under Exhibit B-1 to the Third
2
Amendment to the Lease to Tenants satisfaction, and, as of the Suite 220 Effective Date, Suite 220 was in good order and repair.
6. Warranty of Authority. If Landlord or Tenant signs as a corporation, limited liability company or a partnership, each of the persons executing this Fourth Amendment on behalf of Landlord or Tenant hereby covenants and warrants that the entity executing herein below is a duly authorized and existing entity that is qualified to do business in California; that the person(s) signing on behalf of either Landlord or Tenant have full right and authority to enter into this Fourth Amendment; and that each and every person signing on behalf of either Landlord or Tenant are authorized in writing to do
SO.
7. Broker Representation. Landlord and Tenant represent to one another that it has dealt with no broker in connection with this Fourth Amendment other than Douglas, Emmett and Company and Kennedy-Wilson Properties, Ltd. Landlord and Tenant shall hold one another harmless from and against any and all liability, loss, damage, expense, claim, action, demand, suit or obligation arising out of or relating to a breach by the indemnifying party of such representation. Landlord agrees to pay all commissions due to the brokers listed above created by Tenants execution of this Fourth Amendment.
8. Successors and Heirs. The provisions of this Fourth Amendment shall inure to the benefit of Landlords and Tenants respective successors, assigns, heirs and all persons claiming by, through or under them.
9. Confidentiality. Landlord and Tenant agree that the covenants and provisions of this Fourth Amendment shall not be divulged to anyone not directly involved in the management, administration, ownership, lending against, or subleasing of the Expansion Space, other than Tenants or Landlords counsel-of-record or leasing or sub-leasing broker of record.
10. Disclosure. Landlord and Tenant acknowledge that principals of Landlord have a financial interest in Douglas Emmett Realty Advisors, Douglas Emmett and Company, and P.L.E. Builders.
11. Governing Law. The provisions of this Fourth Amendment shall be governed by the laws of the State of California.
12. Reaffirmation. Landlord and Tenant acknowledge and agree that the Lease, as amended herein, constitutes the entire agreement by and between Landlord and Tenant relating to the Expansion Space, and supersedes any and all other agreements written or oral between the parties hereto. Furthermore, except as modified herein, all other covenants and provisions of the Lease shall remain unmodified and in full force and effect.
13. Submission of Document. No expanded contractual or other rights shall exist between Landlord and Tenant with respect to the Premises, as contemplated under this Fourth Amendment, until both Landlord and Tenant have executed and delivered this Fourth Amendment, whether or not any additional rental or security deposits have been received by Landlord, and notwithstanding that Landlord has delivered to Tenant an unexecuted copy of this Fourth Amendment.
3
14. Conflict. If ay conflict exists between the terms or provisions of the Lease and terms or provisions of this Fourth Amendment, the terms and provisions of this Fourth Amendment shall govern and control.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this document as of the day and year written below.
4
Exhibit 10.100
FIFTH AMENDMENT TO OFFICE LEASE
This Fifth Amendment to Office Lease (the Fifth Amendment) , dated January 27, 2006, is made by and between DOUGLAS EMMETT 2000, LLC, a Delaware limited liability company, successor in interest to Brighton Enterprises, LLC, a California limited liability company (Landlord), with offices at 808 Wilshire Boulevard, Suite 200, Santa Monica, California 90401, and KENNEDY- WILSON, INC. a Delaware corporation (Tenant), with offices at 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210.
WHEREAS,
A. Wilshire-Camden Associates, a California limited partnership (Wilshire-Camden), Landlords predecessor-in-interest, pursuant to the provisions of that certain written Office Lease, dated August 19, 1998, as amended by that certain First Amendment to Lease (Expansion) dated March 5, 1999, that certain Second Amendment to Lease (Expansion) dated June 2, 1999, and that certain Termination Agreement dated October 19, 1999 (collectively the Original Lease), leased to Tenant, and Tenant leased from Wilshire-Camden space in the property located at 9601 Wilshire Boulevard, Beverly Hills, California 90210 (the Building), commonly known as Suite 200 (the entire second floor), and Suite GL-15A/GL-9 (the Original Premises);
B. Pursuant to that certain Third Amendment to Office Lease between Landlords predecessor-in-interest and Tenant dated December 20, 2002 (the Third Amendment), as amended by that certain Fourth Amendment to Office Lease dated September 11, 2003 (the Fourth Amendment), Tenant reduced its occupancy in the Building to a portion of Suite 200 renamed as Suite 220 (the Existing Premises), and extended the term of the Lease to expire on June 30, 2010 (the Termination Date);
C. The Original Lease, the Third Amendment and the Fourth Amendment shall be collectively referred to herein as the Lease);
D. On or about January 20, 2006, DOUGLAS EMMETT 2000, LLC, a Delaware limited liability company acquired Brighton Enterprises, LLC, a California limited liability companys right title and interest in the Lease;
E. Tenant wishes to expand its occupancy within the Building to include additional office space adjacent to the Existing Premises in the Building, commonly known as a portion of Suite 270 (the Expansion Premises), as shown on Exhibit A-I, which expansion Landlord has conditionally permitted, contingent upon Tenants acceptance of and compliance with the provisions of this Fifth Amendment; and
F. Landlord and Tenant, for their mutual benefit, wish to revise certain other covenants and provisions of the Lease;
NOW, THEREFORE, in consideration of the covenants and provisions contained herein, and other good and valuable consideration, the sufficiency of which Landlord and Tenant hereby acknowledge, Landlord and Tenant agree:
If for any reason (including Landlords inability to complete the Landlords Work called for hereunder) Landlord is unable to deliver possession of the Expansion Premises to Tenant on the anticipated Expansion Date, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any damage resulting from Landlords inability to deliver such possession.. However, solely with respect to the Expansion Premises, Tenant shall not be obligated to pay any increase in the Base Rent or Additional Rent, as called for hereunder with respect to the Expansion Premises, until the Expansion Date (as defined and confirmed in this paragraph). Except for such delay in the commencement of Rent, Landlords failure to give possession of the Expansion Premises on the anticipated Expansion Date shall in no way affect Tenants obligations hereunder.
If possession of the Expansion Premises is not tendered by Landlord within one hundred twenty (120) days after the anticipated Expansion Date, then Tenant shall have the right to terminate the provisions of this Fifth Amendment with respect to the Expansion Premises only by giving written notice to Landlord within ten (10) days after such failure. If such notice of termination is not given by Tenant within said ten (10) day period, then the provisions of this Fifth Amendment shall continue in full force and effect.
If due to Force Majeure (as defined in Lease Section 27.04), Landlord is unable to tender possession of the Expansion Premises within one hundred fifty (150) days after the anticipated Expansion Date, then this Fifth Amendment with respect to the Expansion Premises only, and the rights and obligations of Landlord and Tenant hereunder, shall terminate automatically, without further documentation being required.
2
As of the Expansion Date, the Usable Area of the Existing Premises shall increase by approximately 1,013 square feet from approximately 9,731 square feet to approximately 10,744 square feet and the Rentable Area of the Existing Premises shall increase by approximately 1,221 square feet from approximately 11,947 square feet to approximately 13,168 square feet.
Commencing on July 1, 2006 and continuing through June 30, 2007, the monthly installment of Base Rent payable by Tenant for the Expansion Premises shall increase from $4,395.60 per month to $4,527.47 per month.
Commencing on July 1, 2007 and continuing through June 30, 2008, the monthly installment of Base Rent payable by Tenant for the Expansion Premises shall increase from $4,527.47 per month to $4,663.29 per month.
Commencing on July 1, 2008 and continuing through June 30, 2009, the monthly installment of Base Rent payable by Tenant for the Expansion Premises shall increase from $4,663.29 per month to $4,803.19 per month.
Commencing on July 1, 2009 and continuing and continuing throughout the remainder of the Expansion Term, the monthly installment of Base Rent payable by Tenant for the Expansion Premises shall increase from $4,803.19 per month to $4,947.29 per month.
3
If Tenant elects to make any other improvements to the Premises during the Expansion Term or the term for the Existing Premises, the same shall be considered an Alteration, to be completed by Tenant, at Tenants sole expense, pursuant to the provisions of the Lease, Article 9, Section 9.01.
Tenants exercise of this Suite 270-Option is contingent upon Tenant giving written notice to Landlord (the Suite 270-Option Notice) of Tenants election to exercise its rights pursuant to this Suite 270-Option by Certified Mail, Return Receipt Requested, no more than twelve (12) and no less than nine (9) months prior to the Termination Date.
Landlord and Tenant shall have thirty (30) days (the Suite 270-Negotiation Period) after Landlord receives the Suite 270-Option Notice in which to agree on the Fair Market Value. If Landlord and Tenant agree on the Fair Market Value during the Suite 270-Negotiation Period, they shall immediately execute an amendment to the Lease extending the Expansion Term and stating the Fair Market Value.
Within thirty (30) days after the selection of the third appraiser (the Second Suite 270- Appraisal Period) the Fair Market Value for the Suite 270-Extended Term shall be set by a majority of the appraisers now appointed.
If a majority of the appraisers are unable to set the Fair Market Value within the Second Suite 270-Appraisal Period, the three (3) appraisers shall individually render separate appraisals of the Fair Market Value, and their three (3) appraisals shall be added together, then divided by three (3); resulting in an average of the appraisals, which shall be the Fair Market Value during the Suite 270-Extended Term.
However, if the Low appraisal or high appraisal varies by more than ten percent (10%) from the middle appraisal, then one (1) or both shall be disregarded. If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2), and the resulting average shall he the Fair Market Value. If both the low and high appraisal are disregarded, the middle appraisal shall be the Fair Market Value for the Expansion Premises during the Suite 270-Extended Term. The appraisers shall immediately notify Landlord and Tenant of the Fair Market Value so established, and Landlord and Tenant shall immediately execute an amendment to the Lease, extending the Term and revising the Base Monthly Rent payable pursuant to the Fair Market Value so established.
Landlord or Tenants failure to execute such amendment establishing the Fair Market Value within fifteen (15) days after the other partys request therefore shall constitute a material default under the Lease, and if Tenant is the party failing to so execute, this Suite 270-Option shall become null and void and of no further force or effect.
8
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this document as of the later of the date(s) written below.
9
EXHIBIT A-1 EXPANSION PREMISES PLAN
Suite 270 at 9601 Wilshire Boulevard, Beverly Hills, California 90210
Rentable Area: approximately 1,221 square feet
Usable Area: approximately 1,013 square feet
(To be re-measured pursuant to the provisions of Paragraph 4 of the Fifth Amendment to Office Lease)
EXHIBIT B LANDLORDS WORK-DEMOLITION
9601 Wilshire Boulevard
Suite 270
Approximately 1,221 Rentable Square Feet
Proposed Spec Suite
NOT TO SCALE
FIFTH AMENDMENT TO OFFICE LEASE
EXHIBIT C FORM OF AMENDMENT AND RESTATED SNDAA
|
TRIANGLE LENDERS, LLC,
a California limited liability company
DOUGLAS EMMETT 2000, LLC
a Delaware limited liability company
AND
KENNEDY-WILSON, INC. A DELAWARE CORPORATION
a Delaware corporation
AMENDED AND RESTATED SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
Dated: January 27, 2006
Location: 9601 Wilshire Boulevard,
Beverly Hills, California 90210
|
AMENDED AND RESTATED SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
(Lease)
THIS AGREEMENT is made as of January 27, 2006 between TRIANGLE LENDERS, LLC, a California limited liability company, having an address at 808 Wilshire Boulevard, Suite 200, Santa Monica, California 90401 (the Leasehold Mortgagee), DOUGLAS EMMETT 2000, LLC a Delaware limited liability company (successor to Douglas Emmett Realty Fund 2000, a California limited partnership) having an address at 808 Wilshire Boulevard, Suite 200, Santa Monica, California 90401 (the DE LLC), and KENNEDY-WILSON, INC a Delaware corporation, having an office at 9601 Wilshire Boulevard, Suite 220, Beverly. Hills, California 90210 (the Tenant);
W I TNESSETH:
WHEREAS Douglas Emmett Realty Fund 2000, a California limited partnership, as ground lessor (DERF 2000) and Wilshire-Camden Associates, a California limited partnership as ground lessee, (WCA) are the original parties to that certain Amended and Restated Ground Lease dated as of December 20, 2001, which ground lease was amended by that certain First Amendment to Amended and Restated Ground Lease dated as of January 17, 2006 executed by and between DE LLC, successor-in-interest to DERF 2000 as ground lessor and Brighton Enterprises, LLC, a California limited liability company (Brighton), successor-in-interest to WCA as ground lessee (said ground lease, as so amended, being referred to herein as the Ground Lease), pursuant to which WCA leased certain land located in the County of Los Angeles, City of Beverly Hills and State of California, known as 9601 Wilshire Boulevard, as more particularly described in Exhibit A attached hereto and incorporated herein by this reference (the Land) from the DERF 2000;
WHEREAS DE LLC is now the successor-in-interest of both DERF 2000s ground lessor interest in the Ground Lease and Brightons ground lessee interest in the Ground Lease and the Ground Lease remains in effect;
WHEREAS the Leasehold Mortgagee is the present owner and holder of a certain deed of trust or deeds of trust (the Leasehold Deed of Trust) encumbering the ground lessees interest in the Ground Lease, as well as that certain office building together with the four-level subterranean parking garage located on the Land (the Improvements);
WHEREAS the Tenant is the holder of a leasehold estate in a portion of the Improvements under and pursuant to the provisions of a certain written Office Lease with Ground Lessee, as landlord, dated August 19, 1998, as amended by that certain First Amendment to Lease (Expansion) dated March 5, 1999, that certain Second Amendment to Lease (Expansion) dated June 2, 1999, that certain Termination Agreement dated October 19, 1999, that certain Third Amendment to Office Lease dated December 20, 2002, that certain Fourth Amendment to Office Lease dated September 11, 2003 (whereby Tenant reduced its occupancy in the Building to exclude Suite GL- l 5A and GL-9, and a portion of Suite 200 and the remaining portion occupied by Tenant was renamed as Suite 220), and that certain Fifth Amendment to Office Lease dated of even date herewith (whereby Tenant wishes to expand its occupancy in the Building to include Suite 270) (collectively the Lease); and
WHEREAS the Tenant has agreed to subordinate the Lease to the Leasehold Deed of Trust and the Ground Lease, and to the lien of each of the same, and the Leasehold Mortgagee and DE LLC have
C-1
each agreed to grant non-disturbance to the Tenant under the Lease on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of Ten Dollars ($10) and other good and valuable consideration, the receipt of which is hereby acknowledged, the Leasehold Mortgagee, DE LLC and the Tenant hereby covenant and agree as follows:
1 The Tenant agrees that the Lease and all of the terms, covenants and provisions thereof and all rights, remedies and options of the Tenant thereunder are and shall at all times continue to be subject and subordinate in all respects to (i) the Leasehold Deed of Trust and all of the terms, covenants and provisions thereof and to the lien thereof and to any and all increases, renewals, modifications, spreaders, consolidations, replacements and extensions thereof, and to any and all sums secured thereby, with the same force and effect as if the Leasehold Deed of Trust had been executed, delivered and recorded prior to the execution and delivery of the Lease, and (ii) the Ground Lease and all of the terms, covenants and provisions thereof and to any and all amendments, modifications, replacements and extensions thereof, and to any and all amounts required to be paid thereunder, with the same force and effect as if the Ground Lease had been executed, delivered and recorded prior to the execution and delivery of the Lease.
2 The Leasehold Mortgagee and DE LLC, respectively, agree that provided (i) the Term for Suite 220, and the Expansion Term for Suite 270 shall have commenced pursuant to the provisions thereof, (ii) the Tenant shall be in possession of the premises demised under the Lease, including Suite 270, (iii) the Lease shall be in full force and effect, and (iv) the Tenant shall not be in material default beyond any notice and grace period under any of the terms, covenants or conditions of the Lease or of this Agreement on the part of the Tenant to be observed or performed thereunder or hereunder, the right of possession of Tenant and its tights and privileges to the leased premises shall not be terminated, affected or disturbed by (a) the Leasehold Mortgagee in the exercise of any of its rights under the Leasehold Deed of Trust and any sale of the Improvements pursuant to the exercise of any rights and remedies under the Leasehold Deed of Trust or otherwise shall be made subject to Tenants right of possession under the Lease, and (b) DE LLC in the exercise of any of its rights under the Ground Lease and any termination of the Ground Lease pursuant to the exercise of any rights and remedies under the Ground Lease or otherwise shall be made subject to Tenants right of possession under the Lease. Further, the Leasehold Mortgagee and DE LLC, respectively, agree not to join Tenant as a party defendant in any action or proceeding foreclosing the Leasehold Deed of Trust unless such joinder is necessary to foreclose the Leasehold Deed of Trust and then only for such purpose and not for the purpose of terminating the Lease.
3 The Tenant agrees that (i) if the Leasehold Mortgagee or any successors in interest to the Leasehold Mortgagee shall become the owner of the Improvements and the leasehold interest in the Ground Lease by reason of the foreclosure of the Leasehold Deed of Trust or the acceptance of a deed or assignment in lieu of foreclosure or otherwise, or (ii) if the Ground Lease is terminated, the Lease shall not be terminated or affected thereby but shall continue in full force and effect as a direct lease between the Leasehold Mortgagee and DE LLC, as applicable, and the Tenant upon all of the terms, covenants and conditions set forth in the Lease and in that event the Tenant agrees to attorn to the Leasehold Mortgagee and DE LLC, as applicable, and the Leasehold Mortgagee and DE LLC, as applicable, agrees to accept such
C-2
attornment, provided, however, that the Leasehold Mortgagee , shall not be (i) obligated to complete any construction work required to be done by the Landlord (as hereinafter defined) pursuant to the provisions of the Lease or to reimburse the Tenant for any construction work done by the Tenant, (ii) liable for any accrued obligation of the Landlord, or for any act or omission of the Landlord, whether prior to or after such foreclosure, sale or termination, as applicable, (iii) liable under any indemnity provision of whatever nature contained in the Lease, including, but not limited to, any environmental indemnification, (iv) required to make any repairs to the Premises (as hereinafter defined in Paragraph 10 below) and/or to the premises demised under the Lease as a result of fire or other casualty or by reason of condemnation except as provided under the Lease, (v) required to make any capital improvements to the Premises and/or to the premises demised under the Lease which the Landlord may have agreed to make, but bad not completed, or to perform or provide any services not related to possession or quiet enjoyment of the premises demised under the Lease, (vi) subject to any offsets, claims or counterclaims which shall have accrued to the Tenant against the Landlord prior to the date on which the Leasehold Mortgagee shall become the owner of the Premises, (vii) liable for any security deposit or other monies not actually received by the Leasehold Mortgagee.
4 The Tenant shall not, without the prior written consent of the Leasehold Mortgagee (which consent shall not be unreasonably withheld) (i) enter into any agreement decreasing the amount of rent payable under the Lease, (ii) prepay any of the rents, additional rents or other sums due under the Lease for more than one (1) month in advance of the due dale thereof, (iii) voluntarily surrender the premises demised under the Lease or terminate the Lease without cause or shorten the term thereof, or (iv) assign the Lease or sublet the premises demised under the Lease or any part thereof except as expressly permitted by the terms of the Lease; and any such amendment, modification, termination, prepayment, voluntary surrender, assignment or subletting, without the prior written consent of the Leasehold Mortgagee shall not be binding on the Leasehold Mortgagee.
5 INTENTIONALLY OMITTED.
6 Tenant agrees to give the Leasehold Mortgagee a copy of any notice of default served upon the Landlord by Tenant, and agrees that, notwithstanding any provisions of the Lease to the contrary, no such notice of default shall be effective unless the Leasehold Mortgagee shall have received a copy of said notice of the material default or other circumstance giving rise to such cancellation, termination or abatement and shall have failed within sixty (60) days after receipt of such copy of said notice to cure such material default or remedy such circumstance, or if such material default cannot be cured within sixty (60) days, shall have failed within sixty (60) days after receipt of such copy of said notice to commence and to thereafter diligently pursue any action necessary to cure such material default or remedy such circumstance, as the case may be. Upon such time being allowed to cure such default expiring without cure, Tenant shall be entitled to all of its rights and remedies under the Lease on account of Landlords default.
7 Anything herein or in the Lease to the contrary notwithstanding, in the event that the Leasehold Mortgagee shall acquire title to the Premises, or shall otherwise become liable for any obligations of the Landlord under the Lease, the Leasehold Mortgagee shall not have any obligation, nor incur any liability, beyond the then interest, if any, of the Leasehold Mortgagee in
C-3
the Premises and the Tenant shall look exclusively to such interest of the Leasehold Mortgagee, if any, in the Premises for the payment and discharge of any obligations imposed upon the Leasehold Mortgagee hereunder or under the Lease and the Leasehold Mortgagee is hereby released or relieved of any other liability hereunder and under the Lease. The Tenant agrees that with respect to any money judgment which may be obtained or secured by the Tenant against the Leasehold Mortgagee the Tenant shall look solely to the estate or interest owned by the Leasehold Mortgagee in the Premises and the Tenant will not collect or attempt to collect any such judgment out of any other assets of the Leasehold Mortgagee.
8 Any notice, request, demand, statement, authorization, approval or consent made hereunder shall be in writing and shall be sent by Federal Express, or other reputable courier service, or by postage pre-paid registered or certified mail, return receipt requested, and shall be deemed given when received or refused (as indicated on the receipt) and addressed as follows:
If to the Leasehold Mortgagee:
Triangle
Lenders, LLC
c/o Douglas Emmett Realty Advisors
808 Wilshire Boulevard, Suite 200
Santa Monica, California 90401
Attention: Mr. Jordan Kaplan and Mr. William Kamer
If to DE LLC:
Douglas Emmett 2000, LLC
c/o
Douglas Emmett Realty Advisors
808 Wilshire Boulevard, Suite 200
Santa Monica, California 90401
Attention: Mr. Jordan Kaplan and Mr. William Kamer
If to the Tenant:
Kennedy-Wilson, Inc.
West
Coast Acquisition and Asset Management
9601 Wilshire Boulevard, Suite 220
Beverly Hills, California 90210
Attention: Mr. Robert Hart
w/ copy to:
Kulik, Gottesman, & Mouton, LLP
15303
Ventura Boulevard, Suite 1400
Sherman Oaks, California 91403
Attention: Francisco Aparicio, Esq.
it being understood and agreed that each party will use reasonable efforts to send copies of any notices to the addresses marked With a copy to hereinabove set forth; provided, however, that failure to deliver such copy or copies shall have no consequence whatsoever to the effectiveness of any notice made to the Tenant, the Leasehold Mortgagee and/or DE LLC. Each party may designate a change of address by
C-4
notice given, as hereinabove provided, to the other party, at least fifteen (15) days prior to the date such change of address is to become effective.
9 This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
10 The term Leasehold Mortgagee as used herein shall include the successors and assigns of the Leasehold Mortgagee and any person, party or entity which shall become the owner of the Premises by reason of a foreclosure of the Leasehold Deed of Trust or the acceptance of a deed or assignment in lieu of foreclosure or otherwise, The term DE LLC as used herein shall include the successors and assigns of 1)E LLC and any person, party or entity which shall become the owner of the Improvements by reason of a termination of the Ground Lease. The term Landlord as used herein shall mean and include the present landlord under the Lease and such landlords predecessors and successors in interest under the Lease. The term Premises as used herein shall mean the Land, the Improvements, any other improvements now or hereafter located on the Land and/or the estates therein encumbered by the Leasehold Deed of Trust and/or the Ground Lease.
11 This Agreement may not be modified in any manner or terminated except by an instrument in writing executed by the parties hereto.
12 This Agreement shall be governed by and construed under the laws of the State in which the Premises are located.
13 This Agreement shall have no force and effect until all parties to the Agreement have executed and notarized the Agreement and fully executed originals have been delivered to all parties to the Agreement.
[INTENTIONALLY LEFT BLANK]
C-5
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the later of the date(s) written below.
|
TRIANGLE LENDERS, LLC, |
||||
|
a California limited liability company |
||||
|
|
||||
|
By: Douglas Emmett Realty Advisors, |
||||
|
a California corporation, |
||||
|
Manager |
||||
|
|
||||
|
|
||||
|
|
By: |
|
||
|
|
||||
|
|
Name: |
|
||
|
|
||||
|
|
Title: |
|
||
|
|
||||
|
|
Dated: |
|
||
|
|
||||
|
|
||||
|
DOUGLAS EMMETT 2000, LLC |
||||
|
a Delaware limited liability company |
||||
|
|
||||
|
By: Douglas Emmett and Company, |
||||
|
a California corporation, |
||||
|
its Agent |
||||
|
|
||||
|
|
||||
|
|
By: |
|
||
|
|
||||
|
|
Name: |
|
||
|
|
||||
|
|
Title: |
|
||
|
|
||||
|
|
Dated: |
|
||
|
|
||||
|
|
||||
|
KENNEDY-WILSON, INC., a Delaware corporation |
||||
|
|
||||
|
By: |
/s/ Freeman Lyle |
|||
|
|
||||
|
Name: Freeman Lyle |
||||
|
|
||||
|
Its: EVP-CFO |
||||
|
|
||||
|
Dated: 1/31/06 |
||||
C-6
STATE OF )
) ss:
COUNTY OF )
On , before me, a Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed In the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies). and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
|
Notary Public in and for said County and State |
|
|
|
|
|
My Commission Expires: |
|
|
|
|
STATE OF )
) ss:
COUNTY OF )
On , before me, a Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed In the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies). and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
|
Notary Public in and for said County and State |
|
|
|
|
|
My Commission Expires: |
|
|
|
|
STATE OF )
) ss:
COUNTY OF )
On , before me, a Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed In the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies). and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
|
Notary Public in and for said County and State |
|
|
|
|
|
My Commission Expires: |
|
|
|
|
C-7
EXHIBIT A
LEGAL DESCRIPTION
Lots 8, 9, 10, 11, 12, 13 and 14, in Block 18, of Beverly, in the City of Beverly Hills, County of Los Angeles, State of California, as per map recorded in Book 11, Pages 94 and 95 of Maps, in the Office of the County Recorder of said County.
C-8
Exhibit 10.101
STANDARD OFFICE LEASE
This Standard Office Lease ( Lease ) is made and entered into as of this day of , 2009, by and between Landlord (as defined below), and Kennedy-Wilson, Inc., a Delaware corporation ( Tenant ).
As used herein, Landlord shall mean 9701-HEMPSTEAD PLAZA, LLC, a Delaware limited liability company, 9701-CAROLINA GARDENS LLC, a Delaware limited liability company, 9701-WEST POINT REALTY LLC, a Delaware limited liability company, 9701-DAKOTA LEASING LLC, a Delaware limited liability company and 9701-IOWA LEASING LLC, a Delaware limited liability company, as Tenants-in-Common.
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises described as the entire seventh floor (the Seventh Floor Premises ) and that portion of the sixth floor (the Sixth Floor Premises ) designated on the plan attached hereto and incorporated herein as Exhibit A (collectively, the Premises ), of the project ( Project ) located at 9701 Wilshire Boulevard, Beverly Hills, California 90212, for the Term and upon the terms and conditions hereinafter set forth, and Landlord and Tenant hereby agree as follows:
A . |
Term : |
Seven (7) years. |
|
|
|
|
Commencement Date : |
January 1, 2010. |
|
|
|
|
Expiration Date : |
December 31, 2016 |
|
|
|
B. |
Square Footage : |
12,947 rentable square feet for the Seventh Floor Premises. 3,085 rentable square feet for the Sixth Floor Premises. |
|
|
|
C. |
Basic Rental : |
|
|
Lease Year |
|
Monthly Basic Rental
|
|
|
|
|
1 |
|
$ |
4.50 |
|
|
|
2 |
|
$ |
4.65 |
|
|
|
3 |
|
$ |
4.82 |
|
|
|
4 |
|
$ |
4.99 |
|
|
|
5 |
|
$ |
5.16 |
|
|
|
6 |
|
$ |
5.34 |
|
|
|
7 |
|
$ |
5.53 |
|
|
D. |
Base Year : |
Calendar year 2010 |
|
|
|
E. |
Tenants Proportionate Share : |
To be calculated based upon the Project containing 111,165 rentable square feet after measurement of Sixth Floor Premises. |
|
|
|
F. |
Security Deposit : |
None |
|
|
|
G. |
Permitted Use : |
General office use consistent with the character of the Project as a first-class office project. |
|
|
|
H. |
Brokers : |
Kennedy-Wilson (for Tenant) Madison Partners (for Landlord) |
I. |
Parking Passes : |
Tenant shall rent three and seven-tenths (3.7) parking passes for each 1,000 rentable square feet contained in the Premises (the Total Passes). Of the Total Passes, Tenant shall rent eight (8) reserved parking passes and the remainder shall be unreserved passes, upon the terms and conditions and at the rates provided in Article 23 hereof. |
|
|
|
J. |
Initial Installment of Basic Rental : |
The first full months Basic Rental shall be due and payable by Tenant to Landlord upon Tenants execution of this Lease. |
The Term of this Lease shall commence on the Commencement Date as set forth in Article 1.A. of the Basic Lease Provisions and shall end on the Expiration Date set forth in Article 1.A. of the Basic Lease Provisions. For purposes of this Lease, the term Lease Year shall mean each consecutive twelve (12) month period during the Term, with the first (1 st ) Lease Year commencing on the Commencement Date; however, (a) if the Commencement Date falls on a day other than the first (1 st ) day of a calendar month, the first (1 st ) Lease Year shall end on the last day of the eleventh (11 th ) month after the Commencement Date and the second (2 nd ) and each succeeding Lease Year shall commence on the first (1 st ) day of the next calendar month, and (b) the last Lease Year shall end on the Expiration Date. If Landlord does not deliver possession of the Premises to Tenant on or before January 1, 2009 (the Estimated Delivery Date), Landlord shall not be subject to any liability for its failure to do so, and such failure shall not affect the validity of this Lease nor the obligations of Tenant hereunder; provided, however, the Commencement Date and the Expiration Date shall be delayed one (1) day for each one (1) day after the Estimated Delivery Date that occurs prior to the date that Landlord delivers possession of the Premises to Tenant. Landlord and Tenant hereby stipulate that the Seventh Floor Premises contains the number of square feet specified in Article 1.B. of the Basic Lease Provisions. It is anticipated that the Sixth Floor Premises shall be approximately 3,000 rentable square feet; provided, however, Landlord and Tenant shall each have the right, upon notice (the Remeasurement Notice) delivered to the other party within ninety (90) days following the date of this Lease, to measure the usable square feet of the Sixth Floor Premises, which shall then be multiplied by the 19.00% load factor used by Landlord for the Building in order to determine the rentable square feet of the Sixth Floor Premises. In the event that any measurement pursuant to the terms of this Section, all amounts, percentages and figures appearing or referred to in this Lease based upon an incorrect amount (including, without limitation, the amount of the Base Rent, Tenants Pro Rata Share, the Tenant Improvement Allowance, the Termination Fee, the number of parking spaces and any other item based upon the Premises or Buildings rentable square footage) shall be modified in accordance with such determination. If either party disagrees with the other partys measurement and if a dispute occurs regarding the final accuracy of the measurement of any space, such dispute will be resolved pursuant to binding arbitration by (and in accordance with the rules of) the American Arbitration Association. In the event that Landlords architect/space planner determines that the amounts thereof shall be different from those set forth in this Lease, all amounts, percentages and figures appearing or referred to in this Lease based upon such incorrect amount (including, without limitation, the amount of the Basic Rental, Tenants Proportionate Share, the Termination Fee and the Tenant Improvement Allowance) shall be modified in accordance with such determination. If such determination is made, it will be confirmed in writing by Landlord to Tenant. Landlord may deliver to Tenant a Commencement Letter in a form substantially similar to that attached hereto as Exhibit C , which Tenant shall execute and return to Landlord within five (5) days of receipt thereof. Failure of Tenant to timely execute and deliver the Commencement Letter shall constitute acknowledgment by Tenant that the statements included in such notice are true and correct, without exception.
Tenant may enter into the Premises upon the delivery of possession of the Premises to Tenant by Landlord for the purpose of installing the Tenant Improvements, the furniture, trade fixtures, telephones, computers, photocopy equipment, and other business equipment. Such early
2
entry will not advance the Commencement Date. All of the provisions of this Lease shall apply to Tenant during any early entry, including, without limitation, the indemnities set forth in this Lease, but excluding the obligation to pay Basic Rental only. Landlord may revoke its permission for Tenants early entry if Tenants activities or workers interfere with the completion of the Landlords Work. If Tenant is granted early entry, Landlord shall not be responsible for any loss, including theft, damage or destruction to any work or material installed or stored by Tenant at the Premises or for any injury to Tenant or its agents, employees, contractors, subcontractors, subtenants, subtenants, assigns, licensees or invitees. Landlord shall have the right to post appropriate notices of non-responsibility and to require Tenant to provide Landlord with evidence that Tenant has fulfilled its obligation to provide insurance pursuant to the provisions of this Lease.
(e) Audit Right . Within one hundred twenty (120) days after receipt of a Statement by Tenant ( Review Period ), if Tenant disputes the amount set forth in the Statement, Tenants employees or an independent certified public accountant (which accountant is a member of a nationally or regionally recognized accounting firm and is not retained on a contingency fee basis), designated by Tenant, may, after reasonable notice to Landlord ( Review Notice ) and at reasonable times, inspect Landlords records at Landlords offices, provided that Tenant is not then in default after expiration of all applicable cure periods and provided further that Tenant and such accountant or representative shall, and each of them shall use their commercially reasonable efforts to cause their respective agents and employees to, maintain all information contained in Landlords records in strict confidence. Notwithstanding the foregoing, Tenant shall only have the right to review Landlords records one (1) time during any twelve (12) month period. If after such inspection, but within thirty (30) days after the Review Period, Tenant notifies Landlord in writing ( Dispute Notice ) that Tenant still disputes such amounts, a certification as to the proper amount shall be made in accordance with Landlords standard accounting practices, at Tenants expense, by an independent certified public accountant selected by Landlord and who is a member of a nationally or regionally recognized accounting firm. Tenants failure to deliver the Review Notice within the Review Period or to deliver the Dispute Notice within thirty (30) days after the Review Period shall be deemed to constitute Tenants approval of such Statement and Tenant, thereafter, waives the right or ability to dispute the amounts set forth in such Statement. If Tenant timely delivers the Review Notice and the Dispute Notice, Landlord shall cooperate in good faith with Tenant and the accountant to show Tenant and the accountant the information upon which the certification is to be based. However, if such certification by the accountant proves that the Direct Costs charged to Tenant, as set forth in the Statement were overstated by more than ten percent (10%), then the cost of the accountant and the cost of such certification shall be paid for by Landlord, provided that in no event shall Landlord be responsible for costs hereunder in excess of the amount of such overstatement. Promptly following the parties receipt of such certification, the parties shall make such appropriate payments or reimbursements, as the case may be, to each other, as are determined to be owing pursuant to such certification. Tenant agrees that this section shall be the sole method to be used by Tenant to dispute the amount of any Direct Costs payable by Tenant pursuant to the terms of this Lease, and Tenant hereby waives any other rights at law or in equity relating thereto.
Should Tenant, without Landlords written consent, hold over after termination of this Lease, Tenant shall, at Landlords option, become either a tenant at sufferance or a month-to-month tenant upon each and all of the terms herein provided as may be applicable to such a tenancy and any such holding over shall not constitute an extension of this Lease.
Tenant may elect to delay the Expiration Date of this Lease by up to three (3) months (the Holdover Period) by delivering written notice of its election to extend the Expiration Date no later than twelve (12) months prior to the then existing Expiration Date of the Term of the Lease.
7
During such Holdover Period, Tenant shall pay in advance, monthly, Basic Rental at a rate equal to one hundred twenty-five percent (125%) of the rate in effect for the last month of the Term of this Lease, in addition to, and not in lieu of, all other payments required to be made by Tenant hereunder including but not limited to Tenants Proportionate Share of any increase in Direct Costs.
Nothing contained in this Article 5 shall be construed as consent by Landlord to any holding over of the Premises by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or earlier termination of the Term. If Tenant fails to surrender the Premises upon the expiration or termination of this Lease, Tenant agrees to indemnify, defend and hold Landlord harmless from all costs, loss, expense or liability, including without limitation, claims made by any succeeding tenant and real estate brokers claims and attorneys fees and costs.
Tenant shall pay, prior to delinquency, all taxes assessed against or levied upon trade fixtures, furnishings, equipment and all other personal property of Tenant located in the Premises. In the event any or all of Tenants trade fixtures, furnishings, equipment and other personal property shall be assessed and taxed with property of Landlord, or if the cost or value of any leasehold improvements in the Premises exceeds the cost or value of a Project-standard buildout as determined by Landlord and, as a result, real property taxes for the Project are increased, Tenant shall pay to Landlord, within ten (10) days after delivery to Tenant by Landlord of a written statement setting forth such amount, the amount of such taxes applicable to Tenants property or above-standard improvements. Tenant shall assume and pay to Landlord at the time Basic Rental next becomes due (or if assessed after the expiration of the Term, then within ten (10) days), any excise, sales, use, rent, occupancy, garage, parking, gross receipts or other taxes (other than net income taxes) which may be assessed against or levied upon Landlord on account of the letting of the Premises or the payment of Basic Rental or any other sums due or payable hereunder, and which Landlord may be required to pay or collect under any law now in effect or hereafter enacted. In addition to Tenants obligation pursuant to the immediately preceding sentence, Tenant shall pay directly to the party or entity entitled thereto all business license fees, gross receipts taxes and similar taxes and impositions which may from time to time be assessed against or levied upon Tenant, as and when the same become due and before delinquency. Notwithstanding anything to the contrary contained herein, any sums payable by Tenant under this Article 6 shall not be included in the computation of Tax Costs.
Tenant shall use and occupy the Premises only for the use set forth in Article 1.G. of the Basic Lease Provisions and shall not use or occupy the Premises or permit the same to be used or occupied for any other purpose without the prior written consent of Landlord, which consent may be given or withheld in Landlords sole and absolute discretion, and Tenant agrees that it will use the Premises in such a manner so as not to interfere with or infringe upon the rights of other tenants or occupants in the Project. Tenant shall, at its sole cost and expense, promptly comply with all laws, statutes, ordinances, governmental regulations or requirements now in force or which may hereafter be in force relating to or affecting (i) the condition, use or occupancy of the Premises or the Project (excluding structural changes to the Project not related to Tenants particular use of the Premises), and/or (ii) improvements installed or constructed in the Premises by or for the benefit of Tenant. Tenant shall not permit more than six (6) people per one thousand (1,000) rentable square feet of the Premises to occupy the Premises at any time. Tenant shall not do or permit to be done anything which would invalidate or increase the cost of any fire and extended coverage insurance policy covering the Project and/or the property located therein and Tenant shall comply with all rules, orders, regulations and requirements of any organization which sets out standards, requirements or recommendations commonly referred to by major fire insurance underwriters, and Tenant shall promptly upon demand reimburse Landlord for any additional premium charges for any such insurance policy assessed or increased by reason of Tenants failure to comply with the provisions of this Article.
8
Tenant hereby agrees that except as provided in the Tenant Work Letter attached hereto as Exhibit D and made a part hereof and the Landlords Work to be constructed by Landlord pursuant to the second paragraph of this Article 8, the Premises shall be taken as is, with all faults, without any representations or warranties, and Tenant hereby agrees and warrants that it has investigated and inspected the condition of the Premises and the suitability of same for Tenants purposes, and Tenant does hereby waive and disclaim any objection to, cause of action based upon, or claim that its obligations hereunder should be reduced or limited because of the condition of the Premises or the Project or the suitability of same for Tenants purposes. Tenant acknowledges that neither Landlord nor any agent nor any employee of Landlord has made any representations or warranty with respect to the Premises or the Project or with respect to the suitability of either for the conduct of Tenants business and Tenant expressly warrants and represents that Tenant has relied solely on its own investigation and inspection of the Premises and the Project in its decision to enter into this Lease and let the Premises in the above-described condition. The Premises shall be initially improved as provided in, and subject to, the Tenant Work Letter attached hereto as Exhibit D and made a part hereof and in accordance with the second paragraph of this Article 8. The existing leasehold improvements in the Premises as of the date of this Lease, together with the Improvements (as defined in the Tenant Work Letter) may be collectively referred to herein as the Tenant Improvements. The taking of possession of the Premises by Tenant shall conclusively establish that the Premises and the Project were at such time in satisfactory condition. Tenant hereby waives subsection 1 of Section 1932 and Sections 1941 and 1942 of the Civil Code of California or any successor provision of law. Any dispute concerning the delivery condition of the Premises shall be decided by binding arbitration as set forth in Article 35.
Notwithstanding the foregoing, prior to the Commencement Date, Landlord shall at Landlords sole expense, on a one-time basis only, using building standard materials, guidelines, specifications and procedures, (i) upgrade the restrooms on the sixth and seventh floors of the Project, and (ii) upgrade the lobby on the sixth floor of the Project (collectively, the Landlord Work). Tenant shall not (and Tenant shall ensure that its agents, employees and contractors do not) interfere with the performance of the Landlord Work and shall cooperate with Landlord in connection with the performance of the Landlord Work, including, without limitation, by moving any equipment and other property which Landlord or its contractor may request be moved. Landlord shall be permitted to perform the Landlord Work during Tenants occupancy of the Premises, during normal business hours (or any other hours), without any obligation to pay overtime or other premiums. Tenant hereby agrees that the performance of the Landlord Work shall in no way constitute a constructive eviction of Tenant, entitle Tenant to any abatement of rent payable pursuant to the Lease. Landlord shall have no responsibility for, or for any reason be liable to, Tenant for any direct or indirect injury to or interference with Tenants business arising from the performance of the Landlord Work, nor shall Tenant be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or of Tenants personal property or improvements resulting from the performance of the Landlord Work or Landlords or Landlords contractors or agents actions in connection with the performance of the Landlord Work, or for any inconvenience or annoyance occasioned by the performance of the Landlord Work or Landlords or Landlords contractors or agents actions in connection with the performance of the Landlord Work.
9
Tenant shall keep the Premises and the Project free from any mechanics liens, vendors liens or any other liens arising out of any work performed, materials furnished or obligations incurred by Tenant, and Tenant agrees to defend, indemnify and hold Landlord harmless from and against any such lien or claim or action thereon, together with costs of suit and reasonable attorneys fees and costs incurred by Landlord in connection with any such claim or action.
10
Before commencing any work of alteration, addition or improvement to the Premises, Tenant shall give Landlord at least ten (10) business days written notice of the proposed commencement of such work (to afford Landlord an opportunity to post appropriate notices of non-responsibility). In the event that there shall be recorded against the Premises or the Project or the property of which the Premises is a part any claim or lien arising out of any such work performed, materials furnished or obligations incurred by Tenant and such claim or lien shall not be removed or discharged within ten (10) days of filing, Landlord shall have the right but not the obligation to pay and discharge said lien without regard to whether such lien shall be lawful or correct (in which event Tenant shall reimburse Landlord for any such payment made by Landlord within three (3) business days following written demand therefor), or to require that Tenant promptly deposit with Landlord in cash, lawful money of the United States, one hundred fifty percent (150%) of the amount of such claim, which sum may be retained by Landlord until such claim shall have been removed of record or until judgment shall have been rendered on such claim and such judgment shall have become final, at which time Landlord shall have the right to apply such deposit in discharge of the judgment on said claim and any costs, including attorneys fees and costs incurred by Landlord, and shall remit the balance thereof to Tenant.
13
14
Tenant shall have no power to, either voluntarily, involuntarily, by operation of law or otherwise, sell, assign, transfer or hypothecate this Lease, or sublet the Premises or any part thereof, or permit the Premises or any part thereof to be used or occupied by anyone other than Tenant or Tenants employees without the prior written consent of Landlord, which consent shall not be unreasonably withheld. If Tenant is a corporation, unincorporated association, partnership or limited liability company, the sale, assignment, transfer or hypothecation of any class of stock or other ownership interest in such corporation, association, partnership or limited liability company in excess of fifty percent (50%) in the aggregate shall be deemed a Transfer within the meaning and provisions of this Article 15. Tenant may transfer its interest pursuant to this Lease only upon the following express conditions, which conditions are agreed by Landlord and Tenant to be reasonable:
Notwithstanding anything to the contrary contained in this Article 15, Landlord shall have the option, by giving written notice to Tenant ( Landlords Recapture Notice ) within ten (10) days after Landlords receipt of a request for consent to a proposed Transfer, to terminate this Lease as to the portion of the Premises that is the subject of the proposed Transfer (hereinafter, the Recapture Space ). If this Lease is so terminated with respect to less than the entire Premises, (i) the Basic Rental and Tenants Proportionate Share shall be prorated based on the number of rentable square feet retained by Tenant as compared to the total number of rentable square feet previously contained in the Premises, and this Lease as so amended shall continue thereafter in full force and effect, and upon the request of either party, the parties shall execute written confirmation of the same, and (ii) Tenant shall be responsible for all costs incurred by Landlord in connection with separately demising the Recapture Space separate and apart from the balance of the Premises, including without limitation, all ductwork, systems work, demising wall installation and compliance with governmental requirements relating thereto ( Landlords Recapture Costs ). Tenant shall reimburse Landlord for Landlords Recapture Costs within three (3) business days following written demand therefor from Landlord. The effective date of any such termination shall be set forth in Landlords Recapture Notice.
Any dispute regarding whether the Landlord was reasonable in denying consent to a proposed Transfer shall be decided by binding arbitration as set forth in Article 35.
If the Project is damaged by fire or other insured casualty and the insurance proceeds have been made available therefor by the holder or holders of any mortgages or deeds of trust covering the Premises or the Project, the damage shall be repaired by Landlord to the extent such insurance proceeds are available therefor and provided such repairs can, in Landlords sole opinion, be completed within two hundred seventy (270) days after the necessity for repairs as a result of such damage becomes known to Landlord, without the payment of overtime or other premiums, and until such repairs are completed rent shall be abated in proportion to the part of
17
the Premises which is unusable by Tenant in the conduct of its business (but there shall be no abatement of rent by reason of any portion of the Premises being unusable for a period equal to one (1) day or less). Upon the occurrence of any damage to the Premises, Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Section 14(a)(ii)(A) above; provided, however, that if the cost of repair of improvements within the Premises by Landlord exceeds the amount of insurance proceeds received by Landlord from Tenants insurance carrier, as so assigned by Tenant, such excess costs shall be paid by Tenant to Landlord prior to Landlords repair of such damage. If repairs cannot, in Landlords opinion, be completed within two hundred seventy (270) days after the necessity for repairs as a result of such damage becomes known to Landlord without the payment of overtime or other premiums, Landlord and Tenant may, at their option, either (i) make such repairs in a reasonable time and in such event this Lease shall continue in effect and the Basic Rental shall be abated, if at all, in the manner provided in this Article 16, or (ii) elect not to effect such repairs and instead terminate this Lease, by notifying Tenant in writing of such termination within sixty (60) days after Landlord learns of the necessity for repairs as a result of damage, such notice to include a termination date giving Tenant sixty (60) days to vacate the Premises. In addition, Landlord may elect to terminate this Lease if the Project shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, if the damage is not fully covered, except for deductible amounts, by Landlords insurance policies. Finally, if the Premises or the Project is damaged to any substantial extent during the last twelve (12) months of the Term, then notwithstanding anything contained in this Article 16 to the contrary, Landlord and Tenant shall have the option to terminate this Lease by giving written notice to Tenant of the exercise of such option within sixty (60) days after Landlord learns of the necessity for repairs as the result of such damage. A total destruction of the Project shall automatically terminate this Lease. Except as provided in this Article 16, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenants business or property arising from such damage or destruction or the making of any repairs, alterations or improvements in or to any portion of the Project or the Premises or in or to fixtures, appurtenances and equipment therein. Tenant understands that Landlord will not carry insurance of any kind on Tenants furniture, furnishings, trade fixtures or equipment, and that Landlord shall not be obligated to repair any damage thereto or replace the same. Tenant acknowledges that Tenant shall have no right to any proceeds of insurance carried by Landlord relating to property damage. With respect to any damage which Landlord is obligated to repair or elects to repair, Tenant, as a material inducement to Landlord entering into this Lease, irrevocably waives and releases its rights under the provisions of Sections 1932 and 1933 of the California Civil Code.
This Lease is subject to and Tenant agrees to comply with all matters of record affecting the Real Property. This Lease is also subject and subordinate to all ground or underlying leases, mortgages and deeds of trust which affect the Real Property, as well as all renewals, modifications, consolidations, replacements and extensions thereof; provided, however, if the lessor under any such lease or the holder or holders of any such mortgage or deed of trust shall advise Landlord that they desire or require this Lease to be prior and superior thereto, upon written request of Landlord to Tenant, Tenant agrees to promptly execute, acknowledge and deliver any and all documents or instruments which Landlord or such lessor, holder or holders deem necessary or desirable for purposes thereof. Landlord shall have the right to cause this Lease to be and become and remain subject and subordinate to any and all ground or underlying leases, mortgages or deeds of trust which may hereafter be executed covering the Premises, the Project or the property or any renewals, modifications, consolidations, replacements or extensions thereof, for the full amount of all advances made or to be made thereunder and without regard to the time or character of such advances, together with interest thereon and subject to all the terms and provisions thereof; provided, however, that Landlord obtains from the lender or other party in question a written undertaking in favor of Tenant to the effect that such lender or other party will not disturb Tenants right of possession under this Lease if Tenant is not then or thereafter in breach of any covenant or provision of this Lease. Tenant agrees, within ten (10) days after Landlords written request therefor, to execute, acknowledge and deliver upon request any and all commercially reasonable documents or instruments requested by Landlord or necessary or proper to assure the subordination of this Lease to any such mortgages, deed of trust, or leasehold estates. Tenant agrees that in the event any proceedings are brought for the
18
foreclosure of any mortgage or deed of trust or any deed in lieu thereof, to attorn to the purchaser or any successors thereto upon any such foreclosure sale or deed in lieu thereof as so requested to do so by such purchaser and to recognize such purchaser as the lessor under this Lease; Tenant shall, within five (5) days after request execute such further instruments or assurances as such purchaser may reasonably deem necessary to evidence or confirm such attornment. Tenant agrees to provide copies of any notices of Landlords default under this Lease to any mortgagee or deed of trust beneficiary whose address has been provided to Tenant and Tenant shall provide such mortgagee or deed of trust beneficiary a commercially reasonable time after receipt of such notice within which to cure any such default. Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease and the obligations of the Tenant hereunder in the event of any foreclosure proceeding or sale.
If the whole of the Premises or the Project or so much thereof as to render the balance unusable by Tenant shall be taken under power of eminent domain, or is sold, transferred or conveyed in lieu thereof, this Lease shall automatically terminate as of the date of such condemnation, or as of the date possession is taken by the condemning authority, at Landlords option. No award for any partial or entire taking shall be apportioned, and Tenant hereby assigns to Landlord any award which may be made in such taking or condemnation, together with any and all rights of Tenant now or hereafter arising in or to the same or any part thereof; provided, however, that nothing contained herein shall be deemed to give Landlord any interest in or to require Tenant to assign to Landlord any award made to Tenant for the taking of personal property and trade fixtures belonging to Tenant and removable by Tenant at the expiration of the Term hereof as provided hereunder or for the interruption of, or damage to, Tenants business. In the event of a partial taking described in this Article 18, or a sale, transfer or conveyance in lieu thereof, which does not result in a termination of this Lease, the rent shall be apportioned according to the ratio that the part of the Premises remaining useable by Tenant bears to the total area of the Premises. Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of the California Code of Civil Procedure.
Each of the following acts or omissions of Tenant or of any guarantor of Tenants performance hereunder, or occurrences, shall constitute an Event of Default :
19
All defaults by Tenant of any covenant or condition of this Lease shall be deemed by the parties hereto to be material.
