Document:

Exhibit 10.4

 

STOCK PURCHASE AGREEMENT

 

STOCK PURCHASE AGREEMENT
(this “Agreement”) made as of this 11th day of November, 2009 between
Prospect Acquisition Corp., a Delaware corporation (“Buyer” or “Prospect”),
and the signatory on the execution page hereof (“Seller”).

 

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

 

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

 

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

 

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

 

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

 

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

 

WHEREAS, Seller has agreed
to sell to Buyer and Buyer has agreed to purchase from Seller all of Seller’s
shares of the common stock of Buyer owned by Seller as of the close of business
on November 11, 2009, subject to a maximum of 650,000 shares (all such
shares, the “Shares”) for the purchase price per share set forth on the
execution page of this Agreement (“Purchase Price Per Share”).

 

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

 

 

1.             Purchase. Subject to Section 6, Seller
hereby agrees to sell to Buyer and Buyer hereby agrees to purchase from Seller
at the Closing (as defined in Section 3(c)) the Shares at the Purchase
Price Per Share (the total purchase price of the Shares, the “Aggregate
Purchase Price”).

 

2.             Agreement not to Convert.  In further consideration of the Aggregate
Purchase Price, Seller hereby agrees it has not and will not exercise its
Conversion Rights with respect to the Shares or, if it has already exercised
its Conversion Rights, it hereby agrees to withdraw and revoke such exercise
and will execute all necessary documents and take all actions required in
furtherance of such revocation.

 

3.             Closing Matters.

 

(a)           Within one business day of the date of this Agreement, (i) Seller
shall send Buyer a notice of the number of Shares that Seller owns and that are
subject to this Agreement, together with a calculation of the Aggregate
Purchase Price, and (ii) Buyer shall send the notice attached as Annex 1
hereto to Prospect’s transfer agent.

 

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

 

(c)           The closing of the purchase and sale of the Shares (“Closing”)
will occur on the date on which Buyer’s trust account is liquidated after the
Merger is consummated (the “Closing Date”).  The Company shall use commercially reasonable
efforts to cause the trust account to be liquidated on the Closing Date but in
no event shall such liquidation occur more than seven calendar days after the
Closing Date.  At the Closing, Buyer
shall pay Seller the Aggregate Purchase Price by wire transfer from Prospect’s
trust account of immediately available funds to an account specified by Seller
and Seller shall deliver the Shares to Buyer electronically using the
Depository Trust Company’s DWAC (Deposit/Withdrawal at Custodian) System to an
account specified by Buyer. It shall be a condition to the obligation of Buyer
on the one hand and Seller on the other hand, to consummate the transfer of the
Shares contemplated hereunder that the other party’s representations and
warranties are true and correct on the Closing Date with the same effect as
though made on such date, unless waived in writing by the party to whom such
representations and warranties are made.

 

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

 

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

 

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

 

 

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

 

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

 

(e)           Ownership of Shares.  Seller is, or as of the Closing will be, the
legal and beneficial owner of the Shares and will transfer to Buyer on or prior
to the Closing Date good and marketable title to the Shares free and clear of any
liens, claims, security interests, options, charges or any other encumbrance
whatsoever.

 

(f)            Number of Shares. The Shares include all of the
common stock owned by Seller as of the date hereof and as of the close of
business on November 11.

 

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

 

(h)           Aggregate Purchase Price.  Buyer has made no Purchase Price Per Share
offer to any other party in excess of such Purchase Price Per Share being
offered to Seller.  If Buyer offers a
Purchase Price Per Share to any party in excess of the Purchase Price Per Share
offered to Seller (such offer, a “Greater Offer”), Buyer shall (a) inform
Seller in writing of the Greater Offer and (b) pay to Seller the
difference between (i) the Greater Offer and (ii) the Purchase Price
Per Share offered to Seller.  For
purposes of this Section 4(h), “Purchase Price Per Share” shall not
include any fees paid to a third party “aggregator” engaged by the Buyer to buy
shares from Buyer stockholders who have indicated an intention to convert their
shares and/or vote against the Merger.

 

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

 

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

 

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

 

 

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

 

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

 

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

 

7.             Covenant of Seller. After the execution of this
Agreement and prior to Closing, Seller shall not acquire any common stock,
warrants or other securities of Prospect or effect any derivative transactions
with respect thereto, except that Seller may purchase common stock of Buyer on
or before the close of business on November 11, 2009, as long as Seller
does not own more than 650,000 shares of Buyer’s common stock as of the close
of business on November 11, 2009.

