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                                 PROMISSORY NOTE

$10,000,000                                                         June 3, 1998

         FOR VALUED RECEIVED, the undersigned, KENNEDY-WILSON, a Delaware
corporation ("the Company"), hereby promises to pay to the order of FBR ASSET
INVESTMENT CORPORATION, Virginia corporation (the "Lender") or to order, the
principal sum of TEN MILLION DOLLARS ($10,000,000), or so much thereof as shall
have been advanced to the Company by the Lender as line of credit loans and
remain unpaid under the provisions of the Loan and Warrant Agreement (as
hereafter defined), whichever is less, in lawful money of the United States of
America, together with interest on the unpaid principal balance from day-to-day
remaining computed from the date hereof until Maturity at the rate of 12% per
annum (the "Interest Rate").

         1. This Note is issued pursuant to the Loan and Warrant Agreement dated
June 3, 1998 between the Company and the Lender (the "Loan and Warrant
Agreement").

         2. For purposes of calculating interest accrued hereon at the Interest
Rate, interest on this Note shall be calculated on the basis of the actual days
elapsed over a 365- or 366-day year, as the case may be.

         Principal and accrued interest on this Note, computed as aforesaid,
shall be due and payable as follows:

                  (i)  principal shall be payable at Maturity, and

                  (ii) interest shall be payable monthly on the last day of each
         month until Maturity, commencing July 31, 1998.

         3. For purposes hereof, "Maturity" means the first to occur of (i) the
closing of a public offering of common stock by the Company and (ii) December
31, 1998, the date on which all outstanding principal and accrued but unpaid
interest is due under this Note.

         5. Should the principal of, or any installment of the principal or
interest on, this Note become due and payable on any day other than a business
day, the maturity thereof shall be extended to the next succeeding business day
and interest shall be payable with respect to such extension. Payments made to
the Lender by the Company hereunder shall be applied first to accrued interest
and then to principal.

         6. Except as herein provided, the Company waives demand for payment,
presentment, protest, notice of protest and non-payment, or other notice of
default, notice of acceleration and intention to accelerate, and agrees that its
liability under this Note shall not be affected by any renewal or extension in
the time of payment hereof, or by any indulgences, or by any release or change
in any security for the payment of this Note, and hereby consents to any and all
renewals, extensions, indulgences, releases or changes, regardless of the number
of such renewals, extensions, indulgences, release or changes.
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         7. No waiver by the Lender of any of its rights or remedies hereunder
or under any other document evidencing or securing this Note or otherwise shall
be considered a waiver of any other subsequent right to remedy of the Lender; no
delay or omission in the exercise or enforcement by the Lender of any rights or
remedies shall ever be construed as a waiver of any right or remedy of the
Lender; and no exercise or enforcement of any such rights or remedies shall ever
be held to exhaust any right or remedy of the Lender.

         8. An "Event of Default" for the purposes of this Note shall mean any
Event of Default as defined in Section 8 of the Loan and Warrant Agreement. Upon
the occurrence of an Event of Default, the holder hereof may, at its option,
declare the entire unpaid balance of principal and accrued interest on this Note
to be immediately due and payable; provided, however, that with respect to any
Event of Default set forth in Section 8(a)(7) of the Loan and Warrant Agreement,
such Event of Default will automatically cause the principal and accrued
interest on this Note to become immediately due and payable.

         9. The Company may prepay its obligation pursuant to this Note at any
time by tendering to the Lender the then outstanding principal balance hereof,
together with accrued but unpaid interest.

         10. Notwithstanding anything contained in this Note to the contrary,
the Lender shall never be deemed to have contracted for or be entitled to
receive, collect or apply as interest on this Note any amount in excess of the
amount permitted an calculated at the Maximum Rate (defined below), and, in the
event the Lender ever receives, collects or applies as interest any amount in
excess of the amount permitted and calculated at the Maximum Rate, such amount
which would be excessive interest shall be applied to the reduction of the
unpaid principal balance of this Note, and, if the principal balance of this
Note is paid in full, any remaining excess shall forthwith be paid to the
Company.

         The term "Maximum Rate, " as used herein, shall mean, with respect to
the holder hereof, the maximum nonusurious interest rate, if any, that at any
time, or from time to time, may be contracted for, taken, reserved, charged, or
received on the indebtedness evidenced by this Note under the laws which are
presently in effect of the United States and the State of New York applicable to
such holder and such indebtedness or, to the extent permitted by applicable law,
under such applicable laws of the United States and the State of New York which
may hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.

         11. This Note is being executed and delivered, and is intended to be
performed in the State of New York. Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of New York shall govern the validity, construction, enforcement and
interpretation of this Note.

         12. If this Note is placed in the hands of an attorney for collection,
and if it is collected through any legal proceedings at law or in equity or in
bankruptcy, receivership or other court proceedings, the Company promises to pay
all costs and expenses of collection including, but not limited to, court costs
and the reasonable attorneys' fees of the holder hereof.


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         The address for the Company for all purposes contained in this Note and
for the notices hereunder shall be: 530 Wilshire Boulevard, #101, Santa Monica,
California 90401.

         The address of the Lender for all purposes contained in this Note and
for all notices hereunder shall be: 1001 Nineteenth Street, North, Arlington,
Virginia 22209.

         Executed as of the day and year first above written.

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                                 By:      /s/     Richard Mandell
                                       -----------------------------------------
                                 Name:             Richard Mandell
                                       -----------------------------------------
                                 Its:              President
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