Document:

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 Company’s 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 Company’s
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 Company’s
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 Company’s
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 Company’s
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 Company’s
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 Awardee’s fully satisfying any of the above
service requirements, the Awardee’s 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 Company’s or Affiliate’s (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 Company’s or
Affiliate’s main headquarters) that is more than 50 miles from the Awardee’s
principal place of work and more than 50 miles from the 

 

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Awardee’s
principal residence, (B) eliminating or materially reducing the Awardee’s
duties for the Company or Affiliate or (C) materially reducing the Awardee’s
base pay (or base compensation).

 

For
purposes of this Section 4, the term “Company’s assets under management”
shall mean the value of assets under management by the Company, as reflected in
the footnotes to the Company’s 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 Awardee’s
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.

 

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10.           Withholding.

 

The
Company or an Affiliate shall be entitled to deduct and withhold the minimum
amount necessary in connection with the Awardee’s 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 Awardee’s 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

  
					

 

4Exhibit 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:

 

1.             Definitions.

 

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:

 

A.            “Business Day” means any day, other than a Saturday or
Sunday or a national or California state holiday or a day on which banking
institutions in the States of California and New York are authorized or
obligated by law, regulation or executive order to close.

 

B.            “Change of Control Event”
shall occur if
the Company shall:

 

(i)            sell, convey or dispose of all or
substantially all of its assets (the presentation of any such transaction for
stockholder approval being conclusive evidence 

 

 

that such transaction involves the sale of all or substantially all of
the assets of the Company); or

 

(ii)           be acquired by or reorganized into or
with another entity, whether by means of merger, consolidation, reorganization
or any other transaction, in which the holders of Common Stock of the Company
existing immediately prior to such transaction do not, immediately after the
consummation of such transaction, own a majority of both the outstanding voting
stock and the equity interests of the surviving, purchasing or newly resulting
Company.

 

C.            “Change of Control
Purchase Price” means,
with respect to any payment to the Holder in connection with a Change of
Control Event pursuant to Section 4.D(ii) hereof, cash equal to the
product of (i) the Fair Value of one share of Common Stock as of the date
the notice of the Change of Control Event was issued to the Holder, multiplied
by (ii) the number of shares of Common Stock then issuable upon the conversion
of this Note.

 

D.            “Common Stock” means the Common Stock of the Company,
$.01 par value.

 

E.             “Conversion Date” means for any Optional Conversion (as
defined in Section 4.A below), the date which must be a Business Day) on
which this Note is surrendered to the Company for conversion.

 

F.             “Conversion Price” means $40.00 per share of Common Stock,
subject to adjustment as provided in Section 4.D hereof.

 

G.            “Event of Default” has the meaning set forth in the
Securities Purchase Agreement.

 

H.            “Fair Value” of any share of Common Stock as of any
date herein specified shall mean the average of the daily closing prices for
the 30 consecutive trading days commencing 45 trading days before the day in
question The closing price for each day shall be (i) if such shares are
listed or admitted for trading on any national securities exchange, the last
sale price of such security, regular way, or the average of the closing bid and
asked prices thereof if no such sale occurred, in each case as officially
reported on the principal securities exchange on which such shares are listed,
or (ii) if not reported as described in clause (i), the average of the
closing bid and asked prices of such shares in the over-the-counter market as
shown by the National Association of Securities Dealers, Inc. Automated
Quotation System, or any similar system of automated dissemination of
quotations of securities prices then in common use, if so quoted, as reported
by any member firm of the New York Stock Exchange selected by the Company or (iii) if
not quoted as described in clause (ii), the average of the closing bid and
asked prices for such shares as reported by the National Quotation Bureau
Incorporated or any similar successor organization, as reported by any member
firm of the New York Stock Exchange selected by the Company. If such shares of
Common Stock are quoted on a national securities or central market system in
lieu of a market or quotation system 

 

2

 

described above, the closing price shall be determined in the manner
set forth in clause (i) of the preceding sentence if actual transactions
are reported and in the manner set forth in clause (ii) of the preceding
sentence if bid and asked prices are reported but actual transactions are not.

 

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.