20
21
In the event of any transfer or termination of Landlords interest in the Premises or the Project by sale, assignment, transfer, foreclosure, deed-in-lieu of foreclosure or otherwise whether voluntary or involuntary, Landlord shall be automatically relieved of any and all obligations and liabilities on the part of Landlord from and after the date of such transfer or termination, including furthermore without limitation, the obligation of Landlord under Article 4 and California Civil Code 1950.7 above to return the security deposit, provided said security deposit is transferred to said transferee. Tenant agrees to attorn to the transferee upon any such transfer and to recognize such transferee as the lessor under this Lease and Tenant shall, within five (5) days after request, execute such further instruments or assurances as such transferee may reasonably deem necessary to evidence or confirm such attornment.
In connection with this Lease, Tenant warrants and represents that it has had dealings only with firm(s) set forth in Article 1.H. of the Basic Lease Provisions and that it knows of no other person or entity who is or might be entitled to a commission, finders fee or other like payment in connection herewith and does hereby indemnify and agree to hold Landlord, its agents, members, partners, representatives, officers, affiliates, shareholders, employees, successors and assigns harmless from and against any and all loss, liability and expenses that Landlord may incur should such warranty and representation prove incorrect, inaccurate or false.
Tenant shall rent from Landlord, commencing on the Commencement Date, the number of reserved and unreserved parking passes set forth in Article 1.I. of the Basic Lease Provisions, which parking passes shall pertain to the Project parking facility. Tenant shall pay to Landlord for parking passes the prevailing rate charged from time to time at the location of such parking passes. In addition, Tenant shall be responsible for the full amount of any taxes imposed by any governmental authority in connection with the renting of such parking passes by Tenant or the use of the parking facility by Tenant. Tenants continued right to use the parking passes is conditioned upon Tenant abiding by all rules and regulations which are prescribed from time to time for the orderly operation and use of the parking facility where the parking passes are located, including any sticker or other identification system established by Landlord, Tenants cooperation in seeing that Tenants employees and visitors also comply with such rules and regulations, and Tenant not being in default under this Lease. Landlord specifically reserves the right to change the size, configuration, design, layout and all other aspects of the Project parking facility at any time and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of rent under this Lease, from time to time, close-off or restrict access to the Project parking facility for purposes of permitting or facilitating any such construction, alteration or improvements. Landlord may, from time to time, relocate any reserved parking spaces (if any) rented by Tenant to another location in the Project parking facility. Landlord may delegate its responsibilities hereunder to a parking operator or a lessee of the parking facility in which case such parking operator or lessee shall have all the rights of control attributed hereby to the Landlord. The parking passes rented by Tenant pursuant to this Article 23 are provided to Tenant solely for use by Tenants own personnel and such passes may not be transferred, assigned, subleased or otherwise alienated by Tenant without Landlords prior approval. Tenant may validate visitor parking by such method or methods as the Landlord may establish, at the validation rate from time to time generally applicable to visitor parking.
22
No waiver by Landlord of any provision of this Lease shall be deemed to be a waiver of any other provision hereof or of any subsequent breach by Tenant of the same or any other provision. No provision of this Lease may be waived by Landlord, except by an instrument in writing executed by Landlord. Landlords consent to or approval of any act by Tenant requiring Landlords consent or approval shall not be deemed to render unnecessary the obtaining of Landlords consent to or approval of any subsequent act of Tenant, whether or not similar to the act so consented to or approved. No act or thing done by Landlord or Landlords agents during the Term of this Lease shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept such surrender shall be valid unless in writing and signed by Landlord. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlords knowledge of such preceding breach at the time of acceptance of such rent. Any payment by Tenant or receipt by Landlord of an amount less than the total amount then due hereunder shall be deemed to be in partial payment only thereof and not a waiver of the balance due or an accord and satisfaction, notwithstanding any statement or endorsement to the contrary on any check or any other instrument delivered concurrently therewith or in reference thereto. Accordingly, Landlord may accept any such amount and negotiate any such check without prejudice to Landlords right to recover all balances due and owing and to pursue its other rights against Tenant under this Lease, regardless of whether Landlord makes any notation on such instrument of payment or otherwise notifies Tenant that such acceptance or negotiation is without prejudice to Landlords rights.
Tenant shall, at any time and from time to time, upon not less than ten (10) days prior written notice from Landlord, execute, acknowledge and deliver to Landlord a statement in writing (the Estoppel Certificate ) certifying the following information, (but not limited to the following information in the event further information is requested by Landlord): (i) that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as modified, is in full force and effect); (ii) the dates to which the rental and other charges are paid in advance, if any; (iii) the amount of Tenants security deposit, if any; and (iv) acknowledging that there are not, to Tenants knowledge, any uncured defaults on the part of Landlord hereunder, and no events or conditions then in existence which, with the passage of time or notice or both, would constitute a default on the part of Landlord hereunder, or specifying such defaults, events or conditions, if any are claimed. It is expressly understood and agreed that any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the Real Property. Tenants failure to deliver such statement within such time shall constitute an admission by Tenant that all statements contained therein are true and correct. Furthermore, if Tenant fails to timely deliver an Estoppel Certificate to Landlord pursuant to the terms of this Article 25, then without limiting any other rights and remedies of Landlord, Landlord shall have the right to charge Tenant an amount equal to $500 per day for each day thereafter until Tenant delivers to Landlord an Estoppel Certificate pursuant to the terms hereof. Tenant acknowledges and agrees that (A) such charge compensates Landlord for the administrative costs caused by the delinquency, and (B) Landlords damage would be difficult to compute and the amount stated in this paragraph represents a reasonable estimate of such damage. Tenant hereby irrevocably appoints Landlord as Tenants attorney-in-fact and in Tenants name, place and stead to execute any and all documents described in this Article 25 if Tenant fails to do so within the specified time period.
Notwithstanding anything in this Lease to the contrary, any remedy of Tenant for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default by Landlord hereunder or any claim, cause of action or obligation, contractual, statutory or otherwise by Tenant against Landlord or the Landlord Parties
23
concerning, arising out of or relating to any matter relating to this Lease and all of the covenants and conditions or any obligations, contractual, statutory, or otherwise set forth herein, shall be limited solely and exclusively to an amount which is equal to the lesser of (i) the interest of Landlord in and to the Project, and (ii) the interest Landlord would have in the Project if the Project were encumbered by third party debt in an amount equal to seventy percent (70%) of the then current value of the Project (as such value is reasonably determined by Landlord). No other property or assets of Landlord or any Landlord Party shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenants remedies under or with respect to this Lease, Landlords obligations to Tenant, whether contractual, statutory or otherwise, the relationship of Landlord and Tenant hereunder, or Tenants use or occupancy of the Premises.
This Lease and the obligations of Tenant hereunder shall not be affected or impaired because Landlord is unable to fulfill any of its obligations hereunder or is delayed in doing so, if such inability or delay is caused by reason of any prevention, delay, stoppage due to strikes, lockouts, acts of God, acts of terrorism, or any other cause previously, or at such time, beyond the reasonable control or anticipation of Landlord (collectively, a Force Majeure ) and Landlords obligations under this Lease shall be forgiven and suspended by any such Force Majeure.
25
26
27
28
(i) Every part of the Project except the inside surfaces of all walls, windows and doors bounding the Premises (including exterior building walls, the rooftop, core corridor walls and doors and any core corridor entrance), and any space in or adjacent to the Premises or within the Project used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric or other utilities, sinks or other building facilities, and the use thereof, as well as access thereto through the Premises for the purposes of operation, maintenance, decoration and repair, are reserved to Landlord.
(ii) Landlord reserves the right, without incurring any liability to Tenant therefor, to make such changes in or to the Project and the fixtures and equipment thereof, as well as in or to the street entrances, halls, passages, elevators, stairways and other improvements thereof, as it may deem necessary or desirable.
(iii) Landlord may adopt any name for the Project and Landlord reserves the right, from time to time, to change the name and/or address of the Project at any time.
(i) If Tenant constitutes more than one person or entity, (A) each of them shall be jointly and severally liable for the keeping, observing and performing of all of the terms, covenants, conditions and provisions of this Lease to be kept, observed and performed by Tenant, (B) the term Tenant as used in this Lease shall mean and include each of them jointly and severally, and (C) the act of or notice from, or notice or refund to, or the signature of, any one or more of them, with respect to the tenancy of this Lease, including, but not limited to, any renewal, extension, expiration, termination or modification of this Lease, shall be binding upon each and all of the persons or entities executing this Lease as Tenant with the same force and
29
effect as if each and all of them had so acted or so given or received such notice or refund or so signed.
(ii) If Tenant is a partnership (or is comprised of two or more persons, individually and as co-partners of a partnership) or if Tenants interest in this Lease shall be assigned to a partnership (or to two or more persons, individually and as co-partners of a partnership) pursuant to Article 15 hereof (any such partnership and such persons hereinafter referred to in this Section 30(q)(ii) as Partnership Tenant ), the following provisions of this Lease shall apply to such Partnership Tenant:
30
ARTICLE 31
OPTION TO EXTEND
(a) Option Right . Landlord hereby grants the Tenant named in this Lease (the Original Tenant ) one (1) option ( Option ) to extend the Term for the entire Premises for a period of five (5) years (each, an Option Term ), which Option shall be exercisable only by written notice delivered by Tenant to Landlord as set forth below. The rights contained in this Article 31 may only be exercised by the Original Tenant and any assignee or other transferee of the Original Tenants interest in this Lease.
(b) Option Rent . The Basic Rental payable by Tenant during the Option Term ( Option Rent ) shall be equal to the Market Rent (defined below), but in no event shall the Option Rent be less than Tenant is paying under the Lease on the month immediately preceding the Option Term for Monthly Basic Rental, including all escalations, Direct Costs, additional rent and other charges. Market Rent shall mean the applicable Monthly Basic Rental, at which tenants, as of the commencement of the Option Term, are leasing non-sublease space which is not encumbered by expansion rights and which is comparable in size, location and quality to the Premises in renewal transactions for a term comparable to the Option Term, which comparable space is located in the Project and office buildings comparable to the Project in Beverly Hills, California (as reasonably determined by Landlord), taking into consideration the
31
value of the existing improvements in the Premises to Tenant, as compared to the value of the existing improvements in such comparable space, with such value to be based upon the age, quality and layout of the improvements and the extent to which the same could be utilized by Tenant with consideration given to the fact that the improvements existing in the Premises are specifically suitable to Tenant. .
(c) Exercise of Option . The Option shall be exercised by Tenant only in the following manner: (i) Tenant shall not be in default, and shall not have been in default under the Lease more than once; (ii) Tenant shall deliver written notice (Interest Notice) to Landlord not more than fifteen (15) months nor less than nine (9) months prior to the expiration of the Term, stating that Tenant is interested in exercising the Option, (iii) within fifteen (15) business days of Landlords receipt of Tenants written notice, Landlord shall deliver notice ( Option Rent Notice ) to Tenant setting forth the Option Rent; and (iv) Tenant shall provide Landlord written notice ( Tenants Rent Notice ) within five (5) business days after receipt of the Option Rent Notice, in which Tenant may, at its option, object to the Option Rent contained in the Option Rent Notice. Tenants failure to deliver the Interest Notice on or before the dates specified above shall be deemed to constitute Tenants election not to exercise the Option. Tenants failure to deliver the Tenants Rent Notice on or before the date specified above shall be deemed to constitute Tenants approval of the Option Rent set forth in the Option Rent Notice. If Tenant timely and properly exercises its Option, the Term shall be extended for the Option Term upon all of the terms and conditions set forth in the Lease, except that the rent for the Option Term shall be as indicated in the Option Rent Notice unless Tenant objects in Tenants Rent Notice to the Option Rent contained in the Option Rent Notice, in which event Landlord and Tenant shall use their best good faith efforts to agree upon the Market Rent. If Landlord and Tenant fail to reach agreement within fifteen (15) days following Tenants Acceptance (the Outside Agreement Date ), then three (3) arbitrators shall be selected pursuant to Section 31(d) below and within three (3) business days following such selection, each party shall submit to each other and to the arbitrators a separate determination of the Market Rent. Tenants failure to timely submit its determination of Market Rent shall be deemed acceptance of Landlords submitted determination of Market Rent. If Tenants and Landlords submitted Market Rent are within five percent (5%) of each other, the Market Rent shall be deemed to be Landlords submitted Market Rent. If Landlords submitted Market Rent is more than 5% higher than Tenants submitted Market Rent, then the parties shall follow the procedure and the Option Rent shall be determined, as set forth in Section 31(d) below .
(d) Determination of Market Rent . If Tenant timely and appropriately objects to the Market Rent in Tenants Rent Notice, Landlord and Tenant fail to reach agreement on the Market Rent prior to the Outside Agreement Date, then each party shall make a separate determination of the Market Rent which shall be submitted to each other and to arbitration in accordance with the following items (i) through (vii):
(i) Landlord and Tenant shall each appoint, within ten (10) days of the Outside Agreement Date, one arbitrator who shall by profession be a current real estate broker or appraiser of comparable commercial properties in the immediate vicinity of the Project, and who has been active in such field over the last five (5) years. The determination of the arbitrators shall be limited solely to the issue of whether Landlords or Tenants submitted Market Rent is the closest to the actual Market Rent as determined by the arbitrators, taking into account the requirements of item (b), above (i.e., the arbitrators may only select Landlords or Tenants determination of Market Rent and shall not be entitled to make a compromise determination) .
(ii) The two (2) arbitrators so appointed shall within five (5) business days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two (2) arbitrators.
(iii) The three (3) arbitrators shall within fifteen (15) days of the appointment of the third arbitrator reach a decision as to whether the parties shall use Landlords or Tenants submitted Market Rent, and shall notify Landlord and Tenant thereof.
(iv) The decision of the majority of the three (3) arbitrators shall be binding upon Landlord and Tenant.
32
(v) If either Landlord or Tenant fails to appoint an arbitrator within ten (10) days after the applicable Outside Agreement Date, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrators decision shall be binding upon Landlord and Tenant.
(vi) If the two arbitrators fail to agree upon and appoint a third arbitrator, or both parties fail to appoint an arbitrator, then the appointment of the third arbitrator or any arbitrator shall be dismissed and the matter to be decided shall be forthwith submitted to arbitration under the provisions of the American Arbitration Association, but subject to the instruction set forth in this item (d).
(vii) The cost of arbitration shall be paid by Landlord and Tenant equally.
(e) No Defaults . All Option rights of Tenant under this Article 31 shall terminate and be of no further force or effect, notwithstanding Tenants due and timely exercise of an Option, if, after such exercise, (i) Tenant fails to pay to Landlord a monetary obligation of Tenant for a period of five (5) days after written notice that such obligation is due, or (ii) Tenant fails to commence to cure any other default under this Lease within thirty (30) days after the date that Landlord gives notice to Tenant of such default and/or Tenant fails thereafter to diligently prosecute said cure to completion within thirty (30) days after the date of such notice, or (iii) Tenant has committed any incurable breach, or is otherwise in default of any of the terms, covenants and conditions of this Lease.
(f) No Other Option . Except for the Option granted pursuant to this Section 31 , Tenant acknowledges that it shall have no additional option to extend the term of the Lease.
ARTICLE 32
RIGHT OF FIRST OFFER
(i) Procedure for Offer . Landlord shall notify Tenant (the First Offer Notice ) from time to time when Landlord determines that Landlord shall commence the marketing of any First Offer Space because such space shall become available for lease to third parties, where no holder of a Superior Right desires to lease such space. The First Offer Notice shall describe the space so offered to Tenant and shall set forth Landlords proposed material economic terms and conditions applicable to Tenants lease of such space (collectively, the Economic Terms ), including the proposed term of lease and the proposed rent payable for the First Offer Space. Notwithstanding the foregoing, Landlords obligation to deliver the First Offer Notice shall not apply during the last nine (9) months of the initial Term unless Tenant has delivered an Interest Notice to Landlord pursuant to Section 31 above nor shall Landlord be obligated to deliver the First Offer Notice during the last eight (8) months of the initial Term unless Tenant has timely delivered Tenants Acceptance to Landlord pursuant to Section 31(c) above.
33
(ii) Procedure for Acceptance . If Tenant wishes to exercise Tenants right of first offer with respect to the space described in the First Offer Notice, then within five (5) business days after delivery of the First Offer Notice to Tenant, Tenant shall deliver an unconditional irrevocable notice to Landlord of Tenants exercise of its right of first offer with respect to the entire space described in the First Offer Notice and the Economic Terms shall be as set forth in the First Offer Notice. If Tenant does not unconditionally exercise its right of first offer within the five (5) business day period, then Landlord shall be free to lease the space described in the First Offer Notice to anyone to whom Landlord desires on any terms Landlord desires and Tenants right of first offer shall terminate as to the First Offer Space described in the First Offer Notice. Notwithstanding anything to the contrary contained herein, Tenant must elect to exercise its right of first offer, if at all, with respect to all of the space offered by Landlord to Tenant at any particular time, and Tenant may not elect to lease only a portion thereof.
(iii) Construction of First Offer Space . Tenant shall take the First Offer Space in its as-is condition, and Tenant shall be entitled to construct improvements in the First Offer Space in accordance with the provisions of Article 9 of this Lease; provided, however, that Landlord shall provide to Tenant such tenant improvement allowance as Landlord is then offering to new tenants for comparably sized space in the Project for a comparable term.
(iv) Lease of First Offer Space . If Tenant timely and properly exercises Tenants right to lease the First Offer Space as set forth herein, Landlord and Tenant shall execute an amendment adding such First Offer Space to this Lease upon the same non-economic terms and conditions as applicable to the initial Premises, and the economic terms and conditions as provided in this Section 32(b). Unless otherwise specified in Landlords Economic Terms, Tenant shall commence payment of rent for the First Offer Space and the Term of the First Offer Space shall commence upon the date of delivery of such space to Tenant.
(v) No Defaults . The rights contained in this Section 32(b) shall be personal to the Original Tenant, and may only be exercised by the Original Tenant (and not any assignee, sublessee or other transferee of the Original Tenants interest in this Lease) if Original Tenant occupies the entire Premises as of the date of the First Offer Notice. Tenant shall not have the right to lease First Offer Space as provided in this Section 32(b) if, as of the date of the First Offer Notice, or, at Landlords option, as of the scheduled date of delivery of such First Offer Space to Tenant, Tenant is in default under this Lease or Tenant has previously been in default under this Lease more than once.
ARTICLE 33
SIGNAGE/DIRECTORY
(a) Provided Tenant is not in default hereunder, Tenant, at Landlords sole cost and expense, shall have the right to its proportionate share of the lobby directory during the Term. Provided Tenant is not in default hereunder, Tenant shall have the right, at Tenants sole cost and expense, to install a strip on the Projects monument sign ( Tenants Signage ).
(b) Right of First Offer for Building Top Signage . Landlord hereby grants to Tenant a right of first offer with respect to eyebrow or building top signage (Signage Right); provided, however, such Signage Right shall only be effective if Tenant has delivered a written notice to Landlord, stating that tenant is interested in installing eyebrow or building top signage (the Building Top Signage) during the three (3) month period immediately preceding the date that Landlord determines that the Building Top Signage is available for lease to third parties. Notwithstanding the foregoing (i) such Signage Right of Tenant shall commence only following the expiration or earlier termination of any existing lease pertaining to the Building Top Signage (the Superior Leases), including any renewal or extension of such existing or future lease, whether or not such renewal or extension is pursuant to an express written provision in such lease, and regardless of whether any such renewal or extension is consummated pursuant to a lease amendment or a new lease, (ii) such Signage Right shall be subordinate and secondary to all rights of first refusal, first offer or similar rights granted to the tenants of the Superior Lease, and (iii) such Signage Right shall be subordinate and secondary to the right of the Landlord to install an Building Top Signage for its own behalf or on behalf of its affiliates. Tenants Signage Right shall be on the terms and conditions set forth in this Section 33.
34
(i) Procedure for Offer . Landlord shall notify Tenant (the Signage Notice) from time to time when Landlord determines that Landlord shall commence the marketing of the Building Top Signage because such space shall become available for lease to third parties. The Signage Notice shall set forth Landlords proposed material economic terms and conditions applicable to the Building Top Signage (collectively, the Signage Terms), including the proposed term of lease and the proposed rent payable for the Building Top Signage. Notwithstanding the foregoing, Landlords obligation to deliver the Signage Notice shall not apply during the last nine (9) months of the initial Term unless Tenant has delivered an Interest Notice to Landlord pursuant to Section 31 above nor shall Landlord be obligated to deliver the Signage Notice during the last eight (8) months of the initial Term unless Tenant has timely delivered Tenants Acceptance to Landlord pursuant to Section 31(c) above.
(ii) Procedure for Acceptance . If Tenant wishes to exercise Tenants Signage Right with respect to the Building Top Signage, then within five (5) business days after delivery of the Signage Notice to Tenant, Tenant shall deliver an unconditional irrevocable notice to Landlord of Tenants exercise of its Signage Right and the Economic Terms shall be as set forth in the Signage Notice. If Tenant does not unconditionally exercise its Signage Right within the five (5) business day period, then Landlord shall be free to lease the Building Top Signage space to anyone to whom Landlord desires on any terms Landlord desires and Tenants Signage Right shall terminate.
(iii) Lease of First Offer Space. If Tenant timely and properly exercises Tenants Signage Right as set forth herein, Landlord and Tenant shall execute an amendment to this Lease.
(c) Tenants Signage and any Building Top Signage to be installed upon the proper exercise of the Signage Right, shall be subject to Landlords approval as to, without limitation, size, design, location, graphics, materials, colors and similar specifications and shall be consistent with the exterior design, materials and appearance of the Project and the Projects signage program and shall be further subject to all matters of record and all applicable governmental laws, rules, regulations, codes and Tenants receipt of all permits and other governmental approvals and any applicable covenants, conditions and restrictions. All of tenants signage rights set forth in this Article 33 shall be personal to the Original Tenant and may not be assigned to any assignee or sublessee, or any other person or entity. Landlord has the right, but not the obligation, to oversee the installation of Tenants Signage and any Building Top Signage. The cost to maintain and operate, if any, Tenants Signage and any Building Top Signage shall be paid for by Tenant, and Tenant shall be separately metered for such expense (the cost of separately metering any utility usage shall also be paid for by Tenant). Upon the expiration of the Term, or other earlier termination of this Lease, Tenant shall, at Tenants sole cost, cause the removal of Tenants Signage and the Building Top Signage (provided that Landlord shall have the right, at its election, to perform such removal on behalf of Tenant, at Tenants expense). Such costs shall (i) be payable within three (3) business days following written demand therefor from Landlord, and (ii) include, without limitation, the cost to repair and restore the Project to its original condition, normal wear and tear excepted.
ARTICLE 34
TERMINATION RIGHT
Subject to the terms and conditions set forth in this Article 34, effective as of first day of the sixty-first (61st) month of the initial Lease Term only (the Termination Date), Tenant shall have the one-time option (the Termination Option) to terminate the entire Lease (but not any portion of the Lease), upon the following terms and conditions; if the following terms and conditions are not timely and completely satisfied, then the Termination Option shall be null and void with no further force and effect:
(a) Tenant shall give Landlord written notice (the Termination Notice) of Tenants election to exercise the Termination Option at least 180 days prior to the Termination Date;
(b) There shall exist no material monetary or material nonmonetary default under the Lease (beyond any applicable notice and cure period) on the date Landlord receives the Termination Notice or on the Termination Date; and
35
(c) Tenant shall pay to Landlord an amount equal to the sum of (i) the unamortized Tenant Improvement Allowance and (ii) the unamortized leasing commissions paid or payable by Landlord in connection with this Lease, which each shall be amortized over the initial Term of the Lease beginning on the Commencement Date and ending on the originally scheduled Expiration Date, plus interest accruing at ten percent (10%) beginning on the date of disbursement (the Termination Fee). The Termination Fee shall be payable by Tenant to Landlord within ten (10) days of Tenants delivery of the Termination Notice to Landlord, in immediately available funds. If Tenant does not timely pay any portion of the Termination Fee to Landlord as set forth herein, then, at Landlords option, in addition to all other rights and remedies of Landlord, (i) the Termination Option (and Termination Notice) shall be null and void with no force and effect, and this Lease shall continue in full force and effect as if Tenant had not elected to terminate this Lease and as if this Article 34 did not exist, and/or (ii) Tenant shall be in material default under this Lease, without any notice and/or cure period, and Landlord may pursue all of its available rights and remedies in connection therewith.
In the event Tenant timely and properly exercises the Termination Option, the term of this Lease shall terminate effective as of the Termination Date, Basic Rental and all other monetary obligations under this Lease shall be paid through and apportioned as of the Termination Date, and neither Landlord nor Tenant shall have any rights, liabilities or obligations accruing under the Lease after the Termination Date, except for such rights and liabilities which, by the terms of the Lease are obligations of the Tenant or Landlord which expressly survive the expiration of this Lease. The Termination Option shall automatically terminate and become null and void upon (X) the failure of Tenant to timely or properly exercise the Termination Option; or (Y) Tenants right to possession of the Premises being terminated prior to the exercise of the Termination Option. The Termination Option shall be personal to the Original Tenant, and shall only be applicable during the initial Lease Term (i.e., the Termination Option shall not exist during any extension or renewal of the lease Term). Time is of the essence with respect to every deadline set forth in this Article 34.
ARTICLE 35
ARBITRATION
The parties agree that in the event of a good faith dispute over (i) the condition of the Premises upon delivery, (ii) a consent to a proposed Transfer, or (iii) the construction of the Tenant Improvements, either Landlord or Tenant shall have the right to resolve the dispute by filing for binding arbitration before a retired judge of the Superior Court of the State of California (the Arbitrator) under the auspices of Judicial Arbitration & Mediation Services, Inc. (JAMS). Such arbitration shall be initiated by the parties, or either of them, within ten (10) days after either party sends notice (the Arbitration Notice) of a demand to arbitrate to the other party and to JAMS. The Arbitration Notice shall contain a description of the subject matter of the arbitration, the dispute with respect thereto, the amount involved, if any, and the remedy or determination sought. The parties may agree on a retired judge from the JAMS panel. If they are unable to promptly agree, JAMS will provide a list of three available judges and each party may strike one. The remaining judge (or if there are two, the one selected by JAMS) will serve as the Arbitrator. In the event that JAMS shall no longer exist or if JAMS fails or refuses to accept submission of such dispute, then the dispute shall be resolved by binding arbitration before the American Arbitration Association (AAA) under the AAAs commercial arbitration rules then in effect.
The Arbitrator shall schedule a pre-hearing conference to resolve procedural matters, arrange for the exchange of information, obtain stipulations, and narrow the issues. The parties shall be entitled to conduct discovery, including a pre-hearing exchange of information by the parties, and also including, without limitation, production of requested documents and exchange of summaries of testimony of proposed witnesses, and examination by deposition of parties and third-party witnesses. This discretion shall be exercised in favor of discovery reasonable under the circumstances.
The arbitration shall be conducted in Los Angeles, California. Any party may be represented by counsel or other authorized representative. In rendering a decision(s), the Arbitrator shall determine the rights and obligations of the parties according to the substantive and procedural laws of the State of California and the provisions of the Lease. The Arbitrators decision shall be based on the evidence introduced at the hearing, including all logical and
36
reasonable inferences therefrom. The Arbitrator may make any determination, and/or grant any remedy or relief (an Arbitration Award) that is just and equitable. The decision must be based on, and accompanied by, a written statement of decision explaining the factual and legal basis for the decision as to each of the principal controverted issues. The decision shall be conclusive and binding, and it may thereafter be confirmed as a judgment by the Superior Court of the State of California, subject only to challenge on the grounds set forth in the California Code of Civil Procedure Section 1286.2 and correction on the grounds set forth in California Code of Civil Procedure Section 1286.6. The validity and enforceability of the Arbitrators decision is to be determined exclusively by the California courts pursuant to the terms and conditions of this Agreement. The Arbitrators fees and costs shall be paid by the non-prevailing party as determined by the Arbitrator in his or her discretion. A party shall be determined by the Arbitrator to be the prevailing party if its proposal for the resolution of dispute is the closer to that adopted by the Arbitrator.
[The rest of this page intentionally left blank. Signatures on the next page.]
37
IN WITNESS WHEREOF, the parties have executed this Lease, consisting of the foregoing provisions and Articles, including all exhibits and other attachments referenced therein, as of the date first above written.
LANDLORD |
|
||
|
|
||
9701-HEMPSTEAD PLAZA, LLC, |
|
||
a Delaware limited liability company |
|
||
|
|
||
By: |
9701 WILSHIRE MANAGEMENT LLC, |
|
|
|
a Delaware limited liability company |
|
|
|
|
|
|
|
|
|
|
|
By: |
/S/ JAMES T. LeFRAK |
|
|
|
|
|
|
Name: |
|
|
|
|
|
|
|
Its: |
VICE PRESIDENT |
|
|
|
||
|
|
||
9701-CAROLINA GARDENS LLC, |
|
||
a Delaware limited liability company |
|
||
|
|
||
By: |
9701 WILSHIRE MANAGEMENT LLC, |
|
|
|
a Delaware limited liability company |
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ JAMES T. LeFRAK |
|
|
|
|
|
|
Name: |
|
|
|
|
|
|
|
Its: |
VICE PRESIDENT |
|
|
|
||
|
|
||
9701-WEST POINT REALTY LLC, |
|
||
a Delaware limited liability company |
|
||
|
|
||
By: |
9701 WILSHIRE MANAGEMENT LLC, |
|
|
|
a Delaware limited liability company |
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ JAMES T. LeFRAK |
|
|
|
|
|
|
Name: |
|
|
|
|
|
|
|
Its: |
VICE PRESIDENT |
|
[Signatures continued on the next page.]
38
9701-DAKOTA LEASING LLC, |
|
||
a Delaware limited liability company |
|
||
|
|
||
By: |
9701 WILSHIRE MANAGEMENT LLC, |
|
|
|
a Delaware limited liability company |
|
|
|
|
|
|
|
|
|
|
|
By: |
s/s James LeFrak |
|
|
|
|
|
|
Name: |
JAMES LeFRAK |
|
|
Its: |
Vice President |
|
|
|
|
|
9701-IOWA LEASING LLC, |
|
||
a Delaware limited liability company |
|
||
|
|
||
By: |
9701 WILSHIRE MANAGEMENT LLC, |
|
|
|
a Delaware limited liability company |
|
|
|
|
|
|
|
|
|
|
|
By: |
s/s James LeFrak |
|
|
|
|
|
|
Name: |
JAMES LeFRAK |
|
|
Its: |
Vice President |
|
|
|
|
|
|
|
|
|
TENANT |
|
||
|
|
||
KENNEDY-WILSON, INC., |
|
||
a Delaware corporation |
|
||
|
|
||
|
|
||
By: |
/s/ Freeman Lyle |
|
|
|
|
|
|
Name: |
FREEMAN LYLE |
|
|
|
|
|
|
Its: |
EVP/CFO |
|
39
EXHIBIT A
PREMISES
* |
This Exhibit A is provided for informational purposes only and is intended to be only an approximation of the layout of the Premises and shall not be deemed to constitute any representation by Landlord as to the exact layout or configuration of the Premises. |
1
EXHIBIT B
RULES AND REGULATIONS
1. No sign, advertisement or notice shall be displayed, printed or affixed on or to the Premises or to the outside or inside of the Project or so as to be visible from outside the Premises or Project without Landlords prior written consent. Landlord shall have the right to remove any non-approved sign, advertisement or notice, without notice to and at the expense of Tenant, and Landlord shall not be liable in damages for such removal. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by Landlord or by a person selected by Landlord and in a manner and style acceptable to Landlord.
2. Tenant shall not obtain for use on the Premises ice, waxing, cleaning, interior glass polishing, rubbish removal, towel or other similar services, or accept barbering or bootblackening, or coffee cart services, milk, soft drinks or other like services on the Premises, except from persons authorized by Landlord and at the hours and under regulations fixed by Landlord. No vending machines or machines of any description shall be installed, maintained or operated upon the Premises without Landlords prior written consent.
3. The sidewalks, halls, passages, exits, entrances, elevators and stairways shall not be obstructed by Tenant or used for any purpose other than for ingress and egress from Tenants Premises. Under no circumstances is trash to be stored in the corridors. Notice must be given to Landlord for any large deliveries. Furniture, freight and other large or heavy articles, and all other deliveries may be brought into the Project only at times and in the manner designated by Landlord, and always at Tenants sole responsibility and risk. Landlord may impose reasonable charges for use of freight elevators after or before normal business hours. All damage done to the Project by moving or maintaining such furniture, freight or articles shall be repaired by Landlord at Tenants expense. Tenant shall not take or permit to be taken in or out of entrances or passenger elevators of the Project, any item normally taken, or which Landlord otherwise reasonably requires to be taken, in or out through service doors or on freight elevators. Tenant shall move all supplies, furniture and equipment as soon as received directly to the Premises, and shall move all waste that is at any time being taken from the Premises directly to the areas designated for disposal.
4. Toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein.
5. Tenant shall not overload the floor of the Premises or mark, drive nails, screw or drill into the partitions, ceilings or floor or in any way deface the Premises. Tenant shall not place typed, handwritten or computer generated signs in the corridors or any other common areas. Should there be a need for signage additional to the Project standard tenant placard, a written request shall be made to Landlord to obtain approval prior to any installation. All costs for said signage shall be Tenants responsibility.
6. In no event shall Tenant place a load upon any floor of the Premises or portion of any such flooring exceeding the floor load per square foot of area for which such floor is designed to carry and which is allowed by law, or any machinery or equipment which shall cause excessive vibration to the Premises or noticeable vibration to any other part of the Project. Prior to bringing any heavy safes, vaults, large computers or similarly heavy equipment into the Project, Tenant shall inform Landlord in writing of the dimensions and weights thereof and shall obtain Landlords consent thereto. Such consent shall not constitute a representation or warranty by Landlord that the safe, vault or other equipment complies, with regard to distribution of weight and/or vibration, with the provisions of this Rule 6 nor relieve Tenant from responsibility for the consequences of such noncompliance, and any such safe, vault or other equipment which Landlord determines to constitute a danger of damage to the Project or a nuisance to other tenants, either alone or in combination with other heavy and/or vibrating objects and equipment, shall be promptly removed by Tenant, at Tenants cost, upon Landlords written notice of such determination and demand for removal thereof.
1
7. Tenant shall not use or keep in the Premises or Project any kerosene, gasoline or inflammable, explosive or combustible fluid or material, or use any method of heating or air-conditioning other than that supplied by Landlord.
8. Tenant shall not lay linoleum, tile, carpet or other similar floor covering so that the same shall be affixed to the floor of the Premises in any manner except as approved by Landlord.
9. Tenant shall not install or use any blinds, shades, awnings or screens in connection with any window or door of the Premises and shall not use any drape or window covering facing any exterior glass surface other than the standard drapes, blinds or other window covering established by Landlord.
10. Tenant shall cooperate with Landlord in obtaining maximum effectiveness of the cooling system by closing window coverings when the suns rays fall directly on windows of the Premises. Tenant shall not obstruct, alter, or in any way impair the efficient operation of Landlords heating, ventilating and air-conditioning system. Tenant shall not tamper with or change the setting of any thermostats or control valves.
11. The Premises shall not be used for manufacturing or for the storage of merchandise except as such storage may be incidental to the permitted use of the Premises. Tenant shall not, without Landlords prior written consent, occupy or permit any portion of the Premises to be occupied or used for the manufacture or sale of liquor or tobacco in any form, or a barber or manicure shop, or as an employment bureau. The Premises shall not be used for lodging or sleeping or for any improper, objectionable or immoral purpose. No auction shall be conducted on the Premises.
12. Tenant shall not make, or permit to be made, any unseemly or disturbing noises, or disturb or interfere with occupants of Project or neighboring buildings or premises or those having business with it by the use of any musical instrument, radio, phonographs or unusual noise, or in any other way.
13. No bicycles, vehicles or animals of any kind shall be brought into or kept in or about the Premises, and no cooking shall be done or permitted by any tenant in the Premises, except that the preparation of coffee, tea, hot chocolate and similar items for tenants, their employees and visitors shall be permitted. No tenant shall cause or permit any unusual or objectionable odors to be produced in or permeate from or throughout the Premises. The foregoing notwithstanding, Tenant shall have the right to use a microwave and to heat microwavable items typically heated in an office. No hot plates, toasters, toaster ovens or similar open element cooking apparatus shall be permitted in the Premises.
14. The sashes, sash doors, skylights, windows and doors that reflect or admit light and air into the halls, passageways or other public places in the Project shall not be covered or obstructed by any tenant, nor shall any bottles, parcels or other articles be placed on the window sills.
15. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any tenant, nor shall any changes be made in existing locks or the mechanisms thereof unless Landlord is first notified thereof, gives written approval, and is furnished a key therefor. Each tenant must, upon the termination of his tenancy, give to Landlord all keys and key cards of stores, offices, or toilets or toilet rooms, either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys so furnished, such tenant shall pay Landlord the cost of replacing the same or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such change. If more than two keys for one lock are desired, Landlord will provide them upon payment therefor by Tenant. Tenant shall not key or re-key any locks. All locks shall be keyed by Landlords locksmith only.
16. Landlord shall have the right to prohibit any advertising by any tenant which, in Landlords opinion, tends to impair the reputation of the Project or its desirability as an office building and upon written notice from Landlord any tenant shall refrain from and discontinue such advertising.
2
17. Landlord reserves the right to control access to the Project by all persons after reasonable hours of generally recognized business days and at all hours on Sundays and legal holidays and may at all times control access to the equipment areas of the Project outside the Premises. Each tenant shall be responsible for all persons for whom it requests after hours access and shall be liable to Landlord for all acts of such persons. Landlord shall have the right from time to time to establish reasonable rules pertaining to freight elevator usage, including the allocation and reservation of such usage for tenants initial move-in to their premises, and final departure therefrom. Landlord may also establish from time to time reasonable rules for accessing the equipment areas of the Project, including the risers, rooftops and telephone closets.
18. Any person employed by any tenant to do janitorial work shall, while in the Project and outside of the Premises, be subject to and under the control and direction of the Office of the Project or its designated representative such as security personnel (but not as an agent or servant of Landlord, and the Tenant shall be responsible for all acts of such persons).
19. All doors opening on to public corridors shall be kept closed, except when being used for ingress and egress. Tenant shall cooperate and comply with any reasonable safety or security programs, including fire drills and air raid drills, and the appointment of fire wardens developed by Landlord for the Project, or required by law. Before leaving the Premises unattended, Tenant shall close and securely lock all doors or other means of entry to the Premises and shut off all lights and water faucets in the Premises.
20. The requirements of tenants will be attended to only upon application to the Office of the Project.
21. Canvassing, soliciting and peddling in the Project are prohibited and each tenant shall cooperate to prevent the same.
22. All office equipment of any electrical or mechanical nature shall be placed by tenants in the Premises in settings approved by Landlord, to absorb or prevent any vibration, noise or annoyance.
23. No air-conditioning unit or other similar apparatus shall be installed or used by any tenant without the prior written consent of Landlord. Tenant shall pay the cost of all electricity used for air-conditioning in the Premises if such electrical consumption exceeds normal office requirements, regardless of whether additional apparatus is installed pursuant to the preceding sentence.
24. There shall not be used in any space, or in the public halls of the Project, either by any tenant or others, any hand trucks except those equipped with rubber tires and side guards.
25. All electrical ceiling fixtures hung in offices or spaces along the perimeter of the Project must be fluorescent and/or of a quality, type, design and bulb color approved by Landlord. Tenant shall not permit the consumption in the Premises of more than 2½ watts per net usable square foot in the Premises in respect of office lighting nor shall Tenant permit the consumption in the Premises of more than 2 ½ watts per net usable square foot of space in the Premises in respect of the power outlets therein, at any one time. In the event that such limits are exceeded, Landlord shall have the right to require Tenant to remove lighting fixtures and equipment and/or to charge Tenant for the cost of the additional electricity consumed.
26. Parking .
(a) Project parking facility hours shall be determined by Landlord from time to time.
(b) Automobiles must be parked entirely within the stall lines on the floor.
(c) All directional signs and arrows must be observed.
(d) The speed limit shall be 5 miles per hour.
(e) Parking is prohibited in areas not striped for parking.
3
(f) Parking cards or any other device or form of identification supplied by Landlord (or its operator) shall remain the property of Landlord (or its operator). Such parking identification device must be displayed as requested and may not be mutilated in any manner. The serial number of the parking identification device may not be obliterated. Devices are not transferable or assignable and any device in the possession of an unauthorized holder will be void. There will be a replacement charge to the Tenant or person designated by Tenant of $25.00 for loss of any parking card. There shall be a security deposit of $25.00 due at issuance for each card key issued to Tenant.
(g) The monthly rate for parking is payable one (1) month in advance and must be paid by the third business day of each month. Failure to do so will automatically cancel parking privileges and a charge at the prevailing daily rate will be due. No deductions or allowances from the monthly rate will be made for days parker does not use the parking facilities.
(h) Tenant may validate visitor parking by such method or methods as the Landlord may approve, at the validation rate from time to time generally applicable to visitor parking.
(i) Landlord (and its operator) may refuse to permit any person who violates the within rules to park in the Project parking facility, and any violation of the rules shall subject the automobile to removal from the Project parking facility at the parkers expense. In either of said events, Landlord (or its operator) shall refund a prorata portion of the current monthly parking rate and the sticker or any other form of identification supplied by Landlord (or its operator) will be returned to Landlord (or its operator).
(j) Project parking facility managers or attendants are not authorized to make or allow any exceptions to these Rules and Regulations.
(k) All responsibility for any loss or damage to automobiles or any personal property therein is assumed by the parker.
(l) Loss or theft of parking identification devices from automobiles must be reported to the Project parking facility manager immediately, and a lost or stolen report must be filed by the parker at that time.
(m) The parking facilities are for the sole purpose of parking one automobile per space. Washing, waxing, cleaning or servicing of any vehicles by the parker or his agents is prohibited.
(n) Landlord (and its operator) reserves the right to refuse the issuance of monthly stickers or other parking identification devices to any Tenant and/or its employees who refuse to comply with the above Rules and Regulations and all City, State or Federal ordinances, laws or agreements.
(o) Tenant agrees to acquaint all employees with these Rules and Regulations.
(p) No vehicle shall be stored in the Project parking facility for a period of more than one (1) week.
27. The Project is a non-smoking Project. Smoking or carrying lighted cigars or cigarettes in the Premises or the Project, including the elevators in the Project, is prohibited.
28. Tenant shall not, without Landlords prior written consent (which consent may be granted or withheld in Landlords absolute discretion), allow any employee or agent to carry any type of gun or other firearm in or about any of the Premises or Project.
4
EXHIBIT C
NOTICE OF TERM DATES
AND TENANTS PROPORTIONATE SHARE
TO: |
|
|
DATE: |
|
|
|
|
|
|
|
|
|
|
RE: Lease dated , 20 , between ( Landlord ), and ( Tenant ), concerning Suite , located at .
Ladies and Gentlemen:
In accordance with the Lease, Landlord wishes to advise and/or confirm the following:
1. That the Premises have been accepted herewith by the Tenant as being substantially complete in accordance with the Lease and that there is no deficiency in construction.
2. That the Tenant has taken possession of the Premises and acknowledges that under the provisions of the Lease the Term of said Lease shall commence as of for a term of ending on .
3. That in accordance with the Lease, Basic Rental commenced to accrue on .
4. If the Commencement Date of the Lease is other than the first day of the month, the first billing will contain a prorata adjustment. Each billing thereafter shall be for the full amount of the monthly installment as provided for in said Lease.
5. Rent is due and payable in advance on the first day of each and every month during the Term of said Lease. Your rent checks should be made payable to at .
6. The exact number of rentable square feet within the Premises is square feet.
7. Tenants Proportionate Share, as adjusted based upon the exact number of rentable square feet within the Premises is %.
8. The Tenant Improvement Allowance is .
9. The number of reserved parking passes rented by Tenant is and the number of unreserved parking passes rented by Tenant is .
AGREED AND ACCEPTED:
TENANT:
|
, |
|
|
|
By: |
|
|
|
|
Its: |
|
|
EXHIBIT ONLY
***DO NOT SIGN INITIAL ONLY***
EXHIBIT D
TENANT WORK LETTER
This Tenant Work Letter shall set forth the terms and conditions relating to the construction of the Premises. This Tenant Work Letter is essentially organized chronologically and addresses the issues of the construction of the Premises, in sequence, as such issues will arise during the actual construction of the Premises. All references in this Tenant Work Letter to Articles or Sections of this Lease shall mean the relevant portions of Articles 1 through 34 of this Lease to which this Tenant Work Letter is attached as Exhibit D, and all references in this Tenant Work Letter to Sections of this Tenant Work Letter shall mean the relevant portions of Sections 1 through 5 of this Tenant Work Letter.
SECTION 1
DELIVERY OF THE PREMISES AND BASE BUILDING
Upon the full execution and delivery of this Lease by Landlord and Tenant, Landlord shall deliver the Premises and Base Building, as that term is defined below, to Tenant, and Tenant shall accept the Premises and Base Building from Landlord in their presently existing as-is condition. The Base Building shall consist of those portions of the Premises which were in existence prior to the construction of tenant improvements in the Premises.
SECTION 2
TENANT IMPROVEMENTS
2.1 Tenant Improvement Allowance . Tenant shall be entitled to a one-time tenant improvement allowance (Tenant Improvement Allowance) in the amount of $50.00 per rentable square feet of space in the Premises, for the cost relating to the initial design and the actual cost of constructing the Tenants improvements, which are permanently affixed to the Premises (Improvements). In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the Tenant Improvement Allowance.
2.2 Disbursement of the Tenant Improvement Allowance
2.2.1 Tenant Improvement Allowance Items . Except as otherwise set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be disbursed by Landlord only for the following items and costs (collectively the Tenant Improvement Allowance Items):
2.2.1.1 Notwithstanding anything to the contrary set forth herein, costs for the payment of the fees of the Architect and the Engineers, as those terms are defined in Section 3.1 of this Tenant Work Letter, shall not exceed an aggregate amount equal to $5.00 for each usable square foot of space in the Premises;
2.2.1.2 The payment of plan check, permit and license fees relating to construction of the Improvements;
2.2.1.3 The cost of construction of the Improvements, including, without limitation, testing and inspection costs and trash removal costs, and contractors fees and general conditions;
2.2.1.4 The cost of any changes in the Base Building when such changes are required by the Construction Drawings (including if such changes are due to the fact that such work is prepared on an unoccupied basis), such cost to include all direct architectural and/or engineering fees and expenses incurred in connection therewith;
2.2.1.5 The cost of any changes to the Construction Drawings or Improvements required by any applicable building code(s) (the Code);
2.2.1.6 Sales and use taxes and Title 24 fees; and
1
2.2.1.7 [Reserved].
2.2.1.8 All other costs to be expended by Tenant and reasonably approved Landlord in connection with the construction of the Improvements.
2.2.2 Disbursement of Tenant Improvement Allowance . During the construction of the Improvements, Landlord shall make monthly disbursements of the Tenant Improvement Allowance for Tenant Improvement Allowance Items for the benefit of Tenant and shall authorize the release of monies for the benefit of Tenant as follows:
2.2.2.1 Monthly Disbursements . On or before the twenty-fifth (25th) day of each calendar month, during the construction of the Improvements, Tenant shall deliver to Landlord: (i) a request for payment of the Contractor, as that term is defined in Section 4.1 of this Tenant Work Letter, approved by Tenant, in a form to be provided by Landlord, showing the schedule, by trade, of percentage of completion of the Improvements in the Premises, detailing the portion of the work completed and the portion not completed; (ii) invoices from all of Tenants Agents, as that term is defined in Section 4.1.2 of this Tenant Work Letter, for labor rendered and materials delivered to the Premises; (iii) executed mechanics lien releases from all of Tenants Agents which shall comply with the appropriate provisions, as reasonably determined by Landlord, of California Civil Code Section 3262(d); and (iv) all other information reasonably requested by Landlord. Tenants request for payment shall be deemed Tenants acceptance and approval of the work furnished and/or the materials supplied as set forth in Tenants payment request. On or before the last day of the following month, Landlord shall deliver a check to Tenant made jointly payable to Contractor and Tenant in payment of the lesser of: (A) the amounts so requested by Tenant, as set forth in this Section 2.2.2.1, above, less a ten percent (10%) retention (the aggregate amount of such retentions to be known as the Final Retention), and (B) the balance of any remaining available portion of the Tenant Improvement Allowance (not including the Final Retention), provided that Landlord does not dispute any request for payment based on a non-compliance of any work with the Approved Working Drawings, as that term is defined in Section 3.4 below, or due to any substandard work. Landlords payment of such amounts shall not be deemed Landlords approval or acceptance of the work furnished or materials supplied as set forth in Tenants payment request.
2.2.2.2 Final Retention . Subject to the provisions of this Tenant Work Letter, a check for the Final Retention payable jointly to Tenant and Contractor shall be delivered by Landlord to Tenant following the completion of construction of the Premises, provided that (i) Tenant delivers to Landlord a waiver and release in accordance with the terms of California Civil Code Section 3262(d)(2) and a waiver and release in accordance with either California Civil Code Section 3262(d)(3) or Section 3262(d)(4), (ii) Landlord has determined that no substandard work exists which adversely affects the mechanical, electrical, plumbing, heating, ventilating and air conditioning, life-safety or other systems of the Project, the curtain wall of the Project, the structure or exterior appearance of the Project, or any other tenants use of such other tenants leased premises in the Project and (iii) Architect delivers to Landlord a certificate, in a form reasonably acceptable to Landlord, certifying that the construction of the Improvements in the Premises has been substantially completed.
2.2.2.3 Other Terms . Landlord shall only be obligated to make disbursements from the Tenant Improvement Allowance to the extent costs are incurred by Tenant for Tenant Improvement Allowance Items. All Tenant Improvement Allowance Items for which the Tenant Improvement Allowance has been made available shall be deemed Landlords property under the terms of this Lease.
SECTION 3
CONSTRUCTION DRAWINGS
3.1 Selection of Architect/Construction Drawings . Tenant shall retain an architect approved by Landlord (the Architect) to prepare the Construction Drawings. Tenant shall retain the engineering consultants designated by Landlord (the Engineers) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, life-safety, and sprinkler work in the Premises, which work is not part of the Base Building. The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the Construction Drawings. All Construction Drawings shall comply
2
with the drawing format and specifications acceptable to Landlord. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the base building plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlords review of the Construction Drawings as set forth in this Section 3, shall be for its sole purpose and shall not imply Landlords review of the same, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlords space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings, and Tenants waiver and indemnity set forth in this Lease shall specifically apply to the Construction Drawings.
3.2 Approved Working Drawings . Landlord shall approve (or disapprove) working drawings prepared by Architect within five (5) days after Landlord receives the final Working Drawings (the Approved Working Drawings). Tenant shall submit the same to the City of Los Angeles (and Beverly Hills) and diligently pursue its receipt of all applicable building permits. Tenant hereby agrees that neither Landlord nor Landlords consultants shall be responsible for obtaining any building permit or certificate of occupancy for the Premises and that obtaining the same shall be Tenants responsibility; provided, however, that Landlord shall cooperate with Tenant in executing permit applications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any such permit or certificate of occupancy. No changes, modifications or alterations in the Approved Working Drawings may be made without the prior written consent of Landlord, which consent may not be unreasonably withheld.
SECTION 4
CONSTRUCTION OF THE TENANT IMPROVEMENTS
4.1 Tenants Selection of Contractors .
4.1.1 The Contractor. A general contractor shall be retained by Tenant to construct the Improvements and Tenant shall contract directly with such Contractor. Landlord shall file a Notice of Non-Responsibility regarding payments under Tenants contract with the Contractor. Such general contractor (Contractor) shall be selected by Tenant from a list of general contractors supplied by Tenant and approved by Landlord.
4.1.2 Tenants Agents . All subcontractors, laborers, materialmen, and suppliers used by Tenant (such subcontractors, laborers, materialmen, and suppliers, and the Contractor to be known collectively as Tenants Agents) must be approved in writing by Landlord, which approval shall not be unreasonably withheld or delayed. If Landlord does not approve any of Tenants proposed subcontractors, laborers, materialmen or suppliers, Tenant shall submit other proposed subcontractors, laborers, materialmen or suppliers for Landlords written approval.