 

8.             Acknowledgement; Waiver. Seller (i) acknowledges
that Buyer may possess or have access to material non-public information which
has not been communicated to Seller; (ii) hereby waives any and all
claims, whether at law, in equity or otherwise, that he, she, or it may now
have or may hereafter acquire, whether presently known or unknown, against
Buyer or any of its officers, directors, employees, agents, affiliates,
subsidiaries, successors or assigns relating to any failure to disclose any
non-public information in connection with the transaction contemplated by this
Agreement, including without limitation, any claims arising under Rule 10-b(5) of
the Exchange Act; and (iii) is aware that Buyer is relying on the truth of
the representations set forth in Section 4 of this Agreement and the
foregoing acknowledgement and waiver in clauses (i) and (ii) above,
respectively, in connection with the transactions contemplated by this
Agreement.

 

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

 

 

may be executed via
facsimile transmission, and any such executed facsimile copy shall be treated
as an original.

 

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

 

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

 

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

 

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

 

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

 

15.           Trust Waiver. Prospect’s initial public offering
was consummated on November 14, 2007 as a result of which it received net
proceeds of $247 million which are held in a trust fund established by Prospect
for the benefit of its public stockholders (the “Trust Fund”). The Trust
Fund is invested in U.S. government securities in a trust account at JPMorgan
Chase Bank, NA and held in trust by Continental Stock Transfer & Trust
Company (the “Trustee”) pursuant to the Investment Management Trust
Account Agreement, dated as of November 14, 2007 (the “Trust Agreement”),
between Prospect and Trustee. Seller understands that, except for a portion of
the interest earned on the amounts held in the Trust Fund, Prospect may
disburse monies from the Trust Fund only: (a) to Prospect in limited
amounts from time to time (and in no event more than $2,750,000 in total) in
order to permit Prospect to pay its operating expenses; (b) if Prospect
completes a Business Combination, to certain dissenting public stockholders, to
the underwriters in the amount of underwriting discounts and commissions they
earned in the IPO but whose payment they have deferred, and then to Prospect;
and (c) if Prospect fails to complete a Business Combination within the
allotted time period and liquidates, subject to the terms of the 

 

 

Trust Agreement, to Prospect
in limited amounts to permit Prospect to pay the costs and expenses of its
liquidation and dissolution, and then to Prospect’s public stockholders (as
such term is defined in the Trust Agreement). Seller agrees that it does not
now have, and shall not at any time have, other than with respect to the
Aggregate Purchase Price to be paid to Seller in connection with this
Agreement, any claim to, or make any claim against, the Trust Fund or any asset
contained therein, regardless of whether such claim arises as a result of, in
connection with or relating in any way to, the business relationship between
Seller, on the one hand, and Prospect, on the other hand, this Agreement, or
any other agreement or any other matter, and regardless of whether such claim
arises based on contract, tort, equity or any other theory of legal liability.
Seller hereby irrevocably waives any and all claims it may have, now or in the
future (in each case, however, prior to the consummation of a Business
Combination), and will not seek recourse against, the Trust Fund for any reason
whatsoever in respect thereof. In the event Seller commences any action or
proceeding based upon, in connection with, relating to or arising out of any
matter relating to Prospect, which proceeding seeks, in whole or in part,
relief against the Trust Fund or the public stockholders of Prospect, whether
in the form of money damages or injunctive relief, Prospect shall be entitled
to recover from Seller the associated legal fees and costs in connection with
any such action.

 

[Signature
Page Follows]

 

 

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

 

	
   

  	
  PROSPECT ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David A. Minella

  
	
   

  	
  Name:  David A. Minella

  
	
   

  	
  Title:  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NISSWA ACQUISITION MASTER FUND
  LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeff Stolt

  
	
   

  	
  Name:  Jeff Stolt

  
	
   

  	
  Title:    CTO-Pine River Capital Mgmt LP
              Its: Investment Manager

  

 

 

Purchase Price Per Share: $ 9.95

Number of Shares: 650,000

 

 

PROSPECT ACQUISITION CORP.