 

I.              “Junior Subordinated
Indenture” means
that certain Junior Subordinated Indenture, dated as of January 31, 2007,
between the Company and The Bank of New York Trust Company, National
Association, as Trustee, as amended, restated, supplemented or otherwise
modified from time to time.

 

J.             “Preferred Stock” means shares of the Company which shall
be entitled to preference or priority over any other shares of the Company in
respect of either the payment of dividends or the distribution of assets upon
liquidation.

 

K.            “Securities” means Common Stock, Preferred Stock,
Convertible Securities, Purchase Rights and any other shares of capital stock
or equity interests of the Company, whether or not issued or outstanding on the
date of this Note.

 

L.             “Voting Stock” means capital stock (or other equity
interests) of any class or classes of the Company, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote in the election
of corporate directors (or individuals performing similar functions) of the
Company or which permit the holders thereof to control the management of the
Company.

 

3

 

2.             Interest: No Prepayment.

 

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.

 

3.             Events of Default.

 

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.             Conversion.

 

A.            Conversion at the Option of the Holder. The Holder of this Note may, at any
time and from time to time until the tenth (10th)
anniversary of the date of this Note, convert (an “Optional Conversion”) this Note, in whole or in part, into a
number of fully paid and nonassessable shares of Common Stock as is determined
by dividing (i) the sum of the unpaid principal balance of this Note (or
the portion thereof that is being converted into shares of Common Stock), plus,
subject to Section 4.C(v), accrued and unpaid interest on this Note (or
the portion thereof that is being converted into shares of Common Stock) as of
the date this Note is surrendered for conversion, by (ii) the Conversion
Price.

 

B.            Conversion at the Option of the Company. At any time on or after the ninth
anniversary of the date of this Note and prior to November 3, 2018 , the
Company may give written notice to the Holder demanding that the Holder convert
this Note in accordance with this Section 4 (any such conversion pursuant
to this Section 4.B being referred to as a “Mandatory Conversion”). If the Company makes such written
demand, then the Holder, within ten Business Days after receipt of said written
demand, shall tender this Note to the Company for conversion in accordance with
Section 4.0 below. Upon a Mandatory Conversion, the Holder of this Note
shall comply with the provisions of Section 4.0 below. No Mandatory
Conversion shall occur if this Note has been declared, or has otherwise become,
due and payable or if a Default or an Event of Default has occurred and is
continuing.

 

C.            Mechanics of Conversion. In order to effect an Optional
Conversion, the Holder shall: (x) deliver a written notice of conversion
to the Company in accordance with Section 11.0 hereof stating that this
Note (or any portion hereof) has been converted into Common Stock pursuant to
the terms hereof, and (y) surrender this Note to the Company concurrently
with, or as soon as practicable after, the delivery of such written notice.
Such conversion shall be deemed to have been made immediately prior to the 

 

4

 

close of business on the date of such surrender of this Note, and the
Person or Persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date (subject to clauses (iii) and
(iv) of Section 4.D below). Upon receipt by the Company of a
facsimile copy of a notice of conversion from the Holder, the Company shall promptly
send, via facsimile, a confirmation to the Holder stating that the notice of
conversion has been received, the date upon which the Company expects to
deliver the Common Stock issuable upon such conversion and the name and
telephone number of a contact person at the Company regarding the conversion.
The Company shall not be obligated to issue shares of Common Stock upon a
conversion unless either this Note is delivered to the Company as provided
above, or the Holder notifies the Company that this Note has been lost, stolen
or destroyed and delivers the documentation to the Company, required by Section 10.13
hereof. If the Holder has not converted the entire amount of this Note pursuant
to an Optional Conversion, then the Company shall execute and deliver to the
Holder a new Note instrument identical in terms to this Note, but with a
principal amount reflecting the unconverted portion of this Note. The new Note instrument
shall be delivered subject to the     e
timing terms as the certificates evidencing the shares of Common Stock issuable
in such partial conversion.

 

(i)            Delivery of Common Stock Upon Conversion. Upon the surrender of this Note
accompanied by a notice of conversion, the Company (itself, or through its
transfer agent) shall, as soon as practicable thereafter, issue and deliver at
such office to the Holder of this Note, or its nominee, that number of shares
of Common Stock issuable upon conversion of this Note.