4.2 Construction of Improvements by Tenants Agency .
4.2.1 Construction Contract; Cost Budget . Prior to Tenants execution of the construction contract and general conditions with Contractor (the Contract), Tenant shall submit the Contract to Landlord for its approval with regard to proper insurance and licensing requirements and any other areas which may adversely affect Landlords interest in the Project, and which approval shall not be unreasonably withheld or delayed by more than five (5) business days after Landlords receipt of the Contract. Prior to the commencement of the construction of the Improvements, and after Tenant has accepted all bids for the Improvements, Tenant shall provide Landlord with a detailed breakdown, by trade, of the final costs to be incurred or which have been incurred in connection with the design and construction of the Improvements to be performed by or at the direction of Tenant or the Contractor, which costs form a basis for the amount of the Contract (the Final Costs). Prior to the commencement of construction of the Improvements, Tenant shall supply Landlord with cash equal to one-half of the amount (the Over-Allowance Amount) equal to the difference between the amount of the Final Costs and the amount of the Tenant Improvement Allowance (less any portion thereof already disbursed by Landlord, or in the process of being disbursed by Landlord, on or before the commencement of construction of the Improvements). Tenant shall advance to Landlord the balance of the Over-
3
Allowance Amount in cash as needed to pay Final Costs. The Over-Allowance Amount shall be disbursed by Landlord prior to the disbursement of any of the then remaining portion of the Tenant Improvement Allowance, and such disbursement shall be pursuant to the same procedure as the Tenant Improvement Allowance. In the event that, after the Final Costs have been delivered by Tenant to Landlord, the costs relating to the design and construction of the Improvements shall change, any additional costs necessary to such design and construction in excess of the Final Costs, shall be paid by Tenant to Landlord immediately as an addition to the Over-Allowance Amount or at Landlords option, Tenant shall make payments for such additional costs out of its own funds, but Tenant shall continue to provide Landlord with the documents described in Section 2.2.2.1 (i), (ii), (iii) and (iv) of this Tenant Work Letter, above, for Landlords approval, prior to Tenant paying such costs.
4.2.2 Tenants Agents .
4.2.2.1 Landlords General Conditions for Tenants Agents and Tenant Improvement Work . Tenants and Tenants Agents construction of the Improvements shall comply with the following: (i) the Improvements shall be constructed in strict accordance with the Approved Working Drawings; (ii) Tenants Agents shall submit schedules of all work relating to the Tenants Improvements to Contractor and Contractor shall, within five (5) business days of receipt thereof, inform Tenants Agents of any changes which are necessary thereto, and Tenants Agents shall adhere to such corrected schedule; and (iii) Tenant shall abide by all rules made by Landlords Project manager with respect to the use of freight, loading dock and service elevators, storage of materials, coordination of work with the contractors of other tenants, and any other matter in connection with this Tenant Work Letter, including, without limitation, the construction of the Improvements.
4.2.2.2 Indemnity . Tenants indemnity of Landlord as set forth in this Lease shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to any act or omission of Tenant or Tenants Agents, or anyone directly or indirectly employed by any of them, or in connection with Tenants non-payment of any amount arising out of the Improvements and/or Tenants disapproval of all or any portion of any request for payment. Such indemnity by Tenant, as set forth in this Lease, shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to Landlords performance of any ministerial acts reasonably necessary (i) to permit Tenant to complete the Improvements, and (ii) to enable Tenant to obtain any Project permit or certificate of occupancy for the Premises.
4.2.2.3 Requirements of Tenants Agents . Each of Tenants Agents shall guarantee to Tenant and for the benefit of Landlord that the portion of the Improvements for which it is responsible shall be free from any defects in workmanship and materials for a period of not less than one (1) year from the date of completion thereof. Each of Tenants Agents shall be responsible for the replacement or repair, without additional charge, of all work done or furnished in accordance with its contract that shall become defective within one (1) year after the later to occur of (i) completion of the work performed by such contractor or subcontractors and (ii) the Commencement Date. The correction of such work shall include, without additional charge, all additional expenses and damages incurred in connection with such removal or replacement of all or any part of the Improvements, and/or the Project and/or common areas that may be damaged or disturbed thereby. All such warranties or guarantees as to materials or workmanship of or with respect to the Improvements shall be contained in the Contract or subcontract and shall be written such that such guarantees or warranties shall inure to the benefit of both Landlord and Tenant, as their respective interests may appear, and can be directly enforced by either. Tenant covenants to give to Landlord any assignment or other assurances which may be necessary to effect such right of direct enforcement.
4.2.2.3.1 Lien-Free Basis . Tenants Contractor and agents shall perform all work on a lien-free basis. If a lien is filed or recorded against the Project due to, or in any way associated with, the construction of the Improvements, Tenant agrees to have such lien released of record (in a manner and form approved by Landlord) within five (5) days of Landlords notice to Tenant regarding same. If Tenant fails to cause the release of such lien within such five (5) day period to Landlords satisfaction, Landlord may cause the removal of such lien, and Tenant agrees to repay Landlord for all costs and expenses incurred by Landlord to release the lien (including, but not limited to, the payment of the amount stated in the lien, any filing, processing, recording and attorneys fees) within ten (10) days of Landlords request
4
therefor, and such amount shall be considered Additional Rent due under the Lease. If Tenant fails to pay Landlord as aforesaid, such failure shall be deemed an uncured noticed material default under the Lease, and Landlord may pursue any remedy provided for under the Lease, at law or in equity.
4.2.2.4 Insurance Requirements .
4.2.2.4.1 General Coverages . All of Tenants Agents shall carry workers compensation insurance covering all of their respective employees, and shall also carry public liability insurance, including property damage, all with limits, in form and with companies as are required to be carried by Tenant as set forth in this Lease.
4.2.2.4.2 Special Coverages . Tenant shall carry Builders All Risk insurance in an amount approved by Landlord covering the construction of the Improvements, and such other insurance as Landlord may require, it being understood and agreed that the Improvements shall be insured by Tenant pursuant to this Lease immediately upon completion thereof. Such insurance shall be in amounts and shall include such extended coverage endorsements as may be reasonably required by Landlord including, but not limited to, the requirement that all of Tenants Agents shall carry excess liability and Products and Completed Operating Coverage insurance, each in amounts not less than $500,000 for each incident, $1,000,000 in aggregate, and in form and with companies as are required to be carried by Tenant as set forth in this Lease.
4.2.2.4.3 General Terms . Certificates for all insurance carried pursuant to this Section 4.2.2.4 shall be delivered to Landlord before the commencement of construction of the Improvements and before the Contractors equipment is moved onto the site. All such policies of insurance must contain a provision that the company writing said policy will give Landlord thirty (30) days prior written notice of any cancellation or lapse of the effective date or any reduction in the amounts of such insurance. In the event that the Improvements are damaged by any cause during the course of the construction thereof, Tenant shall immediately repair the same at Tenants sole cost and expense. Tenants Agents shall maintain all of the foregoing insurance coverage in force until the Improvements are fully completed and accepted by Landlord, except for any Products and Completed Operation Coverage insurance required by Landlord, which is to be maintained for ten (10) years following completion of the work and acceptance by Landlord and Tenant. All policies carried under this Section 4.2.2.4 shall insure Landlord and Tenant, as their interests may appear, as well as Contractor and Tenants Agents. All insurance, except Workers Compensation, maintained by Tenants Agents shall preclude subrogation claims by the insurer against anyone insured thereunder. Such insurance shall provide that it is primary insurance as respects the owner and that any other insurance maintained by owner is excess and noncontributing with the insurance required hereunder. The requirements for the foregoing insurance shall not derogate from the provisions for indemnification of Landlord by Tenant under Section 4.2.2.2 of this Tenant Work Letter.
4.2.3 Governmental Compliance . The Improvements shall comply in all respects with the following: (i) the Code and other state, federal, city or quasi-governmental laws, codes, ordinances and regulations, as each may apply according to the rulings of the controlling public official, agent or other person; (ii) applicable standards of the American Insurance Association (formerly, the National Board of Fire Underwriters) and the National Electrical Code; and (iii) Project material manufacturers specifications.
4.2.4 Inspection by Landlord . Landlord shall have the right to inspect the Improvements at all times, provided however, that Landlords failure to inspect the Improvements shall in no event constitute a waiver of any of Landlords rights hereunder nor shall Landlords inspection of the Improvements constitute Landlords approval of the same. Should Landlord disapprove any portion of the Improvements, Landlord shall notify Tenant in writing of such disapproval and shall specify the items disapproved. Any defects or deviations in, and/or disapproval by Landlord of, the Improvements shall be rectified by Tenant at no expense to Landlord, provided however, that in the event Landlord determines that a defect or deviation exists or disapproves of any matter in connection with any portion of the Improvements and such defect, deviation or matter might adversely affect the mechanical, electrical, plumbing, heating, ventilating and air conditioning or life-safety systems of the Project, the structure or exterior appearance of the Project or any other tenants use of such other
5
tenants leased premises, Landlord may, take such action as Landlord deems necessary, at Tenants expense and without incurring any liability on Landlords part, to correct any such defect, deviation and/or matter, including, without limitation, causing the cessation of performance of the construction of the Improvements until such time as the defect, deviation and/or matter is corrected to Landlords satisfaction.
4.2.5 Meetings . Commencing upon the execution of this Lease, Tenant and Landlord shall hold meetings as required at a reasonable time, with the Architect and the Contractor regarding the progress of the preparation of Construction Drawings and the construction of the Improvements, which meetings shall be held at a location designated by Landlord, and Landlord and/or its agents shall receive prior notice of, and shall have the right to attend, all such meetings, and, upon Landlords request, certain of Tenants Agents shall attend such meetings. One such meeting each month shall include the review of Contractors current request for payment.
4.3 Notice of Completion; Copy of As Built Plans . Within ten (10) days after completion of construction of the Improvements, Tenant shall cause a Notice of Completion to be recorded in the office of the Recorder of the County of Los Angeles in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and shall furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do so, Landlord may execute and file the same on behalf of Tenant as Tenants agent for such purpose, at Tenants sole cost and expense. At the conclusion of construction, (i) Tenant shall cause the Architect and Contractor (A) to update the Approved Working Drawings as necessary to reflect all changes made to the Approved Working Drawings during the course of construction, (B) to certify to the best of their knowledge that the record-set of as-built drawings are true and correct, which certification shall survive the expiration or termination of this Lease, and (C) to deliver to Landlord two (2) sets of copies of such as-built drawings within ninety (90) days following issuance of a certificate of occupancy for the Premises, and (ii) Tenant shall deliver to Landlord a copy of all warranties, guaranties, and operating manuals and information relating to the improvements, equipment, and systems in the Premises.
SECTION 5
MISCELLANEOUS
5.1 Tenants Representative . Tenant has designated John Prabhu as its sole representative with respect to the matters set forth in this Tenant Work Letter, who shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter.
5.2 Landlords Representative . Landlord shall designate an individual as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter.
5.3 Time of the Essence in This Tenant Work Letter . Time is of the essence with respect to the performance by Tenant of every provision of this Tenant Work Letter. Unless otherwise indicated, all references herein to a number of days shall mean and refer to calendar days. If any item requiring approval is timely disapproved by Landlord, the procedure for preparation of the document and approval thereof shall be repeated until the document is approved by Landlord.
5.4 Tenants Lease Default . Notwithstanding any provision to the contrary contained in this Lease, if an event of default as described in the Lease or this Tenant Work Letter has occurred at any time on or before the Substantial Completion of the Premises, then (i) in addition to all other rights and remedies granted to Landlord pursuant to this Lease, Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement Allowance and/or Landlord may cause Contractor to cease the construction of the Premises (in which case, Tenant shall be responsible for any delay in the substantial completion of the Premises caused by such work stoppage), and (ii) all other obligations of Landlord under the terms of this Tenant Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of this Lease (in which case, Tenant shall be responsible for any delay in the substantial completion of the Premises caused by such inaction by Landlord).
6
5.5 Freight Elevators, Utilities and Parking . During the period of construction of the Improvements, Landlord shall allow Tenant and Tenants Agents nonexclusive freight elevator service at no cost to Tenant, subject to reasonable scheduling by Landlord, use of Project utilities during normal Project hours without charge, and free parking in the Project parking facility.
5.6 Additional Services . If the construction of the Improvements shall require that additional services or facilities (including, but not limited to, hoisting, cleanup or other cleaning services, trash removal, field supervision, or ordering of materials) be provided by Landlord, then Tenant shall pay Landlord for such items at Landlords cost or at a reasonable charge if the item involves time of Landlords personnel only. Electrical power and heating, ventilation and air conditioning shall be available to Tenant during normal business hours for construction purposes at no charge to Tenant.
5.7 Construction Defects . Landlord shall have no responsibility for the Improvements and Tenant will remedy, at Tenants own expense, and be responsible for any and all defects in the Improvements that may appear during or after the completion thereof whether the same shall affect the Improvements in particular or any parts of the Premises in general. Tenant shall indemnify, hold harmless and reimburse Landlord for any costs or expenses incurred by Landlord by reason of any defect in any portion of the Improvements constructed by Tenant or Tenants contractor or subcontractors, or by reason of inadequate cleanup following completion of the Improvements.
5.8 Coordination of Labor . All of Tenants contractors, subcontractors, employees, servants and agents must work in harmony with and shall not interfere with any labor employed by Landlord, or Landlords contractors or by any other tenant or its contractors with respect to any portion of the Project.
5.9 Work in Adjacent Areas . Any work to be performed in areas adjacent to the Premises shall be performed only after obtaining Landlords express written permission, which shall not be unreasonably withheld, conditioned or delayed, and shall be done only if an agent or employee of Landlord is present; Tenant will reimburse Landlord for the expense of any such employee or agent.
5.10 HVAC Systems . Tenant agrees to be entirely responsible for the maintenance or the balancing of any heating, ventilating or air conditioning system installed by Tenant and/or maintenance of the electrical or plumbing work installed by Tenant and/or for maintenance of lighting fixtures, partitions, doors, hardware or any other installations made by Tenant.
5.11 Approval of Plans . Landlord will not check Tenant drawings for building code compliance. Approval of the Construction Drawings by Landlord is not a representation that the drawings are in compliance with the requirements of governing authorities, and it shall be Tenants responsibility to meet and comply with all federal, state, and local code requirements. Approval of the Construction Drawings does not constitute assumption of responsibility by Landlord or its architect for their accuracy, sufficiency or efficiency, and Tenant shall be solely responsible for such matters.
5.12 Substantial Completion . For purposes of this Lease, Substantial Completion of the Improvements in the Premises shall occur upon (i) the completion of construction of the Improvements in the Premises pursuant to the Approved Working Drawings, with the exception of any punch list items and any tenant fixtures, work-stations, built-in furniture or equipment to be installed by Tenant; and (ii) issuance of a temporary certificate of occupancy.
7
EXHIBIT E
JANITORIAL SPECIFICATIONS
1
STANDARD OFFICE LEASE
BY AND BETWEEN
9701-HEMPSTEAD PLAZA, LLC, a Delaware limited liability company, 9701-CAROLINA GARDENS LLC, a Delaware limited liability company, 9701-WEST POINT REALTY LLC, a Delaware limited liability company, 9701-DAKOTA LEASING LLC, a Delaware limited liability company and 9701-IOWA LEASING LLC, a Delaware limited liability company
COLLECTIVELY, AS LANDLORD,
AND
KENNEDY-WILSON, INC.,
a ,
AS TENANT
SUITES AND 700
9701 Wilshire Boulevard, Beverly Hills, California
|
|
Page |
|
|
|
ARTICLE 1 BASIC LEASE PROVISIONS |
|
1 |
|
|
|
ARTICLE 2 TERM/PREMISES |
|
2 |
|
|
|
ARTICLE 3 RENTAL |
|
3 |
|
|
|
ARTICLE 4 INTENTIONALLY OMITTED |
|
7 |
|
|
|
ARTICLE 5 HOLDING OVER |
|
7 |
|
|
|
ARTICLE 6 OTHER TAXES |
|
8 |
|
|
|
ARTICLE 7 USE |
|
8 |
|
|
|
ARTICLE 8 CONDITION OF PREMISES |
|
9 |
|
|
|
ARTICLE 9 REPAIRS AND ALTERATIONS |
|
9 |
|
|
|
ARTICLE 10 LIENS |
|
10 |
|
|
|
ARTICLE 11 PROJECT SERVICES |
|
11 |
|
|
|
ARTICLE 12 RIGHTS OF LANDLORD |
|
13 |
|
|
|
ARTICLE 13 INDEMNITY; EXEMPTION OF LANDLORD FROM LIABILITY |
|
13 |
|
|
|
ARTICLE 14 INSURANCE |
|
14 |
|
|
|
ARTICLE 15 ASSIGNMENT AND SUBLETTING |
|
16 |
|
|
|
ARTICLE 16 DAMAGE OR DESTRUCTION |
|
17 |
|
|
|
ARTICLE 17 SUBORDINATION |
|
18 |
|
|
|
ARTICLE 18 EMINENT DOMAIN |
|
19 |
|
|
|
ARTICLE 19 DEFAULT |
|
19 |
|
|
|
ARTICLE 20 REMEDIES |
|
20 |
|
|
|
ARTICLE 21 TRANSFER OF LANDLORDS INTEREST |
|
22 |
|
|
|
ARTICLE 22 BROKER |
|
22 |
|
|
|
ARTICLE 23 PARKING |
|
22 |
|
|
|
ARTICLE 24 WAIVER |
|
23 |
|
|
|
ARTICLE 25 ESTOPPEL CERTIFICATE |
|
23 |
|
|
|
ARTICLE 26 LIABILITY OF LANDLORD |
|
23 |
|
|
|
ARTICLE 27 INABILITY TO PERFORM |
|
24 |
|
|
|
ARTICLE 28 HAZARDOUS WASTE |
|
24 |
|
|
|
ARTICLE 29 SURRENDER OF PREMISES; REMOVAL OF PROPERTY |
|
26 |
|
|
|
ARTICLE 30 MISCELLANEOUS |
|
27 |
|
|
|
ARTICLE 31 OPTION TO EXTEND |
|
31 |
|
|
|
ARTICLE 32 RIGHT OF FIRST OFFER |
|
33 |
i
|
|
Page |
|
|
|
ARTICLE 33 SIGNAGE/DIRECTORY |
|
34 |
|
|
|
ARTICLE 34 TERMINATION RIGHT |
|
35 |
|
|
|
ARTICLE 35 ARBITRATION |
|
36 |
Exhibit A |
Premises |
|
|
Exhibit B |
Rules and Regulations |
|
|
Exhibit C |
Notice of Term Dates and Tenants Proportionate Share |
|
|
[ Exhibit D |
Tenant Work Letter ] |
|
|
Exhibit E |
Guaranty of Lease |
|
|
ii
INDEX
|
|
Page(s) |
|
|
|
Additional Rent |
|
3 |
Alterations |
|
10 |
Base Year |
|
1 |
Basic Rental |
|
1 |
Brokers |
|
1 |
Commencement Date |
|
1 |
Development |
|
6 |
Direct Costs |
|
3 |
Dispute Notice |
|
7 |
Economic Terms |
|
34 |
Estimate |
|
6 |
Estimate Statement |
|
6 |
Estimated Excess |
|
6 |
Estoppel Certificate |
|
23 |
Event of Default |
|
19 |
Excess |
|
6 |
Expansion Interest Notice |
|
33 |
Expiration Date |
|
1 |
First Offer Notice |
|
33 |
First Offer Space |
|
33 |
Force Majeure |
|
24 |
Generator |
|
26 |
Hazardous Material |
|
25 |
Initial Installment of Basic Rental |
|
2 |
Landlord |
|
1 |
Landlord Parties |
|
13 |
Landlords Recapture Costs |
|
17 |
Landlords Recapture Notice |
|
17 |
Laws |
|
26 |
Lease |
|
1 |
Lease Year |
|
2 |
Operating Costs |
|
4 |
Option Term |
|
31 |
Options |
|
31 |
Original Tenant |
|
31 |
Outside Agreement Date |
|
32 |
Parking Passes |
|
2 |
Partnership Tenant |
|
30 |
Permitted Use |
|
1 |
Premises |
|
1 |
Producer |
|
26 |
Project |
|
1 |
Real Property |
|
3 |
Recapture Space |
|
17 |
Review Notice |
|
7 |
Review Period |
|
6 |
Rules and Regulations |
|
28 |
Security Deposit |
|
1 |
Square Footage |
|
1 |
Statement |
|
6 |
Superior Leases |
|
33 |
Superior Rights |
|
33 |
Tax Costs |
|
3 |
Tenant |
|
1 |
Tenant Improvements |
|
9 |
Tenants Proportionate Share |
|
1 |
Tenants Signage |
|
34 |
Term |
|
1 |
Transfer |
|
16 |
iii
|
|
Page(s) |
|
|
|
Transferee |
|
17 |
Universal Waste |
|
26 |
iv
Exhibit 10.102
SECOND AMENDED AND RESTATED GUARANTY OF PAYMENT
This SECOND AMENDED AND RESTATED GUARANTY OF PAYMENT (Guaranty) is entered in as of November 4, 2008, by ARTHUR S. LEVINE, as Trustee of the RAY J. RUTTER TRUST uta 3/24/81, ARTHUR S. LEVINE, as Trustee of the SUSAN RAYE RUTTER TRUST uta 3/24/81, and ARTHUR S. LEVINE, as Trustee of the ROBERT JONATHAN RUTTER TRUST uta 12/10/84, all having an address at c/o Sonnenschein Nath & Rosenthal, 601 South Figueroa, Suite 1500, Los Angeles, California 90017, and KENNEDY-WILSON INC. a Delaware corporation, having an address at 9601 Wilshire Blvd., Suite 220, Beverly Hills, California 90210 (collectively referred to in the singular as Guarantor ), to BANK MIDWEST N.A., having an office at 1100 Main Street, Kansas City, Missouri 64105-2105 (together with its successors and assigns herein called Lender );
RECITALS
A. RUTTER SANTIAGO, LP, a California Limited Partnership ( Borrower ) has borrowed the current maximum sum of Five Million Dollars ($5,000,000.00) ( Loan ) from Lender in order to finance the acquisition and development of real property located in Orange County, California ( Premises ), which loan is evidenced by that certain Fourth Amended and Restated Promissory Note dated February 13, 2006, executed by Borrower in favor of Lender (as the same has been or may be modified from time to time, Note). The Note and all other documents evidencing or relating to the Loan shall be collectively referred to as the Loan Documents .
B. Borrower has requested and Lender has agreed to modify certain terms of the Loan pursuant to that certain Sixth Agreement to Modify Loan Documents and Amendment to Deed of Trust of even date herewith (Modification Agreement). As part of the consideration for the modifications of the Loan, Borrower has agreed to procure and deliver this Guaranty.
C. Guarantor is an affiliate of Borrower and will derive an indirect benefit from the making of the Loan from Lender to Borrower.
D. Lender has declined to modify the Loan unless this Guaranty is executed by Guarantor and duly delivered to Lender.
AGREEMENT
In consideration of the making of certain modifications to the Loan and of other valuable consideration, the receipt and sufficiency of which are acknowledged, Guarantor hereby certifies, represents and warrants to Bank, and agrees as follows:
1
2
Guarantor waives all rights and defenses that Guarantor may have because Borrowers debt is secured by real property. This means, among other things:
6
(1) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower.
(2) If Lender forecloses on any real property collateral pledged by Borrower:
This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrowers debt is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based on Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure.
8
9
10
11
IN WITNESS WHEREOF, Guarantor has executed this Agreement as of the date first above written.
|
/s/ Arthur S. Levine |
|
|
ARTHUR S. LEVINE, as Trustee of the Ray J. RUTTER TRUST uta 3/24/81 |
|
|
|
|
|
|
|
|
/s/ Arthur S. Levine |
|
|
ARTHUR S. LEVINE, as Trustee of the SUSAN RAYE RUTTER TRUST uta 3/24/81 |
|
|
|
|
|
|
|
|
/s/ Arthur S. Levine |
|
|
ARTHUR S. LEVINE, as Trustee of the ROBERT JONATHAN RUTTER TRUST uta 12/10/84 |
|
|
|
|
|
|
|
|
KENNEDY-WILSON INC., a Delaware corporation |
|
|
|
|
|
|
|
|
By: |
/s/ unknown |
|
Title: |
|
|
Its: |
|
12
IN WITNESS WHEREOF, Guarantor has executed this Agreement as of the date first above written.
|
/s/ Arthur S. Levine |
|
|
ARTHUR S. LEVINE, as Trustee of the Ray J. RUTTER TRUST uta 3/24/81 |
|
|
|
|
|
|
|
|
/s/ Arthur S. Levine |
|
|
ARTHUR S. LEVINE, as Trustee of the SUSAN RAYE RUTTER TRUST uta 3/24/81 |
|
|
|
|
|
|
|
|
/s/ Arthur S. Levine |
|
|
ARTHUR S. LEVINE, as Trustee of the ROBERT JONATHAN RUTTER TRUST uta 12/10/84 |
|
|
|
|
|
|
|
|
KENNEDY-WILSON INC., a Delaware corporation |
|
|
|
|
|
|
|
|
By: |
/s/ unknown |
|
Title: |
|
|
Its: |
|
13
Exhibit 10.103
COMMERCIAL GUARANTY
Principal |
|
Loan Date |
|
Maturity |
|
Loan No. |
|
Call / Coll |
|
Account |
|
Officer
|
|
Initials |
|
References in the boxes above are for Lenders use only and do not limit the applicability of this document to any particular loan or item. Any item above containing * * * has been omitted due to text length limitations.
Borrower: |
|
TDM Beach Villas, LLC, a Hawaii limited liability company 55 Merchant Street, Suite 2900 Honolulu, HI 96813 |
|
Lender: |
|
Pacific Western Bank Beverly Hills Office 9454 Wilshire Boulevard Beverly Hills, CA 90212 |
|
|
|
|
|
|
|
Guarantor: |
|
Kennedy-Wilson, Inc., a Delaware corporation 9601 Wilshire Boulevard, Suite 220 Beverly Hills, CA 90210 |
|
|
|
|
CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of Guarantors Share of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrowers obligations under the Note and the Related Documents. This is a guaranty of payment and performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lenders remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness. Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrowers obligations under the Note and Related Documents. Under this Guaranty, Guarantors obligations are continuing.
INDEBTEDNESS. The word Indebtedness as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, attorneys fees, arising from any and all debts, liabilities and obligations of every nature or form, now existing of hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender. Indebtedness includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether: voluntarily or involuntarily incurred; due or to become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated; determined or undetermined; direct or indirect; primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by a negotiable or nonnegotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reason whatsoever; for any transactions that may be voidable for any reason such as infancy, insanity, ultra vires or otherwise); and originated then reduced or extinguished and then afterwards increased or reinstated.
If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lenders rights under all guaranties shall be cumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantors liability will be Guarantors aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.
GUARANTORS SHARE OF THE INDEBTEDNESS. The words Guarantors Share of the Indebtedness as used in this Guaranty mean an amount not to exceed Three Million & 00/100 Dollars ($3,000,000,00) of all The principal amount, interest thereon to the extent not prohibited by law, and all collection costs, expenses and attorneys fees whether or not there is a lawsuit, and if there is a lawsuit, any fees and costs for trial and appeals.
Guarantors Share of the Indebtedness will only be reduced by sums actually paid by Guarantor under this Guaranty, but will not be reduced by sums from any other source including, but not limited to, sums realized from any collateral securing the Indebtedness or this Guaranty, or payments by anyone other than Guarantor, or reductions by operation of law, judicial order or equitable principles. Lender has the sole and absolute discretion to determine how sums shall be applied among guaranties of the Indebtedness.
The above l imitation on liability is not a restriction on the amount of the Note of Borrower to Lender either in the aggregate or at any one time.
CONTINUING GUARANTY. THIS IS A CONTINUING GUARANTY UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE GUARANTORS SHARE OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON A CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTORS OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all of Guarantors other obligations under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantors written notice of revocation most be mailed to Lender, by certified mail, at Lenders address listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to new Indebtedness created after actual receipt by Lender of Guarantors written revocation. For this purpose and without limitation, the term new Indebtedness does not include the Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. For this purpose and without limitation, new Indebtedness does not include all or part of the indebtedness that is: incurred by Borrower prior to
Loan No: 406265122
revocation; incurred under a commitment that became binding before revocation; any renewals, extensions, substitutions, and modifications of the indebtedness. This Guaranty shall hind Guarantors estate as to the indebtedness created both before and after Guarantors death or incapacity, regardless of Lenders actual notice of Guarantors death, Subject to the foregoing, Guarantors executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. It is anticipated that fluctuations may occur in the aggregate amount of the Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of the Indebtedness, even to zero dollars ($0.00), shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantors heirs , successors and assigns so long as any of the Guarantors Share of the indebtedness remains unpaid and even though the Guarantors Share of the Indebtedness may from time to time be zero dollars ($0.00).
GUARANTORS AUTHORIZATION TO LENDER . Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantors liability under this Guaranty, from time to time: (A) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the indebtedness or any part of the indebtedness, including increases and decreases of the rate of interest on the indebtedness; extensions may be repeated and may be for longer than the original loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal with any one or more Borrowers sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (F) to apply such security agreement or deed of trust, as Lender in its discretion may determine; (G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.
GUARANTORS REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrowers request and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantors assets, or any interest therein; (F) upon Lenders request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantors financial condition as of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantors financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantors financial condition; (H) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid -taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrowers financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantors risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower.
GUARANTORS FINANCIAL STATEMENTS . Guarantor agrees to furnish Lender with the following:
Additional Requirements .
ANNUAL STATEMENTS . Guarantor to provide Lender with, as soon as available, but in no event later than one hundred twenty (120) days after the end of each fiscal year end, a consolidated balance sheet and income statement for the period ended in form satisfactory to Lender, audited by a CPA acceptable to Lender. Statements may be due more often if requested by Lender.
INTERIM STATEMENTS . Guarantor shall provide to Lender, as soon as available, but in no event later than forty-five (45) days after the end of each fiscal quarter (including fiscal year end), a self-prepared consolidated balance sheet and income statement for the period ended in form satisfactory to Lender. Statements may be due more often if requested by Lender.
TAX RETURNS . Guarantor to provide Lender with, as soon as available, but in no event later than thirty (30) days after the applicable filing date for the tax reporting period ended, Federal and other governmental tax returns. If extensions are filed, copies of such extensions are to be provided immediately upon filing.
All financial reports required to be provided under this Guaranty shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Guarantor as being true and correct.
GUARANTORS WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender to (A) make any presentment, protest, demand, or notice of any kind, including notice of change of any terms of repayment of the Indebtedness, default by Borrower or any other guarantor or surety, any action or nonaction taken by Borrower, Lender, or any other guarantor or surety of Borrower, or the creation of new or additional Indebtedness; (B) proceed against any person, including Borrower, before proceeding against Guarantor; (C) proceed against any collateral for the Indebtedness, including Borrowers collateral, before proceeding against Guarantor; (D) apply any payments or proceeds received against the Indebtedness in any order; (E) give notice of the terms, time, and place of any sale of the collateral pursuant to the Uniform Commercial Code or any other law governing such sale; (F) disclose any information about the Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or about any action or nonaction of Lender; or (G) pursue any remedy or course of action in Lenders power whatsoever.
2
Guarantor also waives any and all rights or defenses arising by reason of (H) any disability or other defense of Borrower, any other guarantor or surety or any other person; (I) the cessation from any cause whatsoever, other than payment in full, of the Indebtedness; (J) the application of proceeds of the Indebtedness by Borrower for purposes other than the purposes understood and intended by Guarantor and Lender; (K) any act of omission or commission by Lender which directly or indirectly results in or contributes to the discharge of Borrower or any other guarantor or surety, or the Indebtedness, or the loss or release of any collateral by operation of law or otherwise; (L) any statute of limitations in any action under this Guaranty or on the Indebtedness; or (M) any modification or change in terms of the Indebtedness., whatsoever, including without limitation, the renewal, extension, acceleration, or other change in the time payment of the Indebtedness is due and any change in the interest rate, and including any such modification or change in terms after revocation of this Guaranty on the Indebtedness incurred prior to such revocation.
Guarantor waives all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to Guarantor by reason of California Civil Code Sections 2787 to 2855, inclusive.
Guarantor waives all rights and any defenses arising out of an election of remedies by Lender even though that the election of remedies, such as a non-judicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantors rights of subrogation and reimbursement against Borrower by operation of Section 580d of the California Code of Civil Procedure or otherwise.
Guarantor waives all rights and defenses that Guarantor may have because Borrowers obligation is secured by real property. This means among other things: (N) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower. (O) If Lender forecloses on any real property collateral pledged by Borrower: (1) the amount of Borrowers obligation may be reduced only by the price for which the collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price. (2) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrowers obligation is secured by real property. These rights and defenses include, but are not limited to, any rights and defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure,
Guarantor understands and agrees that the foregoing waivers are unconditional and irrevocable waivers of substantive rights and defenses to which Guarantor might otherwise be entitled under state and federal law. The rights and defenses waived include, without limitation, those provided by California laws of suretyship and guaranty, anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges that Guarantor has provided these waivers of rights and defenses with the intention that they be fully relied upon by Lender. Guarantor further understands and agrees that this Guaranty is a separate and independent contract between Guarantor and Lender, given for full and ample consideration, and is enforceable on its own terms. Until all of the indebtedness is paid in full, Guarantor waives any right to enforce any other guarantor, surety, or other person, and further, Guarantor waives any right to participate in any collateral for the Indebtedness now or hereafter held by Lender.
Guarantors Understanding With Respect To Waivers . Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantors full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.
Subordination of Borrowers Debts to Guarantor . Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuation statements and to execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.
Miscellaneous Provisions . The following miscellaneous provisions are a part of this Guaranty:
AMENDMENTS . This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or hound by the alteration or amendment.
ATTORNEYS FEES; EXPENSES . Guarantor agrees to pay upon demand all of Lenders costs and expenses, including Lenders attorneys fees and Lenders legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lenders attorneys fees and legal expenses whether or not there is a lawsuit, including attorneys fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court.
CAPTION HEADINGS . Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty.
GOVERNING LAW. This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions.
CHOICE OF VENUE . f there is a lawsuit, Guarantor agrees upon Lenders request to submit to the jurisdiction of the courts of Los Angeles County, State of California.
I NTEGRATION . Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity to
3
be advised by Guarantors attorney with respect to this Guaranty; the Guaranty fully reflects Guarantors intentions and parol evidence is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lenders attorneys fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this paragraph.
INTERPRETATION . In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words Borrower and Guarantor respectively shall mean all and any one or more of them. The words Guarantor, Borrower, and Lender include the heirs, successors, assigns, and transferees of each of them. If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.
NOTICES . Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the section of this Guaranty entitled DURATION OF GUARANTY. Any party may change its address for notices under this Guaranty by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the partys address. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantors current address. Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to he notice given to all Guarantors.
NO WAIVER BY LENDER . Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice of constitute a waiver of Lenders right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lenders rights or of any of Guarantors obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent required and in all cases such consent may be granted or withheld in the sole discretion of Lender.
SUCCESSORS AND ASSIGNS . Subject to any limitations stated in this Guaranty on transfer of Guarantors interest, this Guaranty shall be binding upon and inure to the benefit of the parties, their successors and assigns.
Definitions . The following capitalized words and terms shall have the following meanings when used in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed to such terms in the Uniform Commercial Code:
BORROWER . The word Borrower means TDM Beach Villas, LLC, a Hawaii limited liability company and includes all co-signers and co-makers signing the Note and all their successors and assigns,
GAAP . The word GAAP means generally accepted accounting principles.
GUARANTOR . The word Guarantor means everyone signing this Guaranty, including without limitation Kennedy-Wilson, Inc., a Delaware corporation, and in each case, any signers successors and assigns,
GUARANTORS SHARE OF THE INDEBTEDNESS . The words Guarantors Share of the Indebtedness mean Guarantors indebtedness to Lender as more particularly described in this Guaranty.
GUARANTY . The word Guaranty means this guaranty from Guarantor to Lender,
I NDEBTEDNESS . The word Indebtedness means Borrowers indebtedness to Lender as more particularly described in this Guaranty.
LENDER . The word Lender means Pacific Western Bank, its successors and assigns.
NOTE. The word Note means the promissory note dated November 24, 2008, in the original principal amount of $6,000,000.00 from Borrower to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissory note or agreement.
RELATED DOCUMENTS . The words Related Documents mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTORS EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED DURATION OF GUARANTY, NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE, THIS GUARANTY IS DATED NOVEMBER 24, 2008.
Guarantor:
4
KENNEDY-WILSON, INC. A DELAWARE CORPORATION |
||||
|
|
|
||
|
|
|
||
By: |
|
|
By: |
|
|
Mary L. Ricks, Vice President of Kennedy-Wilson, Inc., |
|
|
Freeman A. Lyle, CFO/Secretary of Kennedy-Wilson, Inc., |
|
a Delaware corporation |
|
|
a Delaware corporation |
5
|
LAND COURT SYSTEM |
|
|
REGULAR SYSTEM |
|||||
|
|
|
|||||||
After Recordation, Return By: |
Mail ( ) |
|
Pickup To: ( ) |
||||||
|
|
|
|||||||
|
|
|
Total |
Pages: |
|||||
|
|
|
|
|
|||||
|
Pacific Western Bank |
|
|
|
|||||
|
Beverly Hills Office |
|
|
|
|||||
|
9454 Wilshire Boulevard Beverly |
|
|
|
|||||
|
Hills, CA 90212 |
|
|
|
|||||
|
|
|
|
|
|||||
PARTIES TO DOCUMENT |
|
|
|
||||||
|
|
|
|
|
|||||
|
Grantor: |
|
|
|
|
||||
|
Grantee: |
Pacific Western Bank |
|
|
|
||||
Beverly Hills Office |
|
|
|||||||
9454 Wilshire Boulevard |
|
|
|||||||
Beverly Hills, CA 90212 |
|
|
|||||||
HAZARDOUS SUBSTANCES CERTIFICATE AND INDEMNITY AGREEMENT
THIS HAZARDOUS SUBSTANCES AGREEMENT dated November 24, 2008, is made and executed among TDM Beach Villas, LLC, a Hawaii limited liability company, whose address is 55 Merchant Street, Suite 2900, Honolulu, HI 96813 (sometimes referred to below as Borrower and sometimes as Indemnitor); Mark S. Richards, Individually, whose address is 55 Merchant Street, Suite 2900, Honolulu, HI 96813, Thomas C. Connor, Individually, whose address is 55 Merchant Street, Suite 2900, Honolulu, HI 96813, Donald W. Wooley, Individually, whose address is 55 Merchant Street, Suite 2900, Honolulu, HI 96813, Luke B. Mashburn, individually, whose address is 55 Merchant Street, Suite 2900, Honolulu, HI 96813, Mark S. Richards and Cheryl L. Richards, Trustees of Mark S. and Cheryl L. Richards Family Revocable Trust under the provisions of a trust agreement dated March 17, 1989, whose address is 55 Merchant Street, Suite 2900, Honolulu, Hi 96813 and Kennedy-Wilson, Inc., a Delaware corporation, whose address is 9601 Wilshire Boulevard, Suite 220, Beverly Hills, CA 90210 (sometimes individually or collectively referred to below as Guarantor and sometimes as Indemnitor); and Pacific Western Bank, Beverly Hills Office, 9454 Wilshire Boulevard, Beverly Hills, CA 90212 (referred to below as Lender). For good and valuable consideration and to induce Lender to make a loan to Borrower, each party executing this Agreement hereby represents and agrees with Lender as follows:
PROPERTY DESCRIPTION . The word Property as used in this Agreement means the following Real Properly located in Hawaii County, State of Hawaii.
See Exhibit A, which is attached to this Agreement and made a part of this Agreement as if fully set forth herein.
The Real Property or its address is commonly known as 72-440 Nukumeorneo Place, Kailua-Kona, HI 96740. The Real Property tax identification number is 7-2-032-005,
REPRESENTATIONS . The following representations are made to Lender, subject to disclosures made and accepted by Lender in writing:
Use of Property . After due inquiry and investigation. Indemnitor has no knowledge, or reason to believe. that there has been any use, generation, manufacture, storage, treatment, refinement. transportation, disposal, release, or threatened release of any Hazardous Substances by any person on, under, or about the Property.
Hazardous Substances . After due inquiry and investigation, Indemnitor has no knowledge, or reason to believe, that the Property, whenever and whether owned by previous Occupants, has ever contained asbestos, PCBs, lead paints or other Hazardous Substances. whether used in construction or stored on the Property.
No Notices . Indemnitor has received no summons, citation, directive, letter or other communication, written or oral, from any agency or department of any county or state or the U.S. Government concerning any intentional or unintentional action or omission on, under, or about the Property which has resulted in the releasing, spilling. leaking, pumping, pouring, emitting, emptying or dumping of Hazardous Substances into any waters, ambient air or onto any lands or where damage may have resulted to the lands, waters, fish, shellfish, wildlife, biota, air or other natural resources.
AFFIRMATIVE COVENANTS . Indemnitor covenants with Lender as follows:
Use of Property . Indemnitor will not use and does not intend to use the Property to generate, manufacture, refine, transport, treat, store, handle or dispose of any Hazardous Substances, PCBs, lead paint or asbestos.
Compliance with Environmental Laws . Indemnitor shall cause the Property and the operations conducted on it to comply with any and all Environmental Laws and orders of any governmental authorities having jurisdiction under any Environmental Laws and shall obtain, keep in effect and comply with all governmental permits and authorizations required by Environmental Laws with respect to such Property or operations. Indemnitor shall furnish Lender with copies of all such permits and authorizations and any amendments or renewals of them and shall notify Lender of any expiration or revocation of such permits or authorizations.
Preventive, Investigatory and Remedial Actio n. Indemnitor shall exercise extreme care in handling Hazardous Substances if Indemnitor uses or encounters any. Indemnitor, at lndemnitors expense, shall undertake any and all preventive, investigatory or remedial action (including emergency response, removal, containment and other remedial action) (a) required by any applicable Environmental Laws or orders by any governmental authority having jurisdiction under Environmental Laws. or (b) necessary to prevent or minimize property damage (including damage to Occupants own property), personal injury or damage to the environment, or the threat of any such damage or injury, by releases of or exposure to Hazardous Substances in connection with the Property or operations of any Occupant on the Property. In the event Indemnitor fails to perform any of Indemnitors obligations under this section of the Agreement, Lender may (but shall not be required to) perform such obligations at Indemnitors expense. All such costs and expenses incurred by Lender under this section and otherwise under this Agreement shall be reimbursed by Indemnitor to Lender upon demand with interest at the Note default rate, or in the absence of a default rate, at the Note interest rate, Lender and Indemnitor intend that Lender shall have full recourse to Indemnitor for any sum at any time due to Lender under this Agreement. In performing any such obligations of indemnitor, Lender shall at all times be deemed to be the agent of Indemnitor and shall not by reason of such performance be deemed to be assuming any responsibility of Indemnitor under any Environmental Law or to any third party. Indemnitor hereby irrevocably appoints Lender as Indemnitors attorney-in-fact with full power to perform such of Indemnitors obligations under this section of the Agreement as Lender deems necessary and appropriate.
Notices . Indemnitor shall immediately notify Lender upon becoming aware of any of the following:
(1) Any spill, release or disposal of a Hazardous Substance on any of the Property, or in connection with any of its operations if such spill, release or disposal must be reported to any governmental authority under applicable Environmental Laws.
(2) Any contamination, or imminent threat of contamination, of the Property by Hazardous Substances, or any violation of Environmental Laws in connection with the Property or the operations conducted on the Property.
(3) Any order, notice of violation, fine or penalty or other similar action by any governmental authority relating to Hazardous Substances or Environmental Laws and the Properly or the operations conducted on the Property_
(4) Any judicial or administrative investigation or proceeding relating to Hazardous Substances or Environmental Laws and to the Property or the operations conducted on the Property.
(5) Any matters relating to Hazardous Substances or Environmental Laws that would give a reasonably prudent Lender cause to be concerned that the value of Lenders security interest in the Property may be reduced or threatened or that may impair, or threaten to impair, Indemnitors ability to perform any of its obligations under this Agreement when such performance is due.
Access to Records . Indemnitor shall deliver to Lender. at Lenders request, copies of any and all documents in indemnitors possession or to which has access relating to Hazardous Substances or Environmental Laws and the Property and the operations conducted on the Property, including without limitation results of laboratory analyses, site assessments or studies. environmental audit reports and other consultants studies and reports.
Inspection s. Lender reserves the right to inspect and investigate the Property and operations on it at any time and from time to time, and Indemnitor shall cooperate fully with Lender in such inspection and investigations. If Lender at any time has reason to believe that Indemnitor or any Occupants of the Property are not complying with all applicable Environmental Laws or with the requirements of this Agreement or that a material spill, release or disposal of Hazardous Substances has occurred on or under the Property. Lender may require Indemnitor to furnish Lender at Indemnitors expense an environmental audit or a site
assessment with respect to the matters of concern to Lender, Such audit or assessment shall be performed by a qualified consultant approved by Lender. Any inspections or tests made by Lender shall be far Lenders purposes only and shall not be construed to create any responsibility or liability on the part of Lender to any Indemnitor or to any other person.
INDEMNITORS WAIVER AND INDEMNIFICATION . lndemnitor hereby agrees to and shall indemnify. defend, and hold harmless Lender and Lenders officers, directors, employees and agents, and Lenders successors and assigns and their officers. directors, employees and agents from and against any and all Claims, demands. tosses. liabilities, costs, fines, penalties and expenses (including without limitation attorneys fees at trial and on any appeal or petition for review, consultants fees, remedial action costs, natural resource damages and diminution in value) incurred by such person (a)arising out of or relating to any investigatory or remedial action involving the Property. the operations conducted on the Property, or any other operations of Indemnitor or any Occupant and required by Environmental Laws or by orders of any governmental authority having jurisdiction under any Environmental Laws, including without limitation any natural resource damages, or (b) arising nut of or related to any noncompliance with or violation of Environmental Laws or any applicable permits or approvals, or (c) an account of injury to Lender or any person whatsoever or damage to any property arising out of, in connection with. or in any way relating to (i) the breach of any covenant, representation or warranty contained in this Agreement, (ii) the violation of any Environmental Laws, permits, authorizations or approvals, (iii) the use, treatment, storage, generation, manufacture, transport. release, spill, disposal or other handling of Hazardous Substances on the Property, or (iv) the contamination of any of the Property by, or Me presence, release or threatened release of, Hazardous Substances by any means whatsoever(explicitly including without limitation any presently existing contamination of the Property, whether or not previously disclosed to Lender), or (d) pursuant to this Agreement. indemnitors obligations under this section shall survive the termination of this Agreement and as set forth below in the Survival section. In addition to this indemnity, Indemnitor hereby releases and waives all present and future claims against Lender for indemnity or contribution in the event Indemnitor becomes liable for cleanup or other costs under any Environmental Laws.
PAYMENT: FULL RECOURSE TO INDEMNITOR . Indemnitor intends that Lender shall have full recourse to Indemnitor for Indemnitors obligations under this Agreement as they become due to Lender. Such liabilities, losses, claims, damages and expenses shall be reimbursable to Lender as Lenders obligations to make payments with respect thereto are incurred, without any requirement of waiting for the ultimate outcome of any litigation, claim or other proceeding, and lndemnitor shall pay such liability, losses, claims, damages and expenses to Lender as so incurred within thirty (30) days after written notice from Lender. Lenders notice shall contain a brief itemization of the amounts incurred to the date of such notice. In addition to any remedy available for failure to pay periodically such amounts, such amounts shall thereafter bear Interest at the Note default rate. or in the absence of a default rate, at the Note interest rate.
SURVIVAL . The covenants contained in this Agreement shall survive (A) the repayment of the Indebtedness, (B) any foreclosure, whether judicial or nonjucicial, of the Property, and (C) any delivery of a deed in lieu of foreclosure to Lender or any successor of Lender. The covenants contained in this Agreement shall be for the benefit of Lender and any successor to Lender, as holder of any security interest in the Property or the indebtedness secured thereby. or as owner of the Property following foreclosure or the delivery of a deed in lieu of foreclosure
MISCELLANEOUS PROVISIONS . The following miscellaneous provisions are a part of this Agreement:
Amendments . This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
Attorneys Fees; Expenses . If Lender institutes any suit or action to enforce any of the terms of this Agreement, Lender strait be entitled to recover such sum as the court may adjudge reasonable as attorneys fees at trial and upon any appeal. Whether or riot any court action is involved. and to the extent not prohibited by law, all reasonable expenses Lender incurs that in Lenders opinion are necessary at any time for the protection of its interest or the enforcement of its rights shall become a part of the Indebtedness payable on demand and shall bear interest at the Note rate from the date of the expenditure until repaid. Expenses covered by this paragraph include. without limitation, however subject to any limits under applicable law, Lenders attorneys fees and Lenders legal expenses, whether or not there is a lawsuit, including attorneys tees and expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services, the cost of searching records, obtaining title reports (including foreclosure reports), surveyors reports, and appraisal fees and title insurance, to the extent permitted by applicable law. Indemnitor also will pay any court costs, in addition to all other sums provided by law.
Caption Headings . Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement,
Governing Law . With respect to procedural matters related to the perfection and enforcement of Lenders rights against the Property, this Agreement will be governed by federal taw applicable to Lender and to the extent not preempted by federal law, the laws of the State of Hawaii. In all other respects, this Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions. However, if there ever is a question about whether any provision of this Agreement is valid or enforceable, the provision that is questioned will be governed by whichever state or federal law would find the provision to be valid and enforceable. The loan transaction that is evidenced by the Note and this Agreement has been applied for, considered, approved and made, and all necessary loan documents have been accepted by Lender in the State of California.
Choice of Venue . If there is a lawsuit, lndemnitor agrees upon Lenders request to submit to the jurisdiction of the courts of Los Angeles County, State of California,
Joint and Several Liability . All obligations of Indemnitor under this Agreement shall be joint and several, and all references to Indemnitor shall mean each and every lndemnitor. This means that each Indemnitor signing below is responsible for all obligations in this Agreement.
8
No Waiver by Lender . Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lenders right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Indemnitor, shall constitute a waiver of any of Lenders rights or of any of Indemnitors obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. Indemnitor hereby waives notice of acceptance of this Agreement by Lender.
Notices . Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail. as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the partys address. For notice purposes, Indemnitor agrees to keep Lender informed at all times of indemnitors current address. Unless otherwise provided or required by law. if there is more than one Indemnitor, any notice given by Lender to any Indemnitor is deemed to be notice given to all Indemnitors.
Severability . If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, Invalidity, or unenforceability of any provision of this Agreement shall not effect the legality. validity or enforceability of any other provision of this Agreement.
Successors and Assigns . Subject to any limitations stated in this Agreement on transfer of Indemnitors interest, this Agreement shall be binding upon and inure to the benefit of the parties, their respective heirs, personal representatives, successors and assigns. If ownership of the Property becomes vested in a person other than Indemnitor, Lender, without notice to Indemnitor, may deal with Indemnitors successors with reference to this Agreement and the Indebtedness by way of forbearance or extension without releasing Indemnitor from the obligations of this Agreement or liability under the Indebtedness.
Time is of the Essence . Time is of the essence in the performance of this Agreement.
DEFINITIONS . The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code:
Agreement . The word Agreement means this Hazardous Substances Agreement, as this Hazardous Substances Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Hazardous Substances Agreement from time to time.
Environmental Laws . The words Environmental Laws mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (CERCLA ), the Superfund Amendments and Reauthorization Act of 1986, Pub, L. No. 99-499 (SARA), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.SC. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.
Hazardous Substances . The words Hazardous Substances mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored. disposed of, generated, manufactured, transported or otherwise handled. The words Hazardous Substances are used in their very broadest sense and include without limitation any and alt hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws, The term Hazardous Substances also includes, without limitation, petroleum and petroleum by products or any fraction thereof and asbestos.