9130 GALLERIA COURT, SUITE 318

NAPLES, FLORIDA 34109

 

Annex
1

 

November    ,
2009

 

Continental Stock Transfer &
Trust Company

17 Battery Place

New York, New York 10004

 

Attn:                                          

 

Re:
Trust Account No. 530-151677

 

Gentlemen:

 

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

 

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

 

Bene
Bank — JPMorgan Chase, New York

Bene
SWIFT —                           

Bene
ABA —                              

A/C
— Goldman Sachs & Co New York

A/C
#                                           

FFC
— Nisswa Acquisition Master Fund Ltd

FFC
A/C # –                                

 

In order to expedite
payment, attached is Nisswa Acquisition Master Fund Ltd.’s Form W-8IMY.

 

 

The address for Nisswa
Acquisition Master Fund Ltd. is 601 Carlson Parkway, Suite 330,
Minnetonka, MN 55305. The contact person for Nisswa Acquisition Master Fund
Ltd. is Jeff Stolt. He can be reached at 612 238 3350.

 

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

 

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

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT ACQUISITION CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  David A. Minella

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
				

 

	
  Acknowledged and Agreed:

  	
   

  
	
   

  	
   

  
	
  CONTINENTAL STOCK
  TRANSFER & TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  NISSWA ACQUISITION MASTER
  FUND LTD.

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:Exhibit
10.5

 

SHARE PURCHASE AGREEMENT

 

AGREEMENT, dated as of November 12, 2009
between Prospect Acquisition Corp., a Delaware corporation (“Parent”), and Milton Arbitrage Partners, LLC, a Delaware
limited liability company (“Stockholder”).

 

WHEREAS, Parent has requested Stockholder, and
Stockholder has agreed, to enter into this Agreement with respect to the number
of shares of common stock, par value $0.001 per share, of Parent (“Parent Common Stock”) set forth on Schedule 1 hereto that
Stockholder beneficially owns (the “Shares”).

 

WHEREAS, Stockholder has agreed not to transfer any
of the Shares to any Person prior to the Closing of that certain Agreement and
Plan of Merger, dated as of September 8, 2009 (as amended, the “Transaction Agreement”), among the Parent, KW Merger Sub
Corp. (“Merger Sub”) and Kennedy-Wilson, Inc.
(the “Company”), which provides for the
merger (the “Merger”) of Merger Sub with and
into the Company as a result of which the Company will become a wholly-owned
subsidiary of the Parent and outstanding shares of the Company’s capital stock
will be exchanged for Parent Common Stock.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

ARTICLE 1

PURCHASE AND SALE

 

Section 1.  Purchase and Sale of the
Shares.  (a)  at the
Share Sale Closing (as defined hereinafter), and subject to the provisions of
Sections 4.05 and 4.06, Stockholder and all of its Affiliates shall sell to
Parent, and Parent shall purchase from Stockholder and all of its Affiliates,
the Shares for a purchase price per Share (the “Purchase
Price Per Share”), in cash equal to $9.95.  The total purchase price for the Shares is
hereinafter referred to as the “Purchase
Price”.

 

(b)  Subject to the
provisions of Section 6.01, the closing of the purchase and sale of the
Shares shall occur on the date on which (i) the Trust Account is
liquidated and (ii) Stockholder delivers the Shares to Parent (the “Share
Sale Closing”).  Parent shall use
commercially reasonable efforts to cause the trust account to be liquidated on
the date of Closing but in no event shall such liquidation occur more than
seven days after the Closing.  At the
Share Sale Closing, (i) in the case of Shares that are certificated, (A) Parent
shall cause its transfer agent to deliver to Stockholder the aggregate Purchase
Price, from the Account (as defined hereinafter), for such Shares in
immediately available funds by wire transfer to the order of the Stockholder
and (B) Stockholder and all of its Affiliates shall deliver to Parent a
certificate or certificates evidencing such Shares duly endorsed or accompanied
by a written instrument or instruments of

 

 

transfer in form satisfactory to Parent’s transfer
agent, duly executed by Stockholder and its Affiliates or by the duly appointed
representative thereof and (ii) in the case of Shares that are not
certificated, (A) Stockholder (on behalf of itself and all of its
Affiliates) shall cause their respective brokers or banks to have the Shares
delivered to Parent’s transfer agent, Continental Stock Transfer &
Trust Company, electronically using the Depository Trust Company’s DWAC
(Deposit/Withdrawal At Custodian) system and (B) Parent shall cause its
transfer agent to deliver to Stockholder the aggregate Purchase Price, from the
Account, for such Shares in immediately available funds by wire transfer to the
order of the Stockholder.

