Document:

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 Guarantor’s 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:

 

1.                                       Guarantees.

 

(a)                                  Guaranty of Payment.

 

(i)                                     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 Borrower’s 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 Note, 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 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 is a continuing guaranty of payment
and not a guaranty of collection.

 

(ii)                                  Notwithstanding the foregoing, Guarantor’s
obligations hereunder for repayment of the principal owing under the Loan shall
in no event exceed Ten Million and No/100 Dollars ($10,000,000) (the “Guaranteed
Principal Amount”) 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.  Guarantor’s 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 Principal Amount.  In no event shall the Guaranteed Principal
Amount be reduced as a result of (i) Borrower’s payment of the Guaranteed
Obligations, or (ii) Administrative Agent’s 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 Guarantor’s
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.

 

(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:

 

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(i)                                     that the repair, rehabilitation and
construction 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 Note, 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 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).

 

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 

 

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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 their 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;

 

(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
filed thereon, or whether at maturity or by acceleration, or whether before or
after maturity, or whether in connection with bankruptcy, insolvency 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 

 

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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 therefrom, 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
therefor, 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 Guarantor’s
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 Guarantor’s recourse
against any Person or collateral;

 

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(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 therefor, or to exercise (or in exercising) any other right
or power with respect to any security therefor, 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 any
collateral securing any or all of the Guaranteed 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 

 

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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 Borrower’s 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; or

 

(xviii)                   any early termination of any of the Guaranteed
Obligations;

 

(xix)                           Administrative Agent’s 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 

 

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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 may be, 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 “trustee’s 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 

 

8

 

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)                                    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 a guaranteed
obligation, has destroyed Guarantor’s rights of subrogation and reimbursement
against Borrower by operation of Section 580d of the CCP or otherwise.

 

(g)                                 Guarantor waives Guarantor’s 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 Borrower’s
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. 
If, for any reason whatsoever, Borrower is now or hereafter becomes
indebted to Guarantor:

 

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(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 Guarantor’s
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 therefor, 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
proceedings involving Borrower as debtor, Administrative Agent and Lenders
shall each have 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
therefor, 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 

 

10

 

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 Aged 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, Guarantor’s
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 and
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 infatuation 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 Banc 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 Guarantor’s
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 Guarantor’s 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 Guarantor’s
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 Guarantor’s property to the 

 

11

 

nonexclusive jurisdiction
of any state court, or any United States federal court, sitting 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 by law, 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
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.  Guarantor’s obligations and liabilities under
this Section 10 shall survive any payment or discharge in full of
the Guaranteed Obligations.

 

12

 

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
Guarantor’s 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 and
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; (e) 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 Delaware laws, is lawfully doing business
in California, and has full 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 Guarantor’s
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 Borrower’s 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.  Guarantor’s 

 

13

 

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.

 

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.                                 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
therefor 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 

 

14

 

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 in 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 therefor 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)                                  From time to time promptly after
Administrative Agent’s request, such additional information, reports and
statements regarding the business operations and financial condition of each
Reporting Party as Administrative Agent may reasonably request.

 

15

 

(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 Party’s 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 Agent’s then-current personal financial statement form or
in another form satisfactory 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 fiscal year-end Financial Statements of the following Reporting
Parties shall be compiled or reviewed by independent certified public
accountants acceptable to Administrative Agent. 
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 Guarantor’s 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 

 

16

 

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 executed 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 Guarantor’s obligations hereunder.

 

22.                                 Credit Verification. 
Each 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 Agent’s or Lenders’ choice in connection with any
monitoring, collection or future transaction concerning the Guaranteed
Obligations, including any modification, extension or renewal of the Guaranteed
Obligations.  Also in connection with any
such monitoring, collection or future 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 Guarantor’s 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 

 

17

 

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.