Indebtedness . The word Indebtedness means all principal, interest, and other amounts, costs and expenses payable under the Note or Related Documents, together with all renewals of. extensions of, modifications of, consolidations of and substitutions for the Note or Related Documents and any amounts expended or advanced by Lender to discharge Indemnitors obligations or expenses incurred by Lender to enforce lndemnitors obligations under this Agreement, together with interest an Such amounts as provided in this Agreement.
Lender . The word Lender means Pacific Western Bank, its successors and assigns.
Note . The word Note means the Note executed by TDM Beach Villas, LLC, a Hawaii limited liability company in the principal amount of $6,000,000.00 dated November 24, 2008, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement.
Occupant . The word Occupant means individually and collectively all persons or entities occupying or utilizing the Property, whether as owner, tenant, operator or Other occupant.
Property. The word Property means all of Indemnitors right, title and interest in and to all the Property as described in the Property Description section of this Agreement.
Real Property . The words Real Property mean the real property, interests and rights, as further described in this Agreement.
Related Documents . The words Related Documents mean all promissory notes. credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.
9
EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT, AND EACH AGREES TO ITS TERMS. NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS AGREEMENT EFFECTIVE. THIS AGREEMENT IS DATED NOVEMBER 24, 2008
BORROWER: |
|
|
|
|
|
TDM BEACH VILLAS, LLC, A HAWAII LIMITED LIABILITY COMPANY |
|
|
|
|
|
By: |
/s/ Mark S. Richards |
|
|
Mark S. Richards, Manager of TDM Beach Villas, LLC, a Hawaii limited liability company |
|
|
|
|
By: |
/s/ Mark S. Richards |
|
|
Thomas C. Connor, Manager of TDM Beach Villas, LLC, a Hawaii limited liability company |
|
|
|
|
By: |
/s/ Donald W. Wooley |
|
|
Donald W. Wooley, Manager of TDM Beach Villas, LLC, a Hawaii limited liability company |
|
|
|
|
GUARANTOR: |
|
|
|
|
|
X |
/s/ Mark S. Richards |
|
|
Mark S. Richards, Individually |
|
|
|
|
X |
/s/ Thomas C. Connor |
|
|
Thomas C. Connor, Individually |
|
|
|
|
X |
/s/ Donald W. Wooley |
|
|
Donald W. Wooley, Individually |
|
|
|
|
X |
/s/ Mark S. Richards |
|
|
Mark S. Richards, Trustee of Mark S. and Cheryl L. Richards Family Revocable Trust under the provisions of a Trust Agreement dated March 17, 1989 |
|
|
|
|
X |
/s/ Cheryl L. Richards |
|
|
Cheryl L. Richards, Trustee of Mark S. and Cheryl L. Richards Family Revocable Trust under the provisions of a Trust Agreement dated March 17, 1989 |
|
|
|
|
|
|
|
KENNEDY-WILSON INC., A DELAWARE CORPORATION |
|
|
|
|
|
By: |
/s/ Mary L. Ricks |
|
|
Mary L. Ricks, Vice President of Kennedy-Wilson, Inc., a Delaware corporation |
|
|
|
|
By: |
/s/ Freeman A. Lyle |
|
|
Freeman A. Lyle, CFO/Secretary of Kennedy-Wilson, Inc., a Delaware corporation |
|
|
|
|
|
|
|
LENDER: |
|
|
|
|
|
PACIFIC WESTERN BANK |
|
|
|
|
|
X |
|
|
|
Authorized Signer |
|
STATE OF HAWAII |
) |
SS |
|
) |
|
CITY AND COUNTY OF HONOLULU |
) |
|
|
|
|
On this the day of , 2008, before me personally appeared Mark S. Richards , personally known to me OR proved to me on the basis of satisfactory evidence who, being by me duly sworn or affirmed, did say that such person executed the foregoing instrument as the free act and deed of such person, and if applicable in the capacities shown, having duly authorized to execute such instrument in such capacities
|
|
|
|||||||
|
|
Printed Name: |
|||||||
|
|
|
|||||||
|
|
|
|||||||
|
|
Notary Public, State of Hawaii |
|||||||
|
|
My commission expires: |
|
Printed Name: |
|||||
|
|
|
|||||||
|
|
|
|||||||
Doc Date: |
|
# Pages: |
|
|
|
||||
|
|
|
|||||||
Notary Name: |
|
|
|
||||||
|
|
|
|||||||
Doc. Description: |
|
|
|||||||
|
|
|
|||||||
|
|
(Official Stamp or Seal) |
|||||||
Notary Signature |
Date |
|
|
||||||
NOTARY CERTIFICATION (at time of notarization)
Exhibit 10.104
AMENDED AND RESTATED GUARANTY AGREEMENT
This Amended and Restated Guaranty Agreement (this Guaranty) is made as of October 25, 2007, by Kennedy-Wilson, Inc., a Delaware corporation (singly or collectively, Guarantor), in favor of Bank of America, N.A., a national banking association, as agent for Lenders as that term is defined below (in such capacity, Administrative Agent) and each of the Lenders.
PRELIMINARY STATEMENTS
Administrative Agent and certain other lenders from time to time (each a Lender and collectively, Lenders) and FAIRWAYS 340 LLC, a Delaware limited liability company (Borrower), have entered into, are entering into concurrently herewith, or contemplate entering into, that certain Amended and Restated Loan Agreement of even date herewith (herein called, as it may hereafter be modified, supplemented, restated, extended, or renewed and in effect from time to time, the Loan Agreement), which Loan Agreement sets forth the terms and conditions of a loan (the Loan) to Borrower with respect to land located in Walnut Creek, California, as more particularly described in the Loan Agreement and identified therein as the Land.
A condition precedent to Lenders obligation to make the Loan to Borrower is Guarantors execution and delivery to Administrative Agent of this Guaranty.
The Loan is, or will be, evidenced by those certain Amended and Restated Deed of Trust Notes of even date with the Loan Agreement, executed by Borrower and payable to the order of Lenders in the aggregate original face principal amount of Forty-Two Million Three Hundred Fifty-Nine Thousand Five Hundred Four Dollars ($42,359,504) (such notes, as they may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, are herein called the Note).
Borrower and Bank of America, N.A. as Lender or an affiliate thereof (collectively, Swap Bank) may from time to time enter into an interest rate swap agreement, International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement or other similar agreement or arrangement to hedge the risk of variable interest rate volatility or fluctuations of interest rates (any such agreement or arrangement as it may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time is herein called an Interest Rate Protection Agreement).
Any capitalized term used and not defined in this Guaranty shall have the meaning given to such term in the Loan Agreement, This Guaranty is one of the Loan Documents described in the Loan Agreement.
STATEMENT OF AGREEMENTS
For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and as a material inducement to Administrative Agent and Lenders to extend credit to Borrower, Guarantor hereby guarantees to Administrative Agent and Lenders the prompt and full payment and performance of the indebtedness and obligations described below in this Guaranty (collectively called the Guaranteed Obligations), this Guaranty being upon the following terms and conditions:
Upon demand by Lender following the occurrence of an Event of Default, Guarantor will cause all work to the Improvements to be completed in accordance with the Plans and other requirements of the Loan Agreement and will pay all bills in connection therewith. The liability and obligations under this Section 1(b) shall not be limited or restricted by the existence of, or any terms of, the guaranty of payment under Section 1(a).
8
This is an unconditional and irrevocable waiver of any rights and defenses that Guarantor may have because the Guaranteed Obligations are secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Sections 580a, 580b, 580d, or 726 of the CCP.
11
12
13
Until the Guaranteed Obligations are paid and performed in fall and each and every term, covenant and condition of this Guaranty is fully performed, Guarantor hereby further agrees:
(aa) To maintain Net Worth equal to at least Thirty Million Dollars ($30,000,000); and
(bb) To maintain unencumbered Liquid Assets equal to at least Eight Million Dollars ($8,000,000).
As used herein, (A) Net Worth means the net worth of Guarantor determined in accordance with generally accepted accounting principles; and (B) Liquid Assets means the following assets of Guarantor: (i) cash; (ii) certificates of deposit or time deposits with terms of six (6) months or less; (iii) A-1/P-1 commercial paper with a term of three (3) months or less; (iv) U.S. treasury bills and other obligations of the federal government, all with terms of six (6) months or less; (v) Readily marketable securities (excluding margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), restricted stock and stock subject to the provisions of Rule 144 of the Securities and Exchange Commission); (vi) Bankers acceptances issued for terms of six (6) months or less by financial institutions approved
14
by Lender; and (vii) repurchase agreements with terms of six (6) months or less covering U.S. government securities.
In addition to the foregoing, Guarantor further represents, warrants and covenants that (1) Guarantor has received and examined copies of each Interest Rate Protection Agreement, the observance and performance of which by Borrower is hereby guaranteed; (m) Guarantor will benefit from Swap Bank entering into each Interest Rate Protection Agreement and any transaction thereunder with Borrower, and Guarantor has determined that the execution and delivery by Guarantor of this Guaranty is necessary and convenient to the conduct, promotion and attainment of the business of Guarantor; and (n) neither Administrative Agent nor Swap Bank nor Lenders have any duty to determine whether any Interest Rate Protection Agreement, or any other transaction relating to or arising under any Interest Rate Protection Agreement, will be or has been entered into by Borrower for purposes of hedging interest rate, currency exchange rate, or other risks arising in its businesses or affairs and not for purposes of speculation or is otherwise inappropriate for Borrower.
15
16
17
23: Security. To secure payment and performance of Guarantors obligations hereunder, Guarantor assigns and grants to Administrative Agent for the benefit of Lenders a security interest in all moneys, securities and other property of Guarantor in the possession of Administrative Agent, whether held in a general or special account or deposit or for safekeeping or otherwise, and all proceeds thereof. Upon the occurrence of any Event of Default, Administrative Agent may apply any deposit account to reduce the amount outstanding on the Loan, and may foreclose any collateral as provided in the Uniform Commercial Code and in any security agreements between Administrative Agent and Lenders and Guarantor.
18
19
All arbitration hearings will be commenced within ninety (90) days of the demand for arbitration and completed within ninety (90) days from the date of commencement; provided, however, that upon a showing of good cause, the arbitrator shall be permitted to extend the commencement of such hearing for up to an additional sixty (60) days.
20
21
ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE LOAN DOCUMENTS. GUARANTOR, ADMINISTRATIVE AGENT AND LENDERS ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. GUARANTOR FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
[Signatures begin on next page]
THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Guarantor duly executed this Guaranty as of the date first written above.
Address of Guarantor: |
GUARANTOR |
|
|
|
|
9601 Wilshire Boulevard, Suite 220 |
Kennedy-Wilson, Inc., |
|
Beverly Hills, CA 90210 |
a Delaware limited liability company |
|
Facsimile.: 310-887-6230 |
|
|
Attn: Freeman Lyle |
|
|
|
|
|
|
By: |
/s/ Freeman Lyle |
|
Name: |
|
|
Title: |
|
|
|
|
Address of Administrative Agent: |
|
|
|
|
|
Bank of America, NA. |
|
|
333 South Hope Street, 11th Floor |
|
|
Los Angeles, CA 90071 |
|
|
Facsimile. 213-621-4831 |
|
|
Attn: Marchell Hilliard |
|
22
EXHIBIT
A
Form of Compliance Certificate
Covenant Compliance Certificate
This will certify, among other things, that during the period from to (the Reporting Period), Kennedy-Wilson, Inc., a Delaware corporation (Guarantor) is in compliance with the terms of that certain Amended and Restated Guaranty Agreement dated October , 2007 (the Guaranty Agreement) made by Guarantor for the benefit of Bank of America, N.A. (Agent) and the other Lenders (as defined in the Loan Agreement), in connection with an Amended and Restated Loan Agreement of even date with the Guaranty Agreement among Fairways 340 LLC, a Delaware limited liability company, Agent and Lenders (the Loan Agreement). The Guaranty Agreement requires the maintenance by Guarantors of not less than $30,000,000 Net Worth and not less than $8,000,000 unencumbered Liquid Assets as set forth in Section 13 of the Guaranty Agreement. Initially capitalized terms used but not otherwise defined in this Compliance Certificate shall have the meanings given to them in the Guaranty Agreement.
Guarantor:
KENNEDY-WILSON, INC.,
a Delaware corporation
By: |
|
|
|
Name: |
|
|
|
Title: |
|
Exhibit 10.105
BANK OF AMERICA - CONFIDENTIAL PAGE: 1
DATE: OCTOBER 26, 2007
AMENDMENT TO IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 3078943
AMENDMENT NUMBER 2
ISSUING BANK
BANK
OF AMERICA, N.A.
1000 W. TEMPLE STREET
7TH FLOOR, CA9-705-07-05
LOS ANGELES, CA 90012-1514
BENEFICIARY
CITY OF WALNUT CREEK
1666 NORTH MAIN STREET
WALNUT CREEK, CA 94596
APPLICANT
FAIRWAYS 340 LLC
9601 WILSHIRE BLVD.
SUITE 220
BEVERLY HILLS, CA 90210
RE: SUBDIVISION NO, 8960, CATEGORY II, PHASE 1
THIS AMENDMENT IS TO BE CONSIDERED AN INTEGRAL PART OF THE ABOVE CREDIT AND MUST BE ATTACHED THERETO.
THE ABOVE MENTIONED CREDIT IS AMENDED AS FOLLOWS:
1. THE AMOUNT OF THIS CREDIT HAS BEEN INCREASED BY USD 7,038.00 THE AVAILABLE AMOUNT OF THE CREDIT IS NOW USD 303,632.00
2. THE EXPIRATION DATE IS AMENDED TO: MAY 31, 2012. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS AMENDMENT, PLEASE CALL 213-481-7833,
/s/ Illegible |
|
AUTHORIZED SIGNATURE |
|
THIS DOCUMENT CONSISTS OF 1 PAGE(S)-
Bolivar Carrillo
ORIGINAL
BANK OF AMERICA - CONFIDENTIAL PAGE: 1
DATE: OCTOBER 26, 2007
AMENDMENT TO IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 3079732
AMENDMENT NUMBER 1
BENEFICIARY |
APPLICANT |
|
|
CITY OF WALNUT CREEK |
FAIRWAYS 340 LIJC |
1666 NORTH MAIN STREET |
9601 WILSHIRE BLVD. SUITE 220 |
WALNUT CREEK, CA 94596 |
BEVERLY HILLS, CA 90210 |
ISSUING BANK
BANK OF AMERICA, N.A.
1000 W. TEMPLE STREET
7TH FLOOR, CA9-705-07-05
LOS ANGELES, CA 90012-1514
RE: SUBDIVISION NO. 8960, CATEGORY II, PHASE 7
THIS AMENDMENT IS TO BE CONSIDERED AN INTEGRAL PART OF THE ABOVE CREDIT AND MUST BE ATTACHED THERETO.
THE ABOVE MENTIONED CREDIT IS AMENDED AS FOLLOWS:
1. THE AMOUNT OF THIS CREDIT HAS BEEN INCREASED BY USD 131,054.00 THE AVAILABLE AMOUNT OF THE CREDIT IS NOW USD 1,629,762.00
2. THE EXPIRATION DATE IS AMENDED TO: MAY 31, 2012. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED,
IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS AMENDMENT, PLEASE CALL 213-481-7833.
/s/ Illegible |
|
AUTHORIZED SIGNATURE |
|
THIS DOCUMENT CONSISTS OF 1 PAGE(S).
Bolivar Carrillo
BANK OF AMERICA - CONFIDENTIAL PAGE: 1
DATE: OCTOBER 26, 2007
AMENDMENT TO IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 3079731
AMENDMENT NUMBER 1
ISSUING BANK |
|
|
|
BANK Of AMERICA, N.A. |
APPLICANT |
1000 W. TEMPLE STREET |
|
7TH FLOOR, CA9-705-07-05 |
FAIRWAYS 340 LLC |
LOS ANGELES, CA 90012-1514 |
9601 WILSHIRE BLVD. |
|
SUITE 220 |
BENEFICIARY |
BEVERLY HILLS, CA 90210 |
CITY OF WALNUT CREEK
1666 NORTH MAIN STREET
WALNUT CREEK, CA 94596
RE: SUBDIVISION NO. 8960, CATEGORY II, PHASE 8
THIS AMENDMENT IS TO BE CONSIDERED AN INTEGRAL PART OF THE ABOVE CREDIT AND MUST BE ATTACHED THERETO.
THE ABOVE MENTIONED CREDIT IS AMENDED AS FOLLOWS;
1. THE AMOUNT OF THIS CREDIT HAS BEEN INCREASED BY USD 131,959.00 THE AVAILABLE AMOUNT OF THE CREDIT IS NOW USD 1,641,017.00
2. THE EXPIRATION DATE IS AMENDED TO: MAY 31, 2012. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS AMENDMENT, PLEASE CALL 213-481-7833.
/s/ Illegible |
|
AUTHORIZED SIGNATURE |
|
Bolivar Carrillo
THIS DOCUMENT CONSISTS OF 1 PAGE(S).
ORIGINAL
BANK OF AMERICA - CONFIDENTIAL PAGE: 1
DATE: OCTOBER 26, 2007
AMENDMENT TO IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 3079733
AMENDMENT NUMBER 1
ISSUING BANK |
BENEFICIARY |
|
|
BANK OF AMERICA, N.A. |
CITY OF WALNUT CREEK |
1000 W. TEMPLE STREET |
1666 NORTH MAIN STREET |
7TH FLOOR, CA9-705-07-05 |
WALNUT CREEK, CA 94596 |
LOS ANGELES, CA 90012-1514 |
|
|
APPLICANT |
|
|
|
FAIRWAYS 340 LLC |
|
9601 WILSHIRE BLVD. SUITE 220 |
|
BEVERLY HILLS, CA 90210 |
RE: SUBDIVISION NO. 8960, CATEGORY II, PHASE 6
THIS AMENDMENT IS TO BE CONSIDERED AN INTEGRAL PART OF THE ABOVE CREDIT AND MUST BE ATTACHED THERETO.
THE ABOVE MENTIONED CREDIT IS AMENDED AS FOLLOWS:
1. THE AMOUNT OF THIS CREDIT HAS BEEN INCREASED BY USD 182,891.00 THE AVAILABLE AMOUNT OF THE CREDIT IS NOW USD 2,274,4D5.00
2. THE EXPIRATION DATE IS AMENDED TO I MAY 31, 2012, ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
IF YOU REQUXRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS AMENDMENT, PLEASE CALL 213-481-7833.
/s/ Illegible |
|
AUTHORIZED SIGNATURE |
|
Bolivar Carrillo
THIS DO CUMENT CONSISTS OF 1 PAGE ( S) .
ORIGINAL
BANK OF AMERICA - CONFIDENTIAL PAGE: 1
DATE: OCTOBER 26, 2007
AMENDMENT TO IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 3079734
AMENDMENT NUMBER 2
ISSUING BANK |
APPLICANT |
|
|
BANK OF AMERICA, N.A. |
FAIRWAYS 340 LLC |
1000 W. TEMPLE STREET |
9601 WILSHIRE BLVD. |
7TH FLOOR, CA9-705-07-05 |
SUITE 220 |
LOS ANGELES, CA 90012-1514 |
BEVERLY HILLS, CA 90210 |
BENEFICIARY
CITY
OF WALNUT CREEK
1666 NORTH MAIN STREET
WALNUT CREEK, CA 94596
RE: SUBDIVISION NO. 8960, CATEGORY II, PHASE 5
THIS AMENDMENT IS TO BE CONSIDERED AN INTEGRAL PART OF TEE ABOVE CREDIT AND MUST BE ATTACHED THERETO.
THE ABOVE MENTIONED CREDIT IS AMENDED AS FOLLOWS
1. THE AMOUNT OF THIS CREDIT HAS BEEN INCREASED BY USD 377.00 THE AVAILABLE AMOUNT OF THE CREDIT IS NOW USD 108,650.00
2. THE EXPIRATION DATE IS AMENDED TO: MAY 31, 2012, ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS AMENDMENT, PLEASE CALL 213-481-7833,
/s/ Illegible |
|
AUTHORIZED SIGNATURE |
|
Bolivar Carrillo
THIS DOCUMENT CONSISTS OF 1 PAGE(S)
COPY
BANK OF AMERICA - CONFIDENTIAL PAGE: 1
DATE: OCTOBER 26, 2007
AMENDMENT TO IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 3079737
AMENDMENT NUMBER 2
ISSUING BANK |
APPLICANT . |
|
|
BANK OF AMERICA, N.A. |
FAIRWAYS 340 LLC |
1000 W. TEMPLE STREET |
9601 WILSHIRE BLVD. |
7TH FLOOR, CA9-705-07-05 |
SUITE 220 |
LOS ANGELES, CA 90012-1514 |
BEVERLY HILLS, CA 90210 |
BENEFICIARY
CITY OF WALNUT CREEK
1666 NORTH MAIN STREET
WALNUT CREEK, CA 94596
RE: SUBDIVISION NO, 8960, CATEGORY II, PHASE 2
THIS AMENDMENT IS TO BE CONSIDERED AN INTEGRAL PART OF THE ABOVE CREDIT AND MUST BE ATTACHED THERETO.
THE ABOVE MENTIONED CREDIT IS AMENDED AS FOLLOWS:
1. THE AMOUNT OF THIS CREDIT HAS BEEN INCREASED BY USD 10,669.00 THE AVAILABLE AMOUNT OF THE CREDIT IS NOW USD 256,369.00
2. THE EXPIRATION DATE IS AMENDED TO: MAY 31, 2012. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS AMENDMENT, PLEASE CALL 213-481-7833.
/s/ Illegible |
|
AUTHORIZED SIGNATURE |
|
Bolivar Carrillo
THIS DOCUMENT CONSISTS OF 1 PAGE (S)
ORIGINAL
BANK OF AMERICA - CONFIDENTIAL PAGE: 1
DATE: OCTOBER 26, 2007
AMENDMENT TO IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 3079736
AMENDMENT NUMBER 2
ISSUING BANK |
BENEFICIARY |
|
|
BANK OF AMERICA, N.A. |
CITY OF WALNUT CREEK |
1000 W- TEMPLE STREET |
1666 NORTH MAIN STREET |
7TH FLOOR, CA9-705-07-05 |
WALNUT CREEK, CA 94596 |
LOS ANGELES, CA 90012-1514 |
|
|
APPLICANT |
|
|
|
FAIRWAYS 340 LLC |
|
9601 WILSHIRE BLVD. SUITE 220 |
|
BEVERLY HILLS, CA 90210 |
RE: SUBDIVISION NO. 89.50, CATEGORY II, PHASE 3
THIS AMENDMENT IS TO BE CONSIDERED AN INTEGRAL PART OF THE ABOVE CREDIT AND MUST BE ATTACHED THERETO.
THE ABOVE MENTIONED CREDIT IS AMENDED AS FOLLOWS:
1. THE AMOUNT OF THIS CREDIT HAS BEEN INCREASED BY USD 2,545.00 THE AVAILABLE AMOUNT OF THE CREDIT IS NOW USD 150,910.00
2. THE EXPIRATION DATE IS AMENDED TO: MAY 31, 2012. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS AMENDMENT. PLEASE CALL 213-481-7833.
/s/ Illegible |
|
AUTHORIZED SIGNATURE |
|
THIS DOCUMENT CONSISTS OF 1 PAGE(S).
Bolivar Carillo
ORIGINAL
BANK OF AMERICA - CONFIDENTIAL PAGE: 1
DATE: OCTOBER 26, 2007
AMENDMENT TO IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 3079735
AMENDMENT NUMBER 1
ISSUING BANK |
BENEFICIARY |
|
|
BANK OF AMERICA, N.A. |
CITY OF WALNUT CREEK |
1000 W- TEMPLE STREET |
1666 NORTH MAIN STREET |
7TH FLOOR, CA9-705-07-05 |
WALNUT CREEK, CA 94596 |
LOS ANGELES, CA 90012-1514 |
|
|
APPLICANT |
|
|
|
FAIRWAYS 340 LLC |
|
9601 WILSHIRE BLVD. SUITE 220 |
|
BEVERLY HILLS, CA 90210 |
RE: SUBDIVISION NO. 8960, CATEGORY II, PHASE 4
THIS AMENDMENT IS TO BE CONSIDERED AN INTEGRAL PART OF THE ABOVE CREDIT AND MUST BE ATTACHED THERETO.
THE ABOVE MENTIONED CREDIT IS AMENDED AS FOLLOWS:
1. THE AMOUNT OF THIS CREDIT HAS SEEN INCREASED BY USD 160,404.00 THE AVAILABLE AMOUNT OF THE CREDIT IS NOW USD 1,994,759.00
2. THE EXPIRATION DATE IS AMENDED TO: MAY 31, 2012. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS AMENDMENT, PLEASE CALL 213-481-7833.
/s/ Illegible |
|
AUTHORIZED SIGNATURE |
|
THIS DOCUMENT CONSISTS OF 1 PAGE(S).
Bolivar Carrillo
ORIGINAL
Exhibit 10.106
GUARANTY AGREEMENT
This Guaranty Agreement (this Guaranty) is made as of August 14, 2007, by Kennedy-Wilson, Inc., a Delaware corporation (singly or collectively, Guarantor), in favor of Bank of America, N.A., a national banking association, as agent for Lenders as that term is defined below (in such capacity, Administrative Agent) and each of the Lenders.
PRELIMINARY STATEMENTS
Administrative Agent and certain other lenders from time to time (each a tender and collectively, tenders) and 300 California Partners LLC, a Delaware limited liability company (Borrower), have entered into, are entering into concurrently herewith, or contemplate entering into, that certain Loan Agreement of even date herewith (herein called, as it may hereafter be modified, supplemented, restated, extended, or renewed and in effect from time to time, the Loan Agreement), which Loan Agreement sets forth the terms and conditions of a loan (the Loan) to Borrower for the construction of the Improvements on, and with respect to, land located in the City of San Francisco, County of San Francisco, State of California, as more particularly described in the Loan Agreement and identified therein as the Land,
A condition precedent to Lenders obligation to make the Loan to Borrower is Guarantors execution and delivery to Administrative Agent of this Guaranty.
The Loan is, or will be, evidenced by those certain Deed of Trust Notes of even date with the Loan Agreement, executed by Borrower and payable to the order of Lenders in the aggregate original face principal amount of Forty-Five Million Dollars ($45,000,000) (such notes, as they may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefore, or in modification, renewal, or extension thereof, in whole or in part, are herein called the Note).
Borrower and Bank of America, N.A. as Lender or an affiliate thereof (collectively, Sway Bank) may from time to time enter into an interest rate swap agreement, International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement or other similar agreement or arrangement to hedge the risk of variable interest rate volatility or fluctuations of interest rates (any such agreement or arrangement as it may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time is herein called an Interest Rate Protection Agreement).
Any capitalized term used and not defined in this Guaranty shall have the meaning given to such term in the Loan Agreement. This Guaranty is one of the Loan Documents described in the Loan Agreement.
STATEMENT OF AGREEMENTS
For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and as a material inducement to Administrative Agent and Lenders to extend
credit to Borrower, Guarantor hereby guarantees to Administrative Agent and Lenders the prompt and full payment and performance of the indebtedness and obligations described below in this Guaranty (collectively called the Guaranteed Obligations), this Guaranty being upon the following terms and conditions:
1. Guarantees.
(a) Guaranty of Payment.
(1) Guarantor hereby jointly and severally, unconditionally and irrevocably guarantees to Administrative Agent and Lenders the punctual payment when due, whether by lapse of time, by acceleration of maturity, or otherwise, of all principal, interest (including interest accruing after the commencement of any bankruptcy or insolvency proceeding by or against Borrower, whether or not allowed in such proceeding), fees, late charges, prepayment fees, costs, expenses, required Borrowers Deposits, advances made before recording of the Deed of Trust (if any), and other sums of money now or hereafter due and owing, or which Borrower is obligated to pay, pursuant to (A) the terms of the Not; the Loan Agreement, the Deed of Trust, the Environmental Agreement, any application, agreement, note or other document executed and delivered in connection with any Letter of Credit, any set aside letters, any Interest Rate Protection Agreement or any other Loan Documents, including any indemnifications contained in the Loan Documents, now or hereafter existing, and (B) all renewals, extensions, refinancings, modifications, supplements or amendments of such indebtedness, or any of the Loan Documents, or any part thereof (the indebtedness described in clauses (A) and (B) above in this Section 1(a~ffl is herein collectively called the Indebtedness). This Guaranty covers the Indebtedness, whether presently outstanding or arising subsequent to the date hereof, including all amounts advanced by Administrative Agent or Lenders in stages or installments. The guaranty of Guarantor as set forth in this Section 1(a~ is a continuing guaranty of payment and not a guaranty of collection.
(ii) Notwithstanding the foregoing, Guarantors obligations hereunder for repayment of the principal owing under the Loan shall in no event exceed the Guaranteed Amount (as defined below), plus interest accrued and unpaid on the entire Indebtedness from the date the same is due until paid in full, together with all costs, expenses and attorneys fees incurred by Administrative Agent or Lenders. Guarantors obligations shall not be affected, impaired, lessened or released by loans, credits or other financial accommodations now existing or hereafter advanced by Administrative Agent or Lenders to Borrower in excess of the Guaranteed Amount. In no event shall the Guaranteed Amount be reduced as a result of (A) Borrowers payment of the Guaranteed Obligations, or (B) Administrative Agents foreclosure (or any credit bid in connection with any such foreclosure) or acceptance of a deed in lieu of foreclosure for the benefit of Lenders with respect to any collateral securing the Indebtedness. The agreement of Administrative Agent and Lenders to the foregoing limitation on Guarantors liability shall in no way be deemed to limit or restrict the right of Administrative Agent or Lenders to apply any sums paid by Guarantor to any portion of the Loan. As used herein, Guaranteed Amount means Eleven Million Two Hundred Fifty Thousand Dollars ($11,250,000).
(b) Guaranty of Performance. Guarantor also hereby unconditionally and irrevocably guarantees to Lender the timely performance of all other Obligations under all of the Loan Documents, including, without limiting the generality of the foregoing:
(i) that the renovation of the Improvements will be completed in accordance with the Plans and other requirements of the Loan Agreement;
(ii) that Borrower will make all deposits required under the terms of the-Loan-Agreement and the-other Loan Documents as-and when required
(iii) that Borrower will promptly pay in full and discharge all taxes, assessments and other charges or levies imposed upon or against or with respect to the Property or the ownership, use, occupancy or enjoyment of any portion thereof, or any utility service thereto, as the same become due and payable including all real estate taxes assessed against the Property or any part thereof;
(iv) that Borrower will pay, at or before the times required by the Loan Documents, the premiums on all policies of insurance required to be maintained under the terms of the Loan Documents; and
(v) that Borrower will duly and punctually perform and observe all other terms, covenants and conditions of the Not; the Loan Agreement, the Deed of Trust, the Environmental Agreement, any Interest Rate Protection Agreement and all other Loan Documents.
Upon demand by Lender following the occurrence of a Default, Guarantor will cause all work to the Improvements to be completed in accordance with the Plans and other requirements of the Loan Agreement and will pay all bills in connection therewith. The liability and obligations under this Section 1(b) shall not be limited or restricted by the existence of, or any terms of, the guaranty of payment under Section 1(a).
2. Absolute, Irrevocable and Unconditional Guaranty.
(a) This Guaranty is an absolute, irrevocable and unconditional guaranty of payment and performance. This Guaranty shall be effective as a waiver of, and Guarantor hereby expressly waives, any and all rights to which Guarantor may otherwise have been entitled under any suretyship laws in effect from time to time, including any right or privilege, whether existing under statute, at law or in equity, to require Administrative Agent or Lenders to take prior recourse or proceedings against any collateral, security or Person (hereinafter defined) whatsoever.
(b) As used herein, the term Event of Default means the occurrence of one or more of the following events, individually or collectively:
(i) default by Borrower in payment or performance of the Guaranteed Obligations, or any part thereof, when such indebtedness or performance becomes due,
either by its terms or as the result of the exercise of any power to accelerate;
(ii) the failure of Guarantor to perform completely and satisfactorily the covenants, terms and conditions of any of the Guaranteed Obligations;
(iii) the death, dissolution or insolvency of Guarantor, or the appointment of a conservator for Guarantor, and such Guarantor is not replaced with another Guarantor satisfactory to Administrative Agent within forty-five (45) days after the occurrence of such event;
(iv) the inability of Guarantor to pay debts as they mature;
(v) an assignment by Guarantor for the benefit of creditors;
(vi) the institution of any proceeding by or against Guarantor in bankruptcy or for a reorganization or an arrangement with creditors, or for the appointment of a receiver, trustee or custodian for any of them or for any of theft respective properties;
(vii) the determination by Administrative Agent in good faith that a material adverse change has occurred in the financial condition of Guarantor;
(viii) the entry of a judgment against Guarantor in an amount greater than $500,000 and such judgment remains unstayed or unbonded for a period of thirty (30) days;
(ix) the issuance of a writ or order of attachment, levy or garnishment against Guarantor;
(x) the falsity in any material respect of, or any material omission in~ any representation made to Administrative Agent or any Lender by Guarantor; and/or
(xi) any transfer of assets of any Guarantor, without the prior consent of Administrative Agent (except for transfers of assets for estate planning purposes valued at less than $50,000 per year per Guarantor, customary political and charitable contributions, and transfers for which Guarantor receives consideration substantially equivalent to the fair market value of the transferred asset).
(c) Upon the occurrence of any Event of Default, the Guaranteed Obligations, for purposes of this Guaranty, shall be deemed immediately due and payable at the election of Administrative Agent, and Guarantor shall, on demand and without presentment, protest, notice of protest, further notice of nonpayment or of dishonor, default or nonperformance, or notice of acceleration or of intent to accelerate, or any other notice whatsoever, without any notice having been given to Guarantor prior to such demand of the acceptance by Administrative Agent and Lenders of this Guaranty, and without any notice having been given to Guarantor prior to such demand of the creating or incurring of such indebtedness, all such notices being hereby waived by Guarantor, pay the amount due to Administrative Agent and Lenders, and pay all damages
and all costs and expenses that may arise in consequence of such Event of Default (including all attorneys fees and expenses, investigation costs, court costs, and any and all other costs and expenses incurred by Administrative Agent or Lenders in connection with the collection and enforcement of the Note or any other Loan Document), whether or not suit is fled thereon, or whether at maturity or by acceleration, or whether before or after maturity, or whether in connection with bankruptcy, Solvency or appeal. It shall not be necessary for Administrative Agent or Lenders, in order to enforce such payment by Guarantor, first to institute judicial or non-judicial foreclosure or pursue or exhaust any rights or remedies against Borrower or others liable on such indebtedness, or to enforce any rights against any security that shall ever have been given to secure such indebtedness, or to join Borrower or any others liable for the payment of the Guaranteed Obligations or any part thereof in any action or proceeding to enforce this Guaranty, or to resort to any other means of obtaining payment or performance of the Guaranteed Obligations; provided,, however, that nothing herein contained shall prevent Administrative Agent or Lenders from judicially or non-judicially foreclosing the Deed of Trust or from exercising any other rights or remedies under the Loan Documents, and if such foreclosure or other right or remedy is availed of, only the net proceeds there from, after deduction of all charges and expenses of every kind and nature whatsoever, shall be applied in reduction of the amount due on the Note and Deed of Trust, and neither Administrative Agent nor Lenders shall be required to institute or prosecute proceedings to recover any deficiency as a condition of payment hereunder or enforcement hereof. At any sale of the Property or other collateral given for the Indebtedness or any part thereof, whether by foreclosure or otherwise, Administrative Agent or any Lender may at its discretion purchase all or any part of the Property or collateral so. sold or offered for sale for its own account and may, in payment of the amount bid therefore, deduct such amount from the balance due it pursuant to the terms of the Note, Deed of Trust and other Loan Documents. Collection action may be taken or demand may be made against Borrower or against all parties who have signed this Guaranty or any other guaranty covering all or any part of the Guaranteed Obligations, or against any one or more of them, separately or together, without impairing the rights of Administrative Agent or Lenders against any party hereto.
3. Certain Agreements and Waivers by Guarantor.
(a) Guarantor hereby agrees that neither the rights or remedies of Administrative Agent or Lenders nor Guarantors obligations under the terms of this Guaranty shall be released, diminished, impaired, reduced or affected by any one or more of the following events, actions, facts, or circumstances, and the liability of Guarantor under this Guaranty shall~ be absolute and unconditional irrespective of:
(i) any limitation of liability or recourse in any other Loan Document or arising under any law;
(ii) any and all applicable statutes of limitations, all of which Guarantor hereby waives to the fullest extent permitted by law as a defense to any action or proceeding that may be brought by Administrative Agent or Lenders against Guarantor;
(iii) any claim or defense that this Guaranty was made without consideration or is not supported by adequate consideration;
(iv) the taking or accepting of any other security or guaranty for, or
right of recourse with respect to, any or all of the Guaranteed Obligations;
(v) any homestead exemption or any other exemption under applicable law;
(vi) any release, surrender, abandonment, exchange, alteration, sale or other disposition, subordination, deterioration, waste, failure to protect or preserve, impairment or loss of, or any failure to create or perfect any lien or security interest with respect to, or any other dealings with, any collateral or security at any time existing or purported, believed or expected to exist in connection with any or all of the Guaranteed Obligations, including any impairment of Guarantors recourse against any Person or collateral;
(vii) whether express or by operation of law, any partial release of the liability of Guarantor hereunder, or if one or more other guaranties are now or hereafter obtained by Administrative Agent or Lenders covering all or any part of the Guaranteed Obligations, any complete or partial release of any one or more of such guarantors under any such other guaranty, or any complete or partial release of Borrower or any other party liable, directly or indirectly, for the payment or performance of any or all of the Guaranteed Obligations;
(viii) the death of Borrower or the appointment of a conservator for Borrower;
(ix) the insolvency, bankruptcy, dissolution, liquidation, termination, receivership, reorganization, merger, consolidation, change of form, structure or ownership, sale of all assets, or lack of corporate, partnership or other power of Borrower or any other party at any time liable for the payment of any or all of the Guaranteed Obligations;
(x) either with or without notice to or consent of Guarantor: any renewal, extension, modification, supplement, subordination or rearrangement of the terms of any or all of the Guaranteed Obligations and/or any of the Loan Documents, including material alterations of the terms of payment (including changes in maturity date(s) and interest rate(s)) or any other terms thereof, or any waiver, termination, or release of, or consent to depart from, any of the Loan Documents or any other guaranty of any or all of the Guaranteed Obligations, or any adjustment, indulgence, forbearance, or compromise that may be granted from time to time by Administrative Agent or Lenders to Borrower, Guarantor, and/or any other Person at any time liable for the payment or performance of any or all of the Guaranteed Obligations;
(xi) any neglect, lack of diligence, delay, omission, failure, or refusal of
Administrative Agent or Lenders to take or prosecute (or in taking or prosecuting) any action for the collection or enforcement of any of the Guaranteed Obligations, or to foreclose or take or prosecute any action to foreclose (or in foreclosing or taking or prosecuting any action to foreclose) upon any security therefore, or to exercise (or in exercising) any other right or power with respect to any security therefore, or to take or prosecute (or in taking or prosecuting) any action in connection with any Loan Document, or any failure to sell or otherwise dispose of in a commercially reasonable manner collateral any collateral securing any or all of the guaranty obligations;
(xii) any failure of Administrative Agent or Lenders to notify Guarantor of any creation, renewal, extension, rearrangement, modification, supplement, subordination, or assignment of the Guaranteed Obligations or any part thereof, or of any Loan Document, or of any release of or change in any security, or of any other action taken or refrained from being taken by Administrative Agent or Lenders against Borrower or any security or other recourse, or of any new agreement between or among Administrative Agent and/or Lenders and Borrower, it being understood that neither Administrative Agent nor any Lender shall be required to give Guarantor any notice of any kind under any circumstances with respect to or in connection with the Guaranteed Obligations, any and all rights to notice Guarantor may have otherwise had being hereby waived by Guarantor, and Guarantor shall be responsible for obtaining for itself information regarding Borrower, including any changes in the business or financial condition of Borrower, and Guarantor acknowledges and agrees that Administrative Agent and Lenders shall have no duty to notify Guarantor of any information which Administrative Agent or Lenders may have concerning Borrower;
(xiii) whether for any reason Administrative Agent or any Lender is required to refund any payment by Borrower to any other party liable for the payment or performance of any or all of the Guaranteed Obligations, or to pay the amount thereof to someone else;
(xiv) the making of advances by Administrative Agent or Lenders to protect their interest in the Property, to preserve the value of the Property or to facilitate performance of any term or covenant contained in any of the Loan Documents;
(xv) the existence of any claim, counterclaim, set-off or other right that Guarantor may at any time have against Borrower, Administrative Agent or any Lender or any other Person, whether or not arising in connection with this Guaranty, the Note, the Loan Agreement, or any other Loan Document;
(xvi) the unenforceability of all or any part of the Guaranteed Obligations against Borrower, whether because the Guaranteed Obligations exceed the amount permitted by law or violate any usury law, or because the act of creating the Guaranteed Obligations, or any part thereof is ultra vires , or because the officers or Persons creating the Guaranteed Obligations acted outside the scope of their authority, or because of a lack of validity or enforceability of or defect or deficiency in any of the Loan Documents, or because Borrower has any valid defense, claim or offset with respect thereto, or because Borrowers obligation ceases to exist by operation of law, or because of any other reason
or circumstance, it being agreed that Guarantor shall remain liable on this Guaranty regardless of whether Borrower or any other Person be found not liable for the Guaranteed Obligations, or any part thereof, for any reason (and regardless of any joinder of Borrower or any other party in any action to obtain payment or performance of any or all of the Guaranteed Obligations);
(xvii) any order, ruling or plan of reorganization emanating from proceedings under Title 11 of the United States Code with respect to Borrower or any other Person, including any extension, reduction, composition, or other alteration of the Guaranteed Obligations, whether or not consented to by Administrative Agent or any Lender; (xviii) any early termination of any of the Guaranteed Obligations;
(xix) Administrative Agents enforcement or forbearance from enforcement of the Guaranteed Obligations on a net or gross basis;
(xx) any invalidity, irregularity or unenforceability in whole or in part (including with respect to any netting provision) of any Interest Rate Protection Agreement or any confirmation, instrument or agreement required thereunder or related thereto, or any transaction entered into thereunder, or any limitation on the liability of Borrower thereunder or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever; or
(xxi) any other condition, event, omission, action or inaction that would in the absence of this Section 3(a) result in the release or discharge of Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guaranty or any other agreement.
(b) In the event any payment by Borrower or any other Person to Administrative Agent or any Lender is held to constitute a preference, fraudulent transfer or other voidable payment under any bankruptcy, insolvency or similar law, or if for any other reason Administrative Agent or any Lender is required to refund such payment or pay the amount thereof to any other party, such payment by Borrower or any other party to Administrative Agent or such Lender shall not constitute a release of Guarantor from any liability hereunder, and this Guaranty shall continue to be effective or shall be reinstated (notwithstanding any prior release, surrender or discharge by Administrative Agent or any Lender of this Guaranty or of Guarantor), as the case maybe, with respect to, and this Guaranty shall apply to, any and all amounts so refunded by Administrative Agent or any Lender or paid by Administrative Agent or any Lender to another Person (which amounts shall constitute part of the Guaranteed Obligations), and any interest paid by Administrative Agent or any Lender and any attorneys fees, costs and expenses paid or incurred by Administrative Agent or any Lender in connection with any such event. It is the intent of Guarantor, Administrative Agent and Lenders that the obligations and liabilities of Guarantor hereunder are absolute and unconditional under any and all circumstances and that until the Guaranteed Obligations are fully and finally paid, and not subject to refund or disgorgement, the obligations and liabilities of Guarantor hereunder shall not be discharged or released, in whole or in part, by any act or occurrence that
might, but for the provisions of this Guaranty, be deemed a legal or equitable discharge or release of a guarantor. Administrative Agent shall be entitled to continue to hold this Guaranty in its possession for the benefit of Lenders for a period of one year from the date the Guaranteed Obligations are paid in full and for so long thereafter as may be necessary to enforce any obligation of Guarantor hereunder and/or to exercise any right or remedy of Administrative Agent or Lenders hereunder.
(c) If acceleration of the time for payment of any amount payable by Borrower under the Note, the Loan Agreement, or any other Loan Document is stayed or delayed by any law or tribunal, all such amounts shall nonetheless be payable by Guarantor on demand by Administrative Agent or Lenders.
(d) Guarantor further waives: (i) any defense to the recovery by Administrative Agent or Lenders against Guarantor of any deficiency or otherwise to the enforcement of this Guaranty or any security for this Guaranty based upon the election by Administrative Agent or Lenders of any remedy against Guarantor or Borrower, including the defense to enforcement of this Guaranty (the so-called Gradsky defense) which, absent this waiver, Guarantor would have by virtue of an election by Administrative Agent or Lenders to conduct a non-judicial foreclosure sale (also known as a trustees sale) of any real property security for the Indebtedness, it being understood by Guarantor that any such non-judicial foreclosure sale will destroy, by operation of California Code of Civil Procedure (CCP) Section 580d, all rights of any party to a deficiency judgment against Borrower and, as a consequence, will destroy all rights that Guarantor would otherwise have (including the right of subrogation, the right of reimbursement, and the right of contribution) to proceed against Borrower; (ii) any defense or benefits that may be derived from CCP Sections 580a, 580b, 580d or 726, or comparable provisions of the laws of any other jurisdiction and all other anti-deficiency and one form of action defenses under the laws of California and any other jurisdiction; and (iii) any right to a fair value hearing under CCP Section 580a, or any other similar law, to determine the size of any deficiency owing (for which Guarantor would be liable - hereunder) following a non-judicial foreclosure sale.
(e) Without limiting the foregoing or anything else contained in this Guaranty, Guarantor waives all rights and defenses that Guarantor may have because the Guaranteed Obligations are secured by real property. This means, among other things:
(i) That Administrative Agent or Lenders may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower; - and
(ii) If Administrative Agent, for the benefit of Lenders, forecloses on any real property collateral pledged by Borrower: (A) the amount of the Guaranteed Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and
(B) Administrative Agent and/or Lenders may collect from Guarantor even if Administrative Agent, by foreclosing on the real property collateral for Lenders benefit, has destroyed any right Guarantor may have to collect from Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses that Guarantor may have because the Guaranteed Obligations are secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Sections 580a, 580b, 580d, or 726 of the CCP. -
(f) remedies by Administrative Agent or Lenders, even though that election of remedies, such as a non-judicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantors rights of subrogation and reimbursement against Borrower by operation of Section. 580d of the CCP or otherwise.
(g) Guarantor waives Guarantors rights of subrogation and reimbursement, including (i) any defenses Guarantor may have by reason of an election of remedies by Administrative Agent or Lenders, and (ii) any rights or defenses Guarantor may have by reason of protection afforded to Borrower with respect to the Guaranteed Obligations pursuant to the anti-deficiency or other laws of California limiting or discharging Borrowers obligations, including Sections 580a, 580b, 580d or 726 of the CCP.
(h) Guarantor waives any rights, defenses and benefits that may be derived from Sections 2787 to 2855, inclusive, of the California Civil Code or comparable provisions of the laws of any other jurisdiction and further waives all other suretyship defenses Guarantor would otherwise have under the laws of California or any other jurisdiction.
(i) No provision or waiver in this Guaranty shall be construed as limiting the generality of any other provision or waiver contained in this Guaranty. All of the waivers contained herein are irrevocable and unconditional and are intentionally and freely made by Guarantor.
4. Subordination. ii for any reason whatsoever, Borrower is now or hereafter becomes indebted to Guarantor:
(a) such indebtedness and all interest thereon and all liens, security interests and rights now or hereafter existing with respect to property of Borrower securing such indebtedness shall, at all times, be subordinate in all respects to the Guaranteed Obligations and to all liens, security interests and rights now or hereafter existing to secure the Guaranteed Obligations;
(b) Guarantor shall not be entitled to enforce or receive payment, directly or indirectly, of any such indebtedness of Borrower to Guarantor until the Guaranteed Obligations have been fully and finally paid; provided, however, that notwithstanding the
foregoing, so long as no Default has occurred and is continuing, Guarantor is not prohibited from receiving (i) such reasonable management fees or reasonable salary from Borrower as Administrative Agent may find acceptable from time to time, and (ii) distributions from Borrower or the constituent members of Borrower on account of Guarantors equity interest in any of the foregoing;
(c) Guarantor hereby assigns and grants to Administrative Agent, for the ratable benefit of Lenders, a security interest in all such indebtedness and security therefore, if any, of Borrower to Guarantor now existing or hereafter arising, including any dividends and payments pursuant to debtor relief or insolvency proceedings referred to below. In the event of receivership, bankruptcy, reorganization, arrangement or other debtor relief or insolvency proceeding & involving Borrower as debtor, Administrative Agent and Lenders shall have each the right to prove its claim in any such proceeding so as to establish its rights hereunder and shall have the right to receive directly from the receiver, trustee or other custodian (whether or not a Default shall have occurred or be continuing under any of the Loan Documents), dividends and payments that are payable upon any obligation of Borrower to Guarantor now existing or hereafter arising, and to have all benefits of any security therefore, until the Guaranteed Obligations have been fully and finally paid, If, notwithstanding the foregoing provisions, Guarantor should receive any payment, claim or distribution that is prohibited as provided above in this Section 4. Guarantor shall immediately pay the same to Administrative Agent for the benefit of Lenders, Guarantor hereby agreeing that it shall receive the payment, claim or distribution in trust for Administrative Agent and Lenders and shall have absolutely no dominion over the same except to pay it immediately to Administrative Agent for the benefit of Lenders;
(d) Guarantor shall promptly upon request of Administrative Agent from time to time execute such documents and perform such acts as Administrative Agent may require to evidence and perfect the interest, and to permit or facilitate exercise of the rights, of Administrative Agent and Lenders under this Section 4, including execution and delivery of proofs of claim, further assignments and security agreements, and delivery to Administrative Agent or Lenders of any promissory notes or other instruments evidencing indebtedness of Borrower to Guarantor, All promissory notes, accounts receivable ledgers or other evidences, now or hereafter held by Guarantor, of obligations of Borrower to Guarantor shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under and is subject to the terms of this Guaranty.
5 . Other Liability of Guarantor or Borrower . If Guarantor is or becomes liable, by endorsement or otherwise, for any indebtedness owing by Borrower to Administrative Agent or any Lender other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of Administrative Agent or such Lender hereunder shall be cumulative of any and all other rights that Administrative Agent or such Lender may have against Guarantor. If Borrower is or becomes indebted to Administrative Agent or any Lender for any indebtedness other than or in excess of the Indebtedness for which Guarantor is liable under this Guaranty, any payment received or recovery realized upon such other indebtedness of Borrower to Administrative Agent or such Lender may, except to the extent paid by Guarantor on the Indebtedness or specifically required by law or agreement of Administrative Agent or such Lender to be applied to the Indebtedness, in the sole discretion of Administrative
Agent or such Lender, be applied upon indebtedness of Borrower to Administrative Agent or such Lender other than the Indebtedness. This Guaranty is independent of (and shall not be limited by) any other guaranty now existing or hereafter given. Further, Guarantors liability under this Guaranty is in addition to any and all other liability Guarantor may have in any other capacity.
6. Administrative Agent or Lender Assigns; Disclosure of Information. This Guaranty is for the benefit of Administrative Agent and Lenders and the successors and assigns of each of them. Administrative Agent and any Lender may, at any time, sell, transfer or assign all or a portion of its interest in the Guaranteed Obligations and the Loan Documents, on and subject to the terms and conditions of the Loan Agreement. In the event of any such sale, transfer or assignment of the Guaranteed Obligations or any part thereof, the rights arid benefits under this Guaranty, to the extent applicable to the Guaranteed Obligations so sold, transferred or assigned, may be transferred with such obligations. Guarantor waives notice of any sale transfer or assignment of the Guaranteed Obligations and/or this Guaranty or any part thereof, and agrees that failure to give notice of any such sale, transfer or assignment will not affect the liability of Guarantor hereunder. Administrative Agent and each Lender are hereby authorized to disseminate any information they now have or hereafter obtain pertaining to the Guaranteed Obligations or this Guaranty, including credit or other information on Borrower, Guarantor and/or any party liable, directly or indirectly, for any part of the Guaranteed Obligations, to any actual or prospective assignee or participant with respect to the Guaranteed Obligations, to any of the affiliates of Administrative Agent or such Lender, including Bane of America Securities LLC, to any regulatory body having jurisdiction over Administrative Agent or such Lender, and to any other parties as necessary or appropriate in the reasonable judgment of Administrative Agent or such Lender.