 

ARTICLE 2

VOTING AGREEMENT; GRANT OF PROXY; WAIVER OF RIGHTS

 

Section 2.01.  Voting Agreement.  From the date hereof and until the Closing,
Stockholder and all if its Affiliates hereby agree to vote or exercise their
rights to consent with respect to the Shares at the time of any stockholder
vote or action by written consent to approve and adopt the proposals set forth
in the proxy statement/prospectus filed by Parent with the U.S. Securities and
Exchange Commission and any actions related thereto at any meeting of the
stockholders of Parent, and at any adjournment thereof, at which the
Transaction Agreement and other related agreements (or any amended version
thereof), or such other actions, are submitted for the consideration and vote
of the stockholders of Parent. 
Stockholder and all of its Affiliates hereby agree that they will not
vote any of the Shares in favor of, or consent to, and will vote against and
not consent to, the approval of any corporate action the consummation of which
would frustrate the purposes, or prevent or delay the consummation, of the
transactions contemplated by the Transaction Agreement; provided, however,
Stockholder shall have no obligation to vote in favor of any extension of time
beyond the current Termination Date as set forth in Parent’s Amended and
Restated Certificate of Incorporation.

 

Section 2.02.  Irrevocable Proxy.  Stockholder and all of its Affiliates hereby
revoke any and all previous proxies granted with respect to the Shares.  By entering into this Agreement, Stockholder
and all of its Affiliates hereby grant a proxy appointing each of David A.
Minella and James J. Cahill as the attorney-in-fact and proxy of Stockholder
and all of its Affiliates, with full power of substitution, for and in the
Stockholder’s and all of its Affiliates’ name, to vote, express consent or
dissent, or otherwise to utilize such voting power in the manner contemplated
by Section 2.01 as such person shall, in his sole discretion, deem proper
with respect to the Shares.  The proxy
granted by Stockholder and all of its Affiliates pursuant to this Section 2.02
is irrevocable and is granted in consideration of Parent entering into this
Agreement.  The proxy granted by
Stockholder and all of its Affiliates shall be revoked upon termination of this
Agreement in accordance with its terms. 
If the Stockholder and all of its Affiliates are not the record holders
of the Shares, concurrent with the execution

 

 

of this Agreement, Stockholder (on behalf of
itself and all of its Affiliates) shall cause their respective brokers or banks
to deliver to Parent a legal proxy, substantially in form of Exhibit A
attached hereto.

 

Section 2.03.  Waiver of Right of
Redemption.  By entering into
this Agreement, Stockholder and all of its Affiliates hereby waive their rights
to redeem the Shares.  The waiver granted
by Stockholder and all of its Affiliates pursuant to this Section 2.03 is
irrevocable and is granted in consideration of Parent entering into this
Agreement.  The waiver granted by
Stockholder and all of its Affiliates shall be revoked upon the Termination of
this Agreement.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER

 

Stockholder represents and warrants to Parent as of
the date hereof and as of the Share Sale Closing that:

 

Section 3.01.  Authorization.  The execution, delivery and performance by
Stockholder of this Agreement and the consummation by Stockholder of the
transactions contemplated hereby are within the corporate and all other powers
of Stockholder and have been duly authorized by all necessary corporate and all
other action.  This Agreement constitutes
a valid and binding Agreement of Stockholder.

 

Section 3.02.  Non-Contravention.  The execution, delivery and performance by
Stockholder of this agreement and the consummation of the transactions
contemplated hereby do not and will not (i) violate the certificate of
incorporation or bylaws of Stockholder, (ii) require any consent or other
action by any Person under, constitute a default under, or give rise to any
right of termination, cancellation or acceleration or to a loss of any benefit
to which Stockholder or any of its Affiliates is entitled under any provision
of any agreement or other instrument binding on such Person or (iii) result
in the imposition of any Lien on any asset of Stockholder or any of its
Affiliates.

 

Section 3.03.  Ownership of Shares.  Each of Stockholder and its Affiliates is the
legal and beneficial owner of the Shares, free and clear of any Lien and any
other limitation or restriction (including any restriction on the right to vote
or otherwise dispose of the Shares). 
None of the Shares is subject to any voting trust or other agreement or
arrangement with respect to the voting of such Shares.