 

(ii)           Taxes. The issuance of certificates for shares of Common
Stock upon conversion of this Note shall be made without charge to the Holder
for any issuance tax in respect thereof, provided that the Company shall not be
required to pay any tax in respect of any transfer involved in the issuance and
delivery of any certificate in the name other than that of the Holder of this
Note.

 

(iii)          No
Fractional Shares.
If any conversion of this Note would result in the issuance of a fractional
share of Common Stock such fractional share shall be payable in cash based upon
the ten day average closing sales price of the Common Stock at such time, and
the number of shares of Common Stock issuable upon conversion of this Note
shall be the next lower whole number of shares. If the Company elects not to,
or is unable to, make such a cash payment, the Holder shall be entitled to
receive, in lieu thereof, one whole share of Common Stock.

 

(iv)          Conversion Disputes. In the case of any dispute with respect
to a conversion, the Company shall promptly issue such number of shares of
Common Stock in accordance with subparagraph (i) above as are not
disputed. If such dispute is not promptly resolved by discussion between the
Holder and the Company, the Company shall submit the disputed issues to an
independent outside accountant (reasonably acceptable to the Required Holders)
via facsimile within three Business Days of receipt of the notice of
conversion. The accountant, at the Company’s sole expense, shall promptly audit
the calculations and notify the Company and the Holder of the results no 

 

5

 

later than three Business Days from the date it receives the disputed
calculations. The accountant’s calculation shall be deemed conclusive, absent
manifest error. The Company shall then issue the appropriate number of shares
of Common Stock in accordance with subparagraph (i) above.

 

(v)           Payment of Accrued Amounts. Upon
conversion of this Note, all interest then accrued or payable on such shares
under this Convertible Subordinated Note through and including the Conversion
Date at the Holder’s election shall be paid by the Company in cash or in such
number of share Common Stock as is equal to the aggregate amount of accrued
interest divided by the Conversion Price.

 

D.            Conversion Price Adjustments for Certain
Dilutive Issuances.

 

(i)            Stock Splits, Stock Interest, Etc. If, at any time, or from time to time,
on or after the date of this Note, the number of outstanding shares of Common
Stock is increased by a stock split, stock dividend, reclassification or other
similar event, the Conversion Price shall be proportionately reduced, or if the
number of outstanding shares of Common Stock is decreased by a reverse stock
split, combination, reclassification or other similar event, the Conversion
Price shall be proportionately increased. In such event, the Company shall
notify the Company’s transfer agent of such change on or before the effective
date thereof.

 

(ii)           Change of Control, Merger, Consolidation,
Etc. If, at any
time after the date of this Note, there shall be a Change of Control Event
then, in lieu of the shares of Common Stock otherwise issuable as provided
herein, the Holder of this Note shall thereafter receive upon conversion of
this Note, at the Holder’s election, either (a) such shares of stock,
securities and/or other property as would have been issued or payable in Such
Change of Control Event with respect to or in exchange for the number of shares
of Common Stock which would have been issuable upon conversion of this Note had
such conversion occurred prior to such Change of Control Event, and in any such
case, appropriate provisions shall be made with respect to the rights and
interests of the Holder of this Note to the end that the economic value of this
Note is in no way diminished by such Change of Control Event and that the
provisions hereof (including, without limitation, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing
entity is not the Company, an immediate adjustment of the Conversion Price so
that the Conversion Price immediately after the Change of Control Event
reflects the same relative value as compared to the value of the surviving
entity’s common stock that existed between the Conversion Price and the value
of the Company’s Common Stock immediately prior to such Change of Control
Event) shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock or securities thereafter deliverable upon the
conversion thereat or (b) an amount equal to the Change of Control
Purchase Price. If any Change of Control Event is to occur, then not less than
30 days (or such later date as the Company first obtains knowledge thereof) nor
more than 60 days prior to the occurrence of such Change of Control Event, the
Company will notify the Holder in writing of such pending Change of Control
Event and the date upon which it is scheduled to occur. Upon the conversion of
the Notes following a Change of Control Event, the Holder shall furnish a
written request to the Company designating 

 

6

 

whether it is electing to receive such shares of stock, securities
and/or other property as are issuable or payable in connection with such Change
of Control Event as provided in clause (a) above or whether it is electing
to receive the Change of Control Purchase Price as provided in clause (b) above.
If the Holder elects to receive the Change of Control Purchase Price, the
Company shall pay the Change of Control Purchase Price on the later of the date
upon which the Change of Control Event occurs and the date of the conversion of
the Notes into shares of Common Stock, unless the Company and the Holder agree
to a different date. No payment of the Change of Control Purchase Price
pursuant to this Section 4.D(ii) shall be due unless the Change of
Control Event shall occur.