7. Binding Effect. This Guaranty is binding not only on Guarantor, but also on Guarantors heirs, personal representatives, successors and assigns; provided, however, that Guarantor may not assign this Guaranty, or assign or delegate any of its rights or obligations under this Guaranty, without the prior written consent of each Lender in each instance (and any attempted assignment or delegation by Guarantor without such consent shall be null and void). Upon the death of Guarantor, if Guarantor is a natural person, this Guaranty shall continue against Guarantors estate as to all of the Guaranteed Obligations, including that portion incurred or arising after the death of Guarantor and shall be provable in full against Guarantors estate, whether or not the Guaranteed Obligations are then due and payable.
8. Governing Law~ Forum; Consent to Jurisdiction. The validity, enforcement, and interpretation of this Guaranty, shall for all purposes be governed by and construed in accordance with the laws of the State of California and applicable United States federal law, and is intended to be performed in accordance with, and only to the extent permitted by, such laws. All obligations of Guarantor hereunder are payable and performable at the place or places where the Guaranteed Obligations are payable and performable. Guarantor hereby irrevocably submits generally and unconditionally for Guarantor and in respect of Guarantors property to the nonexclusive jurisdiction of any state court, or any United States federal court, sifting in the state specified in the first sentence of this Section and to the jurisdiction of any state or United States federal court sitting in the state in which any of the Land is located, over any suit, action or
proceeding arising out of or relating to this Guaranty or the Guaranteed Obligations. Guarantor hereby irrevocably waives, to the fullest extent permitted bylaw, any objection that Guarantor may now or hereafter have to the laying of venue in any such court and any claim that any such court is an inconvenient forum. Final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon Guarantor and may be enforced in any court in which Guarantor is subject to jurisdiction. Guarantor hereby agrees and consents that in addition to any methods of service of process provided for under applicable law, all service of process in any such suit, action or proceeding in any state court, or any United States federal court, sitting in the state specified in the first sentence of this Section may be made by certified -or registered mail, return receipt requested, directed to Guarantor at the address set forth at the end of this Guaranty, or at a subsequent address of which Administrative Agent receives actual notice from Guarantor in accordance with the notice of provisions hereof; and service so made shall be complete five (5) days after the same shall have been so mailed. Nothing herein shall affect the right of Administrative Agent to serve process in any manner permitted by law or limit the right of Administrative Agent to bring proceedings against Guarantor in any other court or jurisdiction. The authority and power to appear for and enter judgment against Guarantor shall not be exhausted by one or more exercises thereof or by any imperfect exercise thereof and shall -not be extinguished by any judgment entered pursuant thereto. Such authority may be exercised on one or more occasions or from time to time in the same or different jurisdiction as often as Administrative Agent shall deem necessary and desirable.
9. Invalidity of Certain Provisions. If any provision of this Guaranty or the application thereof to any Person or circumstance shall, for any reason and to any extent, be declared to be invalid or unenforceable, neither the remaining provisions of this Guaranty nor the application of such provision to any other Person or circumstance shall be affected thereby, and the remaining provisions of this Guaranty, or the applicability of such provision to other Persons - or circumstances, as applicable, shall remain in effect and be enforceable to the maximum extent permitted by applicable law.
10. Attorneys Fees and Costs of Collection. If there is a prevailing party in any lawsuit, reference or arbitration arising out of or relating to this Guaranty or the Guaranteed Obligations, such prevailing party shall be entitled to recover from each other party such sums as the court, referee or arbitrator may adjudge to be reasonable attorneys fees in the action, reference or arbitration, in addition to costs and expenses otherwise allowed by law. In all other situations, Guarantor shall pay on demand all attorneys fees and all other costs and expenses incurred by Administrative Agent or Lenders in the enforcement of or preservation of Administrative Agent or Lenders rights under this Guaranty including all attorneys fees and expenses, investigation costs, and all court costs, whether or not suit is filed hereon, or whether at maturity or by acceleration, or whether before or after maturity, or whether in connection with bankruptcy, insolvency or appeal, or whether in connection with the collection and enforcement of this Guaranty against any other Guarantor, if there be more than one. Guarantor agrees to pay interest on any expenses or other sums due to Administrative Agent or Lenders under this Section 10 that are not paid when due, at a rate per annum equal to the interest rate provided for in the Note. Guarantors obligations and liabilities under this Section 10 shall survive any payment or discharge in full of the Guaranteed Obligations.
11. Payments . All sums payable under this Guaranty shall be paid in lawful money of the United States of America that at the time of payment is legal tender for the payment of public and private debts.
12. Controlling Agreement . It is not the intention of Administrative Agent or Lenders or Guarantor to obligate Guarantor to pay interest in excess of that lawfully permitted to be paid by Guarantor under applicable law. Should it be determined that any portion of the Guaranteed Obligations or any other amount payable by Guarantor under this Guaranty constitutes interest in excess of the maximum amount of interest that Guarantor, in Guarantors capacity as guarantor, may lawfully be required to pay under applicable law, the obligation of Guarantor to pay such interest shall automatically be limited to the payment thereof in the maximum amount so permitted under applicable law. The provisions of this Section 12 -shall override and control all other provisions of this Guaranty and of any other agreement between Guarantor Administrative Agent or Lenders.
13. Representations. Warranties and Covenants of Guarantor . Guarantor hereby represents, warrants, and covenants that: (a) Guarantor has a financial interest in Borrower and will derive a material and substantial benefit, directly or indirectly, from the making of the Loan to Borrower and from the making of this Guaranty by Guarantor; (b) this Guaranty is duly authorized and valid, and is binding upon and enforceable against Guarantor; (c) Guarantor is not, and the execution, delivery and performance by Guarantor of this Guaranty will not cause Guarantor to be, in violation of or in default with respect to any law or in default (or at risk of acceleration of indebtedness) under any agreement or restriction by which Guarantor is bound or affected; (d) Guarantor is duly organized, validly existing, and in good standing under the laws of the state of its organization and under California laws, is lawfully doing business in California, and has fill power and authority to enter into and perform this Guaranty; (e) Guarantor will indemnify Administrative Agent and Lenders from any loss, cost or expense as a result of any representation or warranty of Guarantor being false, incorrect, incomplete or misleading in any material respect; (f) there is no litigation pending or, to the knowledge of Guarantor, threatened before or by any tribunal against or affecting Guarantor; (g) all financial statements and information heretofore furnished to Administrative Agent or Lenders by Guarantor do, and all financial statements and information hereafter furnished to Administrative Agent or Lenders by Guarantor will, fully and accurately present the condition (financial or otherwise) of Guarantor as of their dates and the results of Guarantors operations for the periods therein specified, and, since the date of the most recent financial statements of Guarantor heretofore furnished to Administrative Agent or Lenders, no material adverse change has occurred in the financial condition of Guarantor, nor, except as heretofore disclosed in writing to Administrative Agent, has Guarantor incurred any material liability, direct or indirect, fixed or contingent; (h) after giving effect to this Guaranty, Guarantor is solvent, is not engaged or about to engage in business or a transaction for which the property of Guarantor is an unreasonably small capital, and does not intend to incur or believe that it will incur debts that will be beyond its ability to pay as such debts mature; (i) neither Administrative Agent nor Lenders have any duty at any time to investigate or inform Guarantor of the financial or business condition or affairs of Borrower or any change therein, and Guarantor will keep fully apprised of Borrowers financial and business condition; (j) Guarantor acknowledges and agrees that Guarantor may be required to pay and perform the Guaranteed Obligations in full without
assistance or support from Borrower or any other Person; and (k) Guarantor has read and fully understands the provisions contained in the Note, the Loan Agreement, the Deed of Trust, and the other Loan Documents. Guarantors representations, warranties and covenants are a material inducement to Administrative Agent and Lenders to enter into the other Loan Documents and shall survive the execution hereof and any bankruptcy, foreclosure, transfer of security or other event affecting Borrower, Guarantor, any other party, or any security for all or any part of the Guaranteed Obligations.
Until the Guaranteed Obligations are paid and performed in fill and each and every term, covenant and condition of this Guaranty is fully performed, Guarantor hereby further agrees:
(aa) To maintain Net Worth equal to at least Thirty Mjllion Dollars ($30,000,000); and
(bb) To maintain unencumbered Liquid Assets equal to at least Bight Million Dollars ($8,000,000).
As used herein, (A) Net Worth means the net worth of Guarantor determined in accordance with generally accepted accounting principles; and (B) Liquid Assets means the following assets of Guarantor: (i) cash; (ii) certificates of deposit or time deposits with terms of six (6) months or less; (iii) A-1IP-l commercial paper with a term of three (3) months or less; (iv) U.S. treasury bills and other obligations of the federal government, all with terms of six (6) months or less; (v) Readily marketable securities (excluding margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), restricted stock and stock subject to the provisions of Rule 144 of the Securities and Exchange Commission); (vi) Bankers acceptances issued for terms of six (6) months or less by financial institutions approved by Lender; and (vii) repurchase agreements with terms of six (6) months or less covering U.S. government securities.
In addition to the foregoing, Guarantor further represents, warrants and covenants that (1) Guarantor has received and examined copies of each Interest Rate Protection Agreement, the observance and performance of which by Borrower is hereby guaranteed; (m) Guarantor will benefit from Swap Bank entering into each Interest Rate Protection Agreement and any transaction there under with Borrower, and Guarantor has determined that the execution and delivery by Guarantor of this Guaranty is necessary and convenient to the conduct, promotion and attainment of the business of Guarantor; and (n) neither Administrative Agent nor Swap Bank nor Lenders have any duty to determine whether any Interest Rate Protection Agreement, or any other transaction relating to or arising under any Interest Rate Protection Agreement, will be or has been entered into by Borrower for purposes of hedging interest rate, currency exchange rate, or other risks arising in its businesses or affairs and not for purposes of speculation or is otherwise inappropriate for Borrower.
14. Notices . All notices, requests, consents, demands and other communications required or which any party desires to give hereunder or under any other Loan Document shall be in writing and, unless otherwise specifically provided in such other Loan Document, shall be deemed sufficiently given or furnished if delivered by personal delivery, by nationally recognized overnight courier service, or by registered or certified United States mail, postage
prepaid, addressed to the party to whom directed at the addresses specified in this Guaranty (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by telegram, telex, or facsimile. Any such notice or communication shall be deemed to have been given either at the time of personal delivery or, in the case of courier or mail, as of the date of first attempted delivery at the address and in the manner provided herein, or, in the case of telegram, telex or facsimile, upon receipt; provided that, service of a notice required by any applicable statute shall be considered complete when the requirements of that statute are met. Notwithstanding the foregoing, no notice of change of address shall be effective except upon actual receipt. This Section shall not be construed in any way to affect or impair any waiver of notice or demand provided in this Guaranty or in any Loan Document or to require giving of notice or demand to or upon any Person in any situation or for any reason.
15. Cumulative Rights. The exercise by Administrative Agent or Lenders of any right or remedy hereunder or under any other Loan Document, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy. Administrative Agent and Lenders shall have all rights, remedies and recourses afforded to Administrative Agent and Lenders by reason of this Guaranty or any other Loan Document or by law or equity or otherwise, and the same (a) shall be cumulative and concurrent, (b) may be pursued separately, successively or concurrently against Guarantor or others obligated for the Guaranteed Obligations, or any part thereof, or against any one or more of them, or against any security or otherwise, at the sole and absolute discretion of Administrative Agent or Lenders, (c) may be exercised as often as occasion therefore shall arise, it being agreed by Guarantor that the exercise of, discontinuance of the exercise of or failure to exercise any of such rights, remedies, or recourses shall in no event be construed as a waiver or release thereof or of any other right, remedy, or recourse, and (d) are intended to be, and shall be, nonexclusive. No waiver of any default on the part of Guarantor or of any breach of any of the provisions of this Guaranty or of any other document shall be considered a waiver of any other or subsequent default or breach, and no delay or omission in exercising or enforcing the rights and powers granted herein or any other document shall be construed as a waiver of such rights and powers, and no exercise or enforcement of any rights or powers hereunder or under any other document shall be held to exhaust such rights and powers, and every such right and power may be exercised from time to time. The granting of any consent, approval or waiver by Administrative Agent or Lenders shall be limited to the specific instance and purpose therefore and shall not constitute consent or approval in any other instance or for any other purpose. No notice to or demand on Guarantor in any case shall of itself entitle Guarantor to any other or further notice or demand in similar or other circumstances. No provision of this Guaranty or any right, remedy or recourse of Administrative Agent or Lenders with respect hereto, or any default or breach, can be waived, nor can this Guaranty or Guarantor be released or discharged in any way or to any extent, except specifically in each case by a writing intended for that purpose (and which refers specifically to this Guaranty) executed, and delivered to Guarantor, by Administrative Agent.
16. Term of Guaranty. This Guaranty shall continue in effect until all the Guaranteed Obligations are fully and finally paid, performed and discharged, except that, and notwithstanding any return of this Guaranty to Guarantor, this Guaranty shall continue in effect (a) with respect to any of the Guaranteed Obligations that survive the full and final payment of the indebtedness evidenced by the Note, (b) with respect to all obligations and liabilities of
Guarantor under Section 10. and (c) as provided in Section 3(b).
17. Financial Statements .
(a) As used in this Section, Financial Statements means (i) for each Reporting Party other than an individual, a balance sheet, income statement, statements of cash flow and amounts and sources of contingent liabilities, a reconciliation of changes in equity and liquidity verification, and unless Administrative Agent otherwise consents, consolidated and consolidating statements if the Reporting Party is a holding company or a parent of a subsidiary entity; and (ii) for each Reporting Party who is an individual, a balance sheet, statements of amounts and sources of contingent liabilities sources and uses of cash and liquidity verification, and unless Administrative Agent otherwise consents, Financial Statements for each entity owned or jointly owned by the Reporting Party. Each party for whom Financial Statements are required is a Reporting Party and a specified period to which the required Financial Statements relate is a Reporting Period.
(b) Guarantor shall provide or cause to be provided to Administrative Agent the following:
(i) Financial Statements of Guarantor as soon, as reasonably practicable and in any event within ninety (90) calendar days after the close of each fiscal year.
(ii) Copies of filed federal and state income tax returns of Guarantor for each taxable year (with all K-is and other forms and supporting schedules attached) within thirty (30) days after filing but in any event not later than one hundred twenty (120) days after the close of each such taxable year.
(iii) From time to time promptly after Administrative Agents request, such additional information, reports and statements regarding the business operations and financial condition of each Reporting Party as Administrative Agent may reasonably request.
(iv) Within thirty (30) days after the end of each fiscal quarter, a compliance certificate in the form of Exhibit A demonstrating compliance for the preceding fiscal quarter with the financial covenants set forth in Sections l3(aa) and (bb)
(c) All Financial Statements shall be in form and detail satisfactory to Administrative Agent and shall contain or be attached to the signed and-dated written certification of the Reporting Party in form specified by Administrative Agent to certify that the Financial Statements are furnished to Administrative Agent in connection with the extension of credit by Lenders and constitute a true and correct statement of the Reporting Partys financial position. All certifications and signatures on behalf of corporations, partnerships or other entities shall be by a representative of the Reporting Party satisfactory to Administrative Agent. All
Financial Statements for a Reporting Party who is an individual shall be on Administrative Agents then-current personal financial statement form or in another form satisfacfory to Administrative Agent. All fiscal year-end Financial Statements shall be audited and certified, as required by Administrative Agent, without any qualification or exception not acceptable to Administrative Agent, by independent certified public accountants acceptable to Administrative Agent, and shall contain all reports and disclosures required by generally accepted accounting principles for a fair presentation. All assets shown on the Financial Statements provided by Guarantor, unless clearly designated to the contrary, shall be conclusively deemed to be free and clear of any exemption or any claim of exemption of Guarantor at the date of the Financial Statements and at all times thereafter. Acceptance of any Financial Statement by Administrative Agent, whether or not in the form prescribed herein, shall be relied upon by administrative Agent and Lenders in the administration, enforcement, and extension of the Guaranteed Obligations.
18. Subrogation . Notwithstanding anything to the contrary contained herein, Guarantor shall not have any right of subrogation in or under any of the Loan Documents or to participate in any way therein, or in any right, title or interest in and to any security or right of recourse for the Indebtedness or any right to reimbursement, exoneration, contribution, indemnification or any similar rights, until the Indebtedness has been fully and finally paid. This waiver is given to induce Lenders to make the Loan to Borrower.
19. Further Assurances . Guarantor at Guarantors expense will promptly execute and deliver to Administrative Agent upon request by Administrative Agent all such other and further documents, agreements, and instruments in compliance with or accomplishment of the agreements of Guarantor under this Guaranty.
20. No Fiduciary Relationship . The relationship between Administrative Agent or Lenders and Guarantor is solely that of lender and guarantor. Neither Administrative Agent nor any Lender has any fiduciary or other special relationship with or duty to Guarantor and none is created hereby or may be inferred from any course of dealing or act or omission of Administrative Agent or Lenders.
21. Interpretation : Counterparts Time of Essence. If this Guaranty is signed by more than one Person, then all of the obligations of Guarantor arising hereunder shall be jointly and severally binding on each of the undersigned and their respective heirs, personal representatives, successors and assigns, and the term Guarantor shall mean all of such Persons and each of them individually. All promises, agreements, covenants, waivers, consents, representations, warranties and other provisions in this Guaranty are made by and shall be binding upon each and every such Guarantor, jointly and severally, and Administrative Agent and Lenders may pursue any Guarantor hereunder without being required (a) to pursue any other Guarantor hereunder or (b) to pursue rights and remedies under the Deed of Trust and/or applicable law with respect to the Property or any other Loan Documents. The terms Administrative Agent and Lenders shall be deemed to include any subsequent holder(s) of the Note. Whenever the context of any provisions hereof shall require it, words in the singular shall include the plural, words in the plural shall include the singular, and pronouns of any gender shall include the other gender. Captions and headings in the Loan Documents are for convenience only and shall not affect the construction of the Loan Documents. All references in
this Guaranty to Schedules, Articles, Sections, Subsections, paragraphs and subparagraphs refer to the respective subdivisions of this Guaranty, unless such reference specifically identifies another document. The terms herein. hereof, hereto, hereunder and similar terms refer to this Guaranty and not to any particular Section or subsection of this Guaranty. The terms include and including shall be interpreted as if followed by the words without limitation. All references in this Guaranty to sums denominated in dollars or with the symbol $ refer to the lawful currency of the United States of America, unless such reference specifically identifies another currency. For purposes of this Guaranty, Person or Persons shall include firms, associations, partnerships (including limited partnerships), joint ventures, trusts, corporations, limited liability companies, and other legal entities, including governmental bodies, agencies, or instrumentalities, as well as natural persons; This- Guaranty may be execute in multiple counterparts; each of which, for all purposes, shall be deemed an original, and all of which when taken together shall constitute but one and the same agreement. Time shall be of the essence in this Guaranty with respect to all of Guarantors obligations hereunder.
22. Credit Verification . Bach legal entity and individual obligated on this Guaranty, whether as a Guarantor, general partner of a Guarantor or in any other capacity, hereby authorizes Administrative Agent and Lenders to check any credit references, verify his/her employment and obtain credit reports from credit reporting agencies of Administrative Agents or Lenders choice in connection with any monitoring, collection or fixture transaction concerning the Guaranteed Obligations, including any modification, extension or renewal of the Guaranteed Obligations. Also in connection with any such monitoring, collection or fixture transaction, Administrative Agent and Lenders are hereby authorized to check credit references, verify employment and obtain a third party credit report for the spouse of any married person obligated on this Guaranty, if such person lives in a community property state.
23. Security . To secure payment and performance of Guarantors obligations hereunder, Guarantor assigns and grants to Administrative Agent for the benefit of Lenders a security interest in all moneys, securities and other property of Guarantor in the possession of Administrative Agent, whether held in a general or special account or deposit or for safekeeping or otherwise, and all proceeds thereof. Upon the occurrence of any Event of Default, Administrative Agent may apply any deposit account to reduce the amount outstanding on the Loan, and may foreclose any collateral as provided in the Uniform Commercial Code and in any security agreements between Administrative Agent and Lenders and Guarantor.
24. Entire Agreement. This Guaranty embodies the entire agreement between Administrative Agent and Lenders and Guarantor with respect to the guaranty by Guarantor of the Guaranteed Obligations. This Guaranty supersedes all prior agreements and understandings, if any, with respect to the guaranty by Guarantor of the Guaranteed Obligations. No condition or conditions precedent to the effectiveness of this Guaranty exist. This Guaranty shall be effective upon execution by Guarantor and delivery to Administrative Agent. This Guaranty may not be modified, amended or superseded except in a writing signed by Administrative Agent and Guarantor referencing this Guaranty by its date and specifically identifying the portions hereof - that are to be modified, amended or superseded.
25. Dispute Resolution Provision. This Section, including the subsections below, is referred to as the Dispute Resolution Provision. This Dispute Resolution Provision is a material inducement for the parties entering into the Loan and this Guaranty.
(a) This Dispute Resolution Provision concerns the resolution of any controversies or claims between or among the parties, whether arising in contract, tort or by statute, including controversies or claims that arise out of or relate to: (i) this Guaranty (including any renewals, extensions or modifications); or (ii) any Loan Document, the Environmental Agreement or any other document related to-this Guaranty (collectively, a Claim); For the purposes of this Dispute Resolution Provision only, the term parties shall include any parent corporation, subsidiary or affiliate of Administrative Agent involved in the servicing, management or administration of any obligation described or evidenced by this Guaranty.
(b) Except to the extent expressly provided below, any Claim shall, upon the mutual agreement of the parties, acting in their sole and absolute discretion, be resolved by binding arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the Federal Arbitration Act). The Federal Arbitration Act will apply even though this Guaranty provides that it is governed by California law.
(c) Arbitration proceedings will be determined in accordance with the Federal Arbitration Act, the then-current rules and procedures for the arbitration of financial services disputes of the American Arbitration Association, or any successor thereof (AAA) and the terms of this Dispute Resolution Provision. In the event of any inconsistency, the terms of this Dispute Resolution Provision shall control. If A.AA is unwilling or unable to (i) serve as the provider of arbitration or (ii) enforce any provision of this arbitration clause, Administrative Agent may designate another arbitration organization with similar procedures to serve as the provider of arbitration.
(d) The arbitration shall be administered by AAA and conducted, unless otherwise required bylaw, in any U.S. state where real or tangible personal property for the Loan or this Guaranty is located or if there is no such collateral, in the state specified in the governing law section of this Guaranty. All Claims shall be determined by one arbitrator; however, if Claims exceed Five Million Dollars ($5,000,000), upon the request of any party, the Claims shall be decided by three arbitrators. All arbitration hearings shall commence within ninety (90) days of the demand for arbitration and close within ninety (90) days of commencement and the award of the arbitrator(s) shall be issued within thirty (30) days of the close of the hearing. However, the arbitrator(s), upon a showing of good cause, may extend the commencement of the hearing for up to an additional sixty (60) days. The arbitrator(s) shall provide a concise written statement of reasons for the award. The arbitration award may be submitted to any court having jurisdiction to be confirmed and have judgment entered and enforced.
(e) The arbitrator(s) will give effect to statutes of limitation in
determining any Claim and may dismiss the arbitration on the basis that the Claim is barred. For purposes of - the application of any statutes of limitation, the service on AAA under applicable AAA rules of a notice of Claim is the equivalent of the filing of a lawsuit. Any dispute concerning this arbitration provision or whether a Claim is arbitrable shall be determined by the arbitrator(s), except as set forth at clause (fl of this Dispute Resolution Provision. The arbitrator(s) shall have the power to award legal fees pursuant to the terms of this Guaranty.
(f) The procedure described above will not apply if the Claim, at the time of the proposed submission to arbitration, arises from or relates to an obligation to Administrative Agent and/or Lenders secured by real property. In this case, all of the parties to this Guaranty, in their sole and absolute discretion, must consent to submission of the Claim to arbitration.
(g) To the-extent any Claims-are-not arbitrated,-to the extent-permitted by law the Claims shall be resolved in court by a judge without a jury, except any Claims which are brought in California state court shall be determined by judicial reference as described below.
(h) Any claim which is not arbitrated and which is brought in California state court will be resolved by a general reference to a referee (or a panel of referees) as provided in California Code of Civil Procedure (CCP) Section 638. The referee (or presiding referee of the panel) shall be a retired Judge or Justice. The referee (or panel of referees) shall be selected by mutual written agreement of the parties. If the parties do not agree, the referee shall be selected by the Presiding Judge of the Court (or his or her representative) as provided in CCP Section 638 and the following related sections. The referee shall determine all issues in accordance with existing California law and the California rules of evidence and civil procedure. The referee shall be empowered to enter equitable as well as legal relief, provide all temporary or provisional remedies, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a trial, including motions for summary judgment or summary adjudication. The award that results from the decision of the referee(s) will be entered as a judgment in the court that appointed the referee, in accordance with the provisions of CCP Sections 44(a) and 645. The parties reserve the right to seek appellate review of any judgment or order, including orders pertaining to class certification, to the same extent permitted in a court of law.
(i) This Dispute Resolution Provision does not limit the right of any party to: (i) exercise self-help remedies, such as but not limited to, setoff; (ii) initiate judicial or non-judicial foreclosure against any real or personal property collateral; (iii) exercise any judicial or power of sale rights; or (iv) act in a court of law to obtain an interim remedy, such as but not limited to, injunctive relief, writ of possession or appointment of a receiver, or additional or supplementary remedies. The filing of a court action is not intended to constitute a waiver of the right of any party, including the suing party, thereafter to request or require submittal of the Claim to arbitration or judicial reference as provided herein.
(j) Any arbitration, judicial reference or trial by a judge of any Claim will take place on an individual basis without resort to any form of class or representative action ( the Class Action Waiver ). Regardless of anything else in this Dispute Resolution Provision, the validity and effect of the Class Action Waiver may be determined only by a court or referee and not by an arbitrator. The parties to this Guaranty acknowledge that the Class Action Waiver is material and essential to the arbitration of any disputes between the parties and is non severable from the agreement to arbitrate Claims. If the Class Action Waiver is limited, voided or found unenforceable, then the parties agreement to arbitrate shall be null and void with respect to such proceeding, subject to the right to appeal the limitation or invalidation of the Class Action be arbitrated, a class action Waiver . The parties acknowledge and agree that under no circumstances Will a class action be arbitrated.
(k) By agreeing to binding arbitration or judicial reference, the parties irrevocably and voluntarily waive any right they may have to a trial by jury as permitted by law in respect to any Claim. Furthermore, without intending in any way to limit this Dispute -. - Resolution Provision, to the extent any Claim is not arbitrated or submitted to judicial reference, the parties-irrevocably and voluntarily waive any right they may have to a trial by jury to the extent permitted by law in respect of such Claim This waiver of jury trial shall remain in effect even if the Class Action Waiver is limited, voided or found unenforceable WHETHER THE CLAIM IS DECIDED BY ARBITRATION, BY JUDICIAL REFERENCE, OR BY TRIAL BY A JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT THE EFFECT OF THIS AGREEMENT IS THAT THEY ARE CIVING UP THE RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW
THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES
IN WITNESS WHEREOF, Guarantor duly executed this Guaranty as of the date first written above.
Address of Guarantor |
GUARANTOR |
|
9601 Wilshire Boulevard, Suite 220 |
Kennedy-Wilson, Inc. |
|
Beverly Hills, CA 90210 |
a Delaware limited liability company |
|
Facsimile: 31-0-887-6230 |
by: |
/s/ Mary L. Ricks |
Attn: Mary Ricks |
|
Vice President |
|
|
|
Address of Administrative Agent |
|
|
Bank of America, N A |
|
|
333 South Hope Street, 11th Floor |
|
|
Los Angeles, CA 90071 |
|
|
Facsimile 213-621-4831 |
|
EXHIBIT A
Form of Compliance Certificate
Covenant Compliance Certificate
This will certify among other things, that during the period from to (the Reporting Period), Kennedy-Wilson, Inc, a Delaware corporation (Guarantor) is in compliance with the terms of that certain Guaranty Agreement dated August _, 2007 (the Guaranty Agreement) made by Guarantor for the benefit of Bank of America, N.A. (Agent) and the other Lenders (as defined in the Loan Agreement), in connection with a Loan Agreement of even date with the Guaranty Agreement among 300 California Partners LLC, a Delaware limited liability company, Agent and Lenders (the Loan Agreement). The Guaranty Agreement requires the maintenance by Guarantors of not less than $30,000,000 Net Worth and not less than $8,000,000 unencumbered Liquid Assets as set forth in Section 13 of the Guaranty Agreement. Initially capitalized terms used but not otherwise defined in this Compliance Certificate shall have the meanings given to them in the Guaranty Agreement.
1. Attached hereto are copies of financial statements necessary to evidence Guarantors compliance during the Reporting Period with the requirements of the Net Worth covenant set forth in Section 13 (aa) of the Guaranty Agreement.
2. Attached are copies of all bank statements, brokerage statements and other documentation necessary to evidence Guarantors compliance during the Reporting Period with the requirements of the unencumbered Liquid Assets covenant set forth in Section 13 (bb) of the Guaranty Agreement.
3. Guarantor further certifies to its compliance during the Reporting Period with all other covenants under the Loan Documents that are applicable to Guarantor.
Guarantor:
KENNEDY-WILSON, INC., a Delaware corporation
By: |
|
|
Name: |
|
|
Title: |
|
|
A-1
Exhibit 10.107
REPAYMENT GUARANTY
This REPAYMENT GUARANTY (this Guaranty ) is made as of September 4, 2007, by KENNEDY-WILSON, INC., a Delaware corporation ( Guarantor ) in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as agent for the Lenders pursuant to the Loan Agreement described below (in such capacity, Administrative Agent ) and in favor of each party that now or hereafter is bound under the Loan Agreement as a Lender (referred to herein individually as a Lender and collectively as the Lenders).
1. Except as otherwise provided in this Guaranty, initially capitalized terms used in this Guaranty without definition are defined in.that certain Loan Agreement of even date herewith by and between One Baxter Way, L.P., a Delaware limited partnership, and KW Portfolio XIII LLC, a Delaware limited liability company (collectively, Borrower) , Administrative Agent and Lenders (the Loan Agreement) .
2. In order to induce Administrative Agent and Lenders to enter into the Loan Agreement and to induce Lenders to loan to Borrower (whether acting on behalf of itself or any estate created by the commencement of a case under Title 11 United States Code or any successor statute thereto (the Bankruptcy Code ) or any other insolvency, bankruptcy, reorganization or liquidation proceeding, or by any trustee under the Bankruptcy Code, liquidator, sequesirator or receiver of Borrower or Borrowers property or similar Person duly appointed pursuant to any law generally governing any insolvency, bankruptcy, reorganization, liquidation, receivership or like proceeding) the sum of $7,028,960.00 (the Loan), evidenced by one or more secured promissory notes (collectively, the Notes), in the aggregate principal amount of $7,028,960.00, each now or hereafter executed by Borrower and payable to the order of one or more Lenders, Guarantor hereby unconditionally and irrevocably guarantees to Administrative Agent and Lenders and to their successors, endorsees and/or assigns, the Ml and prompt payment of(a) the principal sum of the Notes in accordance with their terms when due, by acceleration or otherwise, together with all interest accrued thereon, when due under the terms of the Notes, and any and all other sums of money that become owing by Borrower to Lenders under the Notes, Loan Agreement or any other Loan Document as such term is defined in the Loan Agreement (which Notes, Loan Agreement and other Loan Documents are also collectively referred to herein as the Loan Documents ) and (b) any and all sums owing under any Swap Contract as such term is defined in the Loan Agreement ( Swap Contract) . The obligations guaranteed pursuant to this Section 2 are hereinafter referred to as the Guaranteed Obligations.
3. In accordance with California Civil Code (CC) Section 2856:
(a) Guarantor waives any and all rights of subrogation, reimbursement, indemnification and contribution, and any other rights and defenses that are or may become available to Guarantor by reason of CC Sections 2787 to 2855, inclusive, 2899 and 3433, including, without limitation, any and all rights or defenses Guarantor may have by reason o. protection afforded to the principal with respect to any of the Guaranteed Obligations or to any other guarantor of any of the Guaranteed Obligations with respect to such guarantors obligations
under its guaranty, in either case, pursuant to the antideficiency or other laws of this state limiting or discharging the principals indebtedness or such other guarantors obligations, including, without limitation, California Code of Civil Procedure (CC) Sections 580a, 580b, 580d or 726; and
(b) Guarantor waives all rights and defenses that Guarantor may have because Borrowers debt is secured by real property. This means, among other things:
(i) Administrative Agent and Lenders may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower
(ii) If Administrative Agent or any Lender forecloses on any real property collateral pledged by Borrower:
(A) The amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price;
(B) Administrative Agent and Lenders may collect from Guarantor even if Administrative Agent or any Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrowers debt is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon CCP Sections 580a, 580b, 580d, or 726; and
(c) Guarantor waives all rights and defenses arising out of an election of remedies by Administrative Agent or Lenders, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for the Guaranteed Obligations, has destroyed Guarantors rights of subrogation and reimbursement against Borrower by the operation of CCP Section 580d or otherwise, and even though that election of remedies by Administrative Agent or Lenders has destroyed Guarantors rights of contribution against another guarantor of any of the Guaranteed Obligations.
No other provision of this Guaranty shall be construed as limiting the generality of any of the covenants and waivers set forth in this Section 3.
4. Guarantor represents and warrants to Administrative Agent and Lenders that Guarantor has a finaneial interest in Borrower or is otherwise affiliated with Borrower. In that regard, Guarantor agrees that Administrative Agents and Lenders entering into the Loan Agreement and Lenders agreement to make the Loan to Borrower is of substantial and material benefit to Guarantor and further agrees as follows:
(a) Guarantor shall continue to be liable under this Guaranty and the provisions hereof will remain in full force and effect notwithstanding (i) any modification, agreement or stipulation between Borrower and Administrative Agent or their respective successors and assigns, with respect to the Loan Documents or the Swap Contracts or the obligations encompassed thereby, including, without limitation, the Guaranteed Obligations, (ii) Administrative Agents waiver of or failure to enforce any of the terms, covenants or conditions contained in the Loan Documents or the Swap Contracts or in any modification thereof; (iii) any discharge or release of Borrower or any other guarantor from any liability with respect to the Guaranteed Obligations, (iv) any discharge, release, exchange or subordination of any real or personal property then held by Administrative Agent or any Lender as security for the performance of the Guaranteed Obligations, (v) any additional security taken for the Guaranteed Obligations, whether real or personal property, (vi) any foreclosure or other realization on any security for the Guaranteed Obligations, regardless of the effect upon Guarantors subrogation, contribution or reimbursement rights against Borrower or any other guarantor, (vii) any additional loans or financial accommodations to Borrower or (viii) the manner or order by which payments are applied to principal, interest or other obligations under the Loan Documents and the Swap Contracts. Without limiting the generality of the foregoing, Guarantor hereby waives the rights and benefits under CC Section 2819, and agrees that by doing so Guarantors liability shall continue even if Administrative Agent or any Lender alters any obligations under the Loan Documents or the Swap Contracts in any respect or Administrative Agents or Lenders remedies or rights against Borrower are in any way impaired or suspended without Guarantors consent.
(b) Guarantors liability under this Guaranty shall continue until all sums due under the Notes have been paid in full and until all Guaranteed Obligations to Administrative Agent and Lenders have been satisfied, and shall not be reduced by virtue of any payment by Borrower of any amount due under the Notes or under any of the Loan Documents or Swap Contracts or by Administrative Agents and Lenders recourse to any collateral or security.
(c) Guarantor represents and warrants to Administrative Agent and Lenders that Guarantor now has and will continue to have full and complete access to any and all information concerning the transactions contemplated by the Loan Documents or Swap Contracts or referred to therein, the value of the assets owned or to be acquired by Borrower, Borrowers financial status and its ability to pay and perform the Guaranteed Obligations owed to Administrative Agent and Lenders. Guarantor further represents and warrants that Guarantor has reviewed and approved copies of the Loan Documents and Swap Contracts and is fully informed of the remedies Administrative Agent and Lenders may pursue, with or without notice to Borrower, in the event of default under the Notes or other Loan Documents or Swap Contracts. So long as any of the Guaranteed Obligations remains unsatisfied or owing to Administrative Agent or Lenders, Guarantor shall keep fully informed as to all aspects of Borrowers financial condition and the performance of the Guaranteed Obligations.
(d) Guarantor acknowledges and agrees that Guarantor may be required to perform the Guaranteed Obligations in accordance with the terms hereof notwithstanding the fact
that the Loan has fully matured, that the outstanding principal balance thereof is fully due and payable and that Borrower is in default of its obligation to pay the full amount due under the Notes on the maturity thereof.
5. The liability of Guarantor under this Guaranty is a guaranty of payment and performance and not of collectibility, and is not conditioned or contingent upon the genuineness, validity; regularity or enforceability of the Loan Documents, Swap Contracts or other instruments relating to the creation or performance of the Guaranteed Obligations or the pursuit by Administrative Agent or any Lender of any remedies which any now has or may hereafter have with respect thereto under the Loan Documents or Swap Contracts, at law, in equity or otherwise. Guarantor hereby waives any and all benefits and defenses under CC Section 2810 and agrees that by doing so Guarantor shall be liable even if Borrower had no liability at the time of execution of any of the Loan Documents or Swap Contracts or thereafter ceases to be liable. Guarantor hereby waives any and all benefits and defenses under CC Section 2809 and agrees that by doing so Guarantors liability may be larger in amount and more burdensome than that of Borrower. Guarantors liability hereunder shall not be limited or affected in any way by any impairment or any diminution or loss of value of any security or collateral for the Loan, whether caused by hazardous substances or otherwise, Administrative Agents or any Lenders failure to perfect a security interest in such security or collateral or any disability or other defense of Borrower or any other guarantor.
6. Guarantor hereby waives to the extent permitted by law: (i) all notices to Guarantor, to Borrower, or to any other Person, including without limitation notices of the acceptance of this Guaranty or the creation, renewal, extension, modification, accrual of any of the Guaranteed Obligations owed to Administrative Agent and Lenders, enforcement of any right or remedy with respect thereto and notice of any other matters relating thereto; (ii) diligence and demand of payment, presentment, protest, dishonor and notice of dishonor; (iii) any statute of limitations affecting Guarantors liability hereunder or the enforcement thereof and (iv) all principles or provisions of law which conflict with the terms of this Guaranty. Guarantor further agrees that Administrative Agent and Lenders may enforce this Guaranty upon the occurrence of an event of default under the Notes or the other Loan Documents or Swap Contracts (as event of default is described therein), notwithstanding the existence of any dispute between Borrower and Administrative Agent or any Lender with respect to the existence of said event of default or performance of the Guaranteed Obligations or any counterclaim, set-off or other claim which Borrower may allege against Administrative Agent or any Lender with respect thereto. Moreover, Guarantor agrees that Guarantors obligations shall not be affected by any circumstances which constitute a legal or equitable discharge of a guarantor or surety.
7. Guarantor agrees that Administrative Agent and Lenders may enforce this Guaranty without the necessity of resorting to or exhausting any security or collateral (including, without limitation, pursuant to a judicial or nonjudicial foreclosure) and without the necessity of proceeding against Borrower or any other guarantor. Guarantor hereby waives any and all benefits under CC Sections 2845, 2849 and 2850, including, without limitation, the right to require Administrative Agent or Lenders to proceed against Borrower, to proceed against any other guarantor, to foreclose any lien on any real or personal property, to exercise any right or remedy under the Loan Documents and Swap Contracts, to draw upon any letter of credit issued in connection herewith, or to pursue any other remedy or to enforce any other right.
8. (a) Guarantor agrees that nothing contained herein shall prevent Administrative Agent and Lenders from suing on the Notes or from exercising any rights. available to them under the Notes or under any of the other Loan Documents or Swap Contracts and that the exercise of any of the aforesaid rights will not constitute a legal or equitable discharge of Guarantor. Guarantor understands that the exercise by Administrative Agent and Lenders of certain rights and remedies contained in the Swap Contracts and Loan Documents (such as a nonjudicial foreclosure) may affect or eliminate Guarantors right of subrogation against Borrower and that Guarantor may therefore incur a partially or totally non-reimbursable liability hereunder nevertheless, Guarantor hereby authorizes and empowers Administrative Agent to exercise, in its sole discretion, any rights and remedies, or any combination thereof, which may then be available to Administrative Agent and Lenders, since it is the intent and purpose of Guarantor that the obligations hereunder are absolute, independent and unconditional under any and all circumstances. Guarantor expressly waives any defense (which defense, if -Guarantor had not given this waiver, Guarantor might otherwise have) to a judgment against Guarantor by reason of a nonjudicial foreclosure sale. Without limiting the generality of the foregoing, Guarantor hereby expressly waives any and all benefits and defenses under (i) CCP Section 580a (which Section, if Guarantor had not given this waiver, would otherwise limit Guarantors liability after a nonjudicial foreclosure sale to the difference between the obligations guaranteed herein and the fair market value of the property or interests sold at such nonjudicial foreclosure sale), (ii) CCP Sections 580b and 580d (which Sections, if Guarantor had not given this waiver, would otherwise limit Lenders right to recover a deficiency judgment with respect to purchase money obligations and after a nonjudicial foreclosure sale, respectively), and (iii) CCP Section 726 (which Section, if Guarantor had not given this waiver, among other things, would otherwise require Lender to exhaust all of its security before a personal judgment may be obtained for a deficiency). Notwithstanding any foreclosure of the lien of any deed of trust or security agreement with respect to any or all of the real or personal property secured thereby, whether by the exercise of the power of sale contained therein, by an action for judicial foreclosure or by an acceptance of a deed in lieu of foreclosure, Guarantor shall remain bound under this Guaranty.
(b) Guarantor waives all benefits and defenses under CC Sections 2847, 2848 and 2849 and agrees that Guarantor shall have no right of subrogation against Borrower or against any collateral or security provided for in the Loan Documents or Swap Contracts and no right of reimbursement or contribution against any other guarantor unless and until all Guaranteed Obligations have been indefeasibly paid and satisfied in full, and Administrative Agent and Lenders have released, transferred or disposed of all of their rights, title and interest in any collateral or security. To the extent the waiver of Guarantors rights of subrogation, reimbursement and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, Guarantor further agrees that Guarantors rights of subrogation and reimbursement against Borrower and Guarantors rights of subrogation against any collateral or security shall be junior and subordinate to any rights Administrative Agent or Lenders may have against Borrower and to all rights, title and interest Administrative Agent or Lenders may have in such collateral or security, and Guarantors rights of contribution against any other guarantor shall be junior and subordinate to any rights Administrative Agent or Lenders may have against such other guarantor. Administrative Agent and Lenders may use, sell or dispose of any item of collateral or security as it sees fit without regard to Guarantors subrogation and contribution rights, and upon disposition or sale of any item, Guarantors rights
with respect to such item will terminate. Guarantor understands that Guarantor may record a Request for Notice of Default pursuant to CC Section 2924(b) and thereby receive notice of any proposed foreclosure of any real property collateral then securing the Guaranteed Obligations. With respect to the foreclosure of any security interest in any personal property collateral then securing the Guaranteed Obligations, Administrative Agent and Lenders agree to give Guarantor five (5) days prior written notice, in the manner set forth in Section 11 hereof, of any sale or disposition of any such personal property collateral, other than collateral which is perishable, threatens to decline speedily in value, is of a type customarily sold on a recognized market, or is cash, cash equivalents, certificates of deposit or the like.
(c) Guarantors sole right with respect to any such foreclosure of real or personal property collateral shall be to bid at such sale in accordance with applicable law. Guarantor acknowledges and agrees that Administrative Agent or any Lender may also bid at any such sale and in the event such collateral is sold to Administrative Agent or any Lender in whole or in partial satisfaction of the Guaranteed Obligations (or any portion thereof), Guarantor shall have no further right or interest with respect thereto. Notwithstanding anything to the contrary contained herein, no provision of this Guaranty shall be deemed to limit, decrease, or in any way to diminish any rights of set-off Administrative Agent and Lenders may have with respect to any cash, cash equivalents, certificates of deposit, letters of credit or the like which may now or hereafter be deposited with Administrative Agent or any Lender by Borrower.
(d) To the extent any dispute exists at any time between or among Guarantor and any other guarantor of the Guaranteed Obligations as to Guarantors or any other guarantors right to contribution or otherwise, Guarantor agrees to indemnify, defend and hold Administrative Agent and Lenders harmless from and against any loss, damage, claim, demand, cost or any other liability (including, without limitation, reasonable attorneys fees and costs) Administrative Agent and Lenders may suffer as a result of such dispute;
(e) So long as any of the Guaranteed Obligations are owing to Administrative Agent or any Lender, Guarantor shall not, without the prior written consent of Administrative Agent, commence or join with any other party in commencing any bankruptcy, reorganization or insolvency proceedings of or against Borrower. The obligations of Guarantor under this Guaranty shall not be altered, limited or affected by any case, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Borrower or by any defense which Borrower may have by reason of the order, decree or decision of any court or administrative body resulting from any such case. Administrative Agent shall have the sole right to accept or reject any plan on behalf of Guarantor proposed in such case and to take any other action which Guarantor would be entitled to take, including, without limitation, the decision to file or not file a claim. Guarantor acknowledges and agrees that any interest on the Guaranteed Obligations which accrues after the commencement of any such proceeding (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on any such portion of the Guaranteed Obligations if said proceedings had not been commenced) will be included in the Guaranteed Obligations because it is the intention of the parties that the Guaranteed Obligations should be determined without regard to any rule or law or order which may relieve Borrower of any portion of such Guaranteed Obligations. Guarantor hereby permits
any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors oi similar Person to pay Administrative Agent and Lenders, or allow the claim of Administrative Agent and Lenders in respect of, any such interest accruing after the date on which such proceeding is commenced. Guarantor hereby assigns to Administrative Agent (for the benefit of Lenders) Guarantors right to receive any payments from any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar Person by way of dividend, adequate protection payment or otherwise. If all or any portion of the Guaranteed Obligations are paid or performed by Borrower, the obligations of Guarantor hereunder shall continue and remain in full force and effect in the event that all or any part of such payment(s) or performance(s) is avoided or recovered directly or indirectly from Administrative Agent or Lenders as a preference, fraudulent transfer or otherwise in such case irrespective of payment in full of all obligations under the Loan Documents and Swap Contracts.
9. (a) Guarantor represents and warrants that any financial statements, tax returns or other documents of Guarantor heretofore delivered to Administrative Agent are true and correct in all material respects. Such statements were prepared in accordance with generally accepted accounting principles, consistently applied and fairly present the financial position of Guarantor as of the date thereof. Guarantor further represents and warrants that no material adverse change has occurred in Guarantors financial position since the date of such statements.
(b) Guarantor covenants and agrees to provide Administrative Agent with any and all financial information required by Administrative Agent pursuant to the Loan Agreement. Guarantor further covenants and agrees to immediately notify Administrative Agent of any material adverse change in Guarantors financial status.
10. All notices, requests and demands to be made hereunder to the parties hereto must be in writing and given as provided in the notice provisions of the Loan Agreement (at the addresses set forth below).
To Administrative Agent: |
|
Wachovia Bank, National Association |
|
|
Real Estate Financial Services |
|
|
Mail Code: CA 6500 |
|
|
l800Century Park East, Suite 500 |
|
|
Los Angeles, CA 90067 |
|
|
Attn: Real Estate Financial Services |
|
|
Telephone: (310) 789-8936 |
|
|
Facsimile: (310) 789-8994 |
To Guarantor: |
|
Kennedy-Wilson, Inc. |
|
|
9601 Wilshire Boulevard, Suite 220 |
|
|
Beverly Hills, California 90210 |
|
|
Attention: Mary Ricks & John Prabhu |
|
|
Telephone: (310) 887-6437 |
|
|
Facsimile: (310) 887-6409 |
11. Guarantor represents and warrants to Administrative Agent and Lenders as follows:
(a) No consent of any other Person, including, without limitation, any
creditors of Guarantor, and no license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required by Guarantor in connection with this Guaranty or the execution, delivery, performance, validity or enforceability of this Guaranty and all obligations required hereunder. This Guaranty has been duly executed and delivered by Guarantor, and constitutes the legally valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms.
(b) The execution, delivery and performance of this Guaranty will not violate any provision of any existing law or regulation binding on Guarantor, or any order, judgment, award or decree of any court, arbitrator or governmental authority binding on Guarantor, or of any mortgage, indenture, lease, contract or other agreement, instrument or undertaking to which Guarantor is a party or by which Guarantor or any of its assets may be bound, and will not result in, or require, the creation or imposition of any lien on any of Guarantors property, assets or revenues pursuant to the provisions of any such mortgage, indenture, lease, contract or other agreement, instrument or undertaking.
12. Guarantors performance of a portion, but not all, of the Guaranteed Obligations will in no way limit, affect, modify or abridge Guarantors liability for that portion of the Guaranteed Obligations that is not performed. Without in any way limiting the generality of the foregoing, in the event that Administrative Agent or any Lender is awarded a judgment in any suit brought to enforce Guarantors covenant to perform a portion of the Guaranteed Obligation, such judgment will in no way be deemed to release Guarantor from its covenant to perform any portion of the Guaranteed Obligation which is not the subject of such suit.
13. Guarantor covenants and agrees to furnish to Administrative Agent, with sufficient copies for each Lender which Administrative Agent shall distribute to the Lenders:
(a) as soon as the same are available, and in any event within ninety (90) days after the end of each fiscal year and sixty (60) days after the end of each interim quarterly accounting period of the subject, a copy of the current financial statements of Guarantor, which shall consist of (a) a balance sheet as of the end of the relevant fiscal period, (b) statements of income and expenses of Guarantor for such fiscal period (together, in each case, with the comparable figures for the corresponding period of the previous fiscal year), (c) contingent liabilities of Guarantor, and (d) cash flow statements of Guarantor. All such financial statements of Guarantor shall be audited by a certified public accountant satisfactory to Administrative Agent;
(b) copies of filed federal income tax returns of Guarantor for each taxable year (with all K-ls and other forms and supporting schedules attached), within thirty (30) days after filing but in any event not later than one hundred twenty (120) days after the close of each such taxable year (subject to extension); and
(c) Such other information concerning Guarantor, and the assets, business, financial condition, operations, property, prospects, and results of operations of Guarantor, as Administrative Agent reasonably requests from time to time.
14. Guarantor shall at all times maintain a combined net worth of at least Fifteen
Million Dollars ($1 5,000,000) As used herein, net worth shall mean an amount equal to the gross fair market value of all of Guarantors assets (excluding any value for goodwill, trademarks, patents, copyrights and other similar intangible items), less an amount equal to all of Guarantors liabilities (including guaranties and other contingent liabilities), all as reasonably determined by Administrative Agent.
15. Guarantor shall at all times maintain combined unencumbered liquid assets equal to at least Seven Million Five Hundred Thousand Dollars ($7,500,000) Liquid assets means the following assets of Guarantor: (i) Cash; (ii) certificates of deposit or time deposits with terms of six (6) months or less; (iii) commercial paper with a term of three (3) months or less; (iv) U.S. treasury bills and other obligations of the federal government, all with terms of six (6) months or less; (v) readily marketable securities (excluding margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), restricted stock and stock subject to the provisions of Rule 144 of the Securities and Exchange Commission); (vi) bankers acceptances issued for terms of six (6) months or less by financial institutions; (vii) repurchase agreements with terms of six (6) months or less covering U.S. government securities; (viii) unfunded capital commitments in Guarantor; and (ix) the undrawn amounts under credit lines available for disbursement to Guarantor.
16. This Guaranty is solely for the benefit of Administrative Agent and Lenders and is not intended to nor may it be deemed to be for the benefit of any third party, including Borrower.