 

Section 3.04.  Total Shares.  The Shares being purchased by Parent pursuant
to this Agreement and set forth on Schedule 1 represent all the Parent Common
Stock owned by Seller as of the date hereof; provided, however,  Stockholder, with the prior written consent
of Parent, may deliver an updated version of Schedule 1 to Parent at any time
prior to the Share Sale Closing.

 

 

Section 3.05  Information.  (a)  Stockholder is an informed and
sophisticated investor, and has engaged expert advisors, experienced in
transactions of the type contemplated by this Agreement.  Stockholder has been given the opportunity to
ask questions of and receive answers from Parent concerning Parent and the
Company, the consideration to be received, the transactions contemplated herein
and all other related matters. 
Stockholder further represents that it has been furnished with, and has
evaluated, all information it deems necessary, desirable and appropriate to
evaluate the merits and risks of the transactions contemplated herein and has
received such legal and financial other advice as deemed to be necessary,
desirable and appropriate to enable it to make an informed and intelligent
decision with respect to the execution, delivery and performance of this
Agreement.  In evaluating the suitability
of the transactions contemplated herein, Stockholder has not relied upon any
other representations or other information (other than as contemplated by the
preceding sentences and this Agreement) whether oral or written made by or on
behalf of Parent.

 

(b)  Each of Stockholder and its
Affiliates understands and acknowledges that Parent has access to (and may be
or is in possession of ) information about the Company, Parent and the Shares
(which may include material, non-public information) that may be or is material
and superior to the information available to Stockholder and its Affiliates,
that Stockholder and its Affiliates do not have access to such information, and
that Parent is not sharing any such information with Stockholder or its Affiliates.  Each of Stockholder and its Affiliates
represents to Parent that it, together with its professional advisers, is
capable of evaluating the risks associated with a transaction involving the
Shares, including the risk of transacting on the basis of inferior information,
and that it is capable of sustaining any loss resulting therefrom without
material injury.

 

Section 3.06  Finder’s Fees.  No investment banker, broker, finder or other
intermediary is entitled to a fee or commission from Parent or the Company in
respect of this Agreement based upon any arrangement or agreement made by or on
behalf of Stockholder or any of its Affiliates.

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF PARENT

 

Parent represents and warrants to Stockholder and
its Affiliates as of the date hereof and as of the Share Sale Closing that:

 

Section 4.01.  Authorization.  The execution, delivery and performance by
Parent of this Agreement and the consummation by Parent of the transactions
contemplated hereby are within the corporate powers of Parent and have been
duly authorized by all necessary corporate action.  This Agreement constitutes a valid and
binding agreement of Parent.

 

 

Section 4.02.  Non-Contravention.  The execution, delivery and performance by
Parent of this agreement and the consummation of the transactions contemplated
hereby do not and will not (i) violate the certificate of incorporation or
bylaws of Parent, (ii) violate any applicable law, rule, regulation,
judgment, injunction, order or decree, (iii) require any consent or other
action by any Person under, constitute a default under, or give rise to any
right of termination, cancellation or acceleration or to a loss of any benefit
to which Parent is entitled under any provision of any agreement or other instrument
binding on Parent or (iv) result in the imposition of any Lien on any
asset of Parent.

 

Section 4.03    Governmental Approvals.  All consents, approvals, orders,
authorizations, registrations, qualifications, designations, declarations or
filings with any governmental or other authority on the part of Parent required
in connection with the consummation of the transactions contemplated in this
Agreement have been or shall have been obtained prior to and be effective as of
the Closing.

 

Section 4.04    Sophisticated Buyer; Independent Investigation.  Parent is sophisticated in financial matters
and is able to evaluate the risks and benefits attendant to the purchase of
Shares from Stockholder.  Parent, in
making the decision to purchase the Shares from Stockholder, has not relied
upon any oral or written representations or assurances from Stockholder or any
of its officers, directors, partners or employees or any other representatives
or agents of Stockholder.

 

Section 4.05    Trust Account.  Parent’s Trust Account contains sufficient funds to satisfy the full payment
of the Purchase Price.  In the
event the Trust Account does not contain sufficient funds to satisfy the
Purchase Price at the Share Sale Closing, Parent, or its Affiliates, shall
satisfy the Purchase Price from sources other than the Trust Account, by wire
transfer to the order of Stockholder, or its Affiliates.