 

(a)                                  Arbitration. 
Except to the extent expressly provided below, any controversy, claim or
dispute between or among the parties hereto, including any such controversy,
claim or dispute arising out of or relating to (i) this Guaranty, (ii) any
other Loan Document, (iii) the Environmental Agreement, (iv) any
related agreements or instruments, or (v) the transaction contemplated
herein or therein (including any claim based on or arising from an alleged
personal injury or business tort) (collectively, a “Dispute”), shall,
upon the mutual agreement of the parties, acting in their sole and absolute
discretion, be determined by binding arbitration in accordance with the Federal
Arbitration Act, Title 9, United States Code (or if not applicable, the
applicable state law), the then-current rules for arbitration of financial
services disputes of the American Arbitration Association, or any successor
thereof (“AAA”), and the “Special Rules” set forth below.  In the event of any inconsistency, the Special
Rules shall control.  The filing of
a court action is not intended to constitute a waiver of the right of
Guarantor, Administrative Agent or any Lender, including the suing party,
thereafter to request submittal of the Dispute to arbitration.  For the purposes of this Dispute Resolution Section only,
the terms “party” and “parties” shall include any parent
corporation, subsidiary or affiliate of Administrative Agent involved in the
servicing, management or administration of any obligation described in or
evidenced by this Guaranty, together with the officers, employees, successors
and assigns of each of the foregoing.

 

(b)                                 Special Rules.

 

(i)                                     The arbitration shall be conducted in any
U.S. state where real or tangible personal property collateral is located, or
if there is no such collateral, in the City and County where Administrative
Agent is located pursuant to its address for notice purposes in this Guaranty.

 

(ii)                                  The arbitration shall be administered by
AAA, who will appoint an arbitrator.  If
AAA is unwilling or unable to administer or legally precluded from
administering the arbitration, or if AAA is unwilling or unable to enforce or
legally precluded from enforcing any and all provisions of this Dispute
Resolution Section, then any party to this Guaranty may substitute, without the
necessity of the agreement or consent of the other party or parties, another
arbitration organization that has similar procedures to AAA but that will
observe and enforce any and all provisions of this Dispute Resolution Section All
Disputes shall be determined by one arbitrator; however, if the amount in
controversy in a Dispute exceeds Five Million Dollars ($5,000,000), upon the
request of any party, the Dispute shall be decided by three arbitrators (for
purposes of this Guaranty, referred to collectively as the “arbitrator”).

 

(iii)                               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.

 

18

 

(iv)                              The judgment and the award, if any, of
the arbitrator shall be issued within thirty (30) days of the close of the
hearing.  The arbitrator shall provide a
concise written statement setting forth the reasons for the judgment and for
the award, if any.  The arbitration
award, if any, may be submitted to any court having jurisdiction to be
confirmed and enforced, and such confirmation and enforcement shall not be
subject to arbitration.

 

(v)                                 The arbitrator will give effect to
statutes of limitations and any waivers thereof in determining the disposition
of any Dispute and may dismiss one or more claims in the arbitration on the
basis that such claim or claims is or are barred.  For purposes of the application of the
statute of limitations, the service on AAA under applicable AAA rules of a
notice of Dispute is the equivalent of the filing of a lawsuit.

 

(vi)                              Any dispute concerning this Dispute
Resolution Section, including any such dispute as to the validity or
enforceability hereof or whether a Dispute is arbitrable, shall be determined
by the arbitrator; provided, however, that the arbitrator shall not be
permitted to vary the express provisions of these “Special Rules” or the
“Reservations of Rights” in subsection (d) below.

 

(vii)                           The arbitrator shall have the power to
award legal fees and costs pursuant to the terms of this Guaranty.

 

(viii)                        The arbitration will take place on an
individual basis without reference to, resort to, or consideration of any form
of class or class action.

 

(c)                                  Judicial Reference. 
If the Dispute arises from or relates to an obligation to Administrative
Agent and/or Lenders secured by real property located in the State of
California, unless both Guarantor and Administrative Agent consent to
submission of the Dispute to arbitration to be conducted as provided in subsections
(a) and (b), the Dispute shall be resolved by judicial reference
pursuant to CCP Sections 638 et seq. 
This provision constitutes a reference agreement between or among the
parties as provided in Section 638 of the CCP.  The referee(s) shall be chosen by the
parties under the auspices of AAA in the same manner as arbitrators are
selected in proceedings administered under the AAA rules and procedures
for the arbitration of financial services disputes.  The referee (or the presiding referee of the
panel) must be an active attorney or a retired judge.  The award that results tom the decision of
the referee(s) shall be entered as a judgment in the court that appointed
the referee, in accordance with the provisions of Sections 644 and 645 of the
CCP.