 

(iii)          Distributions. If, at any time after the date of this
Note, the Company shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of any class of Common Stock as a
partial liquidating dividend, by way of return of capital or otherwise
(including any dividend or distribution to the Company’s stockholders in cash
or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e.,
a spin-off)) (a “Distribution”), then
the Holder of this Note shall be entitled, upon any conversion of this Note
after the date of record for determining stockholders entitled to such
Distribution (or if no such record is taken, the date on which such
Distribution is declared or made), to receive the amount of such assets that
would have been payable to the Holder with respect to the shares of Common
Stock issuable upon such conversion had the Holder been the holder of such
shares of Common Stock on the record date for the determination of stockholders
entitled to such Distribution (or if no such record is taken, the date on which
such Distribution is declared or made).

 

(iv)          Convertible Securities and Purchase
Rights. If, at
any time after the date of this Note, the Company issues any securities or
other instruments that are convertible into or exercisable or exchangeable for
Common Stock (“Convertible Securities”) or
options, warrants or other rights to purchase or subscribe for Common Stock or
Convertible Securities (“Purchase Rights”) pro
rata to the record holders of the Common Stock, whether or not such Convertible
Securities or Purchase Rights are immediately convertible, exercisable or
exchangeable, then the Holder of this Note shall be entitled, upon any
conversion of this Note after the date of record for determining stockholders
entitled to receive such Convertible Securities or Purchase Rights (or if no
such record is taken, the date on which such Convertible Securities or Purchase
Rights are issued), to receive the aggregate number of Convertible Securities
or Purchase Rights that the Holder would have received with respect to the
shares of Common Stock issuable upon such conversion had the Holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to receive such Convertible Securities or Purchase
Rights (or if no such record is taken, the date on which such Convertible
Securities or Purchase Rights were issued). If the right to exercise or convert
any such Convertible Securities or Purchase Rights would expire in accordance
with their terms prior to the conversion of this Note, then the terms of such
Convertible Securities or Purchase Rights shall provide that such exercise or
convertibility right shall remain in effect until 30 days after the date the
Holder of this Note receives such Convertible Securities or Purchase Rights
pursuant to the conversion hereof.

 

7

 

(v)           Notice of Dilutive Events. The Company shall provide written
notice to the Holder of any transaction or event described in clauses (i) through
(iv) above at least 30 days prior to the consummation of any such
transaction or event or, if earlier, 15 days prior to the record date specified
above with respect to such transaction or event (but in no event earlier than
public announcement of such proposed transaction).

 

5.             Reservation Of Shares Of Common Stock.

 

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.

 

6.             Rank.

 

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 Company’s Senior Indebtedness, as hereinafter defined.

 

(i)            As used in this Note, the term “Senior Indebtedness” shall mean the principal of and unpaid accrued
interest on: (i) all indebtedness of the Company now and in the future
owing to banks, commercial finance lenders, insurance companies or other
financial institutions regularly engaged in the business of lending money
(other than indebtedness under and in respect of the Junior Subordinated
Indenture), which is for money borrowed by the Company (whether or not
secured), including without limitation any indebtedness now or hereafter owed
to U.S. Bank National Association, East-West Bank, Pacific Western Bank,
Foothill Capital Corporation and Wachovia Bank, National Association, and (ii) any
such indebtedness or any debentures, notes or other evidence of indebtedness
issued in exchange for or to refinance such Senior Indebtedness, or any
indebtedness arising from the satisfaction of such Senior Indebtedness by a
guarantor; provided, however, that Senior Indebtedness shall not include (a) any
indebtedness where the instrument creating or evidencing such indebtedness or
pursuant to which such indebtedness is outstanding provides that such
indebtedness is not superior in right of payment to this Note, (b) any
indebtedness or other debt securities (and guarantees, if any, in respect of
such debt securities) issued to any trust (or 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, pursuant to an
instrument that ranks pari passu with or junior in right of payment to
this Note, and (c) any indebtedness or other debt securities (and
guarantees, if any, in respect of such debt securities) which contain express
restrictions on the Company’s ability to make payments in respect of this Note
that are more restrictive than the provisions set forth in this Section 6.