 

Section 4.06    Best Price.  Parent
has made no Purchase Price Per Share offer to any other party in excess of such
Purchase Price Per Share being offered to Stockholder (or its Affiliates).  If Parent offers a Purchase Price Per Share
to any party in excess of the Purchase Price Per Share offered to (any such
offer, a “Greater Offer”), Parent shall (a) inform Stockholder in
writing of the Greater Offer pursuant to Section 7.10 and (b)(i) within
three business days if Notice is delivered after the Share Sale Closing,
Parent, or its Affiliate, shall pay to Stockholder the difference between (A) the
Greater Offer and (B) the Purchase Price Per Share offered to
Stockholder.  For purposes of this Section 4.06,
“Purchase Price Per Share” shall not include any fees paid to a third party
“aggregator” engaged by Parent to buy shares from Parent’s stockholders who
have indicated an intention to convert their shares and/or vote against the
Merger.

 

 

ARTICLE 5

COVENANTS

 

Stockholder hereby covenants and agrees that:

 

Section 5.01.  No Proxies for or Encumbrances
on Shares.  Except pursuant to
the terms of this Agreement, Stockholder and its Affiliates shall not, without
the prior written consent of Parent, directly or indirectly, (i) grant any
proxies or enter into any voting trust or other agreement or arrangement with
respect to the voting of any of the Shares or (ii) sell, assign, transfer,
encumber or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the direct or indirect assignment,
transfer, encumbrance or other disposition of, any of the Shares during the
term of this Agreement.  Each of Stockholder
and its Affiliates shall not seek or solicit any such assignment, transfer,
encumbrance or other disposition or any such contract, option or other
arrangement or understanding and agrees to notify Parent promptly, and to
provide all details requested by Parent, if Stockholder or any of its Affiliates
shall be approached or solicited, directly or indirectly, by any Person with
respect to any of the foregoing.

 

Parent
hereby covenants and agrees that:

 

Section 5.02    Filing Obligations. 
Parent shall comply with all filing obligations, if any, under the
Securities Exchange Act of 1934, as amended, with respect to its ownership of
the Shares, or the transactions contemplated by this Agreement.

 

ARTICLE 6

CONDITIONS

 

Section 6.01.  Conditions to Share Sale
Closing.  (a) Each
party’s obligations to consummate the Share Sale Closing shall be subject to
the conditions that (i) the Closing shall have occurred and (ii) the
other party’s representations and warranties are true and correct and the other
party shall have complied with its agreements and covenants.

 

(b)           Parent
shall have delivered to Stockholder, in substantially the form of Exhibit B
(attached), instructions to its transfer agent which shall be irrevocable in
all respects as of the date hereof (the “Irrevocable Instructions”);
provided, however, (i) if Stockholder submits an updated
Schedule 1 pursuant to Section 3.04 or (ii) Parent makes a Greater
Offer, the Irrevocable Instructions shall be amended and revised to reflect
such changes to the Purchase Price and the Shares to be delivered (if
applicable).

 

 

ARTICLE 7

MISCELLANEOUS

 

Section 7.01.  Definitional and
Interpretative Provisions. 
Capitalized terms used but not defined herein shall have the respective
meanings set forth in the Transaction Agreement.  Unless specified otherwise, in this Agreement
the obligations of any party consisting of more than one person are joint and
several.  The captions herein are
included for convenience of reference only and shall be ignored in the
construction or interpretation hereof. 
Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. 
Whenever the words “include”, “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation”, whether or not they are in fact followed by those words or words
of like import.  “Writing”, “written” and
comparable terms refer to printing, typing and other means of reproducing words
(including electronic media) in a visible form. 
References to any Person include the successors and permitted assigns of
that Person.  References from or through
any date mean, unless otherwise specified, from and including or through and
including, respectively.

 

Section 7.02.  Further Assurances.  Parent and Stockholder and its Affiliates
will each execute and deliver, or cause to be executed and delivered, all
further documents and instruments and use it reasonable best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable law, to consummate and make
effective the transactions contemplated by this Agreement.

 

Section 7.03.  Amendments; Termination.  Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and
is signed, in the case of an amendment, by each party to this Agreement or in
the case of a waiver, by the party against whom the waiver is to be
effective.  This Agreement shall
terminate upon the earlier of (i) the termination of the Transaction
Agreement in accordance with its terms and (ii) 11:59 pm, eastern time, on
November 14, 2009 (either occurrence, the “Termination”).

 

Section 7.04.  Expenses.  All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.

 

Section 7.05.  Successors and Assigns.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.

 

Section 7.06.  Governing Law.  This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware.

 

 

Section 7.07.  Counterparts; Effectiveness.  This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.  Until and unless each party has received a
counterpart hereof signed by the other party hereto, this Agreement shall have
no effect and no party shall have any right or obligation hereunder (whether by
virtue of any other oral or written agreement or other communication).

 

Section 7.08.  Severability.  If any term, provision or covenant of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions and
covenants of this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.

 

Section 7.09.  Specific Performance.  The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement is not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof in addition to any other
remedy to which they are entitled at law or in equity.

 

Section 7.10.    Notice.  All notices, statements or other documents
which are required or contemplated by this Agreement shall be in writing and
delivered personally or sent by first class registered or certified mail,
overnight courier service or facsimile transmission to the address or fax
number most recently provided to such Person or such other address or fax
number as may be designated in writing by such Person.  Any notice or other communication so
transmitted shall be deemed to have been given on the day of delivery, if
delivered personally, on the business day following receipt of written confirmation,
if sent by facsimile transmission, one (1) business day after delivery to
an overnight courier service or five (5) days after mailing if sent by
mail.

 

Section 7.11.    Claims Against the Trust
Account.  Stockholder agrees
that it does not now have, and shall not at any time have, other than with
respect to causes of action related to the obligation of Parent to pay the
Purchase Price in connection with this Agreement, any claim to, and shall not
make any claim against, the Trust Account or any asset contained therein,
regardless of whether such claim arises as a result of, in connection with or
relating in any way to, the business relationship between Stockholder, on the
one hand, and Parent, on the other hand, this Agreement, or any other agreement
or any other matter, and regardless of whether such claim arises based on
contract, tort, equity or any other theory of legal liability.  Unless and until the Purchase Price, as
revised by Section 4.06, is paid to Stockholder, Parent, and its
Affiliates acknowledge and agree that Stockholder, and its Affiliates, shall
have, a claim to, or against, the Trust Account and any assets contained
therein, as well as Parent and its Affiliates, for the full amount of the
Purchase Price, as revised by Section 4.06, 

 

 

and
that Stockholder shall be entitled to recover from Parent, and its Affiliates,
the associated legal fees and costs in connection with any such action to
recover the Purchase Price. 

 

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

 

	
   

  	
  PROSPECT
  ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  James J. Cahill

  
	
   

  	
   

  	
  Name:

  	
  James
  J. Cahill

  
	
   

  	
   

  	
  Title:

  	
  Chief
  Financial Officer

  

 

 

	
   

  	
  MILTON
  ARBITRAGE PARTNERS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  James E. Buck II

  
	
   

  	
   

  	
  Name:

  	
  James
  E. Buck II

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member MAP LLC

  

 

 

PROSPECT ACQUISITION CORP.

9130 GALLERIA COURT, SUITE 318

NAPLES, FLORIDA 34109

 

November 11,
2009

 

Continental
Stock Transfer and Trust Company

17
Battery Place

New
York, New York 10004

 

Attn:

 

Re:          Trust Account No. [              ]

 

Gentlemen:

 

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

 

In
the event the Company delivers to you a Termination Letter substantially in the
form of Exhibit A to the Trust Agreement, in addition to the other
documents required to be delivered pursuant to Exhibit A of the trust
Agreement, assuming you are the Trustee on such date then, in consideration for
the electronic transfer of 832,900 shares of the company’s common stock. using
the  Depository Trust Company’s DWAC
(Deposit/Withdrawal at Custodian) System, to an account specified by the
Company, you are irrevocably instructed to deliver the sum of $8,287,355.00
from the Account, which must be delivered in accordance with the bank wire
instructions provided to you in attached Schedule 1.

 

 

In
order to expedite payment, attached is Milton Arbitrage Partners, LLC’s Form W-9,
as well as the 5 other accounts listed on attached Schedule 1.

 

The
contact person for Milton Arbitrage Partners, LLC is James E. Buck II.  He can be reached at (      )-            .

 

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

 

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

 

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROSPECT
  ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
  Acknowledged
  and Agreed:

  	
   

  
	
   

  	
   

  
	
  CONTINENTAL
  STOCK TRANSFER 8

  	
   

  
	
  TRUST
  COMPANY

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  MILTON
  ARBITRAGE PARTNERS, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

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