Exhibit 10.5


 


STOCK PURCHASE AGREEMENT


 


STOCK PURCHASE AGREEMENT
(this “Agreement”) made as of this 12th day of November, 2009 between
Prospect Acquisition Corp., a Delaware corporation (“Buyer” or “Prospect”),
and the signatory on the execution page hereof (“Seller”).


 


WHEREAS, Buyer was organized
for the purpose of acquiring, through a merger, capital stock exchange, asset
acquisition or other similar business combination, an operating business (“Business
Combination”); and


 


WHEREAS, Buyer consummated
an initial public offering in November, 2007 (“IPO”) in connection with
which it raised gross proceeds of approximately $250 million, a significant
portion of which was placed in a trust account pending the consummation of a
Business Combination, or the dissolution and liquidation of Buyer in the event
it is unable to consummate a Business Combination on or prior to November 14,
2009; and


 


WHEREAS, Buyer has entered
into that certain Agreement and Plan of Merger dated September 8, 2009, as
amended by Amendment No. 1 and Amendment No. 2 to the Agreement and
Plan of Merger dated October 22, 2009 and October 26, 2009,
respectively (the “Merger Agreement”), by and among Prospect, KW Merger
Sub Corp., a newly-formed Delaware corporation and wholly-owned subsidiary of
Prospect (“Merger Sub”) and Kennedy-Wilson, Inc. (“Kennedy-Wilson”),
which provides for the merger (the “Merger”) of Merger Sub with and into
Kennedy-Wilson as a result of which Kennedy-Wilson will become a wholly-owned
subsidiary of Prospect and outstanding shares of Kennedy-Wilson’s capital stock
will be exchanged for common stock of Prospect; and


 


WHEREAS, the approval of the
Merger is contingent upon, among other things, the affirmative vote of holders
of a majority of the outstanding common shares of Prospect issued in Prospect’s
IPO and present and eligible to vote at the special meeting called to approve
the Merger; and


 


WHEREAS, pursuant to certain
provisions in Buyer’s certificate of incorporation, a holder of shares of Buyer’s
common stock issued in the IPO may, if it votes against the Merger, demand that
Buyer convert such common shares into cash (“Conversion Rights”); and


 


WHEREAS the Merger cannot be
consummated if holders of 30% or more of Prospect common stock issued in the
IPO exercise their Conversion Rights; and


 


WHEREAS, Seller has agreed
to sell to Buyer and Buyer has agreed to purchase from Seller the common shares
set forth on the execution page of this Agreement (“Shares”) for
the purchase price per share set forth therein (“Purchase Price Per Share”)
and for the aggregate purchase price set forth therein (“Aggregate Purchase
Price”).


 


NOW, THEREFORE, in
consideration of the mutual covenants hereinafter set forth and other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:


 

















 


1.             Purchase. Subject to Section 6,
Seller hereby sells to Buyer and Buyer hereby purchases from Seller at the
Closing (as defined in Section 3(c)) the Shares at the Purchase Price Per
Share, for the Aggregate Purchase Price.


 


2.             Agreement not to Convert;
Appointment of Proxy and Attorney-in-Fact.  In further consideration of the Aggregate
Purchase Price, Seller hereby agrees it has not and will not exercise its
Conversion Rights or, if it has already exercised its Conversion Rights, it
hereby withdraws and revokes such exercise and will execute all necessary
documents and take all actions required in furtherance of such revocation.
Seller acknowledges that the record date to vote on the proposals set forth in
the proxy statement/prospectus (the “Proxy Statement”) filed by Buyer
with the U.S. Securities Exchange Commission (the “SEC”) has passed.
Accordingly, solely with respect to the vote for the Merger and the other
proposals set forth in the Proxy Statement, Seller hereby irrevocably appoints
David A. Minella and James J. Cahill and each of them each with full power of
substitution, as Seller’s proxy and attorney-in-fact, to the full extent of
Seller’s rights with respect to the Shares (and any and all other shares or
securities or rights issued or issuable in respect thereof) to vote in such
manner as each such person or his substitute shall in his sole discretion deem
proper, and to otherwise act (including without limitation acting by written consent)
with respect to all the Shares at any meeting of stockholders (whether annual
or special and whether or not an adjourned meeting) of Buyer held on or prior
to November 14, 2009. This proxy is coupled with an interest and is
irrevocable. Execution by Seller of this Agreement shall revoke, without
further action, all prior proxies granted by Seller at any time with respect to
the Shares (and such other shares or other securities) and no subsequent
proxies will be given by Seller (and if given will be deemed not to be
effective).