17. Guarantor represents and warrants to Administrative Agent and Lenders as follows:
(a) Guarantor is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware, has the power to own its assets and to transact the business in which it is now engaged and is in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification.
(b) Guarantor has the power, authority and legal right to execute, deliver and perform this Guaranty and all obligations required hereunder and has taken all necessary action to authorize its execution, delivery and performance of this Guaranty and all obligations required hereunder. The execution, delivery and performance of this Guaranty will not violate any of the formation or governing documents of Guarantor or of any laws pursuant to which Guarantor has
been formed.
18. Guarantor hereby grants Administrative Agent and Lenders a security interest in any personal property of Borrower in which Guarantor hereafter acquires any right, title or interest. Guarantor agrees that such security interest is additional security for the obligations hereby guaranteed. Such security interest is superior to any right of Guarantor in such personal property until all sums due under the Notes or other Loan Documents and Swap Contracts have been repaid in full and all Guaranteed Obligations have been fully satisfied.
19. Administrative Agent may assign this Guaranty with any Loan Document or Swap Contracts, without in any way affecting Guarantors liability hereunder. Any married person executing this Guaranty agrees that recourse may be had against community property and
separate property for the satisfaction of all obligations hereby guaranteed. This Guaranty shall be binding upon-Guarantor, Guarantors heirs, representatives, administrators, executors, successors and assigns and shall inure to the benefit of and shall be enforceable by Administrative Agent and Lenders, and their successors, endorsees and assigns. As used herein, the singular includes the plural, and the masculine includes the feminine and neuter and vice versa, if the context so requires.
20. In the event of any dispute or litigation regarding the enforcement or validity of this Guaranty, Guarantor shall be obligated to pay all charges, costs and expenses (including, without limitation, reasonable attorneys fees) incurred by Administrative Agent and Lenders, whether or not any action or proceeding is commenced regarding such dispute and whether or not such litigation is prosecuted to judgment.
21. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
22. To the maximum extent permitted by law, Guarantor, Administrative Agent and Lenders hereby voluntarily, knowingly and intentionally WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY in any legal action or proceeding arising under or in connection with this Guaranty or any other Loan Document or Swap Contract or concerning the Guaranteed Obligations and/or any collateral therefore or pertaining to any transaction related to or contemplated in any Loan Document or Swap Contract, regardless of whether such action or proceeding concerns any contractual or tortious or other claim. Guarantor acknowledges that this waiver of jury trial is a material inducement to Administrative Agent and Lenders entering into the Loan Agreement and to Lenders in extending credit to Borrower, that Administrative Agent and Lenders would not have entered into the Loan Agreement and Lenders would not have extended such credit without this jury trial waiver, and that Guarantor has been represented by an attorney or has had an opportunity to consult with an attorney regarding this Guaranty and understands the legal effect of this jury trial waiver.
23. Guarantor hereby submits to the jurisdiction of the state and federal courts in the State of California and State of California for purposes of any action arising from or growing out of this Guaranty, and further agrees that the venue of any such action may be laid in King County, California, or Los Angeles County, California, and that (in addition to any other method provided by law for service of process) service of process in any such action may be made on Guarantor by the delivery of the process to Kent Mouton, Esq., whose present address is 15303 Ventura Boulevard, Suite 1400, Sherman Oaks, California 91403, whom Guarantor hereby appoints as Guarantors agent for service of process. Nothing contained in this Guaranty, however, shall be deemed to constitute, or to imply the existence of, any agreement by Administrative Agent or Lenders to bring any such action only in said courts or to restrict in any way any of Administrative Agents and Lenders remedies or rights to enforce the terms of this Guaranty as, when and where Administrative Agent shall deem appropriate, in its sole discretion.
24. No provision of this Guaranty may be changed, waived, revoked or amended
without Administrative Agents prior written consent. Every provision of this Guaranty is intended to be severable. If any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court of competent jurisdiction, such illegality or invalidity will not affect the balance of the terms and provisions hereof, which terms and provisions will remain binding and enforceable.
25. This Guaranty may be executed in any number of counterparts each of which shall be deemed an original and all of which shall constitute one and the same guaranty with the same effect as if all parties had signed the same signature page. Any signature page of this Guaranty may be detached from any counterpart of this Guaranty and reattached to any other counterpart of this Guaranty identical in form hereto but having attached to it one or more additional signature pages.
26. No failure or delay on the part of Administrative Agent or Lenders to exercise any power, right or privilege under this Guaranty will impair any such power, right or privilege, or be construed to be a waiver of any default or an acquiescence therein, nor will any single or partial exercise of such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
27. This Guaranty embodies the entire agreement among the parties hereto with respect to the matters set forth herein, and supersedes all prior agreements among the parties with respect to the matters set forth herein. No course of prior dealing among the parties, no usage of trade, and no part or extrinsic evidence of any nature may be used to supplement, modify or vary any of the terms hereof. There are no conditions to the full effectiveness of this Guaranty.
28. This Guaranty is in addition to all other guaranties of Guarantor and any other guarantors of Borrowers obligations to Administrative Agent and Lenders.
29. GUARANTOR ACKNOWLEDGES THAT GUARANTOR HAS BEEN AFFORDED THE OPPORTUNITY TO READ THIS DOCUMENT CAREFULLY AND TO REVIEW IT WITH AN ATTORNEY OF GUARANTORS CHOICE BEFORE SIGNING IT. GUARANTOR ACKNOWLEDGES HAVING READ AND UNDERSTOOD THE MEANING AND EFFECT OF THIS DOCUMENT BEFORE SIGNING IT.
30. When two or more persons or entities have executed this Guaranty, unless the context clearly indicates otherwise, all references herein to Guarantor shall mean the guarantors hereunder or either or any of them. All of the obligations and liabilities of said guarantors under this Guaranty (and the obligations of other guarantors under any similar or other guaranties of part or all of the Guaranteed Obligations) shall be joint and several. Suit may be brought against said guarantors, jointly and severally, or against any one or more of them (even if less than all), without impairing the rights of Administrative Agent and Lenders against the other or others of said guarantors; and Administrative Agent may settle with any one or more of said guarantors for such sums or sum as it may see fit and/or Administrative Agent may release any of said guarantors from all further liability to Administrative Agent and Lenders for such indebtedness without impairing the right of Administrative Agent and
Lenders to demand and collect the balance of such indebtedness from the other or others of said guarantors not so released; but it is agreed among said guarantors themselves, however, that such settlement and release shall in no way impair the rights of said guarantors as among themselves.
(Signatures on Following Page]
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first above written.
Guarantor |
|
|
|
|
|
KWI PROPERTY FUND I., L.P. |
|
|
a Delaware limited partnership |
|
|
|
|
|
By: |
Kennedy Wilson Property Services, Inc. |
|
|
a Delaware corporation, |
|
|
its sole general partner |
|
|
|
|
By: |
/s/ John C. Prabu |
|
|
Vice President |
|
|
|
|
|
|
|
KWI PROPERTY FUND II., L.P. |
|
|
a Delaware limited partnership |
|
|
|
|
|
By: |
Kennedy Wilson Property Services, Inc. |
|
|
a Delaware corporation, |
|
|
its sole general partner |
|
|
|
|
By: |
/s/ John C. Prabu |
|
|
Vice President |
|
Exhibit 10.108
COMMERCIAL GUARANTY
Principal |
|
Loan Date |
|
Maturity |
|
Loan No. |
|
Call / Coll |
|
Account |
|
Officer
|
|
Initials |
|
||||||||||||||
References in the boxes above are for Lenders use only and do not limit the applicability of this document to any particular loan or lie An item above containing **** has been omitted due to text length limitations |
Borrower: |
Windscape Village LLC, a California limited |
|
|
|
|
liability company |
|
|
|
|
9601 Wilshire Boulevard, Suite 220 |
|
Lender: |
Pacific Western Bank |
|
Beverly Hills, CA 90210 |
|
|
Beverly Hills Office |
|
|
|
|
9454 Wilshire Boulevard |
Guarantor: |
Kennedy-Wilson, Inc., a Delaware corporation
|
|
|
Beverly Hills, CA 90212 |
|
Beverly Hills, CA 90210 |
|
|
|
CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE . For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrowers obligations under the Note and the Related Documents. This is a guaranty of payment and performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lenders remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness. Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and wilt otherwise perform Borrowers obligations under the Note and Related Documents. Under this Guaranty, Guarantors liability is unlimited and Guarantors obligations are continuing.
INDEBTEDNESS . The word indebtedness as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, attorneys fees, arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender. Indebtedness includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether: voluntarily or involuntarily incurred; due or to become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated; determined or undetermined; direct or indirect; primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by a negotiable or non-negotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reason whatsoever; for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and originated then reduced Of extinguished and then afterwards increased or reinstated.
If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lenders rights under all guaranties shall be cumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantors liability will be Guarantors aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.
CONTINUING GUARANTY . THIS IS A CONTINUING GUARANTY UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON AN OPEN AND CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTORS OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.
DURATION OF GUARANTY . This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all of Guarantors other obligations under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantors written notice of revocation must be mailed to Lender, by certified mail, at Lenders address listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to new Indebtedness created after actual receipt by Lender of Guarantors written revocation. For this purpose and without limitation, the term new Indebtedness does not include the Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. For this purpose and without limitation, new Indebtedness does not include all or part of the Indebtedness that is: incurred by Borrower prior to revocation; incurred under a commitment that became binding before revocation; any renewals, extensions, substitutions, and modifications of the Indebtedness. This Guaranty shall bind Guarantors estate as to the Indebtedness created both before and after Guarantors death or incapacity, regardless of Lenders actual notice of Guarantors death. Subject to the foregoing, Guarantors executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. Guarantors obligations under this Guaranty shall be in addition to any of Guarantors obligations, or any of them, under any other guaranties of the Indebtedness or any other person heretofore or hereafter given to Lender unless such other guaranties are modified or revoked in writing; and this Guarantor shall not, unless provided in this Guaranty, affect, invalidate, or supersede any such other guaranty. It is anticipated that fluctuations may occur in the aggregate amount of the Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of the Indebtedness, even to zero dollars ($0.00), shall not constitute a termination of this Guaranty, This Guaranty is binding upon Guarantor and Guarantors heirs, successors and assigns so long as any of the Indebtedness remains unpaid and even though the Indebtedness may from time to time be zero dollars 450.00).
GUARANTORS AUTHORIZATION TO LENDER . Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantors liability under this Guaranty, from time to time: (A) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal with any one or more of Borrowers sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the order or manner of sale thereof, including
Loan No: 99185256449 |
|
|
|
|
without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.
GUARANTORS REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrowers request and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any taw, regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantors assets, or any interest therein; (F) upon Lenders request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantors financial condition as of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantors financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantors financial condition; (H) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrowers financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantors risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower.
GUARANTORS FINANCIAL STATEMENTS . Guarantor agrees to furnish Lender with the following:
Additional Requirements.
ANNUAL STATEMENTS. Guarantor to provide Lender with, as soon as available, but in no event later than ninety (90) days after the end of each fiscal year end, a self-prepared consolidated balance sheet and income statement for the period ended in form satisfactory to Lender. Statements may be due more often if requested by Lender.
All financial reports required to be provided under this Guaranty shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Guarantor as being true and correct.
GUARANTORS WAIVERS . Except as prohibited by applicable law, Guarantor waives any right to require Lender to (A) make any presentment, protest, demand, or notice of any kind, including notice of change of any terms of repayment of the Indebtedness, default by Borrower or any other guarantor or surety, any action or nonaction taken by Borrower, Lender, or any other guarantor or surety of Borrower, or the creation of new or additional Indebtedness; (B) proceed against any person, including Borrower, before proceeding against Guarantor; (C) proceed against any collateral for the Indebtedness, including Borrowers collateral, before proceeding against Guarantor; (D) apply any payments or proceeds received against the Indebtedness in any order; (E) give notice of the terms, time, and place of any sale of the collateral pursuant to the Uniform Commercial Code or any other law governing such sale; (F) disclose any information about the Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or about any action or nonaction of Lender; or (G) pursue any remedy or course of action in Lenders power whatsoever.
Guarantor also waives any and all rights or defenses arising by reason of (H) any disability or other defense of Borrower, any other guarantor or surety or any other person; (l) the cessation from any cause whatsoever, other than payment in full, of the Indebtedness; (J) the application of proceeds of the indebtedness by Borrower for purposes other than the purposes understood and intended by Guarantor and Lender; (K) any act of omission or commission by Lender which directly or indirectly results in or contributes to the discharge of Borrower or any other guarantor or surety, or the Indebtedness, or the loss or release of any collateral by operation of law or otherwise; (L) any statute of limitations in any action under this Guaranty or on the Indebtedness; or (M) any modification or change in terms of the Indebtedness, whatsoever, including without limitation, the renewal, extension, acceleration, or other change in the time payment of the Indebtedness is due and any change in the interest rate, and including any such modification or change in terms after revocation of this Guaranty on the Indebtedness incurred prior to such revocation.
Guarantor waives all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to Guarantor by reason of California Civil Code Sections 2787 to 2855, inclusive.
Guarantor waives all rights and any defenses arising out of an election of remedies by Lender even though that the election of remedies, such as a non-judicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantors rights of subrogation and reimbursement against Borrower by operation of Section 580d of the California Code of Civil Procedure or otherwise.
Guarantor waives all rights and defenses that Guarantor may have because Borrowers obligation is secured by real property. This means among other things: (N) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower. (0) If Lender forecloses on any real property collateral pledged by Borrower: (1) the amount of Borrowers obligation may be reduced only by the price for which the collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price. (2) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrowers obligation is secured by real property. These rights and defenses include, but are not limited to, any rights and defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure.
Guarantor understands and agrees that the foregoing waivers are unconditional and irrevocable waivers of substantive rights and defenses to which Guarantor might otherwise be entitled under state and federal law. The rights and defenses waived include, without limitation, those provided by California laws of suretyship and guaranty, anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges that Guarantor has provided these waivers of rights and defenses with the intention that they be fully relied upon by Lender. Guarantor further understands and agrees that this Guaranty is a separate and independent contract between Guarantor and Lender, given for full and ample consideration, and is enforceable on its own terms. Until all of the Indebtedness is paid in full, Guarantor waives any right to enforce any remedy Guarantor may have against the Borrower or any other guarantor, surety, or other person, and further, Guarantor waives any right to participate in any collateral for the Indebtedness now or hereafter held by Lender.
Guarantors Understanding With Respect To Waivers. Guarantor warrants and agrees that each of the waivers sat forth above is made with Guarantors full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.
Subordination of Borrowers Debts to Guarantor . Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent.
2
Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. in the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuation statements and to execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.
Miscellaneous Provisions . The following miscellaneous provisions are a part of this Guaranty:
AMENDMENTS . This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
ATTORNEYS FEES; EXPENSES . Guarantor agrees to pay upon demand all of Lenders costs and expenses, including Lenders attorneys fees and Lenders legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lenders attorneys fees and legal expenses whether or not there is a lawsuit, including attorneys fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court.
CAPTION HEADINGS . Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty.
GOVERNING LAW . This Guaranty will be governed by federal law applicable to Lender end, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions.
CHOICE OF VENUE . if there is a lawsuit, Guarantor agrees upon Lenders request to submit to the jurisdiction of the courts of Los Angeles County, State of California.
INTEGRATION . Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity to be advised by Guarantors attorney with respect to this Guaranty; the Guaranty fully reflects Guarantors intentions and parol evidence is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lenders attorneys fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this paragraph.
INTERPRETATION . In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words Borrower and Guarantor respectively shall mean all and any one or more of them. The words Guarantor, Borrower, and Lender include the heirs, successors, assigns, and transferees of each of them. If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.
NOTICES . Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, shall be effective when actually delivered, when actually received by telefacsimiie (unless otherwise required by law}, when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the section of this Guaranty entitled DURATION OF GUARANTY. Any party may change its address for notices under this Guaranty by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the partys address. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantors current address. Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors.
NO WAIVER BY LENDER . Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lenders right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lenders rights or of any of Guarantors obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.
SUCCESSORS AND ASSIGNS . Subject to any limitations stated in this Guaranty on transfer of Guarantors interest, this Guaranty shall be binding upon and inure to the benefit of the parties, their successors and assigns.
Definitions . The following capitalized words and terms shall have the following meanings when used in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed to such terms in the Uniform Commercial Code:
BORROWER . The word Borrower means Windscape Village LLC, a California limited liability company and includes all co-signers and co-makers signing the Note and all their successors and assigns.
GAAP. The word GAAP means generally accepted accounting principles.
GUARANTOR . The word Guarantor means everyone signing this Guaranty, including without limitation Kennedy-Wilson, Inc., a Delaware corporation, and in each case, any signers successors and assigns.
3
GUARANTY . The word Guaranty means this guaranty from Guarantor to Lender.
INDEBTEDNESS . The word Indebtedness means Borrowers indebtedness to Lender as more particularly described in this Guaranty, LENDER . The word Lender means Pacific Western Bank, its successors and assigns.
NOTE . The word Note means and includes without limitation all of Borrowers promissory notes and/or credit agreements evidencing Borrowers loan obligations in favor of Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of and substitutions for promissory notes or credit agreements.
RELATED DOCUMENTS . The words Related Documents mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTORS EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED DURATION OF GUARANTY. NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED SEPTEMBER 13, 2007.
GUARANTOR: |
|
|
|
|
|
|
|
|
|
|
|
KENNEDY-WILSON, INC., A DELAWARE CORPORATION |
|
|
|
|
|
|
|
By: |
/s/ Wiliam J. McMorrow |
|
/s/ Freeman A. Lyle |
|
William .1. McMorrow, CEO of Kennedy-Wilson, Inc., |
|
Freeman A. Lyle, CFO/Secretary of Kennedy-Wlson, Inc., |
|
a Delaware corporation |
|
a Delaware corporation |
4
NOTICE OF FINAL AGREEMENT
Principal |
|
Loan Date |
|
Maturity |
|
Loan No. |
|
Call / Coll |
|
Account |
|
Officer
|
|
Initials |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
References in the boxes above are for Lenders use only and do not limit the applicability of this document to any particular loan or lie An item above containing **** has been omitted due to text length limitations |
Borrower: |
Windscape Village LLC, a California limited |
|
Lender: |
Pacific Western Bank |
|
liability company |
|
|
Beverly Hills Office |
|
9601 Wilshire Boulevard, Suite 220 |
|
|
9454 Wilshire Boulevard |
|
Beverly Hills, CA 90210 |
|
|
Beverly Hi/Is, CA 90212 |
BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES THAT: (A) THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES, (B) THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES, AND (C) THE WRITTEN LOAN AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.
As used in this Notice, the following terms have the following meanings:
Loan . The term Loan means the following described loan: a Variable Rate Nondisclosable Draw Down Line of Credit Loan to a Limited Liability Company for $1,200,000.00 due on September 13, 2008. The reference rate (Lenders Base Rate, currently 8.250%), resulting in an initial rate of 8.250.
Loan Agreement . The term Loan Agreement means one or more promises, promissory notes, agreements, undertakings, security agreements, deeds of trust or other documents, or commitments, or any combination of those actions or documents, relating to the Loan, including without limitation the following:
LOAN DOCUMENTS
Corporate Resolution: Kennedy-Wilson, Inc., a Delaware corporation |
|
LLC Resolution: Windscape Village LLC, a California limited liability company |
Resolution of Corporate LLC Member: KW Windscape Village Corp, a California corporation |
|
Business
Loan Agreement
|
CA Commercial Guaranty: Kennedy-Wilson, Inc., a Delaware corporation |
|
List
of Loan Documents - List of Documents Sent
|
Notice of Final Agreement |
|
|
Parties. The term Parties means Pacific Western Bank and any and all entities or individuals who are obligated to repay the loan or have pledged property as security for the Loan, including without limitation the following:
Borrower: |
Windscape Village LLC, a California limited liability company |
Guarantor 1: |
Kennedy-Wilson, Inc., a Delaware corporation |
Each Party who signs below, other than Pacific Western Bank, acknowledges, represents, and warrants to Pacific Western Bank that it has received, read and understood this Notice of Final Agreement. This Notice is dated September 13, 2007.
BORROWER:
W1NDSCAPE VILLAGE LLC, A CALIFORNIA LIMITED LIABILITY COMPANY
KW WINDSCAPE VILLAGE CORP, A CALIFORNIA CORPORATION, Manager of Windscape Village LLC, a California ted liability company
By: |
/s/ Robert E. Hart |
|
By: |
/s/ Freeman A. Lyle |
Robert E. Hart, President/CEO of KW Windscape |
|
Freem an A Lyle, CFO/Secretary of KW Windscape |
||
Village Corp, a California corporation |
|
Village Coa California corporation |
||
|
|
|
|
|
GUARANTOR: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KENNEDY-WILSON, INC., A DELAWARE CORPORATION |
|
|
|
|
|
|
|
|
|
By: |
/s/ Wiliam J. McMorrow |
|
By: |
/s/ Freeman A. Lyle |
|
William
J. McMorrow, CEO of Kennedy-Wilson, inc.,
|
|
Freernan A Lyle,
CFO/Secretary of Kennedy-
|
Loan No: 99185256449 |
|
|
|
|
LENDER:
PACIFIC WESTERN BANK
X |
|
|
|
Authorized Signer |
|
Exhibit 10.109
Guaranty
To: Mizuho Bank, Ltd. |
Date: |
Guarantor (to be signed/sealed by the Guarantor him/herself) |
|
|
|
Address: |
9601
Wilshire Blvd., Suite 220
|
|
|
Name: |
Kennedy
Wilson, Inc.
|
Agreement
(hereinafter, the Bank), the Guarantor, hereby agreeing to the terms and conditions of this Agreement in addition to the provisions of the Agreement on Bank Transactions and the agreement related to the obligations specified below, both agreed to separately by the Obligor, hereby guarantees, and shall be liable jointly and severally with the Obligor for, the performance of all such obligations.
If the Guarantor is a corporation:
In providing this guarantee, the Guarantor hereby represents and warrants that it has undertaken all the necessary procedures under any applicable laws and regulations, all procedures required by its articles of association, and any other necessary procedures.
Contents of the guaranteed obligations: The Guarantor confirms the guaranteed obligations as follows.
To the Guarantor: Please select only one of the contents of guaranteed obligations below (1, 2, 3, 4, 5, 6, or 7) and affix a confirmation seal/signature in the corresponding space in the right column. If selecting 2, please check the box next to the appropriate details in subsections (1) and (2).
2
|
|
/Details (see NOTE ) |
|
Confirmation
|
|
|
|
|
|
4 |
|
Obligors obligations to the Bank in the amount of JPY (agreement amount JPY ) arising from the note or bill drawn on (date), plus any and 11 obligations incident thereto. Furthermore, when a new note or bill is executed by the Obligor and delivered to the Bank in substitution for a note or bill theretofore executed and delivered by the Obligor, the previous note or bill shall be deemed to have been revised, and this guarantee will cover the obligations arising from a loan against the new note or bill. The same shall apply to any subsequent renewal of notes or bills |
|
(certified seal) |
|
|
|
|
|
5 |
|
The Obligors indemnity obligations to the Bank in the amount of JPY (agreement amount JPY ) arising from the application for an acceptance or guarantee transaction dated , plus any and all obligations incident thereto. |
|
(certified seal) |
|
|
|
|
|
6 |
|
Any and all of the Obligors obligations to the Bank arising from the overdraft agreement (overdraft limit amount JPY ) dated . |
|
(certified seal) |
|
|
|
|
|
7 |
|
|
|
(certified seal) |
NOTE: If the Guarantor wishes to guarantee obligations arising from only certain type(s) of transaction, he or she is requested to indicate the type(s) of obligations (transaction} in the corresponding space and indicate that a modification was made by stating the number of letters inserted outside of the column and affixing his or her seal/signature beside such statement.
(The English translation is for convenience only. All questions that may arise within or without courts of law in regard to the meaning of the words, provisions, and stipulations of this Agreement shall be decided in accordance with the Japanese text.)
3
Exhibit 10.110
COMMERCIAL GUARANTY
P1-71414.
Principal |
|
Loan Date |
|
Maturity |
|
Loan No. |
|
Call / Coll |
|
Account |
|
Officer
|
|
Initials |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
References in the boxes above are for Lenders use only and do not limit the applicability of this document to any particular loan or lie An item above containing **** has been omitted due to text length limitations
Borrower: |
KW Indigo Land, LLC, a Delaware limited liability company 9601 Wilshire Boulevard, Suite 220 Beverly Hills, CA 90210 |
Lender: |
Pacific Western Bank Beverly Hills Office 9454 Wilshire Boulevard Beverly Hills, GA 90212 |
|
|
||
|
|
||
Guarantor: |
Kennedy-Wilson, Inc., a De/aware corporation 9601 Wilshire Boulevard, Suite 220 Beverly Hills, CA 90210 |
|
|
|
|
|
|
|
|
|
CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE . For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrowers obligations under the Note and the Related Documents. This Is a guaranty of payment and performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lenders remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness. Guarantor will make any payments to Lender or its order, on demand, In legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrowers obligations under the Note and Related Documents. Under this Guaranty, Guarantors liability is unlimited and Guarantors obligations are continuing.
INDEBTEDNESS . The word Indebtedness as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, attorneys fees, arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender. Indebtedness includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card Indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether. voluntarily or involuntarily incurred; due or to become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated; determined or undetermined; direct or indirect; primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by a negotiable or non-negotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reason whatsoever; for any transactions that may be voidable for any reason (such as Infancy, Insanity, ultra vires or otherwise); and originated then reduced or extinguished and than afterwards increased or reinstated.
If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lenders rights under all guaranties shall be cumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantors liability will be Guarantors aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.
CONTINUING GUARANTY . THIS IS A CONTINUING GUARANTY UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OP THE INDEBTEDNESS OF BORROWER TO LENDER NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON AN OPEN AND CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTORS OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.
DURATION OF GUARANTY . This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and wilt continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all of Guarantors other obligations under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantors written notice of revocation must be mailed to Lender, by certified mail, at Lenders address listed above or such other place as Lender may designate in writing, Written revocation of this Guaranty will apply only to new Indebtedness created after actual receipt by Lender of Guarantors written revocation. For this purpose arid without limitation, the teen new Indebtedness does not include the Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. For this purpose and without limitation, new Indebtedness does not include all or part of the Indebtedness that is incurred by Borrower prior to revocation; incurred under a commitment that became binding before revocation; any renewals, extensions, substitutions, arid modifications of the Indebtedness. This Guaranty shall bind Guarantors estate as to the Indebtedness created both before and after Guarantors death or incapacity, regardless of Lenders actual notice of Guarantors death. Subject to the foregoing, Guarantors executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated It and with the same effect. Release of any other guarantor or termination of any other guaranty of the indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. Guarantors obligations under this Guaranty shall be in addition to any of Guarantors obligations, or any of thorn, under any other guaranties of the indebtedness or any other person heretofore or hereafter given to Lender unless such other guaranties are modified or revoked In writing; and this Guarantor shall riot, unless provided In this Guaranty, affect, Invalidate, or supersede any such other guaranty. It Is anticipated that fluctuations may occur In the aggregate amount of the Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of the indebtedness, even to zero dollars ($0.00), shall not constitute a termination of this Guaranty. This Guaranty IS binding upon Guarantor and Guarantors heirs, successors and assigns so fang as any of the Indebtedness remains unpaid and even though the Indebtedness may from time to time be zero dollars ($0.00).
GUARANTORS AUTHORIZATION TO LENDER . Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand
and without lessening Guarantors liability under this Guaranty, from time to time: (A) prior to revocation as sat forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower, (B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of Interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan ten-n; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail Or decide not to perfect, and release any such security, with or without the substitution of new collateral; (0) to release, substitute, agree not to sue, or deal with any one or more of Borrowers sureties, endorsers, or other guarantors on any terms or In any manner Lender may choose; (E) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the order or manner of sale thereof, including
Loan No: 406262441 |
|
|
without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or In part.
GUARANTORS REPRESENTATIONS AND WARRANTIES . Guarantor represents and warrants to Lender that (A) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrowers request and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantors assets, or any interest therein; (F) upon Lenders request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial Information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct In all material respects and fairly present Guarantors financial condition as of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantors financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantors financial condition; (H) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrowers financial condition. Guarantor agrees to keep adequately Informed from such means of any facts, events, or circumstances which might in any way affect Guarantors risks under this Guaranty, and Guarantor further agrees that, absent a request for Information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of Its relationship with Borrower.
GUARANTORS FINANCIAL STATEMENTS . Guarantor agrees to furnish Lender with the following:
Additional Requirements.
(I) Financial Statements:
ANNUAL STATEMENTS . Guarantor to provide Lender with, as soon as available, but In no event later than one hundred fifty (150) days after the end of each fiscal year end, consolidated balance sheet and income statement for the period ended in form satisfactory to Lender, audited by a CPA acceptable to Lender. Statements may be due more often If requested by Lender.
INTERIM STATEMENTS . Guarantor shall provide to Lender, as soon as available, but in no event later than sixty (60) days after the end of each fiscal quarter (including fiscal year end), a self-prepared consolidated balance sheet and income statement for the period ended in form satisfactory to Lender, Statements may be due more often If requested by Lender.
(II) Financial Covenants/Ratios:
DEBT/WORTH RATIO . Guarantor to maintain a maximum ratio of Debt/Worth of 4.00 to 1.00. The ratio Debt/Worth means Guarantors total liabilities, excluding debt subordinated to Lender, and divided by Guarantors Effective Tangible Net Worth. This ratio must be maintained at all times and may be evaluated annually. The term Effective Tangible Net Worth means Guarantors total assets excluding all intangible assets (i.e. goodwill, trademarks, patents, copyrights, organization expenses, and similar intangible Items) and excluding due from related entitles (e.g. affiliates, employees, subsidiaries, shareholders, etc.), less total liabilities excluding debt subordinated to Lender,
EFFECTIVE TANGIBLE NET WORTH . Guarantor to maintain a minimum Effective Tangible Net Worth of $15,000,000.00. The term Effective Tangible Net Worth means Guarantors total assets excluding all intangible assets (i.e. goodwill, trademarks, patents, copyrights, organization expenses, and similar intangible items) and excluding due from related entities (e.g. affiliates, employees, subsidiaries, shareholders, etc.), less total liabilities excluding debt subordinated to Lender. This amount must be maintained at all times and may be evaluated annually.
PROFITABILITY . Guarantor must be profitable at all times.
Alt financial reports required to be provided under this Guaranty shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Guarantor as being true and correct.
GUARANTORS WAIVERS . Except as prohibited by applicable law. Guarantor waives any right to require Lender to (A) make any presentment, protest, demand, or notice of any kind, including notice of change of any terms of repayment of the Indebtedness, default by Borrower or any other guarantor or surety, any action or nonaction taken by Borrower, Lender, or any other guarantor or surety of Borrower, or the creation of new or additional Indebtedness; (8) proceed against any person, Including Borrower, before proceeding against Guarantor; (C) proceed against any collateral for the indebtedness, including Borrowers collateral, before proceeding against Guarantor,. (D) apply any payments or proceeds received against the Indebtedness in any order; (E) give notice of the terms, time, and place of any sale of the collateral pursuant to the Uniform Commercial Code or any other law governing such sale; (F) disclose any Information about the Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or about any action or nonaction of Lender; or (G) pursue any remedy or course of action in Lenders power whatsoever.
Guarantee also waives any and all rights or defenses arising by reason of (H) any disability or ether defense of Borrower, any other guarantor or surety or any other person; (I) the cessation from any cause whatsoever, other than payment in full, of the Indebtedness; (a) the application of proceeds of the indebtedness by Borrower for purposes other than the purposes understood and intended by Guarantor and Lender; (K) any act of omission or commission by Lender which directly or indirectly results in or contributes to the discharge of Borrower or any other guarantor or surety, or the Indebtedness, or the loss or release of any collateral by operation of law or otherwise; (L) any statute of limitations in any action under this Guaranty or on the Indebtedness; or (M) any modification or change in terms of the Indebtedness, whatsoever, including without limitation, the renewal, extension, acceleration, or other change in the time payment of the Indebtedness is due and any change in the interest rate, and Including any such modification or change in terms after revocation of this Guaranty on the indebtedness incurred prior to such revocation.
Guarantor waives all rights of subrogation , reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to Guarantor by reason of California Civil Coda Sections 2787 to 2855, inclusive.
Guarantor waives all rights and any defenses arising out of an election of remedies by Lender even though that the election of remedies, such as a non-Judicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantors rights of subrogation and reimbursement against Borrower by operation of Section 580d of the California Code of Civil Procedure or otherwise.
Guarantor waives all rights and defenses that Guarantor may have because Borrowers obligation is secured by real property. This means among other things that Lender may collect from Guarantor without first foreclosing on any reef or personal property collateral pledged by Borrower. (0) If Lender forecloses on any real property collateral pledged by Borrower; (1) the amount of Borrowers obligation may be reduced only by the price for which the collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price. (2) Lender may
2
collect from Guarantor even If Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrowers obligation is secured by real property. These rights and defenses include, but are not limited to, any rights and defenses based upon Section 580a, 580b, 580d, or 726 of the Cade of Civil Procedure.
Guarantor understands and agrees that the foregoing waivers are unconditional and irrevocable waivers of substantive rights and defenses to which Guarantor might otherwise be entitled under state and federal law. The rights and defenses waived include, without limitation, those provided by California laws of suretyship and guaranty, anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges that Guarantor has provided these waivers of rights and defenses with the intention that they be fully relied upon by Lender. Guarantor further understands and agrees that this Guaranty is a separate and independent contract between Guarantor and Lender, given for full and ample consideration, and is enforceable on its own terms. Until all of the Indebtedness is paid in full. Guarantor waives any right to enforce any remedy Guarantor may have against the Borrower Or any other guarantor, surety, or other person, and further. Guarantor waives any right to participate In any collateral for the Indebtedness now Of hereafter held by Lender.
Guarantees Understanding With Respect To Waivers. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantors full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.
Subordination of Borrowers Debts to Guarantor. Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to lime to file financing statements and continuation statements and to execute documents end to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.
Miscellaneous Provisions. The following miscellaneous provisions are a part of this Guaranty:
AMENDMENTS. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
ATTORNEYS FEES; EXPENSES. Guarantor agrees to pay upon demand all of Lenders costs and expenses, including Lenders attorneys fees arid Lenders legal expenses, Incurred in connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lenders attorneys fees and legal expenses whether or not there Is a lawsuit, including attorneys fees arid legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court.
CAPTION HEADINGS. Caption headings In this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty.
GOVERNING LAW, This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of taw provisions.
CHOICE OF VENUE. If there is a lawsuit. Guarantor agrees upon Lenders request to submit to the jurisdiction or the courts of Los Angeles County, State of California.
INTEGRATION. Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty. Guarantor has had the opportunity to be advised by Guarantors attorney with respect to entering Into this Guaranty. Guarantor further agrees that the Guaranty represents the final agreement between Guarantor and Lender regarding the matters addressed therein and therefore: (a) incorporates all negotiations of the parties relating to the Guaranty; (b) there are no unwritten oral agreements between Lender and Guarantor, and (c) this Guaranty may not be contradicted by evidence of any prior, contemporaneous, or subsequent oral agreements or understandings of Lender and Guarantor. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, arid costs (Including Lenders attorneys fees) suffered by Lender as a result of any breath by Guarantor of the warranties, representations and agreements of this Paragraph.
INTERPRETATION. in all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words Borrower and Guarantor respectively shall mean all and any one or more of them. The words Guarantor, Borrower, and Lender include the heirs, successors, assigns, and transferees of each of them. If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable, if any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.
NOTICES. Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, If mailed, when deposited in the United Stales mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. All revocation notices by Guarantor shall be In writing and shall be effective upon delivery to Lender as provided In the Section of this Guaranty entitled DURATION OF GUARANTY. Any party may change its address for notices under this Guaranty by giving formal written notice to the ether parties, specifying that the purpose of the notice is to change the partys address. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantors current address. Unless otherwise provided or required by law, If there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors.
NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights ender this Guaranty unless such waiver is given in writing and
3
signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lenders right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lenders rights or of any of Guarantors obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shaft not constitute continuing consent to subsequent instances where such consent Is required and In all cases such consent may be granted or withheld in the sole discretion of Lender.
SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Guaranty on transfer of Guarantors interest, this Guaranty shall be binding upon and Inure to the benefit of the parties, their successors and assigns.
Definitions. The following capitalized words and terms shall have the following meanings when used in this Guaranty. Unless specifically stated to the contrary, ell references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed to such terms in the Uniform Commercial Code:
BORROWER. The word Borrower means KW indigo Land. LLC, a Delaware limited liability company and includes at co-signers and co-makers signing the Note and all their successors and assigns.
GAAP. The word GAAP means generally accepted accounting principles.
GUARANTOR. The word Guarantor means everyone signing this Guaranty, including without limitation Kennedy-Wilson, Inc., a Delaware corporation, and in each case, any signers successors and assigns.
GUARANTY. The word Guaranty means this guaranty from Guarantor to Lender.
INDEBTEDNESS. The word Indebtedness means Borrowers Indebtedness to Lender as more particularly described in this Guaranty. LENDER. The word Lender means Pacific Western Bank, its successors and assigns.
NOTE. The word Note means the Note executed by Borrower in the principal amount of $450,000.00 dated July 1, 2008, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of and substitutions for the note or credit agreement.
RELATED DOCUMENTS. The words Related Documents mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreem ents, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTORS EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED DURATION OF GUARANTY. NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED JULY 20, 2009.
GUARANTOR: |
|
|
|
|
|
|
|
|
KENNEDY-WILSON, INC., A DELAWAE CORPORATION |
|
|
|
|
|
|
|
|
By: |
/s/ Freeman A. Lyle |
|
Freeman A. Lyle, CFO/Secretary of Kennedy- Wilson, Inc. |
|
|
a Delaware corporation |
|
|
4
Exhibit 10.111
REPAYMENT GUARANTY
THIS REPAYMENT GUARANTY (this Guaranty ) is made as of May 9, 2007, by KENNEDY-WILSON, INC., a Delaware corporation, and KWI PROPERTY FUND I, L.P., a Delaware limited partnership (individually and collectively, Guarantor ) in favor of WACHOVIA BANK, NATIONAL ASSOCIATION , a national banking association, as agent for the Lenders pursuant to the Loan Agreement described below (in such capacity, Administrative Agent ) and in favor of each party that now or hereafter is bound under the Loan Agreement as a Lender (referred to herein individually as a Lender and collectively as the Lenders ).
1. Except as otherwise provided in this Guaranty, initially capitalized terms used in this Guaranty without definition are defined in that certain Construction Loan Agreement of even date herewith by and between Fifth and Madison LLC, a Delaware limited liability company ( Borrower ), Administrative Agent and Lenders (the Loan Agreement ).
2. In order to induce Administrative Agent and Lenders to enter into the Loan Agreement and to induce Lenders to loan to Borrower (whether acting on behalf of itself or any estate created by the commencement of a case under Title 11 United States Code or any successor statute thereto (the Bankruptcy Code ) or any other insolvency, bankruptcy, reorganization or liquidation proceeding, or by any trustee under the Bankruptcy Code, liquidator, sequestrator or receiver of Borrower or Borrowers property or similar Person duly appointed pursuant to any law generally governing any insolvency, bankruptcy, reorganization, liquidation, receivership or like proceeding) the sum of $63,574,000.00 (the Loan ), evidenced by one or more secured promissory notes (collectively, the Notes ), in the aggregate principal amount of $63,574,000.00, each now or hereafter executed by Borrower and payable to the order of one or more Lenders, Guarantor hereby unconditionally and irrevocably guarantees to Administrative Agent and Lenders and to their successors, endorsees and/or assigns, the full and prompt payment of the principal sum of the Notes in accordance with their terms when due, by acceleration or otherwise, together with all interest accrued thereon, when due under the terms of the Notes, and any and all other sums of money that become owing by Borrower to Lenders under the Notes, Loan Agreement or any other Loan Document as such term is defined in the Loan Agreement (which Notes, Loan Agreement and other Loan Documents are also collectively referred to herein as the Loan Documents), The obligations guaranteed pursuant to this Section 2 are hereinafter referred to as the Guaranteed Obligations .
Notwithstanding the foregoing, Guarantors obligations hereunder shall in no event exceed an amount equal to twenty-five percent (25%) of the principal amount of the Loan outstanding on the date the Notes become due and payable in full, whether at maturity or by acceleration or otherwise, plus twenty-five percent (25%) of any additional principal sums disbursed by Administrative Agent and Lenders thereafter (the Guaranteed Principal Amount ), plus 100% of (a) attorneys fees and collection costs and all other sums other than principal owing on the Loan and (b) any deficiency, loss or damage suffered by Lender because of: (1) Borrowers commission of a criminal act, (2) the failure to comply with provisions of the Loan Documents prohibiting the sale, transfer or encumbrance of the Project; (3) the misapplication by Borrower of any funds derived from the Project, including security deposits, insurance proceeds, condemnation awards, rental income or other income arising with respect to the Project; (4) Borrowers commission of waste; (5) Borrowers removal of collateral from the Project without replacement, (6) Borrowers violation of law; (7) losses, expense or liability relating to the presence of hazardous or toxic materials on the Project; (8) the fraud or intentional misrepresentation by Borrower made in or in connection with the Loan Documents or the Loan; (9) Borrowers voluntary or involuntary filing, or the filing against Borrower by any party, of any proceeding for relief under any federal or state bankruptcy, insolvency or receivership laws or any assignment for the benefit of creditors made by Borrower not dismissed within 180 days; (10) Borrowers interference with Lenders enforcement proceedings; or (11) Borrowers collection of rent more than one month in advance.
Guarantors obligations shall not be affected, impaired, lessened or released by loans, credits or other financial accommodations now existing or hereafter advanced by Lender to Borrower in excess of the Guaranteed Principal Amount. in no event shall the Guaranteed Principal Amount be reduced as a result of (a) Lenders foreclosure or acceptance of a deed in lieu of foreclosure with respect to any collateral securing the Loan, or (b) Guarantors payment of the Loan or any portion thereof prior to the date when the entire Loan becomes due and payable in full, whether at maturity or by acceleration or otherwise. The agreement of Lender to the foregoing limitation on Guarantors liability shall in no way be deemed to limit or restrict the right of Lender to apply any sums paid by Guarantor to any portion of the Loan.
The indebtedness guaranteed by Guarantor hereunder shall be deemed to be the last indebtedness which remains outstanding under the Loan Documents after the application of payments received from Borrower and the application of proceeds received from the foreclosure of the Deed of Trust and other liquidation of any collateral for the Loan (subject to the above limitations on the maximum amount of principal indebtedness guaranteed hereby), and Guarantor may not claim or contend so long as any such indebtedness remains outstanding that any payments received by Lender from Borrower or otherwise, or proceeds received by Lender on the liquidation of the Project, shall have reduced or discharged Guarantors liability or obligations hereunder. Nothing contained in this paragraph shall be deemed to (i) limit or otherwise impair any of the waivers or agreements of Guarantor contained in this Guaranty or (ii) require Lender to proceed against Borrower, any collateral or any other Guarantor before proceeding against any particular Guarantor (any such requirement having been specifically waived).
3.
(a) Guarantor waives any and all rights of subrogation, reimbursement, indemnification and contribution, and any other rights and defenses that are or may become available to Guarantor, including, without limitation, any and all rights or defenses Guarantor may have by reason of protection afforded to the principal with respect to any of the Guaranteed Obligations or to any other guarantor of any of the Guaranteed Obligations with respect to such guarantors obligations under its guaranty, in either case, pursuant to the antideficiency or other laws of this state limiting or discharging the principals indebtedness or such other guarantors obligations; and
(b) Guarantor waives all rights and defenses that Guarantor may have because Borrowers debt is secured by real property. This means, among other things:
(i) Administrative Agent and Lenders may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower;
(ii) If Administrative Agent or any Lender forecloses on any real property collateral pledged by Borrower:
(A) The amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price;
(B) Administrative Agent and Lenders may collect from Guarantor even if Administrative Agent or any Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrowers debt is secured by real property; and
(c) Guarantor waives all rights and defenses arising out of an election of remedies by Administrative Agent or Lenders, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for the Guaranteed Obligations, has destroyed Guarantors rights of subrogation and reimbursement against Borrower, and even though that election of remedies by Administrative Agent
2
or Lenders has destroyed Guarantors rights of contribution against another guarantor of any of the Guaranteed Obligations.
No other provision of this Guaranty shall be construed as limiting the generality of any of the covenants and waivers set forth in this Section 3.
4. Guarantor represents and warrants to Administrative Agent and Lenders that Guarantor has a financial interest in Borrower or is otherwise affiliated with Borrower. In that regard, Guarantor agrees that Administrative Agents and Lenders entering into the Loan Agreement and Lenders agreement to make the Loan to Borrower is of substantial and material benefit to Guarantor and further agrees as follows:
(a) Guarantor shall continue to be liable under this Guaranty and the provisions hereof will remain in full force and effect notwithstanding (i) any modification, agreement or stipulation between Borrower and Administrative Agent or their respective successors and assigns, with respect to the Loan Documents or the obligations encompassed thereby, including, without limitation, the Guaranteed Obligations, (ii) Administrative Agents waiver of or failure to enforce any of the terms, covenants or conditions contained in the Loan Documents or in any modification thereof, (iii) any discharge or release of Borrower or any other guarantor from any liability with respect to the Guaranteed Obligations, (iv) any discharge, release, exchange or subordination of any real or personal property then held by Administrative Agent or any Lender as security for the performance of the Guaranteed Obligations, (v) any additional security taken for the Guaranteed Obligations, whether real or personal property, (vi) any foreclosure or other realization on any security for the Guaranteed Obligations, regardless of the effect upon Guarantors subrogation, contribution or reimbursement rights against Borrower or any other guarantor, (vii) any additional loans or financial accommodations to Borrower or (viii) the manner or order by which payments are applied to principal, interest or other obligations under the Loan Documents. Without limiting the generality of the foregoing, Guarantor hereby agrees that Guarantors liability shall continue even if Administrative Agent or any Lender alters any obligations under the Loan Documents in any respect or Administrative Agents or Lenders remedies or rights against Borrower are in any way impaired or suspended without Guarantors consent.
(b) Guarantors liability under this Guaranty shall continue until all sums due under the Notes have been paid in full and until all Guaranteed Obligations to Administrative Agent and Lenders have been satisfied, and shall not be reduced by virtue of any payment by Borrower of any amount due under the Notes or under any of the Loan Documents or by Administrative Agents and Lenders recourse to any collateral or security.
(c) Guarantor represents and warrants to Administrative Agent and Lenders that Guarantor now has and will continue to have full and complete access to any and all information concerning the transactions contemplated by the Loan Documents or referred to therein, the value of the assets owned or to be acquired by Borrower, Borrowers financial status and its ability to pay and perform the Guaranteed Obligations owed to Administrative Agent and Lenders. Guarantor further represents and warrants that Guarantor has reviewed and approved copies of the Loan Documents and is fully informed of the remedies Administrative Agent and Lenders may pursue, with or without notice to Borrower, in the event of default under the Notes or other Loan Documents. So long as any of the Guaranteed Obligations remains unsatisfied or owing to Administrative Agent or Lenders, Guarantor shall keep fully informed as to all aspects of Borrowers financial condition and the performance of the Guaranteed Obligations.
(d) Guarantor acknowledges and agrees that Guarantor may be required to perform the Guaranteed Obligations in accordance with the terms hereof notwithstanding the fact that the Loan has fully matured, that the outstanding principal balance thereof is fully due and payable and that Borrower is in default of its obligation to pay the full amount due under the Notes on the maturity thereof.
5. The liability of Guarantor under this Guaranty is a guaranty of payment and performance and not of collectibility, and is not conditioned or contingent upon the genuineness, validity, regularity or
3
enforceability of the Loan Documents or other instruments relating to the creation or performance of the Guaranteed Obligations or the pursuit by Administrative Agent or any Lender of any remedies which any now has or may hereafter have with respect thereto under the Loan Documents, at law, in equity or otherwise. Guarantor hereby agrees that Guarantor shall be liable even if Borrower had no liability at the time of execution of any of the Loan Documents or thereafter ceases to be liable, and Guarantors liability may be larger in amount and more burdensome than that of Borrower. Guarantors liability hereunder shall not be limited or affected in any way by any impairment or any diminution or loss of value of any security or collateral for the Loan, whether caused by hazardous substances or otherwise, Administrative Agents or any Lenders failure to perfect a security interest in such security or collateral or any disability or other defense of Borrower or any other guarantor.
6. Guarantor hereby waives to the extent permitted by law: (i) all notices to Guarantor, to Borrower, or to any other Person, including without limitation notices of the acceptance of this Guaranty or the creation, renewal, extension, modification, accrual of any of the Guaranteed Obligations owed to Administrative Agent and Lenders, enforcement of any right or remedy with respect thereto and notice of any other matters relating thereto; (ii) diligence and demand of payment, presentment, protest, dishonor and notice of dishonor; (iii) any statute of limitations affecting Guarantors liability hereunder or the enforcement thereof; and (iv) all principles or provisions of law which conflict with the terms of this Guaranty. Guarantor further agrees that Administrative Agent and Lenders may enforce this Guaranty upon the occurrence of an event of default under the Notes or the other Loan Documents (as event of default is described therein), notwithstanding the existence of any dispute between Borrower and Administrative Agent or any Lender with respect to the existence of said event of default or performance of the Guaranteed Obligations or any counterclaim, set-off or other claim which Borrower may allege against Administrative Agent or any Lender with respect thereto. Moreover, Guarantor agrees that Guarantors obligations shall not be affected by any circumstances which constitute a legal or equitable discharge of a guarantor or surety.
7. Guarantor agrees that Administrative Agent and Lenders may enforce this Guaranty without the necessity of resorting to or exhausting any security or collateral (including, without limitation, pursuant to a judicial or nonjudicial foreclosure) and without the necessity of proceeding against Borrower or any other guarantor. Guarantor hereby waives any right to require Administrative Agent or Lenders to proceed against Borrower, to proceed against any other guarantor, to foreclose any lien on any real or personal property, to exercise any right or remedy under the Loan Documents, to draw upon any letter of credit issued in connection herewith, or to pursue any other remedy or to enforce any other right.
8. (a) Guarantor agrees that nothing contained herein shall prevent Administrative Agent and Lenders from suing on the Notes or from exercising any rights available to them under the Notes or under any of the other Loan Documents and that the exercise of any of the aforesaid rights will not constitute a legal or equitable discharge of Guarantor. Guarantor understands that the exercise by Administrative Agent and Lenders of certain rights and remedies contained in the Loan Documents (such as a nonjudicial foreclosure) may affect or eliminate Guarantors right of subrogation against Borrower and that Guarantor may therefore incur a partially or totally non-reimbursable liability hereunder; nevertheless, Guarantor hereby authorizes and empowers Administrative Agent to exercise, in its sole discretion, any rights and remedies, or any combination thereof, which may then be available to Administrative Agent and Lenders, since it is the intent and purpose of Guarantor that the obligations hereunder are absolute, independent and unconditional under any and all circumstances. Guarantor expressly waives any defense (which defense, if Guarantor had not given this waiver, Guarantor might otherwise have) to a judgment against Guarantor by reason of a nonjudicial foreclosure sale. Notwithstanding any foreclosure of the lien of any deed of trust or security agreement with respect to any or all of the real or personal property secured thereby, whether by the exercise of the power of sale contained therein, by an action for judicial foreclosure or by an acceptance of a deed in lieu of foreclosure, Guarantor shall remain bound under this Guaranty.
4
(b) Guarantor shall have no right of subrogation against Borrower or against any collateral or security provided for in the Loan Documents and no right of reimbursement or contribution against any other guarantor unless and until all Guaranteed Obligations have been indefeasibly paid and satisfied in full, and Administrative Agent and Lenders have released, transferred or disposed of all of their rights, title and interest in any collateral or security. To the extent the waiver of Guarantors rights of subrogation, reimbursement and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, Guarantor further agrees that Guarantors rights of subrogation and reimbursement against Borrower and Guarantors rights of subrogation against any collateral or security shall be junior and subordinate to any rights Administrative Agent or Lenders may have against Borrower and to all rights, title and interest Administrative Agent or Lenders may have in such collateral or security, and Guarantors rights of contribution against any other guarantor shall be junior and subordinate to any rights Administrative Agent or Lenders may have against such other guarantor. Administrative Agent and Lenders may use, sell or dispose of any item of collateral or security as it sees fit without regard to Guarantors subrogation and contribution rights, and upon disposition or sale of any item, Guarantors rights with respect to such item will terminate. Guarantor understands that Guarantor may record a Request for Notice of Sale pursuant to RCW 61.24.045 and thereby receive notice of any proposed foreclosure of any real property collateral then securing the Guaranteed Obligations. With respect to the foreclosure of any security interest in any personal property collateral then securing the Guaranteed Obligations, Administrative Agent and Lenders agree to give Guarantor five (5) days prior written notice, in the manner set forth in Section 11 hereof, of any sale or disposition of any such personal property collateral, other than collateral which is perishable, threatens to decline speedily in value, is of a type customarily sold on a recognized market, or is cash, cash equivalents, certificates of deposit or the like.
(c) Guarantors sole right with respect to any such foreclosure of real or personal property collateral shall be to bid at such sale in accordance with applicable law. Guarantor acknowledges and agrees that Administrative Agent or any Lender may also bid at any such sale and in the event such collateral is sold to Administrative Agent or any Lender in whole or in partial satisfaction of the Guaranteed Obligations (or any portion thereof), Guarantor shall have no further right or interest with respect thereto. Notwithstanding anything to the contrary contained herein, no provision of this Guaranty shall be deemed to limit, decrease, or in any way to diminish any rights of set-off Administrative Agent and Lenders may have with respect to any cash, cash equivalents, certificates of deposit, letters of credit or the like which may now or hereafter be deposited with Administrative Agent or any Lender by Borrower.
(d) To the extent any dispute exists at any time between or among Guarantor and any other guarantor of the Guaranteed Obligations as to Guarantors or any other guarantors right to contribution or otherwise, Guarantor agrees to indemnify, defend and hold Administrative Agent and Lenders harmless from and against any loss, damage, claim, demand, cost or any other liability (including, without limitation, reasonable attorneys fees and costs) Administrative Agent and Lenders may suffer as a result of such dispute.
(e) So long as any of the Guaranteed Obligations are owing to Administrative Agent or any Lender, Guarantor shall not, without the prior written consent of Administrative Agent, commence or join with any other party in commencing any bankruptcy, reorganization or insolvency proceedings of or against Borrower. The obligations of Guarantor under this Guaranty shall not be altered, limited or affected by any case, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Borrower or by any defense which Borrower may have by reason of the order, decree or decision of any court or administrative body resulting from any such case. Administrative Agent shall have the sole right to accept or reject any plan on behalf of Guarantor proposed in such case and to take any other action which Guarantor would be entitled to take, including, without limitation, the decision to file or not file a claim. Guarantor acknowledges and agrees that any interest on the Guaranteed Obligations which accrues after the commencement of any such proceeding (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by
5
reason of the commencement of said proceeding, such interest as would have accrued on any such portion of the Guaranteed Obligations if said proceedings had not been commenced) will be included in the Guaranteed Obligations because it is the intention of the parties that the Guaranteed Obligations should be determined without regard to any rule or law or order which may relieve Borrower of any portion of such Guaranteed Obligations. Guarantor hereby permits any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar Person to pay Administrative Agent and Lenders, or allow the claim of Administrative Agent and Lenders in respect of any such interest accruing after the date on which such proceeding is commenced. Guarantor hereby assigns to Administrative Agent (for the benefit of Lenders) Guarantors right to receive any payments from any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar Person by way of dividend, adequate protection payment or otherwise, If all or any portion of the Guaranteed Obligations are paid or performed by Borrower, the obligations of Guarantor hereunder shall continue and remain in full force and effect in the event that all or any part of such payment(s) or performance(s) is avoided or recovered directly or indirectly from Administrative Agent or Lenders as a preference, fraudulent transfer or otherwise in such case irrespective of payment in full of all obligations under the Loan Documents.
9. (a) Guarantor represents and warrants that any financial statements, tax returns or other documents of Guarantor heretofore delivered to Administrative Agent are true and correct in all material respects. Such statements were prepared in accordance with generally accepted accounting principles, consistently applied and fairly present the financial position of Guarantor as of the date thereof. Guarantor further represents and warrants that no material adverse change has occurred in Guarantors financial position since the date of such statements.
(b) Guarantor covenants and agrees to provide Administrative Agent with any and all financial information required by Administrative Agent pursuant to the Loan Agreement. Guarantor further covenants and agrees to immediately notify Administrative Agent of any material adverse change in Guarantors financial status.
10. All notices, requests and demands to be made hereunder to the parties hereto must be in writing and given as provided in the notice provisions of the Loan Agreement (at the addresses set forth below).
11. Guarantor represents and warrants to Administrative Agent and Lenders as follows:
6
(a) No consent of any other Person, including, without limitation, any creditors of Guarantor, and no license, permit, approval or authorization of; exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required by Guarantor in connection with this Guaranty or the execution, delivery, performance, validity or enforceability of this Guaranty and all obligations required hereunder. This Guaranty has been duly executed and delivered by Guarantor, and constitutes the legally valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms.
(b) The execution, delivery and performance of this Guaranty will not violate any provision of any existing law or regulation binding on Guarantor, or any order, judgment, award or decree of any court, arbitrator or governmental authority binding on Guarantor, or of any mortgage, indenture, lease, contract or other agreement, instrument or undertaking to which Guarantor is a party or by which Guarantor or any of its assets may be bound, and will not result in, or require, the creation or imposition of any lien on any of Guarantors property, assets or revenues pursuant to the provisions of any such mortgage, indenture, lease, contract or other agreement, instrument or undertaking.
12. Guarantors performance of a portion, but not all, of the Guaranteed Obligations will in no way limit, affect, modify or abridge Guarantors liability for that portion of the Guaranteed Obligations that is not performed. Without in any way limiting the generality of the foregoing, in the event that Administrative Agent or any Lender is awarded a judgment in any suit brought to enforce Guarantors covenant to perform a portion of the Guaranteed Obligation, such judgment will in no way be deemed to release Guarantor from its covenant to perform any portion of the Guaranteed Obligation which is .not the subject of such suit.
13. Guarantor covenants and agrees to furnish to Administrative Agent, with sufficient copies for each Lender which Administrative Agent shall distribute to the Lenders:
(a) as soon as the same are available, and in any event within ninety (90) days after the end of each fiscal year and sixty (60) days after the end of each interim quarterly accounting period of the subject, a copy of the current financial statements of Guarantor, which shall consist of (a) a balance sheet as of the end of the relevant fiscal period, (b) statements of income and expenses of Guarantor for such fiscal period (together, in each case, with the comparable figures for the corresponding period of the previous fiscal year), (c) contingent liabilities of Guarantor, and (d) cash flow statements of Guarantor. All such financial statements of Guarantor shall be audited by a certified public accountant satisfactory to Administrative Agent;
(b) Copies of filed federal income tax returns of Guarantor for each taxable year (with all K-ls and other forms and supporting schedules attached), within thirty (30) days after filing but in any event not later than one hundred twenty (120) days after the close of each such taxable year (subject to extension); and
(c) Such other information concerning Guarantor, and the assets, business, financial condition, operations, property, prospects, and results of operations of Guarantor, as Administrative Agent reasonably requests from time to time.
14. Kennedy-Wilson, Inc. shall at all times maintain a combined net worth of at least Fifteen Million Dollars ($15,000,000). KWI Property Fund I, L.P. shall at all times maintain a combined net worth of at least Forty Million Dollars ($40,000,000). As used herein, net worth shall mean an amount equal to the gross fair market value of all of the applicable Guarantors assets (excluding any value for goodwill, trademarks, patents, copyrights and other similar intangible items), less an amount equal to all of such Guarantors liabilities (including guaranties and other contingent liabilities), all as reasonably determined by Administrative Agent.
15. Kennedy-Wilson, Inc. shall at all times maintain combined unencumbered liquid assets equal to at least Seven Million Five Hundred Thousand Dollars ($7,500,000). KWI Property Fund 1, L.P.
7
shall at all times maintain combined unencumbered liquid assets equal to at least One Million Dollars ($1,000,000). Liquid assets means the following assets of the applicable Guarantor: (i) Cash; (ii) certificates of deposit or time deposits with terms of six (6) months or less; (iii) A-1/P-1 commercial paper with a term of three (3) months or less; (iv) U.S. treasury bills and other obligations of the federal government, all with terms of six (6) months or less; (v) readily marketable securities (excluding margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), restricted stock and stock subject to the provisions of Rule 144 of the Securities and Exchange Commission); (vi) bankers acceptances issued for terms of six (6) months or less by financial institutions; (vii) repurchase agreements with terms of six (6) months or less covering U.S. government securities; and (viii) unfunded capital commitments in such Guarantor.
16. This Guaranty is solely for the benefit of Administrative Agent and Lenders and is not intended to nor may it be deemed to be for the benefit of any third party, including Borrower.
17. Guarantor represents and warrants to Administrative Agent and Lenders as follows:
(a) Kennedy-Wilson, Inc. is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware, has the power to own its assets and to transact the business in which it is now engaged and is in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification.
(b) KWI Property Fund 1, L.P. is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware, has the power to own its assets and to transact the business in which it is now engaged and is in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification.
(c) Guarantor has the power, authority and legal right to execute, deliver and perform this Guaranty and all obligations required hereunder and has taken all necessary action to authorize its execution, delivery and performance of this Guaranty and all obligations required hereunder. The execution, delivery and performance of this Guaranty will not violate any of the formation or governing documents of Guarantor or of any laws pursuant to which Guarantor has been formed.
18. Guarantor hereby grants Administrative Agent and Lenders 4 security interest in any personal property of Borrower in which Guarantor hereafter acquires any right, title or interest. Guarantor agrees that such security interest is additional security for the obligations hereby guaranteed. Such security interest is superior to any right of Guarantor in such personal property until all sums due under the Notes or other Loan Documents have been repaid in full and all Guaranteed Obligations have been fully satisfied.
19. Administrative Agent may assign this Guaranty with any Loan Document, without in any way affecting Guarantors liability hereunder. Any married person executing this Guaranty agrees that recourse may be had against community property and separate property for the satisfaction of all obligations hereby guaranteed. This Guaranty shall be binding upon Guarantor, Guarantors heirs, representatives, administrators, executors, successors and assigns and shall inure to the benefit of and shall be enforceable by Administrative Agent and Lenders, and their successors, endorsees and assigns. As used herein, the singular includes the plural, and the masculine includes the feminine and neuter and vice versa, if the context so requires.
20. In the event of any dispute or litigation regarding the enforcement or validity of this Guaranty, Guarantor shall be obligated to pay all charges, costs and expenses (including, without limitation, reasonable attorneys fees) incurred by Administrative Agent and Lenders, whether or not any action or proceeding is commenced regarding such dispute and whether or not such litigation is prosecuted to judgment.
8
21. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF WASHINGTON.
22. Guarantor, Administrative Agent and Lenders hereby voluntarily, knowingly and intentionally WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY in any legal action or proceeding arising under or in connection with this Guaranty or any other Loan Document or concerning the Guaranteed Obligations and/or any collateral therefor or pertaining to any transaction related to or contemplated in any Loan Document, regardless of whether such action or proceeding concerns any contractual or tortious or other claim. Guarantor acknowledges that this waiver of jury trial is a material inducement to Administrative Agent and Lenders entering into the Loan Agreement and to Lenders in extending credit to Borrower, that Administrative Agent and Lenders would not have entered into the Loan Agreement and Lenders would not have extended such credit without this jury trial waiver, and that Guarantor has been represented by an attorney or has had an opportunity to consult with an attorney regarding this Guaranty and understands the legal effect of this jury trial waiver.
23. Guarantor hereby submits to the jurisdiction of the state and federal courts in the State of Washington and State of California for purposes of any action arising from or growing out of this Guaranty, and further agrees that the venue of any such action may be laid in King County, Washington, or Los Angeles County, California, and that (in addition to any other method provided by law for service of process) service of process in any such action may be made on Guarantor by the delivery of the process to Kent Mouton, Esq., whose present address is 15303 Ventura Boulevard, Suite 1400, Sherman Oaks, California 91403, whom Guarantor hereby appoints as Guarantors agent for service of process. Nothing contained in this Guaranty, however, shall be deemed to constitute, or to imply the existence of, any agreement by Administrative Agent or Lenders to bring any such action only in said courts or to restrict in any way any of Administrative Agents and Lenders remedies or rights to enforce the terms of this Guaranty as, when and where Administrative Agent shall deem appropriate, in its sole discretion.
24. No provision of this Guaranty may be changed, waived, revoked or amended without Administrative Agents prior written consent. Every provision of this Guaranty is intended to be severable. If any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court of competent jurisdiction, such illegality or invalidity will not affect the balance of the terms and provisions hereof, which terms and provisions will remain binding and enforceable.
25. This Guaranty may be executed in any number of counterparts each of which shall be deemed an original and all of which shall constitute one and the same guaranty with the same effect as if all parties had signed the same signature page. Any signature page of this Guaranty may be detached from any counterpart of this Guaranty and reattached to any other counterpart of this Guaranty identical in form hereto but having attached to it one or more additional signature pages.
26. No failure or delay on the part of Administrative Agent or Lenders to exercise any power, right or privilege under this Guaranty will impair any such power, right or privilege, or be construed to be a waiver of any default or an acquiescence therein, nor will any single or partial exercise of such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
27. This Guaranty embodies the entire agreement among the parties hereto with respect to the matters set forth herein, and supersedes all prior agreements among the parties with respect to the matters set forth herein. No course of prior dealing among the parties, no usage of trade, and no parol or extrinsic evidence of any nature may be used to supplement, modify or vary any of the terms hereof. There are no conditions to the full effectiveness of this Guaranty.
28. This Guaranty is in addition to all other guaranties of Guarantor and any other guarantors of Borrowers obligations to Administrative Agent and Lenders.
29. GUARANTOR ACKNOWLEDGES THAT GUARANTOR HAS BEEN AFFORDED THE OPPORTUNITY TO READ THIS DOCUMENT CAREFULLY AND TO
9
REVIEW IT WITH AN ATTORNEY OF GUARANTORS CHOICE BEFORE SIGNING IT. GUARANTOR ACKNOWLEDGES HAVING READ AND UNDERSTOOD THE MEANING AND EFFECT OF THIS DOCUMENT BEFORE SIGNING IT.
30. When two or more persons or entities have executed this Guaranty, unless the context clearly indicates otherwise, all references herein to Guarantor shall mean the guarantors hereunder or either or any of them. All of the obligations and liabilities of said guarantors under this Guaranty (and the obligations of other guarantors under any similar or other guaranties of part or all of the Guaranteed Obligations) shall be joint and several. Suit may be brought against said guarantors, jointly and severally, or against any one or more of them (even if less than all), without impairing the rights of Administrative Agent and Lenders against the other or others of said guarantors; and Administrative Agent may settle with any one or more of said guarantors for such sums or sum as it may see fit and/or Administrative Agent may release any of said guarantors from all further liability to Administrative Agent and Lenders for such indebtedness without impairing the right of Administrative Agent and Lenders to demand and collect the balance of such indebtedness from the other or others of said guarantors not so released; but it is agreed among said guarantors themselves, however, that such settlement and release shall in no way impair the rights of said guarantors as among themselves.
[Signatures on Following Page]
10
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF , Guarantor has executed this Guaranty as of the date first above written.
|
Guarantor |
|||
|
|
|
||
|
KENNEDY-WILSON, INC., a Delaware corporation |
|||
|
|
|
||
|
|
|
||
|
By: |
/s/ Freeman Lyle |
||
|
Name: |
Freeman Lyle |
||
|
Title: |
EVP-CFO |
||
|
|
|
||
|
|
|
||
|
KWI PROPERTY FUND I, L.P., a Delaware limited partnership, |
|||
|
|
|||
|
|
|
||
|
By: |
Kennedy Wilson Property Services, Inc., |
||
|
|
a Delaware corporation, |
||
|
|
its sole general partner |
||
|
|
|
||
|
|
|
||
|
|
By: |
/s/ John Prabhu |
|
|
|
Name: |
John Prabhu |
|
|
|
Title: |
Vice President |
|
11
Exhibit 10.112
COMMERCIAL GUARANTY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
Loan Date |
|
Maturity |
|
Loan No |
|
Call/Coll |
|
Account |
|
Officer |
|
Initials |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
710 |
|
|
|
References in the boxes above are for Lenders use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing *** has been omitted due to text length limitations.
Borrower: |
|
Fifth and Madison, LLC, a Delaware limited liability company 9601 Wilshire Boulevard, Suite 220 Beverly Hills, CA 90210 |
|
Lender: |
|
Pacific Western Bank Beverly Hills Office 9454 Wilshire Boulevard Beverly Hills, CA 90212 |
|
|
|
|
|
|
|
Guarantor: |
|
KWI Property Fund I, L.P., a Delaware limited partnership 9601 Wilshire Boulevard, Suite 220 Beverly Hills, CA 90210 |
|
|
|
|
CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrowers obligations under the Note and the Related Documents. This is a guaranty of payment and performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lenders remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness. Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrowers obligations under the Note and Related Documents. Under this Guaranty, Guarantors liability is unlimited and Guarantors obligations are continuing.
INDEBTEDNESS . The word Indebtedness as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, attorneys fees, arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender. Indebtedness includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether: voluntarily or involuntarily incurred; due or to become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated;
determined or undetermined; direct or indirect; primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by a negotiable or non-negotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reason whatsoever; for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and originated then reduced or extinguished and then afterwards increased or reinstated.
If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lenders rights under all guaranties shall be cumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantors liability will be Guarantors aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.
CONTINUING GUARANTY. THIS IS A CONTINUING GUARANTY UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON AN OPEN AND CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTORS OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.
DURATION OF GUARANTY . This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all of Guarantors other obligations under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantors written notice of revocation must be mailed to Lender, by certified mail, at Lenders address listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to new Indebtedness created after actual receipt by Lender of Guarantors written revocation. For this purpose and without limitation, the term new Indebtedness does not include the Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. For this purpose and without limitation, new Indebtedness does not include all or part of the Indebtedness that is: incurred by Borrower prior to revocation; incurred under a commitment that became binding before revocation; any renewals, extensions, substitutions, and modifications of the Indebtedness. This Guaranty shall bind Guarantors estate as to the Indebtedness created both before and after Guarantors death or incapacity, regardless of Lenders actual notice of Guarantors death. Subject to the foregoing, Guarantors executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. Guarantors obligations under this Guaranty shall be in addition to any of Guarantors
2
obligations, or any of them, under any other guaranties of the Indebtedness or any other person heretofore or hereafter given to Lender unless such other guaranties are modified or revoked in writing; and this Guarantor shall not, unless provided in this Guaranty, affect, invalidate, or supersede any such other guaranty. It is anticipated that fluctuations may occur in the aggregate amount of the Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of the Indebtedness, even to zero dollars ($0.00), shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantors heirs, successors and assigns so long as any of the Indebtedness remains unpaid and even though the Indebtedness may from time to time be zero dollars ($0.00).
GUARANTORS AUTHORIZATION TO LENDER . Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantors liability under this Guaranty, from time to time: (A) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal with any one or more of Borrowers sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.
GUARANTORS REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrowers request and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantors assets, or any interest therein; (F) upon Lenders request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantors financial condition as of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantors financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect
3
Guarantors financial condition; (H) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrowers financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantors risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower.
GUARANTORS FINANCIAL STATEMENTS . Guarantor agrees to furnish Lender with the following; Additional Requirements.
ANNUAL STATEMENTS. Guarantor to provide Lender with, as soon as available, but in no event later than one hundred fifty (150) days after the end of each fiscal year end, a consolidated balance sheet and income statement for the period ended in form satisfactory to Lender, audited by a CPA acceptable to Lender. Statements may be due more often if requested by Lender.
INTERIM STATEMENTS . Guarantor shall provide to Lender, as soon as available, but in no event later than forty-five (45) days after the end of each fiscal quarter (including fiscal year end), a self-prepared consolidated balance sheet and income statement for the period ended in form satisfactory to Lender. Statements may be due more often if requested by Lender.
MINIMUM OWNERS CAPITAL . Borrower shall maintain a Minimum Owners Capital of $18,000,000.00. This required Minimum Owners Capital must be maintained at all times and may be evaluated at any time.
All financial reports required to be provided under this Guaranty shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Guarantor as being true and correct.
GUARANTORS WAIVERS . Except as prohibited by applicable law, Guarantor waives any right to require Lender to (A) make any presentment, protest, demand, or notice of any kind, including notice of change of any terms of repayment of the Indebtedness, default by Borrower or any other guarantor or surety, any action or nonaction taken by Borrower, Lender, or any other guarantor or surety of Borrower, or the creation of new or additional Indebtedness; (B) proceed against any person, including Borrower, before proceeding against Guarantor; (C) proceed against any collateral for the Indebtedness, including Borrowers collateral, before proceeding against Guarantor; (D) apply any payments or proceeds received against the Indebtedness in any order; (E) give notice of the terms, time, and place of any sale of the collateral pursuant to the Uniform Commercial Code or any other law governing such sale; (F) disclose any information about the Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or about any action or nonaction of Lender; or (G) pursue any remedy or course of action in Lenders power whatsoever.
4
Guarantor also waives any and all rights or defenses arising by reason of (H) any disability or other defense of Borrower, any other guarantor or surety or any other person; (I) the cessation from any cause whatsoever, other than payment in full, of the Indebtedness; (J) the application of proceeds of the Indebtedness by Borrower for purposes other than the purposes understood and intended by Guarantor and Lender; (K) any act of omission or commission by Lender which directly or indirectly results in or contributes to the discharge of Borrower or any other guarantor or surety, or the Indebtedness, or the loss or release of any collateral by operation of law or otherwise; (L) any statute of limitations in any action under this Guaranty or on the Indebtedness; or (M) any modification or change in terms of the Indebtedness, whatsoever, including without [imitation, the renewal, extension, acceleration, or other change in the time payment of the Indebtedness is due and any change in the interest rate, and including any such modification or change in terms after revocation of this Guaranty on the Indebtedness incurred prior to such revocation.
Guarantor waives all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to Guarantor by reason of California Civil Code Sections 2787 to 2855, inclusive.
Guarantor waives all rights and any defenses arising out of an election of remedies by Lender even though that the election of remedies, such as a non-judicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantors rights of subrogation and reimbursement against Borrower by operation of Section 580d of the California Code of Civil Procedure or otherwise.
Guarantor waives all rights and defenses that Guarantor may have because Borrowers obligation is secured by real property. This means among other things: (N) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower. (0) If Lender forecloses on any real property collateral pledged by Borrower: (1) the amount of Borrowers obligation may be reduced only by the price for which the collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price. (2) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrowers obligation is secured by real property. These rights and defenses include, but are not limited to, any rights and defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure.
Guarantor understands and agrees that the foregoing waivers are unconditional and irrevocable waivers of substantive rights and defenses to which Guarantor might otherwise be entitled under state and federal law. The rights and defenses waived include, without limitation, those provided by California laws of suretyship and guaranty, anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges that Guarantor has provided these waivers of rights and defenses with the intention that they be fully relied upon by Lender. Guarantor further understands and agrees that this Guaranty is a separate and independent contract between Guarantor and Lender, given for full and ample consideration, and is enforceable on its own terms. Until all of the Indebtedness is paid in full, Guarantor waives any right to enforce any remedy Guarantor may have against the Borrower or any other guarantor, surety, or other person,
5
and further, Guarantor waives any right to participate in any collateral for the Indebtedness now or hereafter held by Lender.
Guarantors Understanding With Respect To Waivers . Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantors full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.
Subordination of Borrowers Debts to Guarantor . Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuation statements and to execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.
Miscellaneous Provisions . The following miscellaneous provisions are a part of this Guaranty:
AMENDMENTS . This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
ATTORNEYS FEES; EXPENSES . Guarantor agrees to pay upon demand all of Lenders costs and expenses, including Lenders attorneys fees and Lenders legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lenders attorneys fees and legal expenses whether or not there is a lawsuit, including attorneys fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court.
CAPTION HEADINGS . Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty.
6
GOVERNING LAW. This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions.
CHOICE OF VENUE . If there is a lawsuit, Guarantor agrees upon Lenders request to submit to the jurisdiction of the courts of Los Angeles County, State of California.
INTEGRATION . Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty. Guarantor has had the opportunity to be advised by Guarantors attorney with respect to entering into this Guaranty. Guarantor further agrees that the Guaranty represents the final agreement between Guarantor and Lender regarding the matters addressed therein and therefore: (a) incorporates all negotiations of the parties relating to the Guaranty; (b) there are no unwritten oral agreements between Lender and Guarantor, and (c) this Guaranty may not be contradicted by evidence of any prior, contemporaneous, or subsequent oral agreements or understandings of Lender and Guarantor. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lenders attorneys fees) suffered by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this Paragraph.
INTERPRETATION . In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words Borrower and Guarantor respectively shall mean all and any one or more of them. The words Guarantor, Borrower, and Lender include the heirs, successors, assigns, and transferees of each of them. If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.
NOTICES . Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the section of this Guaranty entitled DURATION OF GUARANTY. Any party may change its address for notices under this Guaranty by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the partys address. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantors current address. Unless otherwise provided or required by law,
7
if there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors.
NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lenders right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lenders rights or of any of Guarantors obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.
SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Guaranty on transfer of Guarantors interest, this Guaranty shall be binding upon and inure to the benefit of the parties, their successors and assigns.
Definitions . The following capitalized words and terms shall have the following meanings when used in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed to such terms in the Uniform Commercial Code:
BORROWER. The word Borrower means Fifth and Madison, LLC, a Delaware limited liability company and includes all co-signers and co-makers signing the Note and all their successors and assigns.
GAAP . The word GAAP means generally accepted accounting principles.
GUARANTOR. The word Guarantor means everyone signing this Guaranty, including without limitation KWI Property Fund I, L.P., a Delaware limited partnership, and in each case, any signers successors and assigns.
GUARANTY. The word Guaranty means this guaranty from Guarantor to Lender.
INDEBTEDNESS. The word Indebtedness means Borrowers indebtedness to Lender as more particularly described in this Guaranty.
LENDER. The word Lender means Pacific Western Bank, its successors and assigns.
NOTE. The word Note means the promissory note dated February 13, 2008, in the original principal amount of $13,500,000.00 from Borrower to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of and substitutions for the promissory note or agreement
8
RELATED DOCUMENTS. The words Related Documents mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTORS EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED DURATION OF GUARANTY. NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED JANUARY 16, 2009.
GUARANTOR:
KWI PROPERTY FUND I, L.P., A DELAWARE LIMITED PARTNERSHIP
KENNEDY-WILSON PROPERTY SERVICES, INC., A DELAWARE CORPORATION, General partner of KWI Property Fund I, L.P., a Delaware limited partnership
By: |
/s/ Freeman Lyle |
|
Freeman Lyle, Vice President/Secretary of |
|
|
Kennedy-Wilson Property Services, Inc., a |
|
|
Delaware corporation |
|
9
COMMERCIAL GUARANTY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
Loan Date |
|
Maturity |
|
Loan No |
|
Call/Coll |
|
Account |
|
Officer |
|
Initials |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
710 |
|
|
|
References in the boxes above are for Lenders use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing *** has been omitted due to text length limitations.
Borrower: |
|
Fifth and Madison, LLC, a Delaware limited liability company 9601 Wilshire Boulevard, Suite 220 Beverly Hills, CA 90210 |
|
Lender: |
|
Pacific Western Bank Beverly Hills Office 9454 Wilshire Boulevard Beverly Hills, CA 90212 |
|
|
|
|
|
|
|
Guarantor: |
|
Kennedy-Wilson, Inc., a Delaware corporation 9601 Wilshire Boulevard, Suite 220 Beverly Hills, CA 90210 |
|
|
|
|
CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of Guarantors Share of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrowers obligations under the Note and the Related Documents. This is a guaranty of payment and performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lenders remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness. Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrowers obligations under the Note and Related Documents. Under this Guaranty, Guarantors obligations are continuing.
INDEBTEDNESS . The word Indebtedness as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, attorneys fees, arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender. Indebtedness includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether: voluntarily or involuntarily incurred; due or to
become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated; determined or undetermined; direct or indirect; primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by a negotiable or non-negotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reason whatsoever; for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and originated then reduced or extinguished and then afterwards increased or reinstated.
If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lenders rights under all guaranties shall be cumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantors liability will be Guarantors aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.
GUARANTORS SHARE OF THE INDEBTEDNESS . The words Guarantors Share of the Indebtedness as used in this Guaranty mean an amount not to exceed Six Million Seven Hundred Fifty Thousand & 00/100 Dollars ($6,750,000.00) of all the principal amount, interest thereon to the extent not prohibited by law, and all collection costs, expenses and attorneys fees whether or not there is a lawsuit, and if there is a lawsuit, any fees and costs for trial and appeals.
Guarantors Share of the Indebtedness will only be reduced by sums actually paid by Guarantor under this Guaranty, but will not be reduced by sums from any other source including, but not limited to, sums realized from any collateral securing the Indebtedness or this Guaranty, or payments by anyone other than Guarantor, or reductions by operation of law, judicial order or equitable principles. Lender has the sole and absolute discretion to determine how sums shall be applied among guaranties of the Indebtedness.
The above limitation on liability is not a restriction on the amount of the Note of Borrower to Lender either in the aggregate or at any one time.
CONTINUING GUARANTY. THIS IS A CONTINUING GUARANTY UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE GUARANTORS SHARE OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON A CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTORS OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all of Guarantors other obligations under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantors
2
written notice of revocation must be mailed to Lender, by certified mail, at Lenders address listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to new Indebtedness created after actual receipt by Lender of Guarantors written revocation. For this purpose and without limitation, the term new Indebtedness does not include the Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. For this purpose and without limitation, new Indebtedness does not include all or part of the Indebtedness that is: incurred by Borrower prior to revocation; incurred under a commitment that became binding before revocation; any renewals, extensions, substitutions, and modifications of the Indebtedness. This Guaranty shall bind Guarantors estate as to the Indebtedness created both before and after Guarantors death or incapacity, regardless of Lenders actual notice of Guarantors death. Subject to the foregoing, Guarantors executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. It is anticipated that fluctuations may occur in the aggregate amount of the Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of the Indebtedness, even to zero dollars ($0.00), shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantors heirs, successors and assigns so long as any of the Guarantors Share of the Indebtedness remains unpaid and even though the Guarantors Share of the Indebtedness may from time to time be zero dollars ($0.00).
GUARANTORS AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantors liability under this Guaranty, from time to time: (A) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (3) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal with any one or more of Borrowers sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.
GUARANTORS REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreements of any kind have been made to
3
Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrowers request and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantors assets, or any interest therein; (F) upon Lenders request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantors financial condition as of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantors financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantors financial condition; (H) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrowers financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantors risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower.
GUARANTORS FINANCIAL STATEMENTS . Guarantor agrees to furnish Lender with the following: Additional Requirements.
ANNUAL STATEMENTS . Guarantor to provide Lender with, as soon as available, but in no event later than one hundred fifty (150) days after the end of each fiscal year end, a consolidated balance sheet and income statement for the period ended in form satisfactory to Lender, audited by a CPA acceptable to Lender. Statements may be due more often if requested by Lender.
INTERIM STATEMENTS . Guarantor shall provide to Lender, as soon as available, but in no event later than forty-five (45) days after the end of each fiscal quarter (including fiscal year end), a self-prepared consolidated balance sheet and income statement for the period ended in form satisfactory to Lender. Statements may be due more often if requested by Lender.
All financial reports required to be provided under this Guaranty shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Guarantor as being true and correct.
GUARANTORS WAIVERS . Except as prohibited by applicable law, Guarantor waives any right to require Lender to (A) make any presentment, protest, demand, or notice of any kind, including notice of change of any terms of repayment of the Indebtedness, default by Borrower or any other guarantor or surety, any action or nonaction taken by Borrower, Lender, or any other
4
guarantor or surety of Borrower, or the creation of new or additional Indebtedness; (B) proceed against any person, including Borrower, before proceeding against Guarantor; (C) proceed against any collateral for the Indebtedness, including Borrowers collateral, before proceeding against Guarantor; (D) apply any payments or proceeds received against the Indebtedness in any order; (E) give notice of the terms, time, and place of any sale of the collateral pursuant to the Uniform Commercial Code or any other law governing such sale; (F) disclose any information about the Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or about any action or nonaction of Lender; or (G) pursue any remedy or course of action in Lenders power whatsoever.
Guarantor also waives any and all rights or defenses arising by reason of (H) any disability or other defense of Borrower, any other guarantor or surety or any other person; (I) the cessation from any cause whatsoever, other than payment in full, of the Indebtedness; (J) the application of proceeds of the Indebtedness by Borrower for purposes other than the purposes understood and intended by Guarantor and Lender; (K) any act of omission or commission by Lender which directly or indirectly results in or contributes to the discharge of Borrower or any other guarantor or surety, or the Indebtedness, or the loss or release of any collateral by operation of law or otherwise; (L) any statute of limitations in any action under this Guaranty or on the Indebtedness; or (M) any modification or change in terms of the Indebtedness, whatsoever, including without limitation, the renewal, extension, acceleration, or other change in the time payment of the Indebtedness is due and any change in the interest rate, and including any such modification or change in terms after revocation of this Guaranty on the Indebtedness incurred prior to such revocation.
Guarantor waives all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to Guarantor by reason of California Civil Code Sections 2787 to 2855, inclusive.
Guarantor waives all rights and any defenses arising out of an election of remedies by Lender even though that the election of remedies, such as a non- judicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantors rights of subrogation and reimbursement against Borrower by operation of Section 580d of the California Code of Civil Procedure or otherwise.
Guarantor waives all rights and defenses that Guarantor may have because Borrowers obligation is secured by real property. This means among other things: (N) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower. (0) If Lender forecloses on any real property collateral pledged by Borrower: (1) the amount of Borrowers obligation may be reduced only by the price for which the collateral is sold at the foreclosure sale, even if the collateral is worth more than the safe price. (2) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrowers obligation is secured by real property. These rights and defenses include, but are not limited to, any rights and defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure.
5
Guarantor understands and agrees that the foregoing waivers are unconditional and irrevocable waivers of substantive rights and defenses to which Guarantor might otherwise be entitled under state and federal law. The rights and defenses waived include, without limitation, those provided by California laws of suretyship and guaranty, anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges that Guarantor has provided these waivers of rights and defenses with the intention that they be fully relied upon by Lender. Guarantor further understands and agrees that this Guaranty is a separate and independent contract between Guarantor and Lender, given for full and ample consideration, and is enforceable on its own terms. Until all of the Indebtedness is paid in full, Guarantor waives any right to enforce any remedy Guarantor may have against the Borrower or any other guarantor, surety, or other person, and further, Guarantor waives any right to participate in any collateral for the Indebtedness now or hereafter held by Lender.
Guarantors Understanding With Respect To Waivers . Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantors full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.
Subordination of Borrowers Debts to Guarantor . Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuation statements and to execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.
Miscellaneous Provisions . The following miscellaneous provisions are a part of this Guaranty:
AMENDMENTS . This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
ATTORNEYS FEES; EXPENSES. Guarantor agrees to pay upon demand all of Lenders costs and expenses, including Lenders attorneys fees and Lenders legal expenses, incurred in
6
connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lenders attorneys fees and legal expenses whether or not there is a lawsuit, including attorneys fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty.
GOVERNING LAW . This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions.
CHOICE OF VENUE . If there is a lawsuit, Guarantor agrees upon Lenders request to submit to the jurisdiction of the courts of Los Angeles County, State of California.
INTEGRATION . Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty. Guarantor has had the opportunity to be advised by Guarantors attorney with respect to entering into this Guaranty. Guarantor further agrees that the Guaranty represents the final agreement between Guarantor and Lender regarding the matters addressed therein and therefore: (a) incorporates all negotiations of the parties relating to the Guaranty; (b) there are no unwritten oral agreements between Lender and Guarantor, and (c) this Guaranty may not be contradicted by evidence of any prior, contemporaneous, or subsequent oral agreements or understandings of Lender and Guarantor. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lenders attorneys fees) suffered by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this Paragraph.
INTERPRETATION . In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words Borrower and Guarantor respectively shall mean all and any one or more of them. The words Guarantor, Borrower, and Lender include the heirs, successors, assigns, and transferees of each of them. If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.
7
NOTICES . Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the section of this Guaranty entitled DURATION OF GUARANTY. Any party may change its address for notices under this Guaranty by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the partys address. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantors current address. Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors.
NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lenders right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lenders rights or of any of Guarantors obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.
SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Guaranty on transfer of Guarantors interest, this Guaranty shall be binding upon and inure to the benefit of the parties, their successors and assigns.
Definitions . The following capitalized words and terms shall have the following meanings when used in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed to such terms in the Uniform Commercial Code:
BORROWER . The word Borrower means Fifth and Madison, LLC, a Delaware limited liability company and includes all co-signers and co-makers signing the Note and all their successors and assigns.
GAAP . The word GAAP means generally accepted accounting principles.
GUARANTOR. The word Guarantor means everyone signing this Guaranty, including without limitation Kennedy-Wilson, Inc., a Delaware corporation, and in each case, any signers successors and assigns.
8
GUARANTORS SHARE OF THE INDEBTEDNESS. The words Guarantors Share of the Indebtedness mean Guarantors indebtedness to Lender as more particularly described in this Guaranty.
GUARANTY. The word Guaranty means this guaranty from Guarantor to Lender.
INDEBTEDNESS . The word Indebtedness means Borrowers indebtedness to Lender as more particularly described in this Guaranty.
LENDER. The word Lender means Pacific Western Bank, its successors and assigns.
NOTE . The word Note means the promissory note dated February 13, 2008, in the original principal amount of $13,500,000.00 from Borrower to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of and substitutions for the promissory note or agreement.
RELATED DOCUMENTS. The words Related Documents mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTORS EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED DURATION OF GUARANTY. NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED JANUARY 16, 2009.
GUARANTOR:
KENNEDY-WILSON, INC., A DELAWARE CORPORATION |
|
|
|
|
|
|
|
|
By: |
/s/ Freeman Lyle |
|
Freeman A. Lyle, CFO/Secretary of Kennedy- |
|
|
Wilson, Inc., a Delaware corporation |
|
|
9
Exhibit 10.113
GUARANTY
This GUARANTY (this Guaranty ) is made and entered into by KENNEDY-WILSON, INC., a Delaware corporation, and KW PROPERTY FUND III, L.P., a Delaware limited partnership, each having an address at c/o Kennedy-Wilson Inc., 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210 (individually and collectively, Guarantor ), jointly and severally, for the benefit of DEUTSCHE BANK AG, CAYMAN ISLANDS BRANCH, a branch of a foreign banking institution whose address is 60 Wall Street, New York, New York 10005 ( Buyer ) on this May 29, 2008. This Guaranty is made with reference to the following facts (with some capitalized terms being defined below):
A. KW Kona Investors, LLC, as Seller, and Buyer have entered into that certain Master Repurchase Agreement, dated May 29, 2008 (the Repurchase Agreement ), pursuant to which the Buyer shall purchase the Purchased Loan Participations from KW Kona Investors, LLC with a simultaneous agreement from KW Kona Investors, LLC to repurchase the Purchased Loan Participations at a date certain or following the occurrence of an Event of Default thereunder that is continuing (the Transactions );
B. Buyer has requested, as a condition of entering into the Repurchase Agreement, that the Guarantor deliver to Buyer this Guaranty;
C. Guarantor collectively owns 100% of the interests of KW Kona Investors, LLC;
D. Guarantor expects to benefit if Buyer enters into the Repurchase Agreement with Seller, and desires that Buyer enter into the Repurchase Agreement with Seller; and
E. Buyer would not enter into the Repurchase Agreement with KW Kona Investors, LLC unless Guarantor executed this Guaranty. This Guaranty is therefore delivered to Buyer to induce Buyer to enter into the Repurchase Agreement.
NOW, THEREFORE, in exchange for good, adequate, and valuable consideration, the receipt of which Guarantor acknowledges, and to induce Buyer to enter into the Repurchase Agreement, Guarantor agrees as follows:
2
3
4
5
Minimum Net Worth . Net Worth to be less than $75,000,000.00;
Debt to Book Equity . The ratio of Indebtedness to Net Worth to exceed 3 to 1;
Minimum Liquidity . The sum of cash and Cash Equivalents to be less than $5,000,000.00, provided , for the purposes of this Guaranty, no amounts described as restricted cash in the financial statements delivered pursuant to the Repurchase Agreement shall be included in such calculation;
6
7
8
10
11
12
13
14
15
IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty as of the date indicated below.
|
GUARANTOR: |
||||
|
|
||||
|
KW PROPERTY FUND III, L.P., |
||||
|
a Delaware limited partnership |
||||
|
|
||||
|
By: |
Kennedy-Wilson
Property Services III, Inc.,
|
|||
|
|
its sole general partner |
|||
|
|
|
|||
|
|
|
|||
|
|
By: |
/s/ John Prabhu |
||
|
|
Name: |
John Prabhu |
||
|
|
Title: |
Vice President |
||
|
|
|
|||
|
|
||||
|
KENNEDY-WILSON, INC., |
||||
|
a Delaware corporation |
||||
|
|
||||
|
|
||||
|
By: |
/s/ unknown |
|||
|
Name: |
unknown |
|||
|
Title: |
CFO |
|||
|
|
||||
Acknowledgements: |
|
||||
|
|
||||
DEUTSCHE BANK AG, CAYMAN |
|
||||
ISLANDS BRANCH |
|
||||
|
|
||||
|
|
||||
By: |
/s/ Thomas R. |
|
|||
|
Name: Thomas R. |
|
|||
|
Title: Director |
|
|||
|
|
|
|||
|
|
|
|||
By: |
/s/ Christine Belbusti |
|
|||
|
Name: Christine Belbusti |
|
|||
|
Title: Director |
|
|||
16
Exhibit 10.114
PAYMENT GUARANTY
by
KENNEDY-WILSON, INC.,
as Guarantor
in favor of
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
as Lender
Dated: As of June , 2009
Location: 3810 Wilshire Boulevard, Los Angeles, CA 90010
THIS PAYMENT GUARANTY (as amended, modified, restated or supplemented from time to time, this Guaranty) is made as of the day of June, 2009, by KENNEDY- WILSON, INC. a Delaware corporation, having an address at 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210 (Guarantor), in favor of THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, a New York corporation, having an address at 7 Hanover Square, New York, New York 10004 (Lender).
RECITALS
A. Lender is simultaneously herewith making the loan to Borrower (as defined in the Security Instrument, which term is defined below) in the original principal amount of $28,000,000.00 (the Loan), which Loan is evidenced by two promissory notes, one in the original principal amount of $20,000,000 and the second in the original principal amount of $8,000,000, each dated the date hereof, made by Borrower and payable to Lender in the principal amount of the Loan (as amended, modified, extended, renewed, restated or supplemented from time to time, collectively, the Note).
B. The Loan is secured by, among other things, that certain DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FINANCING STATEMENT dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the Security Instrument), which also secures the payment and performance of all other Obligations, as defined in the Security Instrument.
C. For purposes of this Guaranty, the capitalized terms used herein without definition shall have the respective meanings set forth for such terms in Annex A to the Security Instrument, and the rules of interpretation set forth in such Annex A of the Security Instrument shall govern the interpretation of this Guaranty.
D. As a material inducement for, and as a condition precedent to Lenders making the Loan, Guarantor is required to execute and deliver to Lender this Guaranty.
2
3
4
5
This is an unconditional and irrevocable waver of any rights and defenses Guarantor may have because Borrowers debt is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
6
7
8
The obligations of Guarantor hereunder shall not be released, discharged or affected in any way nor shall Guarantor have any recourse against Lender by reason of any action which Lender may take or omit to take under these powers or otherwise existing with respect to the Liabilities or the Collateral.
Any notice, request, demand, consent, approval or other communication required or desired to be given or delivered under this Guaranty shall be made in accordance with the notice provisions of the Security Instrument.
9
10
11
12
[signatures on following page]
13
THIS GUARANTY is being executed and delivered as of the day and year first above written.
|
GUARANTOR: |
|
|
|
|
|
|
|
|
KENNEDY-WILSON, INC., |
|
|
a Delaware corporation |
|
|
|
|
|
|
|
|
By: |
/s/Freeman Lyle |
|
Name: Freeman Lyle |
|
|
Title: CFO |
Signature Page
Exhibit 10.115
GUARANTY AGREEMENT
This Guaranty Agreement (this Guaranty ) is made as of September 9, 2005, by Kennedy-Wilson, Inc., a Delaware corporation (singly or collectively, Guarantor ), in favor of Bank of America, N.A., a national banking association, as agent for Lenders as that term is defined below (in such capacity, Administrative Agent ) and each of the Lenders.
PRELIMINARY STATEMENTS
Administrative Agent and certain other lenders from time to time (each a Lender and collectively, Lenders ) and KW Alameda LLC, a Delaware limited liability company ( Borrower ), have entered into, are entering into concurrently herewith, or contemplate entering into, that certain Construction Loan Agreement of even date herewith (herein called, as it may hereafter be modified, supplemented, restated, extended, or renewed and in effect from time to time, the Loan Agreement ), which Loan Agreement sets forth the terms and conditions of a loan (the Loan ) to Borrower for the construction of the Improvements on, and with respect to, land located in Alameda, California, as more particularly described in the Loan Agreement and identified therein as the Land.
A condition precedent to Lenders obligation to make the Loan to Borrower is Guarantors execution and delivery to Administrative Agent of this Guaranty.
The Loan is, or will be, evidenced by those certain Deed of Trust Notes of even date with the Loan Agreement, executed by Borrower and payable to the order of Lenders in the aggregate original face principal amount of Eighty-Seven Million and No/100 Dollars ($87,000,000) (such notes, as they may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, are herein called the Note ).
Borrower and Bank of America, N.A. as Lender or an affiliate thereof (collectively, Swap Bank ) may from time to time enter into an interest rate swap agreement, International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement or other similar agreement or arrangement to hedge the risk of variable interest rate volatility or fluctuations of interest rates (any such agreement or arrangement as it may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time is herein called an Interest Rate Protection Agreement ).
Any capitalized term used and not defined in this Guaranty shall have the meaning given to such term in the Loan Agreement. This Guaranty is one of the Loan Documents described in the Loan Agreement.
STATEMENT OF AGREEMENTS
For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and as a material inducement to Administrative Agent and Lenders to extend credit to Borrower, Guarantor hereby guarantees to Administrative Agent and Lenders the
prompt and full payment and performance of the indebtedness and obligations described below in this Guaranty (collectively called the Guaranteed Obligations ), this Guaranty being upon the following terms and conditions:
2
Upon demand by Lender following the occurrence of an Event of Default, Guarantor will cause all work to the Improvements to be completed in accordance with the Plans and other requirements of the Loan Agreement and will pay all bills in connection therewith. The liability and obligations under this Section 1(b) shall not be limited or restricted by the existence of, or any terms of, the guaranty of payment under Section 1(a) .
3
4
5
6
7
8
This is an unconditional and irrevocable waiver of any rights and defenses that Guarantor may have because the Guaranteed Obligations are secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Sections 580a, 580b, 580d, or 726 of the CCP.
9
10
11
12
13
In addition to the foregoing, Guarantor further represents, warrants and covenants that (1) Guarantor has received and examined copies of each Interest Rate Protection Agreement, the observance and performance of which by Borrower is hereby guaranteed; (m) Guarantor will benefit from Swap Bank entering into each Interest Rate Protection Agreement and any transaction thereunder with Borrower, and Guarantor has determined that the execution and delivery by Guarantor of this Guaranty is necessary and convenient to the conduct, promotion and attainment of the business of Guarantor; and (n) neither Administrative Agent nor Swap Bank nor Lenders have any duty to determine whether any Interest Rate Protection Agreement, or any other transaction relating to or arising under any Interest Rate Protection Agreement, will be or has been entered into by Borrower for purposes of hedging interest rate, currency exchange rate, or other risks arising in its businesses or affairs and not for purposes of speculation or is otherwise inappropriate for Borrower.
14
15
16
17
18
19
20
THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF , Guarantor duly executed this Guaranty as of the date first written above.
Address of Guarantor: |
GUARANTOR: |
|
|
|
|
9601 Wilshire Boulevard, Suite 220 |
Kennedy-Wilson, Inc., |
|
Beverly Hills, CA 90210 |
a Delaware limited liability company |
|
Facsimile: 310-887-6230 |
|
|
Attn: Robert E. Hart |
By: |
/s/ Freeman Lyle |
|
Name: |
FREEMAN LYLE |
|
Title: |
EVP - CFO |
|
|
|
Address of Administrative Agent: |
|
|
|
|
|
Bank of America, N.A. |
|
|
333 South Hope Street, 11th Floor |
|
|
Los Angeles, CA 90071 |
|
|
Facsimile: 213-621-4831 |
|
|
Attn: Marchell Hilliard |
|
21
Exhibit 10.116
KENNEDY-WILSON, INC.
1992
INCENTIVE
AND
NONSTATUTORY STOCK OPTION PLAN
KENNEDY-WILSON, INC.
1992
INCENTIVE
AND
NONSTATUTORY STOCK OPTION PLAN
2
3
The Option Price for shares of. Common Stock to be issued under either Plan A or Plan B shall the fair market value of such shares on the date on which the Option covering such shares is granted by the Committee, except that if on the date on which such Option is granted the Optionee is a Restricted Shareholder, ,than such Option Price for Options granted under Plan A shall be 110% of the fair market value of the shares of Common Stock subject to the Option on the date such Option is granted by the Committee. The fair market value of shares of Common Stock for all purposes of this Plan is to be determined by the Committee, in its sole discretion, exercised in good faith.
Plan A and Plan B shall become effective on May 11, 1992; both Plan A and Plan B shall continue in effect until May 11, 2002, unless terminated earlier by action of the Board. No Option may be granted hereunder after May 11, 2002.
Subject to the actions, conditions and limitations set forth in this Plan document and any applicable Stock Option Agreement entered into hereunder, Options granted under this Plan shall be exercisable in accordance with the following rules:
4
5
If the Company at any time should succeed to the business of another corporation through a merger or consolidation, or through the acquisition of stock or assets of such corporation, Options may be granted under the Plan to option holders of such corporation or its subsidiaries, in substitution for options or rights to purchase stock of such corporation held by them at the time of succession. The Committee shall have sole and absolute discretion to determine the extent to which such substitute Options shall be granted (if at all), the person or persons within the eligible group to receive such substitute Options (who need not be all option holders of such corporation), the number of Options to be received by each such person, the Option Price of such Option, and the terms and conditions of such substitute Options; provided, however, that the terms and conditions of the substitute Options shall comply with the provisions of Section 424 of the Code, such that the excess of the aggregate fair market value of the shares subject to such substitute Option immediately after the substitution or assumption over the aggregate option price of such shares is not more than the excess of the aggregate fair market value of all shares subject to the substitute Option immediately before such substitution or assumption over the aggregate option price of such shares, and the substitute Option or the assumption of the old option does not give the holder thereof additional benefits which he did not have under such old option.
6
7
Unless in the judgment of counsel to the Company such permit is not necessary with respect to particular grants, Options granted under the Plan shall be conditioned upon the Company obtaining any required permit from the California Department of Corporations or any other appropriate governmental agencies, free of any conditions not acceptable to the Committee, provided, however, such condition shall lapse as of the effective date of issuance of such permit(s) in a form to which the Company does not object within sixty (60) days. The grant of Options under the Plan also is conditioned on approval of the Plan by they vote or consent of the holders of a majority of the outstanding share the Company is Common Stock and no Option granted hereunder shall be effective or exercisable unless and until the Plan has been so approved.
The aggregate fair market value (determined as of the Option Grant Date)of the shares of Common Stock to which Options granted under Plan A are exercisable for the first time by any employee of the Company during any calendar year under all incentive stock option plans of the Company and its Affiliated Companies shall not exceed $100,000. The limitation imposed by this Section 13 shall not apply with respect to Options granted under Plan B.
The Committee may provide that, upon exercise of the Option, the Optionee may elect to pay for all or some of the shares of Common Stock underlying the Option with shares of Common Stock of the Company previously acquired and owned at the time of exercise by the Optionee, subject to all restrictions and limitations of applicable laws, rules and regulations, including Section 424(c)(3) of the Code, and provided that the Optionee will make representations and warranties satisfactory to the Company regarding his title to the shares used to effect the purchase, including without limitation representations and warranties that the Optionee has good and marketable title to such shares free and clear of any and all liens, encumbrances, charges, equities, claims, security interests, options or restrictions and has full power to deliver such shares without obtaining the consent or approval of any person or governmental authority other than those which have already given consent or approval in a form satisfactory to the Company. The equivalent dollar value of the shares used to effect the purchase shall be the fair market value of the shares on the date of the purchase as determined by the Committee in its sole discretion, exercised in good faith.
The terms and conditions of Options granted under the Plan shall be evidenced by a Stock Option Agreement (hereinafter, referred to , as the Agreement) executed by the Company and the person to whom the Option is granted. Each agreement shall contain the following provisions:
8
The Company shall pay all original issue and transfer taxes (but not income taxes, if any) with respect to the grant of Options and the issue and transfer of shares pursuant to the exercise of such Options, and all other fees and expenses necessarily incurred by the Company in connection therewith, and will from time to time use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.
The .grant of Options hereunder and the issuance of Common Stock pursuant to the exercise of such Options is conditioned upon the Companys reservation of the right to withhold, . in accordance with any applicable law, from any compensation payable to the Optionee any taxes required to be withheld by Federal, state or local law as a result of the grant or exercise of any such Option.
9
Options granted under this Plan may not be sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise transferred or alienated in any manner, either voluntarily or involuntarily by operation of law, otherwise than by will or the laws of descent of distribution, and may be exercised during the lifetime of an Optionee only by such Optionee.
Common Stock issued pursuant to the exercise of an Option granted under this Plan (hereinafter Optioned Stock), or any interest in such Optioned Stock, may be sold, assigned, gifted, pledged, hypothecated, encumbered or otherwise transferred or alienated in any manner by the holder(s) thereof, subject, however, to any representations or warranties requested under Section 24 of this Plan and also subject to compliance with any applicable Federal, state or other local law, regulation or rule governing the sale or transfer of stock or securities and subject further to the six-month holding period set forth above in Section 7(a).
The Company, during the term of this Plan, will at all times reserve and keep available such number of shares of its Common Stock as shall be sufficient to satisfy the requirements of the Plan.
The Company, during the term of this Plan, will use its best efforts to seek to obtain from the appropriate regulatory agencies any requisite authorization in order to grant Options or issue and sell such number of shares of its Common Stock as shall be sufficient to satisfy the requirements of the Plan. The inability of the Company to obtain from any such regulatory agency having jurisdiction thereof the authorization deemed by the Companys counsel to be necessary to the lawful grant of Options or the issuance and sale of any shares of its stock hereunder or that inability of the Company to confirm to its satisfaction that any grant of Options or issuance and sale of any shares of such stock will meet applicable legal requirements shall relieve the Company of any liability in respect of the nonissuance or sale of such stock as to which such authorization or confirmation have not been obtained.
10
Any notice to be given to the Company pursuant to the provisions of this Plan shall be addressed to the Company in care of its Chief Financial Officer at its principal office, and any notice to be given to a person to whom an Option is granted hereunder shall be addressed to him at the address given beneath his signature on his or her Stock Option Agreement, or at such other address as such person or his or her transferee (upon the transfer of Optioned Stock) may hereafter designate in writing to the Company. Any such notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed . as aforesaid, registered or certified, and deposited postage and registry or certification fee prepaid, in a post office or branch post office regularly maintained by the United States Postal Service. It shall be the obligation of each Optionee and each transferee holding Optioned Stock to provide the Chief Financial Officer of the company, by letter mailed as provided hereinabove, with written notice of his correct mailing address.
If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of shares of the Company through reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split, then upon proper authorization of the Committee an appropriate and proportionate adjustment shall be made in the number or kind of shares which may be issued upon exercise of Options granted under the Plan; provided, however, that no such adjustment need be made if, upon the advice of counsel, the Committee determines that such adjustment may result in . the receipt of federally taxable income to holders of Options granted hereunder or the holders of Common Stock or other classes of the Companys securities.
As a condition to the grant of any Option hereunder or the exercise of any portion of an Option, the Company may require the person to be granted or exercising such Option to make any representation and warranty to the Company as may, in the judgment of counsel to the Company, be required under any applicable law or regulation, including but not limited to a representation and warranty that the Option and shares issuable or issued upon exercise of such Option are being acquired only for investment and without any present intention to sell or distribute such Option or shares, as the case may be, if, in the opinion of counsel for the Company, such representation is required under the Securities Act of 1933, as amended (the Act), or any other applicable law, regulation or rule of any governmental agency.
This Plan is purely voluntary on the part of the Company, and while the Company hopes to continue it indefinitely, the continuance of the Plan shall not be deemed to constitute a contract between the Company and any employee or to be consideration for or a condition of the employment of any employee. Nothing contained in the Plan shall be deemed to give any employee the right to be retained in the employ of the Company or its Affiliated Companies, or to interfere with the right of the Company or an Affiliated Company to discharge or retire any
11
employee thereof any time. No employee shall have any right to or interest in Options authorized hereunder prior to the grant of such an Option to such employee, and upon such grant he shall have only such rights and interests as are expressly provided herein, subject, however, to all applicable provisions of the Companys Articles of Incorporation, as the same may be amended from time to time.
During the period any options granted to employees of the Company remain outstanding, such employee-option holders shall be entitled to receive, on an annual or other periodic basis, financial and other information regarding the Company. The Committee shall exercise its discretion with regard to the nature and extent of the financial information so provided, giving due regard to the size and circumstances of the Company and, if the Company provides annual reports to its shareholders, the Companys practice in connection with such annual reports. Notwithstanding the above, if the issuance of options under either Plan A or Plan B is limited to key employees whose duties in connection with the Company assure their access to equivalent information, this Section 26 shall not apply to such employees and plan.
Each certificate representing Common Stock issued under this Plan shall bear whatever legends are required by Federal or state law or by any governmental agency. In particular, unless an appropriate registration statement is filed pursuant to the Act with respect to the shares of Common Stock issuable under this Plan, each certificate representing such Common Stock shall be endorsed on its face with the following legend or its equivalent:
Neither the Option pursuant to which the shares represented by this certificate are issued nor said shares have been registered under the Securities Act of 1933, as amended (the Act). Transfer or sale of such securities or any interest therein is unlawful except after registration, or pursuant to an exemption from the registration requirements, as provided in the Act and the regulations thereunder.
A copy of this Plan shall be delivered to the Chief Financial Officer of the Company and shall be shown by him to each eligible person making reasonable inquiry concerning it. A copy of this Plan also shall be delivered to each Optionee at the time his or her Options are granted.
The Options granted under this Plan . and the Optioned Stock issued pursuant to the exercise of such Options cannot be readily purchased or sold in the open market, and, for that reason among others, the Company and its shareholders will be irreparably damaged in the event that this Plan is not specifically enforced. In the event of any controversy concerning the right or obligation to purchase or sell any such Option or optioned Stock, such right or obligation shall be enforceable in a court of equity by a decree of a specific performance. Such remedy shall,
12
however, be cumulative and not exclusive, and shall be in addition to any other remedy which the parties may have.
In the event that any provision of this Plan is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability shall not be construed as rendering any other provisions contained herein invalid or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid or unenforceable provision was not contained herein.
With respect to persons subject to Section 16 of the Securities Exchange Act of 1934, as amended (the 1934 Act), transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.
This Plan shall be governed by and construed in accordance with the laws of the State of California.
This Plan shall be binding on and inure to the benefit of the Company and the employees to whom an Option is granted hereunder, and such employees heirs, executors, administrators, legatees, personal representatives, assignees and transferees.
IN WITNESS WHEREOF, pursuant to the due authorization and adoption of this Plan by the Board on May 11, 1992, the Company has caused this Plan to be duly executed by its duly authorized officers.
|
KENNEDY-WILSON, INC., a Delaware Corporation |
|
|
|
|
|
|
|
|
BY: |
/s/ William J. McMorrow |
|
|
William J. McMorrow, |
|
|
Chief Executive Officer |
|
|
|
|
|
|
|
By: |
/s/ William R. Stevenson |
|
|
William R. Stevenson, |
|
|
President |
13
Exhibit 10.117
REPAYMENT GUARANTY
THIS REPAYMENT GUARANTY (this Guaranty ) is made as of September 4, 2007, by KWI PROPERTY FUND I, L.P., a Delaware limited partnership, and KW PROPERTY FUND II, L.P., a Delaware limited partnership (individually and collectively, Guarantor ) in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as agent for the Lenders pursuant to the Loan Agreement described below (in such capacity, Administrative Agent ) and in favor of each party that now or hereafter is bound under the Loan Agreement as a Lender (referred to herein individually as a Lender and collectively as the Lenders ).
1. Except as otherwise provided in this Guaranty, initially capitalized terms used in this Guaranty without definition are defined in that certain Loan Agreement of even date herewith by and between One Baxter Way, L.P., a Delaware limited partnership, and KW Portfolio XIII LLC, a Delaware limited liability company (collectively, Borrower ), Administrative Agent and Lenders (the Loan Agreement ).
2. In order to induce Administrative Agent and Lenders to enter into the Loan Agreement and to induce Lenders to loan to Borrower (whether acting on behalf of itself or any estate created by the commencement of a case under Title 11 United States Code or any successor statute thereto (the Bankruptcy Code ) or any other insolvency, bankruptcy, reorganization or liquidation proceeding, or by any trustee under the Bankruptcy Code, liquidator, sequestrator or receiver of Borrower or Borrowers property or similar Person duly appointed pursuant to any law generally governing any insolvency, bankruptcy, reorganization, liquidation, receivership or like proceeding) the sum of $98,405,440.00 (the Loan ), evidenced by one or more secured promissory notes (collectively, the Notes ), in the aggregate principal amount of $98,405,440.00, each now or hereafter executed by Borrower and payable to the order of one or more Lenders, Guarantor hereby unconditionally and irrevocably guarantees to Administrative Agent and Lenders and to their successors, endorsees and/or assigns, the full and prompt payment of (a) the principal sum of the Notes in accordance with their terms when due, by acceleration or otherwise, together with all interest accrued thereon, when due under the terms of the Notes, and any and all other sums of money that become owing by Borrower to Lenders under the Notes, Loan Agreement or any other Loan Document as such term is defined in the Loan Agreement (which Notes, Loan Agreement and other Loan Documents are also collectively referred to herein as the Loan Documents ) and (b) any and all sums owing under any Swap Contract as such term is defined in the Loan Agreement ( Swap Contract ). The obligations guaranteed pursuant to this Section 2 are hereinafter referred to as the Guaranteed Obligations .
Notwithstanding the foregoing, Guarantors obligations hereunder shall in no event exceed an amount equal to Thirty-Five Million One Hundred Forty-Four Thousand Eight Hundred and No/100 Dollars ($35,144,800.00) (the Guaranteed Principal Amount ), plus 100% of (a) attorneys fees and collection costs and all other sums other than principal owing on the Loan, (b) all amounts owing under the Swap Contracts and (c) any deficiency, loss or damage suffered by Lender because of: (1) Borrowers commission of a criminal act, (2) the failure to comply with provisions of the Loan Documents prohibiting the sale, transfer or encumbrance of
the Project; (3) the misapplication by Borrower of any funds derived from the Project, including security deposits, insurance proceeds, condemnation awards, rental income or other income arising with respect to the Project; (4) Borrowers commission of waste; (5) Borrowers removal of collateral from the Project without replacement, (6) Borrowers violation of law; (7) losses, expense or liability relating to the presence of hazardous or toxic materials on the Project; (8) the fraud or intentional misrepresentation by Borrower made in or in connection with the Loan Documents or the Loan; (9) Borrowers voluntary or involuntary filing, or the filing against Borrower by any party, of any proceeding for relief under any federal or state bankruptcy, insolvency or receivership laws or any assignment for the benefit of creditors made by Borrower not dismissed within 180 days; (10) Borrowers interference with Lenders enforcement proceedings; or (11) Borrowers collection of rent more than one month in advance. Guarantors obligations shall not be affected, impaired, lessened or released by loans, credits or other financial accommodations now existing or hereafter advanced by Lender to Borrower in excess of the Guaranteed Principal Amount. In no event shall the Guaranteed Principal Amount be reduced as a result of (a) Lenders foreclosure or acceptance of a deed in lieu of foreclosure with respect to any collateral securing the Loan, or (b) Guarantors payment of the Loan or any portion thereof prior to the date when the entire Loan becomes due and payable in full, whether at maturity or by acceleration or otherwise. The agreement of Lender to the foregoing limitation on Guarantors liability shall in no way be deemed to limit or restrict the right of Lender to apply any sums paid by Guarantor to any portion of the Loan.
The indebtedness guaranteed by Guarantor hereunder shall be deemed to be the last indebtedness which remains outstanding under the Loan Documents and the Swap Contracts after the application of payments received from Borrower and the application of proceeds received from the foreclosure of the Deed of Trust and other liquidation of any collateral for the Loan (subject to the above limitations on the maximum amount of principal indebtedness guaranteed hereby), and Guarantor may not claim or contend so long as any such indebtedness remains outstanding that any payments received by Lender from Borrower or otherwise, or proceeds received by Lender on the liquidation of the Project, shall have reduced or discharged Guarantors liability or obligations hereunder. Nothing contained in this paragraph shall be deemed to (i) limit or otherwise impair any of the waivers or agreements of Guarantor contained in this Guaranty or (ii) require Lender to proceed against Borrower, any collateral or any other Guarantor before proceeding against any particular Guarantor (any such requirement having been specifically waived).
3. In accordance with California Civil Code ( CC ) Section 2856:
(a) Guarantor waives any , and all rights of subrogation, reimbursement, indemnification and contribution, and any other rights and defenses that are or may become available to Guarantor by reason of CC Sections 2787 to 2855, inclusive, 2899 and 3433, including, without limitation, any and all rights or defenses Guarantor may have by reason of protection afforded to the principal with respect to any of the Guaranteed Obligations or to any other guarantor of any of the Guaranteed Obligations with respect to such guarantors obligations under its guaranty, in either case, pursuant to the antideficiency or other laws of this state limiting or discharging the principals indebtedness or such other guarantors obligations, including, without limitation, California Code of Civil Procedure ( CCP ) Sections 580a, 580b, 580d or 726; and
2
(b) Guarantor waives all rights and defenses that Guarantor may have because Borrowers debt is secured by real property. This means, among other things:
(i) Administrative Agent and Lenders may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower;
(ii) If Administrative Agent or any Lender forecloses on any real property collateral pledged by Borrower:
(A) The amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price;
(B) Administrative Agent and Lenders may collect from Guarantor even if Administrative Agent or any Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrowers debt is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon CCP Sections 580a, 580b, 580d, or 726; and
(c) Guarantor waives all rights and defenses arising out of an election of remedies by Administrative Agent or Lenders, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for the Guaranteed Obligations, has destroyed Guarantors rights of subrogation and reimbursement against Borrower by the operation of CCP Section 580d or otherwise, and even though that election of remedies by Administrative Agent or Lenders has destroyed Guarantors rights of contribution against another guarantor of any of the Guaranteed Obligations.
No other provision of this Guaranty shall be construed as limiting the generality of any of the covenants and waivers set forth in this Section 3.
4. Guarantor represents and warrants to Administrative Agent and Lenders that Guarantor has a financial interest in Borrower or is otherwise affiliated with Borrower. In that regard, Guarantor agrees that Administrative Agents and Lenders entering into the Loan Agreement and Lenders agreement to make the Loan to Borrower is of substantial and material benefit to Guarantor and further agrees as follows:
(a) Guarantor shall continue to be liable under this Guaranty and the provisions hereof will remain in full force and effect notwithstanding (i) any modification, agreement or stipulation between Borrower and Administrative Agent or their respective successors and assigns, with respect to the Loan Documents or the Swap Contracts or the obligations encompassed thereby, including, without limitation, the Guaranteed Obligations, (ii) Administrative Agents waiver of or failure to enforce any of the terms, covenants or conditions contained in the Loan Documents or the Swap Contracts or in any modification thereof, (iii) any discharge or release of Borrower or any other guarantor from any liability with respect to the
3
Guaranteed Obligations, (iv) any discharge, release, exchange or subordination of any real or personal property then held by Administrative Agent or any Lender as security for the performance of the Guaranteed Obligations, (v) any additional security taken for the Guaranteed Obligations, whether real or personal property, (vi) any foreclosure or other realization on any security for the Guaranteed Obligations, regardless of the effect upon Guarantors subrogation, contribution or reimbursement rights against Borrower or any other guarantor, (vii) any additional loans or financial accommodations to Borrower or (viii) the manner or order by which payments are applied to principal, interest or other obligations under the Loan Documents and the Swap Contracts. Without limiting the generality of the foregoing, Guarantor hereby waives the rights and benefits under CC Section 2819, and agrees that by doing so Guarantors liability shall continue even if Administrative Agent or any Lender alters any obligations under the Loan Documents or the Swap Contracts in any respect or Administrative Agents or Lenders remedies or rights against Borrower are in any way impaired or suspended without Guarantors consent.
(b) Guarantors liability under this Guaranty shall continue until all sums due under the Notes have been paid in full and until all Guaranteed Obligations to Administrative Agent and Lenders have been satisfied, and shall not be reduced by virtue of any payment by Borrower of any amount due under the Notes or under any of the Loan Documents or Swap Contracts or by Administrative Agents and Lenders recourse to any collateral or security.
(c) Guarantor represents and warrants to Administrative Agent and Lenders that Guarantor now has and will continue to have full and complete access to any and all information concerning the transactions contemplated by the Loan Documents or Swap Contracts or referred to therein, the value of the assets owned or to be acquired by Borrower, Borrowers financial status and its ability to pay and perform the Guaranteed Obligations owed to Administrative Agent and Lenders. Guarantor further represents and warrants that Guarantor has reviewed and approved copies of the Loan Documents and Swap Contracts and is fully informed of the remedies Administrative Agent and Lenders may pursue, with or without notice to Borrower, in the event of default under the Notes or other Loan Documents or Swap Contracts. So long as any of the Guaranteed Obligations remains unsatisfied or owing to Administrative Agent or Lenders, Guarantor shall keep fully informed as to all aspects of Borrowers financial condition and the performance of the Guaranteed Obligations.
(d) Guarantor acknowledges and agrees that Guarantor may be required to perform the Guaranteed Obligations in accordance with the terms hereof notwithstanding the fact that the Loan has fully matured, that the outstanding principal balance thereof is fully due and payable and that Borrower is in default of its obligation to pay the full amount due under the Notes on the maturity thereof.
5. The liability of Guarantor under this Guaranty is a guaranty of payment and performance and not of collectibility, and is not conditioned or contingent upon the genuineness, validity, regularity or enforceability of the Loan Documents, Swap Contracts or other instruments relating to the creation or performance of the Guaranteed Obligations or the pursuit by Administrative Agent or any Lender of any remedies which any now has or may hereafter have with respect thereto under the Loan Documents or Swap Contracts, at law, in equity or otherwise. Guarantor hereby waives any and all benefits and defenses under CC Section 2810 and agrees that by doing so Guarantor shall be liable even if Borrower had no liability at the time
4
of execution of any of the Loan Documents or Swap Contracts or thereafter ceases to be liable. Guarantor hereby waives any and all benefits and defenses under CC Section 2809 and agrees that by doing so Guarantors liability may be larger in amount and more burdensome than that of Borrower. Guarantors liability hereunder shall not be limited or affected in any way by any impairment or any diminution or loss of value of any security or collateral for the Loan, whether caused by hazardous substances or otherwise, Administrative Agents or any Lenders failure to perfect a security interest in such security or collateral or any disability or other defense of Borrower or any other guarantor.
6. Guarantor hereby waives to the extent permitted by law: (i) all notices to Guarantor, to Borrower, or to any other Person, including without limitation notices of the acceptance of this Guaranty or the creation, renewal, extension, modification, accrual of any of the Guaranteed Obligations owed to Administrative Agent and Lenders, enforcement of any right or remedy with respect thereto and notice of any other matters relating thereto; (ii) diligence and demand of payment, presentment, protest, dishonor and notice of dishonor; (iii) any statute of limitations affecting Guarantors liability hereunder or the enforcement thereof; and (iv) all principles or provisions of law which conflict with the terms of this Guaranty. Guarantor further agrees that Administrative Agent and Lenders may enforce this Guaranty upon the occurrence of an event of default under the Notes or the other Loan Documents or Swap Contracts (as event of default is described therein), notwithstanding the existence of any dispute between Borrower and Administrative Agent or any Lender with respect to the existence of said event of default or performance of the Guaranteed Obligations or any counterclaim, set-off or other claim which Borrower may allege against Administrative Agent or any Lender with respect thereto. Moreover, Guarantor agrees that Guarantors obligations shall not be affected by any circumstances which constitute a legal or equitable discharge of a guarantor or surety.
7. Guarantor agrees that Administrative Agent and Lenders may enforce this Guaranty without the necessity of resorting to or exhausting any security or collateral (including, without limitation, pursuant to a judicial or nonjudicial foreclosure) and without the necessity of proceeding against Borrower or any other guarantor. Guarantor hereby waives any and all benefits under CC Sections 2845, 2849 and 2850, including, without limitation, the right to require Administrative Agent or Lenders to proceed against Borrower, to proceed against any other guarantor, to foreclose any lien on any real or personal property, to exercise any right or remedy under the Loan Documents and Swap Contracts, to draw upon any letter of credit issued in connection herewith, or to pursue any other remedy or to enforce any other right.
8. (a) Guarantor agrees that nothing contained herein shall prevent Administrative Agent and Lenders from suing on the Notes or from exercising any rights available to them under the Notes or under any of the other Loan Documents or Swap Contracts and that the exercise of any of the aforesaid rights will not constitute a legal or equitable discharge of Guarantor. Guarantor understands that the exercise by Administrative Agent and Lenders of certain rights and remedies contained in the Swap Contracts and Loan Documents (such as a nonjudicial foreclosure) may affect or eliminate Guarantors right of subrogation against Borrower and that Guarantor may therefore incur a partially or totally non-reimbursable liability hereunder; nevertheless, Guarantor hereby authorizes and empowers Administrative Agent to exercise, in its sole discretion, any rights and remedies, or any combination thereof, which may then be available to Administrative Agent and Lenders, since it is the intent and
5
purpose of Guarantor that the obligations hereunder are absolute, independent and unconditional under any and all circumstances. Guarantor expressly waives any defense (which defense, if Guarantor had not given this waiver, Guarantor might otherwise have) to a judgment against Guarantor by reason of a nonjudicial foreclosure sale. Without limiting the generality of the foregoing, Guarantor hereby expressly waives any and all benefits and defenses under (i) CCP Section 580a (which Section, if Guarantor had not given this waiver, would otherwise limit Guarantors liability after a nonjudicial foreclosure sale to the difference between the obligations guaranteed herein and the fair market value of the property or interests sold at such nonjudicial foreclosure sale), (ii) CCP Sections 580b and 580d (which Sections, if Guarantor had not given this waiver, would otherwise limit Lenders right to recover a deficiency judgment with respect to purchase money obligations and after a nonjudicial foreclosure sale, respectively), and (iii) CCP Section 726 (which Section, if Guarantor had not given this waiver, among other things, would otherwise require Lender to exhaust all of its security before a personal judgment may be obtained for a deficiency). Notwithstanding any foreclosure of the lien of any deed of trust or security agreement with respect to any or all of the real or personal property secured thereby, whether by the exercise of the power of sale contained therein, by an action for judicial foreclosure or by an acceptance of a deed in lieu of foreclosure, Guarantor shall remain bound under this Guaranty.
(b) Guarantor waives all benefits and defenses under CC Sections 2847, 2848 and 2849 and agrees that Guarantor shall have no right of subrogation against Borrower or against any collateral or security provided for in the Loan Documents or Swap. Contracts and no right of reimbursement or contribution against any other guarantor unless and until all Guaranteed Obligations have been indefeasibly paid and satisfied in full, and Administrative Agent and Lenders have released, transferred or disposed of all of their rights, title and interest in any collateral or security. To the extent the waiver of Guarantors rights of subrogation, reimbursement and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, Guarantor further agrees that Guarantors rights of subrogation and reimbursement against Borrower and Guarantors rights of subrogation against any collateral or security shall be junior and subordinate to any rights Administrative Agent or Lenders may have against Borrower and to all rights, title and interest Administrative Agent or Lenders may have in such collateral or security, and Guarantors rights of contribution against any other guarantor shall be junior and subordinate to any rights Administrative Agent or Lenders may have against such other guarantor. Administrative Agent and Lenders may use, sell or dispose of any item of collateral or security as it sees fit without regard to Guarantors subrogation and contribution rights, and upon disposition or sale of any item, Guarantors rights with respect to such item will terminate. Guarantor understands that Guarantor may record a Request for Notice of Default pursuant to CC Section 2924(b) and thereby receive notice of any proposed foreclosure of any real property collateral then securing the Guaranteed Obligations. With respect to the foreclosure of any security interest in any personal property collateral then securing the Guaranteed Obligations, Administrative Agent and Lenders agree to give Guarantor five (5) days prior written notice, in the manner set forth in Section 11 hereof, of any sale or disposition of any such personal property collateral, other than collateral which is perishable, threatens to decline speedily in value, is of a type customarily sold on a recognized market, or is cash, cash equivalents, certificates of deposit or the like.
6
(c) Guarantors sole right with respect to any such foreclosure of real or personal property collateral shall be to bid at such sale in accordance with applicable law. Guarantor acknowledges and agrees that Administrative Agent or any Lender may also bid at any such sale and in the event such collateral is sold to Administrative Agent or any Lender in whole or in partial satisfaction of the Guaranteed Obligations (or any portion thereof), Guarantor shall have no further right or interest with respect thereto. Notwithstanding anything to the contrary contained herein, no provision of this Guaranty shall be deemed to limit, decrease, or in any way to diminish any rights of set-off Administrative Agent and Lenders may have with respect to any cash, cash equivalents, certificates of deposit, letters of credit or the like which may now or hereafter be deposited with Administrative Agent or any Lender by Borrower.
(d) To the extent any dispute exists at any time between or among Guarantor and any other guarantor of the Guaranteed Obligations as to Guarantors or any other guarantors right to contribution or otherwise, Guarantor agrees to indemnify, defend and hold Administrative Agent and Lenders harmless from and against any loss, damage, claim, demand, cost or any other liability (including, without limitation, reasonable attorneys fees and costs) Administrative Agent and Lenders may suffer as a result of such dispute.
(e) So long as any of the Guaranteed Obligations are owing to Administrative Agent or any Lender, Guarantor shall not, without the prior written consent of Administrative Agent, commence or join with any other party in commencing any bankruptcy, reorganization or insolvency proceedings of or against Borrower. The obligations of Guarantor under this Guaranty shall not be altered, limited or affected by any case, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Borrower or by any defense which Borrower may have by reason of the order, decree or decision of any court or administrative body resulting from any such case. Administrative Agent shall have the sole right to accept or reject any plan on behalf of Guarantor proposed in such case and to take any other action which Guarantor would be entitled to take, including, without limitation, the decision to file or not file a claim. Guarantor acknowledges and agrees that any interest on the Guaranteed Obligations which accrues after the commencement of any such proceeding (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on any such portion of the Guaranteed Obligations if said proceedings had not been commenced) will be included in the Guaranteed Obligations because it is the intention of the parties that the Guaranteed Obligations should be determined without regard to any rule or law or order which may relieve Borrower of any portion of such Guaranteed Obligations. Guarantor hereby permits any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar Person to pay Administrative Agent and Lenders, or allow the claim of Administrative Agent and Lenders in respect of, any such interest accruing after the date on which such proceeding is commenced. Guarantor hereby assigns to Administrative Agent (for the benefit of Lenders) Guarantors right to receive any payments from any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar Person by way of dividend, adequate protection payment or otherwise. If all or any portion of the Guaranteed Obligations are paid or performed by Borrower, the obligations of Guarantor hereunder shall continue and remain in full force and effect in the event that all or any part of such payment(s) or performance(s) is avoided or recovered directly or indirectly from Administrative Agent or Lenders as a preference, fraudulent transfer or otherwise in such case irrespective of payment in
7
full of all obligations under the Loan Documents and Swap Contracts.
9. (a) Guarantor represents and warrants that any financial statements, tax returns or other documents of Guarantor heretofore delivered to Administrative Agent are true and correct in all material respects. Such statements were prepared in accordance with generally accepted accounting principles, consistently applied and fairly present the financial position of Guarantor as of the date thereof. Guarantor further represents and warrants that no material adverse change has occurred in Guarantors financial position since the date of such statements.
(b) Guarantor covenants and agrees to provide Administrative Agent with any and all financial information required by Administrative Agent pursuant to the Loan Agreement. Guarantor further covenants and agrees to immediately notify Administrative Agent of any material adverse change in Guarantors financial status.
10. All notices, requests and demands to be made hereunder to the parties hereto must be in writing and given as provided in the notice provisions of the Loan Agreement (at the addresses set forth below).
To Administrative Wachovia Bank, National Association
Agent: Real Estate Financial Services
Mail Code: CA 6500
1800 Century Park East, Suite 500
Los Angeles, CA 90067
Attn: Real Estate Financial Services
Telephone: (310) 789-8936
Facsimile: (310) 789-8994
To Guarantor: KWI Property Fund I, L.P .
KW Property Fund II, L.P .
c/o Kennedy-Wilson, Inc.
9601 Wilshire Boulevard, Suite 220
Beverly Hills, California 90210
Attention: Mary Ricks & John Prabhu
Telephone: (310) 887-6437
Facsimile: (310) 887-6409
11. Guarantor represents and warrants to Administrative Agent and Lenders as follows:
(a) No consent of any other Person, including, without limitation, any creditors of Guarantor, and no license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required by Guarantor in connection with this Guaranty or the execution, delivery, performance, validity or enforceability of this Guaranty and all obligations required hereunder. This Guaranty has been duly executed and delivered by Guarantor, and constitutes the legally valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms.
8
(b) The execution, delivery and performance of this Guaranty will not violate any provision of any existing law or regulation binding on Guarantor, or any order, judgment, award or decree of any court, arbitrator or governmental authority binding on Guarantor, or of any mortgage, indenture, lease, contract or other agreement, instrument or undertaking to which Guarantor is a party or by which Guarantor or any of its assets may be bound, and will not result in, or require, the creation or imposition of any lien on any of Guarantors property, assets or revenues pursuant to the provisions of any such mortgage, indenture, lease, contract or other agreement, instrument or undertaking.
12. Guarantors performance of a portion, but not all, of the Guaranteed Obligations will in no way limit, affect, modify or abridge Guarantors liability for that portion of the Guaranteed Obligations that is not performed. Without in any way limiting the generality of the foregoing, in the event that Administrative Agent or any Lender is awarded a judgment in any suit brought to enforce Guarantors covenant to perform a portion of the Guaranteed Obligation, such judgment will in no way be deemed to release Guarantor from its covenant to perform any portion of the Guaranteed Obligation which is not the subject of such suit.
13. Guarantor covenants and agrees to furnish to Administrative Agent, with sufficient copies for each Lender which Administrative Agent shall distribute to the Lenders:
(a) as soon as the same are available, and in any event within ninety (90) days after the end of each fiscal year and sixty (60) days after the end of each interim quarterly accounting period of the subject, a copy of the current financial statements of Guarantor, which shall consist of (a) a balance sheet as of the end of the relevant fiscal period, (b) statements of income and expenses of Guarantor for such fiscal period (together, in each case, with the comparable figures for the corresponding period of the previous fiscal year), (c) contingent liabilities of Guarantor, and (d) cash flow statements of Guarantor. All such financial statements of Guarantor shall be audited by a certified public accountant satisfactory to Administrative Agent;
(b) copies of filed federal income tax returns of Guarantor for each taxable year (with all K-1s and other forms and supporting schedules attached), within thirty (30) days after filing but in any event not later than one hundred twenty (120) days after the close of each such taxable year (subject to extension); and
(c) Such other information concerning Guarantor, and the assets, business, financial condition, operations, property, prospects, and results of operations of Guarantor, as Administrative Agent reasonably requests from time to time.
14. KWI Property Fund I, L.P. shall at all times maintain a combined net worth of at least Forty Million Dollars ($40,000,000). KW Property Fund II, L.P. shall at all times maintain a combined net worth of at least Forty Million Dollars ($40,000,000). As used herein, net worth shall mean an amount equal to the gross fair market value of all of the applicable Guarantors assets (excluding any value for goodwill, trademarks, patents, copyrights and other similar intangible items), less an amount equal to all of such Guarantors liabilities (including guaranties and other contingent liabilities), all as reasonably determined by Administrative Agent.
9
15. KWI Property Fund I, L.P. and KW Property Fund II, L.P. shall at all times collectively maintain combined unencumbered liquid assets equal to at least One Million Dollars ($1,000,000). Liquid assets means the following assets of the applicable Guarantor: (i) Cash; (ii) certificates of deposit or time deposits with terms of six (6) months or less; (iii) A-1/P-1 commercial paper with a term of three (3) months or less; (iv) U.S. treasury bills and other obligations of the federal government, all with terms of six (6) months or less; (v) readily marketable securities (excluding margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), restricted stock and stock subject to the provisions of Rule 144 of the Securities and Exchange Commission); (vi) bankers acceptances issued for terms of six (6) months or less by financial institutions; (vii) repurchase agreements with terms of six (6) months or less covering U.S. government securities; and (viii) unfunded capital commitments in such Guarantor.
16. This Guaranty is solely for the benefit of Administrative Agent and Lenders and is not intended to nor may it be deemed to be for the benefit of any third party, including Borrower.
17. Guarantor represents and warrants to Administrative Agent and Lenders as follows:
(a) KWI Property Fund I, L.P. is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware, has the power to own its assets and to transact the business in which it is now engaged and is in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification.
(b) KW Property Fund II, L.P. is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware, has the power to own its assets and to transact the business in which it is now engaged and is in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification.
(c) Guarantor has the power, authority and legal right to execute, deliver and perform this Guaranty and all obligations required hereunder and has taken all necessary action to authorize its execution, delivery and performance of this Guaranty and all obligations required hereunder. The execution, delivery and performance of this Guaranty will not violate any of the formation or governing documents of Guarantor or of any laws pursuant to which Guarantor has been formed.
18. Guarantor hereby grants Administrative Agent and Lenders a security interest in any personal property of Borrower in which Guarantor hereafter acquires any right, title or interest. Guarantor agrees that such security interest is additional security for the obligations hereby guaranteed. Such security interest is superior to any right of Guarantor in such personal property until all sums due under the Notes or other Loan Documents and Swap Contracts have been repaid in full and all Guaranteed Obligations have been fully satisfied.
10
19. Administrative Agent may assign this Guaranty with any Loan Document or Swap Contracts, without in any way affecting Guarantors liability hereunder. Any married person executing this Guaranty agrees that recourse may be had against community property and separate property for the satisfaction of all obligations hereby guaranteed. This Guaranty shall be binding upon Guarantor, Guarantors heirs, representatives, administrators, executors, successors and assigns and shall inure to the benefit of and shall be enforceable by Administrative Agent and Lenders, and their successors, endorsees and assigns. As used herein, the singular includes the plural, and the masculine includes the feminine and neuter and vice versa, if the context so requires.
20. In the event of any dispute or litigation regarding the enforcement or validity of this Guaranty, Guarantor shall be obligated to pay all charges, costs and expenses (including, without limitation, reasonable attorneys fees) incurred by Administrative Agent and Lenders, whether or not any action or proceeding is commenced regarding such dispute and whether or not such litigation is prosecuted to judgment.
21. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
22. To the maximum extent permitted by law, Guarantor, Administrative Agent and Lenders hereby voluntarily, knowingly and intentionally WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY in any legal action or proceeding arising under or in connection with this Guaranty or any other Loan Document or Swap Contract or concerning the Guaranteed Obligations and/or any collateral therefor or pertaining to any transaction related to or contemplated in any Loan Document or Swap Contract, regardless of whether such action or proceeding concerns any contractual or tortious or other claim. Guarantor acknowledges that this waiver of jury trial is a material inducement to Administrative Agent and Lenders entering into the Loan Agreement and to Lenders in extending credit to Borrower, that Administrative Agent and Lenders would not have entered into the Loan Agreement and Lenders would not have extended such credit without this jury trial waiver, and that Guarantor has been represented by an attorney or has had an opportunity to consult with an attorney regarding this Guaranty and understands the legal effect of this jury trial waiver.
23. Guarantor hereby submits to the jurisdiction of the state and federal courts in the State of California and State of California for purposes of any action arising from or growing out of this Guaranty, and further agrees that the venue of any such action may be laid in King County, California, or Los Angeles County, California, and that (in addition to any other method provided by law for service of process) service of process in any such action may be made on Guarantor by the delivery of the process to Kent Mouton, Esq., whose present address is 15303 Ventura Boulevard, Suite 1400, Sherman Oaks, California 91403, whom Guarantor hereby appoints as Guarantors agent for service of process. Nothing contained in this Guaranty, however, shall be deemed to constitute, or to imply the existence of, any agreement by Administrative Agent or Lenders to bring any such action only in said courts or to restrict in any way any of Administrative Agents and Lenders remedies or rights to enforce the terms of this Guaranty as, when and where Administrative Agent shall deem appropriate, in its sole discretion.
11
24. No provision of this Guaranty may be changed, waived, revoked or amended without Administrative Agents prior written consent. Every provision of this Guaranty is intended to be severable. If any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court of competent jurisdiction, such illegality or invalidity will not affect the balance of the terms and provisions hereof, which terms and provisions will remain binding and enforceable.
25. This Guaranty may be executed in any number of counterparts each of which shall be deemed an original and all of which shall constitute one and the same guaranty with the same effect as if all parties had signed the same signature page. Any signature page of this Guaranty may be detached from any counterpart of this Guaranty and reattached to any other counterpart of this Guaranty identical in form hereto but having attached to it one or more additional signature pages.
26. No failure or delay on the part of Administrative Agent or Lenders to exercise any power, right or privilege under this Guaranty will impair any such power, right or privilege, or be construed to be a waiver of any default or an acquiescence therein, nor will any single or partial exercise of such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
27. This Guaranty embodies the entire agreement among the parties hereto with respect to the matters set forth herein, and supersedes all prior agreements among the parties with respect to the matters set forth herein. No course of prior dealing among the parties, no usage of trade, and no parol or extrinsic evidence of any nature may be used to supplement, modify or vary any of the terms hereof. There are no conditions to the full effectiveness of this Guaranty.
28. This Guaranty is in addition to all other guaranties of Guarantor and any other guarantors of Borrowers obligations to Administrative Agent and Lenders.
29. GUARANTOR ACKNOWLEDGES THAT GUARANTOR HAS BEEN AFFORDED THE OPPORTUNITY TO READ THIS DOCUMENT CAREFULLY AND TO REVIEW IT WITH AN ATTORNEY OF GUARANTORS CHOICE BEFORE SIGNING IT. GUARANTOR ACKNOWLEDGES HAVING READ AND UNDERSTOOD THE MEANING AND EFFECT OF THIS DOCUMENT BEFORE SIGNING IT.
30. When two or more persons or entities have executed this Guaranty, unless the context clearly indicates otherwise, all references herein to Guarantor shall mean the guarantors hereunder or either or any of them. All of the obligations and liabilities of said guarantors under this Guaranty (and the obligations of other guarantors under any similar or other guaranties of part or all of the Guaranteed Obligations) shall be joint and several. Suit may be brought against said guarantors, jointly and severally, or against any one or more of them (even if less than all), without impairing the rights of Administrative Agent and Lenders against the other or others of said guarantors; and Administrative Agent may settle with any one or more of said guarantors for such sums or sum as it may see fit and/or Administrative Agent may release any of said guarantors from all further liability to Administrative Agent and Lenders for such indebtedness without impairing the right of Administrative Agent and Lenders to demand
12
and collect the balance of such indebtedness from the other or others of said guarantors not so released; but it is agreed among said guarantors themselves, however, that such settlement and release shall in no way impair the rights of said guarantors as among themselves.
[Signatures on Following Page]
13
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first above written.
|
Guarantor |
||
|
|
||
|
KWI PROPERTY FUND I, L.P., |
||
|
a Delaware limited partnership, |
||
|
|
||
|
By: |
Kennedy Wilson Property Services, Inc., |
|
|
|
a Delaware corporation, |
|
|
|
its sole general partner |
|
|
|
|
|
|
|
By: |
/s/ John Prabhu |
|
|
Name: |
JOHN PRABHU |
|
|
Title: |
Vice President |
|
|
|
|
|
|
||
|
KW PROPERTY FUND II, L.P., |
||
|
a Delaware limited partnership, |
||
|
|
|
|
|
By: |
Kennedy Wilson Property Services, Inc., |
|
|
|
a Delaware corporation, |
|
|
|
its sole general partner |
|
|
|
|
|
|
|
By: |
/s/ John Prabhu |
|
|
Name: |
JOHN PRABHU |
|
|
Title: |
Vice President |
S-1
Exhibit 21.1
Subsidiary |
|
Incorp. |
KWP Financial, Inc. |
|
CA |
1860 Howe Avenue Corp |
|
Del |
KW Fund II - 1860 Howe General Partner LLC |
|
Del |
KW 1901 Corp. |
|
CA |
KWI 1901 Newport Plaza General Partner LLC |
|
Del |
KWI 1901 Newport Plaza General Partner LLC |
|
Del/CA |
KW 300 California Manager, LLC |
|
Del/CA |
KW Fund I - Hegenberger General Partner LLC |
|
Del |
K-W Portfolio Group I, Inc.(used for Cargill investments) |
|
Del |
Fifth and Madison, LLC |
|
Del/CA |
KW Portfolio Fifth and Madison Property Manager, LLC |
|
Del |
KW Portfolio XII Manager LLC |
|
Del |
KW Funds - 6100 Wilshire Manager, LLC |
|
Del/CA |
KW Portfolio 900 Fourth Property Manager LLC |
|
Del |
KW Portfolio XI Manager LLC |
|
Del |
KWP Financial IX, Inc. |
|
CA |
KWI Ashford Westchase Buildings General Partner LLC |
|
Del/TX |
KWI Ashford Westchase Buildings, LP |
|
Del |
KW James Street Member, LLC |
|
CA |
Kennedy Wilson Auction Group, Inc. |
|
CA |
KW BASGF II Manager, LLC |
|
Del/CA |
KW Pinole Equity LLC |
|
CA |
KWI Briarcroft General Partner LLC |
|
Del/TX |
Subsidiary |
|
Incorp. |
KW Paramount GP, LLC |
|
Del |
KW Paramount Investors, LLC |
|
CA |
KW Paramount Member, LLC |
|
CA |
KW/HFC Paramount, LP |
|
Del |
Fairways 340 Corp |
|
Del |
KWI Continental Building, LP |
|
Del |
KWI Continental General Partner LLC |
|
Del/TX |
KW/WDC Norwalk LLC |
|
Del |
Mokuleia Farrington Shores, LLC |
|
Hawaii/Del Active |
Mokuleia Shores Holder LLC |
|
Hawaii |
68-540 Farrington LLC |
|
Del |
KW Dillingham Aina LLC |
|
Del |
Panako LLC |
|
Del |
North Shores Water Company LLC |
|
Hawaii/CA |
DV Estates Corp. |
|
CA |
KWP Fairways GP, Inc. |
|
TX |
Fairways 340,LLC |
|
Del |
Glendora Partners |
|
CA |
KW Alameda Member LLC |
|
CA, Del |
Kennedy-Wilson Properties Ltd |
|
Del |
Kennedy-Wilson Properties, Ltd |
|
ILL. |
Kennedy-Wilson, Inc. |
|
Del |
K-W Properties |
|
CA |
2
Subsidiary |
|
Incorp. |
KW Fund II Howe CC General Partner LLC |
|
Del |
KW Fund II Howe CC LP |
|
Del |
KW Indigo Manager, LLC |
|
CA |
KW Davis Equity LLC |
|
CA |
KW James Street Manager, LLC |
|
Del/WA |
KW Hawaii Development LLC |
|
CA, Hawaii |
K-W Kohanaiki Group, Inc. |
|
CA |
K-W Kohanaiki LLC |
|
CA |
KW Hawaii, Inc. |
|
CA/Del |
Kohanaiki Shores LLC |
|
Del |
KS Developers LLC |
|
Hawaii |
KW Kona Investors Manager, LLC |
|
Del/CA |
KW Kona Investors, LLC |
|
Del/CA |
KW America Multifamily Manager, LLC |
|
CA |
KW BASGF II Manager, LLC |
|
Del |
Kennedy Wilson Fund Management Group, LLC |
|
CA |
KW Multi-Family Management Group, LLC |
|
CA |
Kennedy-Wilson Property Equity II, Inc. |
|
Del |
Kennedy-Wilson Property Services II, Inc. |
|
Del |
Kennedy-Wilson Property Special Equity II, Inc. |
|
Del |
Kennedy-Wilson Property Equity III, Inc. |
|
Del/CA |
Kennedy-Wilson Property Services III GP, LLC |
|
Del/CA |
Kennedy-Wilson Property Services III, LLC |
|
Del/CA |
3
Subsidiary |
|
Incorp. |
Kennedy-Wilson Property Special Equity III, LLC |
|
Del/CA |
Kennedy-Wilson Property Equity, Inc. |
|
Del |
Kennedy-Wilson Property Services, Inc. |
|
Del |
Kennedy-Wilson Property Special Equity, Inc |
|
Del |
KWIBAM Funding LLC |
|
Del |
K-W Austin I, Inc. |
|
Del |
KW La Mesa Land Partners, LLC |
|
CA |
4
Consent of Independent Registered Public Accounting Firm
We consent to the use in this Registration Statement on Form S-4 of Prospect Acquisition Corp. of our report dated March 13, 2009, relating to our audits of the financial statements of Prospect Acquisition Corp., appearing in the Prospectus, which is part of this Registration Statement. Our report dated March 13, 2009 includes an emphasis paragraph relating to an uncertainty as to Prospect Acquisition Corp.'s ability to continue as a going concern.
We also consent to the reference to our firm under the caption "Experts" in the Prospectus.
/s/ McGladrey & Pullen, LLP
McGLADREY & PULLEN, LLP
New York, New York
September 24, 2009
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Kennedy Wilson, Inc.:
We consent to the use of our report dated March 20, 2009, except for notes 4, 22, and 23 as to which the date is September 24, 2009, with respect to the consolidated balance sheets of Kennedy Wilson, Inc. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of income and comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2008, included herein and to the reference to our firm under the heading Experts in this Registration Statement on Form S-4. Our report refers to the adoption of Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements an Amendment of ARB No. 51 .
/s/ KPMG LLP
Los Angeles, California
September 24, 2009
Exhibit 99.3
Consent of Houlihan Smith & Company, Inc.
We hereby consent to the inclusion of our opinion letter, dated September 5, 2009, to the Board of Directors of Prospect Acquisition Corp. (Prospect), as an Appendix to, and to the references to such opinion and our name in, the joint proxy statement/prospectus forming part of this Registration Statement on Form S-4. By giving such consent, we do not thereby admit that we are experts with respect to any part of such Registration Statement within the meaning of the term expert as used in, or that we come within the category of persons whose consent is required under, the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission promulgated thereunder.
/s/ Houlihan Smith & Company Inc.
Chicago, Illinois
September 23, 2009
Exhibit 99.4
Consent of
Kent Mouton
Pursuant to Rule 438 of Regulation C promulgated under the Securities Act of 1933, as amended, in connection with the Registration Statement on Form S-4 (as amended, the Registration Statement ) of Prospect Acquisition Corp. (the Company ), the undersigned hereby consents to being named and described in the Registration Statement and in any and all amendments or supplements thereto to be filed with the U.S. Securities and Exchange Commission as a person about to become a director of the Company and to the filing or attachment of this Consent with such Registration Statement and any amendment or supplement thereto.
IN WITNESS WHEREOF, the undersigned has executed this Consent as of the 15th day of September, 2009.
|
|
|
/s/ Kent Mouton |
Exhibit 99.5
Consent of
Jerry R. Solomon
Pursuant to Rule 438 of Regulation C promulgated under the Securities Act of 1933, as amended, in connection with the Registration Statement on Form S-4 (as amended, the Registration Statement ) of Prospect Acquisition Corp. (the Company ), the undersigned hereby consents to being named and described in the Registration Statement and in any and all amendments or supplements thereto to be filed with the U.S. Securities and Exchange Commission as a person about to become a director of the Company and to the filing or attachment of this Consent with such Registration Statement and any amendment or supplement thereto.
IN WITNESS WHEREOF, the undersigned has executed this Consent as of the 15th day of September, 2009.
|
/s/ Jerry R. Solomon |
Exhibit 99.6
Consent of
Norm Creighton
Pursuant to Rule 438 of Regulation C promulgated under the Securities Act of 1933, as amended, in connection with the Registration Statement on Form S-4 (as amended, the Registration Statement ) of Prospect Acquisition Corp. (the Company ), the undersigned hereby consents to being named and described in the Registration Statement and in any and all amendments or supplements thereto to be filed with the U.S. Securities and Exchange Commission as a person about to become a director of the Company and to the filing or attachment of this Consent with such Registration Statement and any amendment or supplement thereto.
IN WITNESS WHEREOF, the undersigned has executed this Consent as of the 16th day of September, 2009.
|
/s/ Norm Creighton |
Exhibit 99.7
Consent of
Thomas Sorell
Pursuant to Rule 438 of Regulation C promulgated under the Securities Act of 1933, as amended, in connection with the Registration Statement on Form S-4 (as amended, the Registration Statement ) of Prospect Acquisition Corp. (the Company ), the undersigned hereby consents to being named and described in the Registration Statement and in any and all amendments or supplements thereto to be filed with the U.S. Securities and Exchange Commission as a person about to become a director of the Company and to the filing or attachment of this Consent with such Registration Statement and any amendment or supplement thereto.
IN WITNESS WHEREOF, the undersigned has executed this Consent as of the 16th day of September, 2009.
|
/s/ Thomas Sorell |
Exhibit 99.8
Consent of
Cathy Hendrickson
Pursuant to Rule 438 of Regulation C promulgated under the Securities Act of 1933, as amended, in connection with the Registration Statement on Form S-4 (as amended, the Registration Statement ) of Prospect Acquisition Corp. (the Company ), the undersigned hereby consents to being named and described in the Registration Statement and in any and all amendments or supplements thereto to be filed with the U.S. Securities and Exchange Commission as a person about to become a director of the Company and to the filing or attachment of this Consent with such Registration Statement and any amendment or supplement thereto.
IN WITNESS WHEREOF, the undersigned has executed this Consent as of the 15th day of September, 2009.
|
/s/ Cathy Hendrickson |
Exhibit 99.9
Consent of
William J. McMorrow
Pursuant to Rule 438 of Regulation C promulgated under the Securities Act of 1933, as amended, in connection with the Registration Statement on Form S-4 (as amended, the Registration Statement ) of Prospect Acquisition Corp. (the Company ), the undersigned hereby consents to being named and described in the Registration Statement and in any and all amendments or supplements thereto to be filed with the U.S. Securities and Exchange Commission as a person about to become a director of the Company and to the filing or attachment of this Consent with such Registration Statement and any amendment or supplement thereto.
IN WITNESS WHEREOF, the undersigned has executed this Consent as of the 15th day of September, 2009.
|
|
|
/s/ William J. McMorrow |