 

(d)                                 Reservations of Rights. 
Nothing in this Guaranty shall be deemed to (i) limit the
applicability of any otherwise applicable statutes of limitations and any
waivers contained in this Guaranty, or (ii) apply to or limit the right of
Administrative Agent or any Lender (A) to exercise self help remedies such
as (but not limited to) setoff, or (B) to foreclose judicially or
nonjudicially against any real or personal property collateral, or to exercise
judicial or nonjudicial power of sale rights, (C) to obtain from a court
provisional or ancillary remedies such as (but not limited to) injunctive
relief, writ of possession, prejudgment attachment, or the appointment of a
receiver, or (D) to pursue rights against a party to this Guaranty in a
third-party proceeding in any action brought against Administrative Agent or
any Lender in a state, federal or international court, tribunal or hearing body
(including actions in specialty courts, such as bankruptcy and patent
courts).  Subject to the terms of the
Loan Documents, Administrative 

 

19

 

Agent and any Lender may
exercise the rights set forth in clauses (A) through (D), inclusive,
before, during or after the pendency of any arbitration or judicial reference
proceeding brought pursuant to this Guaranty. 
Neither the exercise of self help remedies nor the institution or
maintenance of an action fir foreclosure or provisional or ancillary remedies
shall constitute a waiver of the right of any party, including the claimant in
any such action, to arbitrate, or submit to judicial reference, the merits of
the Dispute occasioning resort to such remedies.  No provision in the Loan Documents regarding
submission to jurisdiction and/or venue in any court is intended or shall be
construed to be in derogation of the provisions in any Loan Document for
submission of any Dispute to arbitration or reference.

 

(e)                                  Conflicting Provisions for Dispute
Resolution.  If there is any conflict between the terms,
conditions and provisions of this Section and those of any other provision
or agreement for arbitration, judicial reference or dispute resolution, the
terms, conditions and provisions of this Section shall prevail as to any
Dispute arising out of or relating to (i) this Guaranty, (ii) any
other Loan Document, (iii) the Environmental Agreement, (iv) any
related agreements or instruments, or (v) the transaction contemplated
herein or therein (including any claim based on or arising from an alleged
personal injury or business tort).  In
any other situation, if the resolution of a given Dispute is specifically
governed by another provision or agreement for arbitration, judicial reference
or other dispute resolution, the other provision or agreement shall prevail
with respect to said Dispute.

 

(f)                                    Jury Trial Waiver in Judicial Reference
or Arbitration.  By agreeing to this Section, the parties
irrevocably and voluntarily waive any right they may have to a trial by jury in
respect of any Dispute.

 

26.                                 WAIVER OF JURY TRIAL. 
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO SUBMIT
TO JUDICIAL REFERENCE OR ARBITRATION ANY “DISPUTE” (FOR PURPOSES OF THIS
SECTION, AS DEFINED ABOVE) AS SET FORTH IN THIS GUARANTY, GUARANTOR,
ADMINISTRATIVE AGENT AND LENDERS WAIVE TRIAL BY JURY IN RESPECT OF ANY ANT) ALL
“DISPUTES” AND ANY ACTION ON ANY “DISPUTE.” THIS WAIVER SHALL APPLY TO THE
EXTENT ANY “DISPUTE” IS NOT SUBMITTED TO JUDICIAL REFERENCE OR ARBITRATION, OR
IS DEEMED BY THE ARBITRATOR, REFEREE OR ANY COURT WITH JURISDICTION TO BE NOT
REQUIRED TO BE DETERMINED BY JUDICIAL REFERENCE OR ARBITRATION, OR NOT
SUSCEPTIBLE OF BEING SO DETERMINED.  THIS
WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY GUARANTOR,
ADMINISTRATIVE AGENT AND LENDERS, AND GUARANTOR, ADMINISTRATIVE AGENT AND
LENDERS HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN
MADE BY ANY PERSON OR 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 

 

20

 

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.

 

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

  	
   

  

 

21Exhibit
10.116

 

KENNEDY-WILSON, INC.

 

1992

 

INCENTIVE

 

AND

 

NONSTATUTORY STOCK OPTION PLAN

 

 

KENNEDY-WILSON, INC.

 

1992

 

INCENTIVE

 

AND

 

NONSTATUTORY STOCK OPTION PLAN

 

1.                                       NAME, EFFECTIVE DATE AND PURPOSE.

 

(a)                                  This Plan document is intended to
implement and govern two separate stock option plans of KENNEDY-WILSON, INC., a
Delaware corporation (the “Company”):  the
Incentive Stock Option Plan (“Plan A”) and the Nonstatutory Stock Option Plan (“Plan
B”).  Plan A provides for the granting of
options that are intended to qualify as incentive stock options (“Incentive
Stock Options”) within the meaning of Section 422(b) of the Internal Revenue
Code of 1986, as amended (the “Code”).  Plan
B provides for the granting of options that are not intended to so qualify.  Unless specified otherwise, all the
provisions of this Plan relate equally to both Plan A and Plan B and are
condensed for convenience into one Plan document.

 

(b)                                 Plan A and Plan B are each established
effective as of May 11, 1992:  The
purpose of Plan A and Plan B (sometimes together referred to as the “Plan” or
this “Plan”) is to promote the growth and general prosperity of the Company and
its Affiliated Companies.  This Plan will
permit the Company to grant options (“Options”) to purchase shares of its
common stock (“Common Stock”).  The
granting of Options will help the Company attract and retain the best available
persons for positions of substantial responsibility and will provide certain
key employees with an additional incentive to contribute to the success of the
Company and its Affiliated Companies.  For
purposes of this Plan, the term “Affiliated Companies” shall mean any component
member of a controlled group of corporations, as defined under Code Section 1563,
in which the Company is also a component member.

 

2.                                       ADMINISTRATION.

 

(a)                                  The Plan shall be administered by a
Committee of the Board of Directors of the Company (the “Committee”) appointed
by the Board of Directors of the Company (the “Board”).

 

(b)                                 The Committee shall have sole authority,
in its absolute discretion, to determine which of the eligible persons of the
Company and its Affiliated Companies shall receive Options (“Optionees”), and,
subject to the express provisions and restrictions of this Plan, shall have
sole authority, in its absolute discretion, .to determine the time when Options
shall be granted, the terms and conditions of an Option other than those terms
an& conditions fixed under this Plan, the number of shares  which may be issued upon exercise of an
Option and the means of payment for shares, and shall have authority to do
everything necessary or 

 

2

 

appropriate to administer
the Plan.  All decisions, determinations
and interpretations of the Committee shall be final and binding on all Optionees.

 

(c)                                  The Committee appointed by the Board
shall consist of not less than two (2) members of the Board, all of whom shall
be directors who are not employees of the Company (“Outside Directors”) and
each of whom shall be a “disinterested person” (as such term is defined in Rule
16b-3 promulgated under the Securities Exchange Act of:  1934, as amended, as such rule may be amended
from time to time).  The Board may from
time to time remove members from, or add members to, the Committee (provided
such members added are Outside Directors), and vacancies on the Committee shall
be  filled by the Board. 
Any Outside Director may be eligible to become a member of the Committee
provided such person has not received a discretionary grant or award under any
Company stock plan during the twelve-month period preceding the transaction
that constituted such person’s initial action as a member of the Committee.

 

(d)                                 Definitions:

 

(i)                                     Restricted Shareholder:  An individual who, at the time an Option is
granted under either Plan A or Plan B, owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the employer
corporation or of its Parent Corporation or Subsidiary Corporation, with stock
ownership to be determined in light of the attribution rules set forth in Section
424(d) of the Code.

 

(ii)                                  Parent Corporation:  A corporation as defined in Section 424(e) of
the Code.

 

(iii)                               Subsidiary Corporation:  A corporation as defined in Section 424(f) of
the Code.

 

(iv)                              Officer: 
The president, secretary, chief financial officer, any managing
director, any vice president in charge of a principal business function (such
as sales, administration, or
finance) and any other person who performs similar policy-making functions for
the Company.

 

3.                                       ELIGIBILITY.

 

(a)                                  Plan A: 
The Committee may, in its discretion, grant one or more Options under
Plan A to any  key management employee of the Company or its
Affiliated Companies, including any employee who is a director of the Company or of
any of its.  Affiliated Companies
presently existing or hereinafter organized or acquired.  Such Options may be granted to one or more such employees without being
granted to other eligible  employees, as the Committee may deem fit.

 

(b)                                 Plan B: 
The Committee may, in its discretion, grant one or more Options under
Plan B to any key management employee, any employee who is a director of the
Company or its Affiliated Companies presently existing or hereinafter organized or acquired or
any person who performs consulting or other services for the Company or its Affiliated
Companies and who is designated by the Board as eligible to participate in Plan
B.  Such Options may be granted to 

 

3

 

one or more such persons
without being granted to other eligible persons, as the Board may deem fit.

 

(c)                                  Notwithstanding anything to the contrary
herein said, Outside Directors shall not be eligible to receive a grant of
Options under this Plan.

 

4.                                       STOCK TO BE OPTIONED.

 

(a)                                  The maximum aggregate number of shares
which may be optioned and sold under Plan A and Plan B is 750,000 shares of
authorized Common Stock of the Company.  The
foregoing constitutes an absolute cumulative limitation on the total number of
shares that may be optioned under both Plan A and B.  Therefore, at any particular date the maximum
aggregate number of shares which may be optioned under Plan A is equal to
750,000 minus the number of shares previously optioned under both Plan A and
Plan B and the maximum aggregate number of shares which may be optioned under
Plan B is equal to 750,000 minus the number of shares which have been previously
optioned under both Plan A and Plan B.  All
shares to be optioned and sold under either Plan A or Plan B may be either authorized but
unissued shares or shares held in the treasury.

 

(b)                                 Shares of Common Stock that:  (i) are repurchased by the Company after
issuance hereunder pursuant to the exercise of an Option, or (ii) are not
purchased by the Optionee prior to the expiration or termination of the
applicable Option, shall again become available to be covered by Options to be
issued hereunder and shall not, as of the effective date of such repurchase or
expiration, be counted as covered by an outstanding Option for purposes of the
above-described maximum number of shares which may be optioned ‘hereunder.

 

5.                                       OPTION PRICE.

 

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.

 

6.                                       TERM OF PLAN.

 

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.

 

7.                                       EXERCISE OF OPTION.

 

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

 

(a)                                  No Shares of Common Stock acquired by the
Optionee pursuant to an exercise of an Option granted under the Plan may be
disposed of in whole or in part until six (6) months after the date on which
the Option is granted by the Committee (hereinafter the “Option Grant Date”).

 

(b)                                 Subject to the specific provisions of
this Section 7, options shall become exercisable at such times and in such
installments (which may be cumulative) as the Committee shall provide in the
terms of each individual Option; provided, however, that by a resolution
adopted after an Option is granted the Committee, may, on such terms and
conditions as it may determine to be appropriate and subject to the specific
provisions of this Section 7, accelerate the time at which such Option or
installment thereof may be exercised.  For
purposes of this Plan, any accrued installment of an Option granted hereunder
shall be referred to as.  an “Accrued
Installment.”

 

(c)                                  Subject to the restrictions contained in this Section
7, an Option may .be exercised when Accrued Installments accrue, as provided
in the terms under which such Option was granted for a period of up to five  (5) years from the Option Grant Date with respect
to Options granted under Plan A and for a period of up  to ten (10) years from the Option Grant Date with
respect to Options granted under Plan B. 
In no event shall any Option be exercised on or after the expiration of said maximum applicable period, regardless
of the circumstances then existing (including but not limited to the death or
termination of employment of the Optionee).

 

(d)                                 The Committee shall fix the expiration
date of the Option (the “Option Expiration Date”) at the time the Option grant
is authorized.

 

8.                                       RULES APPLICABLE TO CERTAIN DISPOSITIONS.

 

(a)                                  Notwithstanding the foregoing provisions
of Section 7, in the event the Company or the shareholders of the Company enter
into an agreement to dispose of all or substantially all of the assets or
capital stock of the Company by means of a sale, merger, consolidation,
reorganization, liquidation, or otherwise, an option shall become immediately
exercisable with respect to the full number of shares subject to that Option
during the period commencing as of the later of (x) date of execution of such
agreement or (y) six  (6) months
after the Option Grant Date, and ending as of the earlier of:

 

(i)                                     the Option Expiration Date; or

 

(ii)                                  the date on which the disposition of
assets or capital stock contemplated by the agreement is consummated.  The exercise of any Option that was made
exercisable solely by reason of this Subsection 8(a) shall be conditioned upon
the consummation of the disposition of assets or stock under the above
referenced agreement.  Upon the
consummation of any such disposition of assets or stock, this Plan and any
unexercised Options issued hereunder (or any unexercised portion thereof) shall
terminate and cease to be effective.

 

(b)                                 Notwithstanding the foregoing, in the
event that any such agreement shall be terminated without consummating the
disposition of said stock or assets:

 

5

 

(i)                                     any unexercised nonvested installments
that had become exercisable solely by reason of the provisions of  Subsection 8(a) shall again become nonvested and
unexercisable as of said  termination
of such agreement, and

 

(ii)                                  the exercise of any option that had
become exercisable solely by reason of this Subsection 8(a) shall be deemed
ineffective and such installments shall again become nonvested and
unexercisable as of said termination of such agreement.

 

(c)                                  Notwithstanding the provisions set forth
in Subsection 8(a), the Committee may, at its election and subject to the
approval of the corporation purchasing or acquiring the stock or assets of the
Company (the “Surviving Corporation”) arrange for the Optionee to receive upon
surrender of Optionee’s Option a new option covering shares of the Surviving
Corporation in the same proportion, at an equivalent option price and subject to the same terms and conditions
as the old Option.  For purposes of the preceding sentence,
the excess of the aggregate fair market value of the.  shares subject to such new option
immediately after consummation of such disposition of stock or assets over the
aggregate option price of such shares of the Surviving Corporation shall be no
more than the excess of the aggregate fair market value of all shares subject
to the old Option immediately before consummation of such disposition of stock
or assets over the aggregate Option Price of such shares of the Company, and
the new option shall not give the Optionee additional benefits which such
Optionee did not have under the old Option or deprive the Optionee of benefits
which the Optionee had under the old Option. 
If such substitution of options is effectuated, the Optionee’s rights
under the old Option shall thereupon terminate.

 

9.                                       MERGERS AND ACQUISITIONS.

 

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

 

10.                                 TERMINATION OF EMPLOYMENT.

 

(a)                                  In the event that the Optionee’s
employment, directorship or consulting or other arrangement with the Company
(or Affiliated Company) is terminated for any reason other than death or
disability, any unexercised Accrued Installments of the Option granted hereunder
to such terminated Optionee shall expire and become unexercisable as of the
earlier of:

 

(i)                                     the applicable Option Expiration Date; or

 

(ii)                                  a date 90 days after such termination
occurs.

 

(b)                                 In the event that the Optionee’s
employment, directorship or consulting or other arrangement with the Company is terminated due to the death or
disability of the Optionee, any unexercised Accrued Installments of the Option
granted hereunder to such Optionee shall expire and become unexercisable as of
the earlier of:

 

(i)                                     the applicable Option Expiration Date; or

 

(ii)                                  the first anniversary of the date of
death of such Optionee (if applicable).  Any
such Accrued Installments of a deceased Optionee may be exercised prior to
their expiration by (and only by) the person or persons to whom the Optionee’s
Option right shall pass by will or by the laws of descent and distribution, if
applicable, subject, however, to all of the terms and conditions of this Plan
and the applicable Stock Option Agreement governing the exercise of Options
granted hereunder.

 

(c)                                  For purposes of this Section 10, an  Optionee shall be deemed employed by the
Company.  (or Affiliated Company) during any period of leave of
absence from active employment as authorized by the Company (or Affiliated
Company).

 

11.                                 EXERCISE OF OPTIONS.

 

(a)                                  An Option shall be deemed exercised when
written notice of such exercise has been given to the Company at its principal
business office by the person entitled to exercise the Option and full payment
in cash or by certified bank check (or with shares of Common Stock pursuant to Section
14) for the shares with respect to which the Option is exercised has been
received by the Company.

 

(b)                                 An Option may be exercised in accordance
with this Section 11 as to all or any portion of the shares covered by any
Accrued Installment of the Option from time to time during the applicable
Option period, but shall not be exercisable with respect to fractions of a
share.

 

(c)                                  As soon as practicable after any proper
exercise of an Option in accordance with the provisions of this Plan, the
Company shall, without charging transfer or issue tax to the Optionee, deliver
to the Optionee at the main office of the Company, or such other place as shall
be mutually acceptable, a certificate or certificates representing the shares
of Common Stock as to which the Option has been exercised.  The time of issuance and delivery of the
Common Stock may be postponed by the Company for such period as may be required
for it 

 

7

 

with reasonable diligence
to comply with any applicable listing requirements of any national or regional
securities exchange and any law or regulation applicable to the issuance and
delivery of such shares.

 

12.                                 AUTHORIZATION TO ISSUE OPTIONS AND
SHAREHOLDER APPROVAL.

 

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.

 

13.                                 LIMIT ON VALUE OF OPTIONED SHARES.

 

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.

 

14.                                 PAYMENT OF EXERCISE PRICE WITH COMPANY
STOCK.

 

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

 

(a)                                  A provision
fixing the number of
shares which may be issued upon exercise of
the Option;

 

(b)                                 A provision establishing the Option
exercise price per share;

 

(c)                                  A provision establishing the times and
the installments in which Options may be exercised;

 

(d)                                 A provision incorporating therein this
Plan by reference;

 

(e)                                  A provision clarifying which Options are
intended to be incentive stock options under Plan A and which are intended to
be nonstatutory stock options under Plan B;

 

(f)                                    A provision fixing the maximum duration
of the Option as not more than five (5) years from the Option Grant Date for
Options granted under Plan A and not more than ten (10) years from the Option
Grant Date for Options granted under Plan B;

 

(g)                                 Such representations and warranties by
the Optionee as may be required by Section 24 of this Plan or as may be
required by the Committee in its discretion;

 

(h)                                 Any other restriction (in addition to
those established under this Plan) as may be established by the Committee with
respect to the exercise of the Option, the transfer of the Option, or the
transfer of the shares purchased by exercise of the option, provided that such
restrictions are not in conflict with this Plan; and

 

(i)                                     Such other terms and conditions not
inconsistent with this Plan as may be established by the Committee.

 

15.                                 TAXES, FEES AND EXPENSES.

 

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.

 

16.                                 WITHHOLDING OF TAXES.

 

The .grant of Options
hereunder and the issuance of Common Stock pursuant to the exercise of such Options
is conditioned upon the Company’s 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.

 

17.                                 AMENDMENT OR TERMINATION OF THE PLAN.

 

(a)                                  The Board may amend this Plan from time
to time in such respects as the Board may deem advisable; provided, however,
that no  such amendment shall
operate to (i) 

 

9

 

affect adversely an
Optionee’s rights under this Plan with respect to any Option granted hereunder
prior to the adoption of such amendment, except as may be necessary, in the
judgment of counsel to the Company, to comply with any applicable law, (ii) increase
the maximum aggregate number of shares which may be optioned and sold under the
Plan, (iii) change the manner of determining the option exercise price, (iv) change
the classes of persons eligible to receive Options under the Plan, or (v) extend
the maximum duration of the Option or the Plan.

 

(b)                                 The Board may at any time terminate this
Plan.  Any such termination of the Plan shall
not, without the written consent of the Optionee, alter the terms of Options
already granted and such Options shall remain in full force and effect as if
this Plan had not been terminated.

 

18.                                 OPTIONS NOT TRANSFERABLE.

 

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.

 

19.                                 NO RESTRICTIONS ON TRANSFER OF STOCK.

 

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).

 

20.                                 RESERVATION OF SHARES OF COMMON STOCK.

 

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.

 

21.                                 RESTRICTIONS ON ISSUANCE OF SHARES.

 

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 Company’s 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

 

22.                                 NOTICES.

 

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.

 

23.                                 ADJUSTMENTS UPON CHANGES IN
CAPITALIZATION.

 

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 Company’s securities.

 

24.                                 REPRESENTATIONS AND WARRANTIES.

 

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.

 

25.                                 NO ENLARGEMENT OF EMPLOYEE RIGHTS.

 

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 Company’s Articles of Incorporation, as the same
may be amended from time to time.

 

26.                                 INFORMATION TO OPTION HOLDERS.

 

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 Company’s 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.

 

27.                                 LEGENDS OF STOCK CERTIFICATES.

 

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.

 

28.                                 SPECIFIC PERFORMANCE.

 

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.

 

29.                                 INVALID PROVISION AND COMPLIANCE WITH
16b-3.

 

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.

 

30.                                 APPLICABLE LAW.

 

This Plan shall be
governed by and construed in accordance with the laws  of the State of California.

 

31.                                 SUCCESSORS AND ASSIGNS.

 

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

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