 


3.             Closing Matters.


 


(a)           Within one business day of
the date of this Agreement, (i) Seller shall provide Buyer with a true and
correct copy of the voting instruction form with respect to the Shares held by
Seller indicating the financial institution through which such shares are held
and the control number provided by Broadridge Financial Solutions (or other
similar service provider) regarding the voting of the Shares or written
confirmation of such information as would appear on the voting instruction
form; and (ii) Buyer shall send the notice attached as Annex 1 hereto to
Prospect’s transfer agent.


 


(b)           Prior to the Closing, Seller
shall deliver or cause to be delivered to Buyer appropriate instructions for
book entry transfers of ownership of the Shares from Seller to Buyer.


 


(c)           The closing of the purchase
and sale of the Shares (“Closing”) will occur on the date on which Buyer’s
trust account is liquidated after the Merger is consummated (the “Closing
Date”). At the Closing, Buyer shall pay Seller the Aggregate Purchase Price
by wire transfer from Prospect’s trust account of immediately available funds
to an account specified by Seller and Seller shall deliver the Shares to Buyer
electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal at
Custodian) System to an account specified by Buyer. It shall be a condition to
the obligation of Buyer on the one hand and Seller on the other hand, to
consummate the transfer of the Shares contemplated hereunder that the other
party’s representations and warranties are true and correct on the Closing Date
with the same effect as though made on such date, unless waived in writing by
the party to whom such representations and warranties are made.


 

















 


4.             Representations and Warranties
of the Seller. Seller hereby represents and warrants to Buyer on
the date hereof and on the Closing that:


 


(a)           Sophisticated Seller. Seller is
sophisticated in financial matters and is able to evaluate the risks and
benefits attendant to the sale of Shares to Buyer.


 


(b)           Independent Investigation. Seller, in
making the decision to sell the Shares to Buyer, has not relied upon any oral
or written representations or assurances from Buyer or any of its officers,
directors or employees or any other representatives or agents of Buyer. Seller
has had access to all of the filings made by Prospect with the SEC, pursuant to
the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and the Securities Act of 1933, as amended, in each case to the extent
available publicly via the SEC’s Electronic Data Gathering, Analysis and
Retrieval system.


 


(c)           Authority. This
Agreement has been validly authorized, executed and delivered by Seller and,
assuming the due authorization, execution and delivery thereof by Buyer, is a
valid and binding agreement enforceable in accordance with its terms, subject
to the general principles of equity and to bankruptcy or other laws affecting
the enforcement of creditors’ rights generally. The execution, delivery and
performance of this Agreement by Seller does not and will not conflict with,
violate or cause a breach of, constitute a default under, or result in a
violation of (i) any agreement, contract or instrument to which Seller is
a party which would prevent Seller from performing its obligations hereunder or
(ii) any law, statute, rule or regulation to which Seller is subject.


 


(d)           No Legal Advice from Buyer.  Seller is not relying on any statements or
representations of Buyer or any of its representatives or agents for legal, tax
or investment advice with respect to this Agreement or the transactions
contemplated by the Agreement.