 

8

 

(ii)           Subject to the payment in full of all
Senior Indebtedness and until this Note shall be paid in full, the Holder shall
be subrogated to the rights of the holders of Senior Indebtedness (to the
extent of payments or distributions previously made to such holders of Senior
Indebtedness pursuant to the provisions of clause (iv) below) to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness. No such payments or distributions applicable to the Senior
Indebtedness shall, as between the Company and its creditors, other than the
holders of Senior Indebtedness and the Holder, be deemed to be a payment by the
Company to or on account of this Note; and for the purposes of such
subrogation, no payment or distributions to the holders of Senior Indebtedness
to which the Holder would be entitled except for the provisions of this Section 6 shall, as
between the Company and its creditors, other than the holder of Senior Indebtedness
and the Holder, be deemed to be a payment by the Company to or on account of
the  Senior
Indebtedness.

 

(iii)          In
the event and during the continuation of any default by the Company in the
payment of any principal of or any premium or interest on any Senior
Indebtedness (following any grace period, if applicable) when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, then, upon written notice of such
default to the Company by the holders of such Senior Indebtedness or any
trustee therefor, unless and until such default shall have been cured or waived
or shall have ceased to exist, o direct or indirect payment (in cash, property,
securities, by set-off or otherwise) shall be made on account of the principal
of or any premium or interest on this Note, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of this Note.

 

(iv)          In the event of a bankruptcy, insolvency
or other proceeding described in clause (g) or (h) of the definition
of Event of Default in the Securities Purchase Agreement (each such event, if
any, herein sometimes referred to as a “Proceeding”),
all Senior
Indebtedness (including any interest thereon accruing after the commencement of
any such proceedings) shall first be paid in full before any payment or
distribution, whether in cash, securities or other property, shall be made to
the Holder on account of this Note. Any payment or distribution, whether in
cash, securities or other property (other than Common Stock issuable upon
conversion of this Note and securities of the Company or any other entity
provided for by a plan of reorganization or readjustment the payment of which
is subordinate, at least to the extent provided in these subordination
provisions with respect to the indebtedness evidenced by this Note, to the
payment of all Senior Debt at the time outstanding and to any securities issued
in respect thereof under any such plan of reorganization or readjustment),
which would .otherwise(but for these subordination provisions) be payable or
deliverable in respect of this Note shall be paid or delivered directly to the
holders of Senior Indebtedness in accordance with the priorities then existing
among such holders until all Senior Indebtedness (including any interest
thereon accruing after the commencement of any Proceeding) shall have been paid
in full.

 

(v)           In the event of any Proceeding, after
payment in full of all sums owing with respect to Senior Indebtedness, the
Holder, together with the holders of any obligations of the Company ranking on
a parity with this Note, shall be entitled to be paid 

 

9

 

from the remaining assets of the Company the amounts at the time due
and owing on account of unpaid principal of and any premium and interest on
this Note and such other obligations before any payment or other distribution,
whether in cash, property or otherwise, shall be made on account of any capital
stock or any obligations of the Company ranking junior to this Note and such
other obligations. If, notwithstanding the foregoing, any payment or
distribution of any character on this Note, whether in cash, securities or
other property (other than Common Stock issuable upon conversion of this Note
and securities of the Company or any other entity provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in these subordination provisions with respect to the
indebtedness evidenced by this Note, to the payment of all Senior Indebtedness
at the time outstanding and to any securities issued in respect thereof under
any such plan of reorganization or readjustment) shall be received by the
Holder in contravention of any of the terms hereof and before all Senior
Indebtedness shall have been paid in full, such payment or distribution or
security shall be received in trust for the benefit of, and shall be paid over
or delivered and transferred to, the holders of the Senior Indebtedness at the
time outstanding in accordance with the priorities then existing among such holders
for application to the payment of all Senior Indebtedness remaining unpaid to
the extent necessary to pay all such Senior Indebtedness (including any
interest thereon accruing after the commencement of any Proceeding) in full.

 

(vi)          The Holder, at the expense of the
Company, shall take such reasonable action as may, in the opinion of counsel
designated by the holders of a majority in principal amount of the Senior
Indebtedness at the time outstanding, be necessary or appropriate to assure the
effectiveness of the subordination effected by these provisions.

 

(vii)         The
provisions of this Section 6 shall not impair any rights, interests,
remedies or powers of any secured creditor of the Company in respect of any
security interest the creation of which is not prohibited by the provisions of
this Note or the Securities Purchase Agreement.

 

(viii)        The
securing of any obligations of the Company, otherwise ranking on a parity with
this Note or ranking junior to this Note, shall not be deemed to prevent such
obligations from constituting, respectively, obligations ranking on a parity
with this Note or ranking junior to this Note.

 

(ix)           Nothing contained in this Section 6
or elsewhere in this Note or in the Securities Purchase Agreement shall prevent
(a) the Company, at any time, except during the pendency of the conditions
described in clause (iii) above or of any Proceeding referred to in clause
(iv) above, from making payments at any time of principal of and any
premium or interest on this Note, or (b) the retention by the Holder of
any payments of principal of, and any premium or interest on, this Note, if, at
the time of such application by the Holder, it did not have knowledge that such
payment would have been prohibited by the provisions of this Section 6.

 

10

 

(x)            The provisions of this Section 6 are and are
intended solely for the purpose of defining the relative rights of the Holder
on the one hand and the holders of Senior Indebtedness on the other hand.
Nothing contained in this Section 6 or elsewhere in this Note or in the
Securities Purchase Agreement is intended to or shall (a) impair, as
between the Company and the Holder, the obligations of the Company, which are
absolute and unconditional, to pay to the Holder the principal of and any
premium and interest on this Note 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 Holder and creditors of the Company other than their
rights in relation to the holders of Senior Indebtedness or (c) prevent
the Holder from exercising all remedies otherwise permitted by applicable law
upon default under this Note or the Sec ties Purchase Agreement, including
filing and voting claims in any Proceeding, subject  to the rights, if any, under this Section 6 of
the holders of Senior Indebtedness to receive cash, property and securities
otherwise payable or deliverable the Holder.

 

(xi)           No right of any present or future holder
of any Senior Indebtedness to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired by any act or failure to act on
the part of the Company or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company with the terms, provisions
and covenants of this Note, regardless of any knowledge thereof that any such
holder may have or be otherwise charged with. Without in any way limiting the
generality of the foregoing, the holders of Senior Indebtedness may, at any
time and from to time, without the consent of or notice to the Holder, without
incurring responsibility to the Holder and without impairing or releasing the
subordination provided in this Section 6 or the obligations hereunder of
the Holder to the holders of Senior Indebtedness, do any one or more of the
following: (a) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend
or supplement in any manner Senior Indebtedness or any instrument evidencing
the same or any agreement under which Senior Indebtedness is outstanding;
provided that no such change or amendment shall impose any express restrictions
on the Company’s ability to make payments in respect of this Note that are more
restrictive than the provisions set forth in this Section 6, (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness, (iii) release any Person liable in
any manner for the payment of Senior Indebtedness and (iv) exercise or
refrain from exercising any rights against the Company and any other Person.

 

(xii)          The
Company shall give prompt written notice to the Holder of any fact known to the
Company that would prohibit the making of any payment to the Holder in respect
of this Note. Notwithstanding the provisions of this Section 6 or any
other provision of this Note or the Securities Purchase Agreement, the Holder
shall not be charged with knowledge of the existence of any facts that would
prohibit the making of any payment to the Holder in respect of this Note,
unless and until the Holder shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee, agent or
representative therefor.