 


(e)           Ownership of Shares. Seller is the
legal and beneficial owner of the Shares and will transfer to Buyer on the
Closing Date good and marketable title to the Shares free and clear of any
liens, claims, security interests, options, charges or any other encumbrance
whatsoever. The Seller beneficially owned all of the Shares as of the close of
the trading day on October 26, 2009 and has the sole right to exercise
conversion rights with respect to all of the Shares.


 


(f)            [Intentionally omitted.]


 


(g)           Seller Taxes . Seller
understands that Seller (and not the Buyer) shall be responsible for any and
all tax liabilities of Seller that may arise as a result of the transactions
contemplated by this Agreement.


 


(h)           Aggregate Purchase Price
Negotiated. Buyer has made no Purchase Price Per Share offer
to any other party in excess of such Purchase Price Per Share being offered to
Seller.  If Buyer offers a Purchase Price
Per Share to any party in excess of the Purchase Price Per Share offered to
Seller (such offer, a “Greater Offer”), Buyer shall (i) inform
Seller in writing of the Greater Offer and (ii) pay to Seller the
difference between (A) the Greater Offer and (ii) the Purchase Price
Per Share offered to Seller.  For
purposes of this Section 4(h), “Purchase Price Per Share” shall not
include any fees paid to a third party “aggregator” engaged 


 

















 


by the Buyer to buy shares
from Buyer stockholders who have indicated an intention to convert their shares
and/or vote against the Merger.


 


5.             Representations and
Warranties of Buyer . Buyer hereby represents to the Seller that:


 


(a)           Sophisticated Buyer. Buyer is
sophisticated in financial matters and is able to evaluate the risks and
benefits attendant to the purchase of Shares from Seller.


 


(b)           Independent Investigation. Except for
the representations of Seller contained in this Agreement, Buyer, in making the
decision to purchase the Shares from Seller, has not relied upon any oral or
written representations or assurances from Seller or any of its officers,
directors, partners or employees or any other representatives or agents of
Seller.


 


(c)           Authority. This
Agreement has been validly authorized, executed and delivered by Buyer and
assuming the due authorization, execution and delivery thereof by Seller, is a
valid and binding agreement enforceable in accordance with its terms, subject
to the general principles of equity and to bankruptcy or other laws affecting
the enforcement of creditors’ rights generally. The execution, delivery and
performance of this Agreement by Buyer does not and will not conflict with,
violate or cause a breach of, constitute a default under, or result in a
violation of (i) any agreement, contract or instrument to which Buyer is a
party which would prevent Buyer from performing its obligations hereunder or (ii) any
law, statute, rule or regulation to which Buyer is subject.


 


(d)           No Legal Advice from Seller. Buyer
acknowledges that it has had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with Buyer’s own legal counsel and
investment and tax advisors.  Except for
the representations of Seller contained in this Agreement, Buyer is relying
solely on such counsel and advisors and not on any statements or
representations of Seller or any of its representatives or agents for legal,
tax or investment advice with respect to this Agreement or the transactions
contemplated by this Agreement.


 


6.             Termination.


 


(a)           Notwithstanding any
provision in this Agreement to the contrary, this Agreement shall become null
and void and of no force and effect upon the earlier to occur of (i) the
termination of the Merger Agreement or (ii) 11:59 Eastern Time on November 14,
2009 if the Merger has not been consummated by such time. Notwithstanding any
provision in this Agreement to the contrary, Buyer’s obligation to purchase the
Shares from Seller shall be conditioned on the consummation of the Merger.


 


(b)           The Seller may terminate
this Agreement at any time; provided that Sections 2 and 15 shall survive any
termination of this Agreement pursuant to this Section 6(b).


 


7.             [Intentionally omitted.]


 


8.             Acknowledgement; Waiver. Seller (i) acknowledges
that Buyer may possess or have access to material non-public information which
has not been communicated to Seller; (ii) hereby waives any and all
claims, whether at law, in equity or otherwise, that he, she, or it 


 

















 


may now have or may
hereafter acquire, whether presently known or unknown, against Buyer or any of
its officers, directors, employees, agents, affiliates, subsidiaries,
successors or assigns relating to any failure to disclose any non-public
information in connection with the transaction contemplated by this Agreement,
including without limitation, any claims arising under Rule 10-b(5) of
the Exchange Act; and (iii) is aware that Buyer is relying on the truth of
the representations set forth in Section 4 of this Agreement and the
foregoing acknowledgement and waiver in clauses (i) and (ii) above,
respectively, in connection with the transactions contemplated by this
Agreement.


 


9.             Counterparts; Facsimile. This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same instrument. This Agreement or any counterpart
may be executed via facsimile transmission, and any such executed facsimile
copy shall be treated as an original.


 


10.           Governing Law. This
Agreement shall for all purposes be deemed to be made under and shall be
construed in accordance with the laws of the State of New York. Each of the
parties hereby agrees that any action, proceeding or claim against it arising
out of or relating in any way to this Agreement shall be brought and enforced
in the courts of the State of New York or the United States District Court for
the Southern District of New York, and irrevocably submits to such
jurisdiction, which jurisdiction shall be exclusive. Each of the parties hereby
waives any objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum.


 


11.           Remedies. Each of the
parties hereto acknowledges and agrees that, in the event of any breach of any
covenant or agreement contained in this Agreement by the other party, money
damages may be inadequate with respect to any such breach and the non-breaching
party may have no adequate remedy at law. It is accordingly agreed that each of
the parties hereto shall be entitled, in addition to any other remedy to which
they may be entitled at law or in equity, to seek injunctive relief and/or to
compel specific performance to prevent breaches by the other party hereto of
any covenant or agreement of such other party contained in this Agreement.


 


12.           Binding Effect; Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective legal representatives, successors and permitted assigns.
This Agreement shall not be assigned by either party without the prior written
consent of the other party hereto.


 


13.           Headings. The
descriptive headings of the Sections hereof are inserted for convenience only
and do not constitute a part of this Agreement.


 


14.           Entire Agreement; Changes in
Writing. This Agreement constitutes the entire agreement among the parties
hereto and supersedes and cancels any prior agreements, representations and
warranties, whether oral or written, among the parties hereto relating to the
transaction contemplated hereby. Neither this Agreement not any provision
hereof may be changed or amended orally, but only by an agreement in writing
signed by the other party hereto.


 


15.           Trust Waiver. Prospect’s
initial public offering was consummated on November 14, 2007 as a result
of which it received net proceeds of $247 million which are held in a trust 


 

















 


fund established by Prospect
for the benefit of its public stockholders (the “Trust Fund”). The Trust
Fund is invested in U.S. government securities in a trust account at JPMorgan
Chase Bank, NA and held in trust by Continental Stock Transfer & Trust
Company (the “Trustee”) pursuant to the Investment Management Trust
Account Agreement, dated as of November 14, 2007 (the “Trust Agreement”),
between Prospect and Trustee. Seller understands that, except for a portion of
the interest earned on the amounts held in the Trust Fund, Prospect may
disburse monies from the Trust Fund only: (a) to Prospect in limited
amounts from time to time (and in no event more than $2,750,000 in total) in order
to permit Prospect to pay its operating expenses; (b) if Prospect
completes a 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 Prospect;
and (c) if Prospect fails to complete a Business Combination within the
allotted time period and liquidates, subject to the terms of the Trust
Agreement, to Prospect in limited amounts to permit Prospect to pay the costs
and expenses of its liquidation and dissolution, and then to Prospect’s public
stockholders (as such term is defined in the Trust Agreement). Seller agrees
that it does not now have, and shall not at any time have, other than with
respect to the Aggregate Purchase Price to be paid to Seller in connection with
this Agreement, any claim to, or make any claim against, the Trust Fund or any
asset contained therein, regardless of whether such claim arises as a result
of, in connection with or relating in any way to, the business relationship
between Seller, on the one hand, and Prospect, on the other hand, this
Agreement, or any other agreement or any other matter, and regardless of
whether such claim arises based on contract, tort, equity or any other theory
of legal liability. Seller hereby irrevocably waives any and all claims it may
have, now or in the future (in each case, however, prior to the consummation of
a Business Combination), and will not seek recourse against, the Trust Fund for
any reason whatsoever in respect thereof. In the event Seller commences any
action or proceeding based upon, in connection with, relating to or arising out
of any matter relating to Prospect, which proceeding seeks, in whole or in
part, relief against the Trust Fund or the public stockholders of Prospect,
whether in the form of money damages or injunctive relief, Prospect shall be
entitled to recover from Seller the associated legal fees and costs in
connection with any such action.