 

11

 

7.             Liquidation Preference.

 

A.            If the Company shall commence a voluntary
case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or make an assignment for
the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Company shall be entered by a court having jurisdiction in the
premises in an involuntary case under the U.S. Federal bankruptcy laws or any
other applicable bankruptcy, insolvency or similar law resulting in the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Company or of any substantial
part of its property, or ordering the winding up or liquidation of its affairs,
and any such decree or order shall be unstayed and in effect for a period of 90
consecutive days and, on account of any such event, the Company shall
liquidate, dissolve or wind up, or if the Company shall otherwise liquidate,
dissolve or wind up, including, but not limited to, a Change of Control Event
(each a “Liquidation Event”), no
distribution shall be made to the holders of any shares of capital stock of the
Company upon liquidation, dissolution or winding up unless prior thereto the
Holder of this Note shall have received the Liquidation Preference with respect
to this Note.

 

B.            The purchase or redemption by the Company
of stock of any class, in any manner permitted by law, shall not, for the
purposes hereof, be regarded as a liquidation, dissolution or winding up of the
Company.

 

C.            The “Liquidation
Preference” with respect to this Note means an amount equal to the
unpaid principal amount hereof, plus all accrued and unpaid interest thereon,
as of the date of any Liquidation Event.

 

8.             Voting Rights.

 

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.

 

9.             Protective Provisions.

 

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:

 

(i)            alter or change the rights, preferences
or privileges of this Note;

 

(ii)           alter or change the rights, preferences
or privileges of any capital stock of the Company so as to affect adversely
this Note;

 

(iii)          increase
the par value of the Common Stock; or

 

12

 

(iv)          enter into any agreement, commitment,
understanding or other arrangement to take any of the foregoing actions.

 

10.           Miscellaneous.

 

A.            Cancellation of The Note. If this Note is converted pursuant to Section 4
by the Holder or the Company, this Note shall be canceled at such time as the
Common Stock issuable upon such conversion is delivered to the Holder hereof.

 

B.            Lost or Stolen Certificates. Upon receipt by the Company of (i) evidence
of the loss, theft, destruction or mutilation of this Note and (ii) (y) in
the case of loss, theft or destruction, an unsecured indemnity agreement
reasonably satisfactory to the Company, or (z) in the case of mutilation,
this Note (surrendered for cancellation), the Company shall execute and deliver
a new Note of like tenor and date. However, the Company shall not be obligated
to reissue such lost, stolen, destroyed or mutilated Note if the Holder
contemporaneously requests the Company to convert such Note.

 

C.            Notices. Any notices required or permitted to be given under
the terms hereof shall be sent by certified or registered mail (return receipt
requested) or delivered personally, by nationally recognized overnight carrier
or by confirmed facsimile transmission, and shall be effective five days after
being placed in the mail, if mailed, or upon receipt or refusal of receipt, if
delivered personally or by nationally recognized overnight carrier or confirmed
facsimile transmission, in each case addressed to a party. The addresses for
such communications are (i) if to the Company to Kennedy-Wilson, Inc.,
9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210,
Telephone: (310) 887-6453, Facsimile: (310) 887-6459, Attention: Chairman and
Chief Executive Officer, and (ii) if to the Holder to the address first
set forth above or to such other address as may be designated in writing by
such Person.

 

D.            Assignment. Subject to the restrictions on transfer described in
Section 13.2 of the Securities Purchase Agreement, the rights and
obligations of the Holder and the Company shall be binding upon and benefit the
successors, assigns, heirs, administrators and transferees of the parties. Any
sale or other disposition (other than to an affiliate of the Holder) of all or
any part of this Note or securities into which such Note may be converted shall
be subject to the limitations set forth in Section 13.2 of the Securities
Purchase Agreement.

 

E.             Governing Law. This Note shall be construed and
enforced in accordance with, and the rights of the Company and the holder of
this Note 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.

 

13

 

IN WITNESS WHEREOF, this
Convertible Subordinated Note is executed on behalf of the Company this 3rd day of November,
2008.

 

 

	
  KENNEDY-WILSON,
  INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Freeman
  Lyle

  	
   

  	
   

  
	
  Name: Freeman Lyle

  	
   

  	
   

  
	
  Title:
  EVP & CFO

  	
   

  	
   

  
				

 

 

[Signature page to Note]

 

14

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