 


[Signature
Page Follows]


 

















 


IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date set forth on the first page of
this Agreement.


 


	
   

  	
  PROSPECT ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James J. Cahill

  
	
   

  	
  Name: James J. Cahill

  
	
   

  	
  Title: Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  IBS (MF) LTD. IN RESPECT OF
  GLAZER MERGER ARBITRAGE SERIES

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul Glazer

  
	
   

  	
  Name: Paul Glazer

  
	
   

  	
  Title:  President

  



 


 


Purchase Price Per Share: $
9.95


Number of Shares: 93,860


Aggregate Purchase Price:
$933,907.00


 

















 


PROSPECT ACQUISITION CORP.


9130 GALLERIA COURT, SUITE 318


NAPLES, FLORIDA 34109


 


November 12, 2009


 


Continental Stock Transfer &
Trust Company


17 Battery Place


New York, New York 10004


 


Attn:


 


Re:
Trust Account No. [NUMBER]


 


Gentlemen:


 


Prospect Acquisition Corp.
(the “Company”) is providing these irrevocable instructions to you in
connection with the above described Trust Account established in connection
with and pursuant to an Investment Management Trust Agreement dated as of November 14,
2007 between the Company and Continental Stock Transfer & Trust
Company as Trustee (the “Trust Agreement”). Upper case terms used herein
shall have the meanings ascribed to such terms in the Trust Agreement.


 


In the event the Company
delivers to you a Termination Letter substantially in the form of Exhibit A
to the Trust Agreement, in addition to the other documents required to be
delivered pursuant to Exhibit A of the Trust Agreement, assuming you are
the Trustee on such date, then, in consideration for the electronic transfer of
93,860 shares of the Company’s common stock, using the Depository Trust Company’s
DWAC (Deposit/Withdrawal at Custodian) System, to an account specified by the
Company, on the Consummation Date you are irrevocably instructed to deliver as
the initial distribution of funds from the Trust Account the sum of
$933,907.00, which must be delivered in accordance with the bank wire
instructions provided to you below.


 


[INSTRUCTIONS]


 


 

















 


In order to expedite
payment, attached is a Form W-8IMY for IBS (MF) Ltd in respect of Glazer Merger
Arbitrage Series.


 


The address for the seller
is 237 Park Avenue, Suite 900, New York, NY 10017. The contact person for
the seller is David Barlow. He can be reached at 212-808-7308.


 


Kindly acknowledge where
indicated below, your receipt and understanding of these instructions and
return a copy to Bingham McCutchen LLP, attn: Kate Ness, facsimile number (617)
951-8736.


 


A facsimile signed and
electronically delivered copy of this letter shall be deemed an original.


 


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT ACQUISITION CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  James J. Cahill

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  



 


 


	
  Acknowledged and Agreed:

  	
   

  
	
   

  	
   

  	
   

  
	
  CONTINENTAL STOCK
  TRANSFER & TRUST COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IBS (MF) LTD. IN RESPECT
  OF GLAZER MERGER ARBITRAGE SERIES

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title: