Document:

Exhibit 10.111

 

REPAYMENT GUARANTY

 

THIS REPAYMENT GUARANTY
(this “Guaranty”) is made as of May 9,
2007, by KENNEDY-WILSON, INC., a Delaware corporation, and KWI PROPERTY
FUND I, L.P., a Delaware limited partnership (individually and
collectively, “Guarantor”) in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking
association, as agent for the “Lenders” pursuant to the Loan Agreement
described below (in such capacity, “Administrative Agent”)
and in favor of each party that now or hereafter is bound under the Loan
Agreement as a “Lender”  (referred to
herein individually as a “Lender”
and collectively as the “Lenders”).

 

1.             Except as otherwise provided in this
Guaranty, initially capitalized terms used in this Guaranty without definition
are defined in that certain Construction Loan Agreement of even date herewith
by and between Fifth and Madison LLC, a Delaware limited liability company (“Borrower”), Administrative Agent and Lenders (the “Loan Agreement”).

 

2.             In order to induce Administrative Agent
and Lenders to enter into the Loan Agreement and to induce Lenders to loan to
Borrower (whether acting on behalf of itself or any estate created by the
commencement of a case under Title 11 United States Code or any successor
statute thereto (the “Bankruptcy Code”)
or any other insolvency, bankruptcy, reorganization or liquidation proceeding,
or by any trustee under the Bankruptcy Code, liquidator, sequestrator or
receiver of Borrower or Borrower’s property or similar Person duly appointed
pursuant to any law generally governing any insolvency, bankruptcy,
reorganization, liquidation, receivership or like proceeding) the sum of
$63,574,000.00 (the “Loan”),
evidenced by one or more secured promissory notes (collectively, the “Notes”), in the aggregate principal amount of
$63,574,000.00, each now or hereafter executed by Borrower and payable to the
order of one or more Lenders, Guarantor hereby unconditionally and irrevocably
guarantees to Administrative Agent and Lenders and to their successors,
endorsees and/or assigns, the full and prompt payment of the principal sum of
the Notes in accordance with their terms when due, by acceleration or
otherwise, together with all interest accrued thereon, when due under the terms
of the Notes, and any and all other sums of money that become owing by Borrower
to Lenders under the Notes, Loan Agreement or any other “Loan
Document” as such term is defined in the Loan Agreement (which
Notes, Loan Agreement and other “Loan Documents”
are also collectively referred to herein as the “Loan Documents”), The
obligations guaranteed pursuant to this Section 2 are hereinafter referred
to as the “Guaranteed Obligations.”

 

Notwithstanding the
foregoing, Guarantor’s obligations hereunder shall in no event exceed an amount
equal to twenty-five percent (25%) of the principal amount of the Loan
outstanding on the date the Notes become due and payable in full, whether at
maturity or by acceleration or otherwise, plus twenty-five percent (25%) of any
additional principal sums disbursed by Administrative Agent and Lenders
thereafter (the “Guaranteed Principal  Amount”), plus 100% of (a) attorneys’
fees and collection costs and all other sums other than principal owing on the
Loan and (b) any deficiency, loss or damage suffered by Lender because of:
(1) Borrower’s commission of a criminal act, (2) the failure to
comply with provisions of the Loan Documents prohibiting the sale, transfer or
encumbrance of the Project; (3) the misapplication by Borrower of any
funds derived from the Project, including security deposits, insurance
proceeds, condemnation awards, rental income or other income arising with
respect to the Project; (4) Borrower’s commission of waste; (5) Borrower’s
removal of collateral from the Project without replacement, (6) Borrower’s
violation of law; (7) losses, expense or liability relating to the
presence of hazardous or toxic materials on the Project; (8) the fraud or
intentional misrepresentation by Borrower made in or in connection with the
Loan Documents or the Loan; (9) Borrower’s voluntary or involuntary
filing, or the filing against Borrower by any party, of any proceeding for
relief under any federal or state bankruptcy, insolvency or receivership laws
or any assignment for the benefit of creditors made by Borrower not dismissed
within 180 days; (10) Borrower’s interference with Lender’s enforcement
proceedings; or (11) Borrower’s collection of rent more than one month in
advance. 

 

 

Guarantor’s
obligations shall not be affected, impaired, lessened or released by loans, credits
or other financial accommodations now existing or hereafter advanced by Lender
to Borrower in excess of the Guaranteed Principal Amount. in no event shall the
Guaranteed Principal Amount be reduced as a result of (a) Lender’s
foreclosure or acceptance of a deed in lieu of foreclosure with respect to any
collateral securing the Loan, or (b) Guarantor’s payment of the Loan or
any portion thereof prior to the date when the entire Loan becomes due and
payable in full, whether at maturity or by acceleration or otherwise. The
agreement of Lender to the foregoing limitation on Guarantor’s liability shall
in no way be deemed to limit or restrict the right of Lender to apply any sums
paid by Guarantor to any portion of the Loan.

 

The indebtedness
guaranteed by Guarantor hereunder shall be deemed to be the last indebtedness
which remains outstanding under the Loan Documents after the application of
payments received from Borrower and the application of proceeds received from
the foreclosure of the Deed of Trust and other liquidation of any collateral
for the Loan (subject to the above limitations on the maximum amount of
principal indebtedness guaranteed hereby), and Guarantor may not claim or
contend so long as any such indebtedness remains outstanding that any payments
received by Lender from Borrower or otherwise, or proceeds received by Lender
on the liquidation of the Project, shall have reduced or discharged Guarantor’s
liability or obligations hereunder. Nothing contained in this paragraph shall
be deemed to (i) limit or otherwise impair any of the waivers or
agreements of Guarantor contained in this Guaranty or (ii) require Lender
to proceed against Borrower, any collateral or any other Guarantor before
proceeding against any particular Guarantor (any such requirement having been
specifically waived).

 

3.

 

(a)           Guarantor waives any and all rights of
subrogation, reimbursement, indemnification and contribution, and any other
rights and defenses that are or may become available to Guarantor, including,
without limitation, any and all rights or defenses Guarantor may have by reason
of protection afforded to the principal with respect to any of the Guaranteed
Obligations or to any other guarantor of any of the Guaranteed Obligations with
respect to such guarantor’s obligations under its guaranty, in either case,
pursuant to the antideficiency or other laws of this state limiting or
discharging the principal’s indebtedness or such other guarantor’s obligations;
and

 

(b)           Guarantor waives all rights and defenses
that Guarantor may have because Borrower’s debt is secured by real property.
This means, among other things:

 

(i)            Administrative Agent and Lenders may
collect from Guarantor without first foreclosing on any real or personal
property collateral pledged by Borrower;

 

(ii)           If Administrative Agent or any Lender
forecloses on any real property collateral pledged by Borrower:

 

(A)          The amount of the debt 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;

 

(B)          Administrative Agent and Lenders may
collect from Guarantor even if Administrative Agent or any Lender, by
foreclosing on the real property collateral, has destroyed any right Guarantor
may have to collect from Borrower.

 

This is an unconditional
and irrevocable waiver of any rights and defenses Guarantor may have because
Borrower’s debt is secured by real property; and

 

(c)           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 the Guaranteed Obligations, has destroyed Guarantor’s
rights of subrogation and reimbursement against Borrower, and even though that
election of remedies by Administrative Agent 

 

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or Lenders has destroyed Guarantor’s rights of
contribution against another guarantor of any of the Guaranteed Obligations.

 

No other provision of
this Guaranty shall be construed as limiting the generality of any of the
covenants and waivers set forth in this Section 3.

 

4.             Guarantor represents and warrants to
Administrative Agent and Lenders that Guarantor has a financial interest in
Borrower or is otherwise affiliated with Borrower. In that regard, Guarantor
agrees that Administrative Agent’s and Lenders’ entering into the Loan
Agreement and Lenders’ agreement to make the Loan to Borrower is of substantial
and material benefit to Guarantor and further agrees as follows:

 

(a)           Guarantor shall continue to be liable
under this Guaranty and the provisions hereof will remain in full force and
effect notwithstanding (i) any modification, agreement or stipulation
between Borrower and Administrative Agent or their respective successors and
assigns, with respect to the Loan Documents or the obligations encompassed
thereby, including, without limitation, the Guaranteed Obligations, (ii) Administrative
Agent’s waiver of or failure to enforce any of the terms, covenants or
conditions contained in the Loan Documents or in any modification thereof, (iii) any
discharge or release of Borrower or any other guarantor from any liability with
respect to the Guaranteed Obligations, (iv) any discharge, release,
exchange or subordination of any real or personal property then held by
Administrative Agent or any Lender as security for the performance of the
Guaranteed Obligations, (v) any additional security taken for the
Guaranteed Obligations, whether real or personal property, (vi) any
foreclosure or other realization on any security for the Guaranteed
Obligations, regardless of the effect upon Guarantor’s subrogation,
contribution or reimbursement rights against Borrower or any other guarantor, (vii) any
additional loans or financial accommodations to Borrower or (viii) the
manner or order by which payments are applied to principal, interest or other
obligations under the Loan Documents. Without limiting the generality of the
foregoing, Guarantor hereby agrees that Guarantor’s liability shall continue
even if Administrative Agent or any Lender alters any obligations under the
Loan Documents in any respect or Administrative Agent’s or Lenders’ remedies or
rights against Borrower are in any way impaired or suspended without Guarantor’s
consent.

 

(b)           Guarantor’s liability under this Guaranty
shall continue until all sums due under the Notes have been paid in full and
until all Guaranteed Obligations to Administrative Agent and Lenders have been
satisfied, and shall not be reduced by virtue of any payment by Borrower of any
amount due under the Notes or under any of the Loan Documents or by
Administrative Agent’s and Lenders’ recourse to any collateral or security.

 

(c)           Guarantor represents and warrants to
Administrative Agent and Lenders that Guarantor now has and will continue to
have full and complete access to any and all information concerning the
transactions contemplated by the Loan Documents or referred to therein, the
value of the assets owned or to be acquired by Borrower, Borrower’s financial
status and its ability to pay and perform the Guaranteed Obligations owed to
Administrative Agent and Lenders. Guarantor further represents and warrants
that Guarantor has reviewed and approved copies of the Loan Documents and is
fully informed of the remedies Administrative Agent and Lenders may pursue,
with or without notice to Borrower, in the event of default under the Notes or
other Loan Documents. So long as any of the Guaranteed Obligations remains
unsatisfied or owing to Administrative Agent or Lenders, Guarantor shall keep
fully informed as to all aspects of Borrower’s financial condition and the
performance of the Guaranteed Obligations.

 

(d)           Guarantor acknowledges and agrees that
Guarantor may be required to perform the Guaranteed Obligations in accordance
with the terms hereof notwithstanding the fact that the Loan has fully matured,
that the outstanding principal balance thereof is fully due and payable and
that Borrower is in default of its obligation to pay the full amount due under the
Notes on the maturity thereof.

 

5.             The liability of Guarantor under this
Guaranty is a guaranty of payment and performance and not of collectibility,
and is not conditioned or contingent upon the genuineness, validity, regularity
or 

 

3

 

enforceability of the Loan Documents or other
instruments relating to the creation or performance of the Guaranteed
Obligations or the pursuit by Administrative Agent or any Lender of any
remedies which any now has or may hereafter have with respect thereto under the
Loan Documents, at law, in equity or otherwise. Guarantor hereby agrees that
Guarantor shall be liable even if Borrower had no liability at the time of
execution of any of the Loan Documents or thereafter ceases to be liable, and
Guarantor’s liability may be larger in amount and more burdensome than that of
Borrower. Guarantor’s liability hereunder shall not be limited or affected in
any way by any impairment or any diminution or loss of value of any security or
collateral for the Loan, whether caused by hazardous substances or otherwise,
Administrative Agent’s or any Lender’s failure to perfect a security interest
in such security or collateral or any disability or other defense of Borrower
or any other guarantor.

 

6.             Guarantor hereby waives to the extent
permitted by law: (i) all notices to Guarantor, to Borrower, or to any
other Person, including without limitation notices of the acceptance of this
Guaranty or the creation, renewal, extension, modification, accrual of any of
the Guaranteed Obligations owed to Administrative Agent and Lenders,
enforcement of any right or remedy with respect thereto and notice of any other
matters relating thereto; (ii) diligence and demand of payment,
presentment, protest, dishonor and notice of dishonor; (iii) any statute
of limitations affecting Guarantor’s liability hereunder or the enforcement
thereof; and (iv) all principles or provisions of law which conflict with
the terms of this Guaranty. Guarantor further agrees that Administrative Agent
and Lenders may enforce this Guaranty upon the occurrence of an event of
default under the Notes or the other Loan Documents (as event of default is
described therein), notwithstanding the existence of any dispute between
Borrower and Administrative Agent or any Lender with respect to the existence
of said event of default or performance of the Guaranteed Obligations or any
counterclaim, set-off or other claim which Borrower may allege against
Administrative Agent or any Lender with respect thereto. Moreover, Guarantor
agrees that Guarantor’s obligations shall not be affected by any circumstances
which constitute a legal or equitable discharge of a guarantor or surety.

 

7.             Guarantor agrees that Administrative
Agent and Lenders may enforce this Guaranty without the necessity of resorting
to or exhausting any security or collateral (including, without limitation,
pursuant to a judicial or nonjudicial foreclosure) and without the necessity of
proceeding against Borrower or any other guarantor. Guarantor hereby waives any
right to require Administrative Agent or Lenders to proceed against Borrower,
to proceed against any other guarantor, to foreclose any lien on any real or
personal property, to exercise any right or remedy under the Loan Documents, to
draw upon any letter of credit issued in connection herewith, or to pursue any
other remedy or to enforce any other right.

 

8.             (a)           Guarantor
agrees that nothing contained herein shall prevent Administrative Agent and
Lenders from suing on the Notes or from exercising any rights available to them
under the Notes or under any of the other Loan Documents and that the exercise
of any of the aforesaid rights will not constitute a legal or equitable
discharge of Guarantor. Guarantor understands that the exercise by
Administrative Agent and Lenders of certain rights and remedies contained in
the Loan Documents (such as a nonjudicial foreclosure) may affect or eliminate
Guarantor’s right of subrogation against Borrower and that Guarantor may
therefore incur a partially or totally non-reimbursable liability hereunder;
nevertheless, Guarantor hereby authorizes and empowers Administrative Agent to
exercise, in its sole discretion, any rights and remedies, or any combination
thereof, which may then be available to Administrative Agent and Lenders, since
it is the intent and purpose of Guarantor that the obligations hereunder are
absolute, independent and unconditional under any and all circumstances.
Guarantor expressly waives any defense (which defense, if Guarantor had not
given this waiver, Guarantor might otherwise have) to a judgment against
Guarantor by reason of a nonjudicial foreclosure sale. Notwithstanding any
foreclosure of the lien of any deed of trust or security agreement with respect
to any or all of the real or personal property secured thereby, whether by the
exercise of the power of sale contained therein, by an action for judicial
foreclosure or by an acceptance of a deed in lieu of foreclosure, Guarantor
shall remain bound under this Guaranty.

 

4

 

(b)           Guarantor shall have no right of
subrogation against Borrower or against any collateral or security provided for
in the Loan Documents and no right of reimbursement or contribution against any
other guarantor unless and until all Guaranteed Obligations have been
indefeasibly paid and satisfied in full, and Administrative Agent and Lenders
have released, transferred or disposed of all of their rights, title and
interest in any collateral or security. To the extent the waiver of Guarantor’s
rights of subrogation, reimbursement and contribution as set forth herein is
found by a court of competent jurisdiction to be void or voidable for any
reason, Guarantor further agrees that Guarantor’s rights of subrogation and
reimbursement against Borrower and Guarantor’s rights of subrogation against
any collateral or security shall be junior and subordinate to any rights
Administrative Agent or Lenders may have against Borrower and to all rights,
title and interest Administrative Agent or Lenders may have in such collateral
or security, and Guarantor’s rights of contribution against any other guarantor
shall be junior and subordinate to any rights Administrative Agent or Lenders
may have against such other guarantor. Administrative Agent and Lenders may
use, sell or dispose of any item of collateral or security as it sees fit
without regard to Guarantor’s subrogation and contribution rights, and upon
disposition or sale of any item, Guarantor’s rights with respect to such item
will terminate. Guarantor understands that Guarantor may record a Request for
Notice of Sale pursuant to RCW 61.24.045 and thereby receive notice of any
proposed foreclosure of any real property collateral then securing the
Guaranteed Obligations. With respect to the foreclosure of any security
interest in any personal property collateral then securing the Guaranteed
Obligations, Administrative Agent and Lenders agree to give Guarantor five (5) days’
prior written notice, in the manner set forth in Section 11 hereof, of any
sale or disposition of any such personal property collateral, other than
collateral which is perishable, threatens to decline speedily in value, is of a
type customarily sold on a recognized market, or is cash, cash equivalents, certificates
of deposit or the like.

 

(c)           Guarantor’s sole right with respect to
any such foreclosure of real or personal property collateral shall be to bid at
such sale in accordance with applicable law. Guarantor acknowledges and agrees
that Administrative Agent or any Lender may also bid at any such sale and in
the event such collateral is sold to Administrative Agent or any Lender in
whole or in partial satisfaction of the Guaranteed Obligations (or any portion
thereof), Guarantor shall have no further right or interest with respect
thereto. Notwithstanding anything to the contrary contained herein, no
provision of this Guaranty shall be deemed to limit, decrease, or in any way to
diminish any rights of set-off Administrative Agent and Lenders may have with
respect to any cash, cash equivalents, certificates of deposit, letters of
credit or the like which may now or hereafter be deposited with Administrative
Agent or any Lender by Borrower.

 

(d)           To the extent any dispute exists at any
time between or among Guarantor and any other guarantor of the Guaranteed
Obligations as to Guarantor’s or any other guarantor’s right to contribution or
otherwise, Guarantor agrees to indemnify, defend and hold Administrative Agent
and Lenders harmless from and against any loss, damage, claim, demand, cost or
any other liability (including, without limitation, reasonable attorneys’ fees
and costs) Administrative Agent and Lenders may suffer as a result of such
dispute.

 

(e)           So long as any of the Guaranteed
Obligations are owing to Administrative Agent or any Lender, Guarantor shall
not, without the prior written consent of Administrative Agent, commence or
join with any other party in commencing any bankruptcy, reorganization or
insolvency proceedings of or against Borrower. The obligations of Guarantor
under this Guaranty shall not be altered, limited or affected by any case,
voluntary or involuntary, involving the bankruptcy, insolvency, receivership,
reorganization, liquidation or arrangement of Borrower or by any defense which
Borrower may have by reason of the order, decree or decision of any court or
administrative body resulting from any such case. Administrative Agent shall
have the sole right to accept or reject any plan on behalf of Guarantor
proposed in such case and to take any other action which Guarantor would be
entitled to take, including, without limitation, the decision to file or not
file a claim. Guarantor acknowledges and agrees that any interest on the
Guaranteed Obligations which accrues after the commencement of any such
proceeding (or, if interest on any portion of the Guaranteed Obligations ceases
to accrue by operation of law by 

 

5

 

reason of the commencement of said proceeding, such
interest as would have accrued on any such portion of the Guaranteed
Obligations if said proceedings had not been commenced) will be included in the
Guaranteed Obligations because it is the intention of the parties that the
Guaranteed Obligations should be determined without regard to any rule or
law or order which may relieve Borrower of any portion of such Guaranteed
Obligations. Guarantor hereby permits any trustee in bankruptcy, receiver,
debtor in possession, assignee for the benefit of creditors or similar Person
to pay Administrative Agent and Lenders, or allow the claim of Administrative
Agent and Lenders in respect of any such interest accruing after the date on
which such proceeding is commenced. Guarantor hereby assigns to Administrative
Agent (for the benefit of Lenders) Guarantor’s right to receive any payments
from any trustee in bankruptcy, receiver, debtor in possession, assignee for
the benefit of creditors or similar Person by way of dividend, adequate
protection payment or otherwise, If all or any portion of the Guaranteed
Obligations are paid or performed by Borrower, the obligations of Guarantor
hereunder shall continue and remain in full force and effect in the event that
all or any part of such payment(s) or performance(s) is avoided or
recovered directly or indirectly from Administrative Agent or Lenders as a
preference, fraudulent transfer or otherwise in such case irrespective of
payment in full of all obligations under the Loan Documents.

 

9.             (a)           Guarantor represents and warrants that any financial
statements, tax returns or other documents of Guarantor heretofore delivered to
Administrative Agent are true and correct in all material respects. Such
statements were prepared in accordance with generally accepted accounting
principles, consistently applied and fairly present the financial position of
Guarantor as of the date thereof. Guarantor further represents and warrants
that no material adverse change has occurred in Guarantor’s financial position
since the date of such statements.

 

(b)           Guarantor covenants and agrees to provide
Administrative Agent with any and all financial information required by
Administrative Agent pursuant to the Loan Agreement. Guarantor further
covenants and agrees to immediately notify Administrative Agent of any material
adverse change in Guarantor’s financial status.

 

10.          All notices, requests and demands to be
made hereunder to the parties hereto must be in writing and given as provided
in the notice provisions of the Loan Agreement (at the addresses set forth
below).

 

	
  To Administrative Agent:

  	
  Wachovia Bank, National
  Association

  
	
   

  	
  Real Estate Financial
  Services

  
	
   

  	
  Mail Code: CA 6500

  
	
   

  	
  1800 Century Park East,
  Suite 500

  
	
   

  	
  Los Angeles, CA 90067

  
	
   

  	
  Attn: Real Estate
  Financial Services

  
	
   

  	
  Telephone: (310) 789-8936

  
	
   

  	
  Facsimile: (310) 789-8994

  
	
   

  	
   

  
	
  To Guarantor:

  	
  Kennedy-Wilson, Inc.

  
	
   

  	
  KWI
  Property Fund 1, L.P.

  
	
   

  	
  c/o
  Kennedy-Wilson, Inc.

  
	
   

  	
  9601
  Wilshire Boulevard, Suite 220 Beverly Hills,

  California
  90210

  
	
   

  	
  Attention:
  Mary Ricks & John Prabhu

  
	
   

  	
  Telephone:

  	
  (310)
  887-6437

  
	
   

  	
  Facsimile:

  	
  (310) 887-6409

  

 

11.          Guarantor represents and warrants to
Administrative Agent and Lenders as follows:

 

6

 

(a)           No consent of any other Person,
including, without limitation, any creditors of Guarantor, and no license, permit,
approval or authorization of; exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is
required by Guarantor in connection with this Guaranty or the execution,
delivery, performance, validity or enforceability of this Guaranty and all
obligations required hereunder. This Guaranty has been duly executed and
delivered by Guarantor, and constitutes the legally valid and binding
obligation of Guarantor enforceable against Guarantor in accordance with its
terms.

 

(b)           The execution, delivery and performance
of this Guaranty will not violate any provision of any existing law or
regulation binding on Guarantor, or any order, judgment, award or decree of any
court, arbitrator or governmental authority binding on Guarantor, or of any
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which Guarantor is a party or by which Guarantor or any of its
assets may be bound, and will not result in, or require, the creation or
imposition of any lien on any of Guarantor’s property, assets or revenues
pursuant to the provisions of any such mortgage, indenture, lease, contract or
other agreement, instrument or undertaking.

 

12.          Guarantor’s performance of a portion, but
not all, of the Guaranteed Obligations will in no way limit, affect, modify or
abridge Guarantor’s liability for that portion of the Guaranteed Obligations
that is not performed. Without in any way limiting the generality of the
foregoing, in the event that Administrative Agent or any Lender is awarded a
judgment in any suit brought to enforce Guarantor’s covenant to perform a
portion of the Guaranteed Obligation, such judgment will in no way be deemed to
release Guarantor from its covenant to perform any portion of the Guaranteed
Obligation which is .not the subject of such suit.

 

13.          Guarantor covenants and agrees to furnish
to Administrative Agent, with sufficient copies for each Lender which
Administrative Agent shall distribute to the Lenders:

 

(a)           as soon as the same are available, and in
any event within ninety (90) days after the end of each fiscal year and sixty
(60) days after the end of each interim quarterly accounting period of the
subject, a copy of the current financial statements of Guarantor, which shall
consist of (a) a balance sheet as of the end of the relevant fiscal
period, (b) statements of income and expenses of Guarantor for such fiscal
period (together, in each case, with the comparable figures for the
corresponding period of the previous fiscal year), (c) contingent
liabilities of Guarantor, and (d) cash flow statements of Guarantor. All
such financial statements of Guarantor shall be audited by a certified public
accountant satisfactory to Administrative Agent;

 

(b)           Copies of filed federal income tax returns
of Guarantor for each taxable year (with all K-ls and other forms and
supporting schedules attached), within thirty (30) days after filing but in any
event not later than one hundred twenty (120) days after the close of each such
taxable year (subject to extension); and

 

(c)           Such other information concerning
Guarantor, and the assets, business, financial condition, operations, property,
prospects, and results of operations of Guarantor, as Administrative Agent
reasonably requests from time to time.

 

14.          Kennedy-Wilson, Inc. shall at all
times maintain a combined net worth of at least Fifteen Million Dollars
($15,000,000). KWI Property Fund I, L.P. shall at all times maintain a combined
net worth of at least Forty Million Dollars ($40,000,000). As used herein, “net
worth” shall mean an amount equal to the gross fair market value of all of the
applicable Guarantor’s assets (excluding any value for goodwill, trademarks,
patents, copyrights and other similar intangible items), less an amount equal
to all of such Guarantor’s liabilities (including guaranties and other
contingent liabilities), all as reasonably determined by Administrative Agent.

 

15.          Kennedy-Wilson, Inc. shall at all
times maintain combined unencumbered liquid assets equal to at least Seven Million
Five Hundred Thousand Dollars ($7,500,000). KWI Property Fund 1, L.P. 

 

7

 

shall at all times maintain combined unencumbered
liquid assets equal to at least One Million Dollars ($1,000,000). “Liquid assets”
means the following assets of the applicable Guarantor: (i) Cash; (ii) certificates
of deposit or time deposits with terms of six (6) months or less; (iii) A-1/P-1
commercial paper with a term of three (3) months or less; (iv) U.S.
treasury bills and other obligations of the federal government, all with terms
of six (6) months or less; (v) readily marketable securities
(excluding “margin stock” (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), restricted stock and stock subject to
the provisions of Rule 144 of the Securities and Exchange Commission); (vi) bankers’
acceptances issued for terms of six (6) months or less by financial
institutions; (vii) repurchase agreements with terms of six (6) months
or less covering U.S. government securities; and (viii) unfunded capital
commitments in such Guarantor.

 

16.          This Guaranty is solely for the benefit
of Administrative Agent and Lenders and is not intended to nor may it be deemed
to be for the benefit of any third party, including Borrower.

 

17.          Guarantor represents and warrants to
Administrative Agent and Lenders as follows:

 

(a)           Kennedy-Wilson, Inc. is a
corporation duly formed, validly existing and in good standing under the laws
of the State of Delaware, has the power to own its assets and to transact the
business in which it is now engaged and is in good standing under the laws of
each jurisdiction where its ownership or lease of property or the conduct of
its business requires such qualification.

 

(b)           KWI Property Fund 1, L.P. is a limited
partnership duly formed, validly existing and in good standing under the laws
of the State of Delaware, has the power to own its assets and to transact the
business in which it is now engaged and is in good standing under the laws of
each jurisdiction where its ownership or lease of property or the conduct of
its business requires such qualification.

 

(c)           Guarantor has the power, authority and
legal right to execute, deliver and perform this Guaranty and all obligations
required hereunder and has taken all necessary action to authorize its
execution, delivery and performance of this Guaranty and all obligations
required hereunder. The execution, delivery and performance of this Guaranty
will not violate any of the formation or governing documents of Guarantor or of
any laws pursuant to which Guarantor has been formed.

 

18.          Guarantor hereby grants Administrative
Agent and Lenders 4 security interest in any personal property of Borrower in
which Guarantor hereafter acquires any right, title or interest. Guarantor
agrees that such security interest is additional security for the obligations
hereby guaranteed. Such security interest is superior to any right of Guarantor
in such personal property until all sums due under the Notes or other Loan
Documents have been repaid in full and all Guaranteed Obligations have been
fully satisfied.

 

19.          Administrative Agent may assign this
Guaranty with any Loan Document, without in any way affecting Guarantor’s
liability hereunder. Any married person executing this Guaranty agrees that
recourse may be had against community property and separate property for the
satisfaction of all obligations hereby guaranteed. This Guaranty shall be
binding upon Guarantor, Guarantor’s heirs, representatives, administrators,
executors, successors and assigns and shall inure to the benefit of and shall
be enforceable by Administrative Agent and Lenders, and their successors,
endorsees and assigns. As used herein, the singular includes the plural, and
the masculine includes the feminine and neuter and vice versa, if the context
so requires.

 

20.          In the event of any dispute or litigation
regarding the enforcement or validity of this Guaranty, Guarantor shall be
obligated to pay all charges, costs and expenses (including, without
limitation, reasonable attorneys’ fees) incurred by Administrative Agent and
Lenders, whether or not any action or proceeding is commenced regarding such
dispute and whether or not such litigation is prosecuted to judgment.

 

8

 

21.          THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF WASHINGTON.

 

22.          Guarantor, Administrative Agent and
Lenders hereby voluntarily, knowingly and intentionally WAIVE ANY AND ALL
RIGHTS TO TRIAL BY JURY in any legal action or proceeding arising under or in
connection with this Guaranty or any other Loan Document or concerning the
Guaranteed Obligations and/or any collateral therefor or pertaining to any
transaction related to or contemplated in any Loan Document, regardless of
whether such action or proceeding concerns any contractual or tortious or other
claim. Guarantor acknowledges that this waiver of jury trial is a material
inducement to Administrative Agent and Lenders entering into the Loan Agreement
and to Lenders in extending credit to Borrower, that Administrative Agent and
Lenders would not have entered into the Loan Agreement and Lenders would not
have extended such credit without this jury trial waiver, and that Guarantor
has been represented by an attorney or has had an opportunity to consult with
an attorney regarding this Guaranty and understands the legal effect of this
jury trial waiver.

 

23.          Guarantor hereby submits to the
jurisdiction of the state and federal courts in the State of Washington and
State of California for purposes of any action arising from or growing out of
this Guaranty, and further agrees that the venue of any such action may be laid
in King County, Washington, or Los Angeles County, California, and that (in
addition to any other method provided by law for service of process) service of
process in any such action may be made on Guarantor by the delivery of the
process to Kent Mouton, Esq., whose present address is 15303 Ventura
Boulevard, Suite 1400, Sherman Oaks, California 91403, whom Guarantor
hereby appoints as Guarantor’s agent for service of process. Nothing contained
in this Guaranty, however, shall be deemed to constitute, or to imply the
existence of, any agreement by Administrative Agent or Lenders to bring any
such action only in said courts or to restrict in any way any of Administrative
Agent’s and Lenders’ remedies or rights to enforce the terms of this Guaranty
as, when and where Administrative Agent shall deem appropriate, in its sole
discretion.

 

24.          No provision of this Guaranty may be
changed, waived, revoked or amended without Administrative Agent’s prior
written consent. Every provision of this Guaranty is intended to be severable.
If any term or provision hereof is declared to be illegal or invalid for any
reason whatsoever by a court of competent jurisdiction, such illegality or
invalidity will not affect the balance of the terms and provisions hereof,
which terms and provisions will remain binding and enforceable.

 

25.          This Guaranty may be executed in any
number of counterparts each of which shall be deemed an original and all of
which shall constitute one and the same guaranty with the same effect as if all
parties had signed the same signature page. Any signature page of this
Guaranty may be detached from any counterpart of this Guaranty and reattached
to any other counterpart of this Guaranty identical in form hereto but having
attached to it one or more additional signature pages.

 

26.          No failure or delay on the part of Administrative
Agent or Lenders to exercise any power, right or privilege under this Guaranty
will impair any such power, right or privilege, or be construed to be a waiver
of any default or an acquiescence therein, nor will any single or partial
exercise of such power, right or privilege preclude other or further exercise
thereof or of any other right, power or privilege.

 

27.          This Guaranty embodies the entire
agreement among the parties hereto with respect to the matters set forth
herein, and supersedes all prior agreements among the parties with respect to
the matters set forth herein. No course of prior dealing among the parties, no
usage of trade, and no parol or extrinsic evidence of any nature may be used to
supplement, modify or vary any of the terms hereof. There are no conditions to
the full effectiveness of this Guaranty.

 

28.          This Guaranty is in addition to all other
guaranties of Guarantor and any other guarantors of Borrower’s obligations to
Administrative Agent and Lenders.

 

29.          GUARANTOR ACKNOWLEDGES THAT
GUARANTOR HAS BEEN AFFORDED THE OPPORTUNITY TO READ THIS DOCUMENT CAREFULLY AND
TO 

 

9

 

REVIEW IT WITH AN ATTORNEY OF GUARANTOR’S CHOICE
BEFORE SIGNING IT. GUARANTOR ACKNOWLEDGES HAVING READ AND UNDERSTOOD THE
MEANING AND EFFECT OF THIS DOCUMENT BEFORE SIGNING IT.

 

30.          When two or more persons or entities have
executed this Guaranty, unless the context clearly indicates otherwise, all
references herein to “Guarantor”
shall mean the guarantors hereunder or either or any of them. All of the
obligations and liabilities of said guarantors under this Guaranty (and the
obligations of other guarantors under any similar or other guaranties of part
or all of the Guaranteed Obligations) shall be joint and several. Suit may be
brought against said guarantors, jointly and severally, or against any one or
more of them (even if less than all), without impairing the rights of
Administrative Agent and Lenders against the other or others of said
guarantors; and Administrative Agent may settle with any one or more of said
guarantors for such sums or sum as it may see fit and/or Administrative Agent
may release any of said guarantors from all further liability to Administrative
Agent and Lenders for such indebtedness without impairing the right of
Administrative Agent and Lenders to demand and collect the balance of such
indebtedness from the other or others of said guarantors not so released; but
it is agreed among said guarantors themselves, however, that such settlement
and release shall in no way impair the rights of said guarantors as among
themselves.

 

[Signatures on Following Page]

 

10

 

ORAL
AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR FORBEAR FROM ENFORCING
REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

IN
WITNESS WHEREOF,
Guarantor has executed this Guaranty as of the date first above written.

 

 

	
   

  	
  “Guarantor”

  
	
   

  	
   

  	
   

  
	
   

  	
  KENNEDY-WILSON, INC., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Freeman Lyle

  
	
   

  	
  Name:

  	
  Freeman Lyle

  
	
   

  	
  Title:

  	
  EVP-CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KWI PROPERTY FUND I, L.P., a Delaware limited partnership,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kennedy Wilson Property Services, Inc.,

  
	
   

  	
   

  	
  a Delaware corporation,

  
	
   

  	
   

  	
  its sole general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John Prabhu

  
	
   

  	
   

  	
  Name:

  	
  John Prabhu

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

11Exhibit 10.112

 

COMMERCIAL GUARANTY

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call/Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  710

  	
   

  	
   

  	
   

  

 

References in the boxes above are for Lender’s use only and do not
limit the applicability of this document to any particular loan or item.

 

Any item above containing “***” has been omitted due to text length
limitations.

 

	
  Borrower:

  	
   

  	
  Fifth
  and Madison, LLC, a Delaware limited liability company  

  9601
  Wilshire Boulevard, Suite 220  

  Beverly Hills, CA 90210

  	
   

  	
  Lender:

  	
   

  	
  Pacific
  Western Bank  

  Beverly
  Hills Office  

  9454
  Wilshire Boulevard  

  Beverly
  Hills, CA 90212

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Guarantor:

  	
   

  	
  KWI
  Property Fund I, L.P., a Delaware limited partnership  

  9601
  Wilshire Boulevard, Suite 220  

  Beverly
  Hills, CA 90210

  	
   

  	
   

  	
   

  	
   

  

 

CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration,
Guarantor absolutely and unconditionally guarantees full and punctual payment
and satisfaction of the Indebtedness of Borrower to Lender, and the performance
and discharge of all Borrower’s obligations under the Note and the Related
Documents. This is a guaranty of payment and performance and not of collection,
so Lender can enforce this Guaranty against Guarantor even when Lender has not
exhausted Lender’s remedies against anyone else obligated to pay the
Indebtedness or against any collateral securing the Indebtedness, this Guaranty
or any other guaranty of the Indebtedness. Guarantor will make any payments to
Lender or its order, on demand, in legal tender of the United States of
America, in same-day funds, without set-off or deduction or counterclaim, and
will otherwise perform Borrower’s obligations under the Note and Related
Documents. Under this Guaranty, Guarantor’s liability is unlimited and
Guarantor’s obligations are continuing.

 

INDEBTEDNESS. The word “Indebtedness” as used in this
Guaranty means all of the principal amount outstanding from time to time and at
any one or more times, accrued unpaid interest thereon and all collection costs
and legal expenses related thereto permitted by law, attorneys’ fees, arising
from any and all debts, liabilities and obligations of every nature or form,
now existing or hereafter arising or acquired, that Borrower individually or
collectively or interchangeably with others, owes or will owe Lender. “Indebtedness”
includes, without limitation, loans, advances, debts, overdraft indebtedness,
credit card indebtedness, lease obligations, liabilities and obligations under
any interest rate protection agreements or foreign currency exchange agreements
or commodity price protection agreements, other obligations, and liabilities of
Borrower, and any present or future judgments against Borrower, future
advances, loans or transactions that renew, extend, modify, refinance, consolidate
or substitute these debts, liabilities and obligations whether: voluntarily or
involuntarily incurred; due or to become due by their terms or acceleration;
absolute or contingent; liquidated or unliquidated; 

 

 

determined
or undetermined; direct or indirect; primary or secondary in nature or arising
from a guaranty or surety; secured or unsecured; joint or several or joint and
several; evidenced by a negotiable or non-negotiable instrument or writing;
originated by Lender or another or others; barred or unenforceable against
Borrower for any reason whatsoever; for any transactions that may be voidable
for any reason (such as infancy, insanity, ultra vires or otherwise); and
originated then reduced or extinguished and then afterwards increased or reinstated.

 

If
Lender presently holds one or more guaranties, or hereafter receives additional
guaranties from Guarantor, Lender’s rights under all guaranties shall be
cumulative. This Guaranty shall not (unless specifically provided below to the
contrary) affect or invalidate any such other guaranties. Guarantor’s liability
will be Guarantor’s aggregate liability under the terms of this Guaranty and
any such other unterminated guaranties.

 

CONTINUING GUARANTY. THIS IS A “CONTINUING GUARANTY” UNDER WHICH GUARANTOR
AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION
OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR
ACQUIRED, ON AN OPEN AND CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ON
THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTOR’S OBLIGATIONS AND
LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS
EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO
BALANCE FROM TIME TO TIME.

 

DURATION
OF GUARANTY. This
Guaranty will take effect when received by Lender without the necessity of any
acceptance by Lender, or any notice to Guarantor or to Borrower, and will
continue in full force until all the Indebtedness incurred or contracted before
receipt by Lender of any notice of revocation shall have been fully and finally
paid and satisfied and all of Guarantor’s other obligations under this Guaranty
shall have been performed in full. If Guarantor elects to revoke this Guaranty,
Guarantor may only do so in writing. Guarantor’s written notice of revocation
must be mailed to Lender, by certified mail, at Lender’s address listed above
or such other place as Lender may designate in writing. Written revocation of
this Guaranty will apply only to new Indebtedness created after actual receipt
by Lender of Guarantor’s written revocation. For this purpose and without
limitation, the term new Indebtedness” does not include the Indebtedness which
at the time of notice of revocation is contingent, unliquidated, undetermined
or not due and which later becomes absolute, liquidated, determined or due. For
this purpose and without limitation, “new Indebtedness” does not include all or
part of the Indebtedness that is: incurred by Borrower prior to revocation;
incurred under a commitment that became binding before revocation; any
renewals, extensions, substitutions, and modifications of the Indebtedness.
This Guaranty shall bind Guarantor’s estate as to the Indebtedness created both
before and after Guarantor’s death or incapacity, regardless of Lender’s actual
notice of Guarantor’s death. Subject to the foregoing, Guarantor’s executor or
administrator or other legal representative may terminate this Guaranty in the
same manner in which Guarantor might have terminated it and with the same
effect. Release of any other guarantor or termination of any other guaranty of
the Indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation Lender receives from any one or more Guarantors shall
not affect the liability of any remaining Guarantors under this Guaranty.
Guarantor’s obligations under this Guaranty shall be in addition to any of
Guarantor’s 

 

2

 

obligations,
or any of them, under any other guaranties of the Indebtedness or any other
person heretofore or hereafter given to Lender unless such other guaranties are
modified or revoked in writing; and this Guarantor shall not, unless provided
in this Guaranty, affect, invalidate, or supersede any such other guaranty. It
is anticipated that fluctuations may occur in the aggregate amount of the
Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges
and agrees that reductions in  the amount of the Indebtedness,
even to zero dollars ($0.00), shall not constitute a termination of this
Guaranty. This Guaranty is binding upon Guarantor and Guarantor’s heirs,
successors and assigns so long as any of the Indebtedness remains unpaid and
even though the Indebtedness may from time to time be zero  dollars ($0.00).

 

GUARANTOR’S
AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation
hereof, without notice or demand and without lessening Guarantor’s liability
under this Guaranty, from time to time: (A) prior to revocation as set
forth above, to make one or more additional secured or unsecured loans to
Borrower, to lease equipment or other goods to Borrower, or otherwise to extend
additional credit to Borrower; (B) to alter, compromise, renew, extend,
accelerate, or otherwise change one or more times the time for payment or other
terms of the Indebtedness or any part of the Indebtedness, including increases
and decreases of the rate of interest on the Indebtedness; extensions may be
repeated and may be for longer than the original loan term; (C) to take
and hold security for the payment of this Guaranty or the Indebtedness, and
exchange, enforce, waive, subordinate, fail or decide not to perfect, and
release any such security, with or without the substitution of new collateral; (D) to
release, substitute, agree not to sue, or deal with any one or more of Borrower’s
sureties, endorsers, or other guarantors on any terms or in any manner Lender
may choose; (E) to determine how, when and what application of payments
and credits shall be made on the Indebtedness; (F) to apply such security and
direct the order or manner of sale thereof, including without limitation, any
nonjudicial sale permitted by the terms of the controlling security agreement
or deed of trust, as Lender in its discretion may determine; (G) to sell,
transfer, assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in
part.

 

GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (A) no representations or agreements of any kind have been
made to Guarantor which would limit or qualify in any way the terms of this
Guaranty; (B) this Guaranty is executed at Borrower’s request and not at
the request of Lender; (C) Guarantor has full power, right and authority
to enter into this Guaranty; (D) the provisions of this Guaranty do not
conflict with or result in a default under any agreement or other instrument
binding upon Guarantor and do not result in a violation of any law, regulation,
court decree or order applicable to Guarantor; (E) Guarantor has not and
will not, without the prior written consent of Lender, sell, lease, assign,
encumber, hypothecate, transfer, or otherwise dispose of all or substantially
all of Guarantor’s assets, or any interest therein; (F) upon Lender’s
request, Guarantor will provide to Lender financial and credit information in
form acceptable to Lender, and all such financial information which currently
has been, and all future financial information which will be provided to Lender
is and will be true and correct in all material respects and fairly present
Guarantor’s financial condition as of the dates the financial information is
provided; (G) no material adverse change has occurred in Guarantor’s financial
condition since the date of the most recent financial statements provided to
Lender and no event has occurred which may materially adversely affect 

 

3

 

Guarantor’s
financial condition; (H) no litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid taxes)
against Guarantor is pending or threatened; (I) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor
has established adequate means of obtaining from Borrower on a continuing basis
information regarding Borrower’s financial condition. Guarantor agrees to keep
adequately informed from such means of any facts, events, or circumstances
which might in any way affect Guarantor’s risks under this Guaranty, and
Guarantor further agrees that, absent a request for information, Lender shall
have no obligation to disclose to Guarantor any information or documents
acquired by Lender in the course of its relationship with Borrower.

 

GUARANTOR’S
FINANCIAL STATEMENTS.
Guarantor agrees to furnish Lender with the following; Additional Requirements.

 

ANNUAL STATEMENTS. Guarantor to provide Lender with, as soon as
available, but in no event later than one hundred fifty (150) days after the
end of each fiscal year end, a consolidated balance sheet and income statement
for the period ended in form satisfactory to Lender, audited by a CPA
acceptable to Lender. Statements may be due more often if requested by Lender.

 

INTERIM
STATEMENTS.
Guarantor shall provide to Lender, as soon as available, but in no event later
than forty-five (45) days after the end of each fiscal quarter (including
fiscal year end), a self-prepared consolidated balance sheet and income
statement for the period ended in form satisfactory to Lender. Statements may
be due more often if requested by Lender.

 

MINIMUM
OWNERS’ CAPITAL.
Borrower shall maintain a Minimum Owners’ Capital of $18,000,000.00. This
required Minimum Owners’ Capital must be maintained at all times and may be
evaluated at any time.

 

All
financial reports required to be provided under this Guaranty shall be prepared
in accordance with GAAP, applied on a consistent basis, and certified by
Guarantor as being true and correct.

 

GUARANTOR’S
WAIVERS. Except
as prohibited by applicable law, Guarantor waives any right to require Lender
to (A) make any presentment, protest, demand, or notice of any kind, including
notice of change of any terms of repayment of the Indebtedness, default by
Borrower or any other guarantor or surety, any action or nonaction taken by
Borrower, Lender, or any other guarantor or surety of Borrower, or the creation
of new or additional Indebtedness; (B) proceed against any person, including
Borrower, before proceeding against Guarantor; (C) proceed against any
collateral for the Indebtedness, including Borrower’s collateral, before
proceeding against Guarantor; (D) apply any payments or proceeds received
against the Indebtedness in any order; (E) give notice of the terms, time,
and place of any sale of the collateral pursuant to the Uniform Commercial Code
or any other law governing such sale; (F) disclose any information about
the Indebtedness, the Borrower, the collateral, or any other guarantor or
surety, or about any action or nonaction of Lender; or (G) pursue any
remedy or course of action in Lender’s power whatsoever.

 

4

 

Guarantor
also waives any and all rights or defenses arising by reason of (H) any
disability or other defense of Borrower, any other guarantor or surety or any
other person; (I) the cessation from any cause whatsoever, other than
payment in full, of the Indebtedness; (J) the application of proceeds of
the Indebtedness by Borrower for purposes other than the purposes understood
and intended by Guarantor and Lender; (K) any act of omission or
commission by Lender which directly or indirectly results in or contributes to
the discharge of Borrower or any other guarantor or surety, or the
Indebtedness, or the loss or release of any collateral by operation of law or
otherwise; (L) any statute of limitations in any action under this
Guaranty or on the Indebtedness; or (M) any modification or change in
terms of the Indebtedness, whatsoever, including without [imitation, the
renewal, extension, acceleration, or other change in the time payment of the
Indebtedness is due and any change in the interest rate, and including any such
modification or change in terms after revocation of this Guaranty on the
Indebtedness incurred prior to such revocation.

 

Guarantor
waives all rights of subrogation, reimbursement, indemnification, and
contribution and any other rights and defenses that are or may become available
to Guarantor by reason of California Civil Code Sections 2787 to 2855,
inclusive.

 

Guarantor
waives all rights and any defenses arising out of an election of remedies by
Lender even though that the election of remedies, such as a non-judicial
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 California Code of Civil Procedure or
otherwise.

 

Guarantor
waives all rights and defenses that Guarantor may have because Borrower’s
obligation is secured by real property. This means among other things: (N) Lender
may collect from Guarantor without first foreclosing on any real or personal
property collateral pledged by Borrower. (0) If Lender forecloses on any
real property collateral pledged by Borrower: (1) the amount of Borrower’s
obligation may be reduced only by the price for which the collateral is sold at
the foreclosure sale, even if the collateral is worth more than the sale price.
(2) Lender may collect from Guarantor even if Lender, by foreclosing on
the real property collateral, has destroyed any right Guarantor may have to
collect from Borrower. This is an unconditional and irrevocable waiver of any
rights and defenses Guarantor may have because Borrower’s obligation is secured
by real property. These rights and defenses include, but are not limited to,
any rights and defenses based upon Section 580a, 580b, 580d, or 726 of the
Code of Civil Procedure.

 

Guarantor
understands and agrees that the foregoing waivers are unconditional and irrevocable
waivers of substantive rights and defenses to which Guarantor might otherwise
be entitled under state and federal law. The rights and defenses waived
include, without limitation, those provided by California laws of suretyship
and guaranty, anti-deficiency laws, and the Uniform Commercial Code. Guarantor
acknowledges that Guarantor has provided these waivers of rights and defenses
with the intention that they be fully relied upon by Lender. Guarantor further
understands and agrees that this Guaranty is a separate and independent
contract between Guarantor and Lender, given for full and ample consideration,
and is enforceable on its own terms. Until all of the Indebtedness is paid in
full, Guarantor waives any right to enforce any remedy Guarantor may have
against the Borrower or any other guarantor, surety, or other person, 

 

5

 

and
further, Guarantor waives any right to participate in any collateral for the
Indebtedness now or hereafter held by Lender.

 

Guarantor’s
Understanding With Respect To Waivers. Guarantor warrants and agrees that each of the
waivers set forth above is made with Guarantor’s full knowledge of its
significance and consequences and that, under the circumstances, the waivers
are reasonable and not contrary to public policy or law. If any such waiver is
determined to be contrary to any applicable law or public policy, such waiver
shall be effective only to the extent permitted by law or public policy.

 

Subordination
of Borrower’s Debts to Guarantor. Guarantor agrees that the Indebtedness, whether now
existing or hereafter created, shall be superior to any claim that Guarantor
may now have or hereafter acquire against Borrower, whether or not Borrower
becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor
may have against Borrower, upon any account whatsoever, to any claim that
Lender may now or hereafter have against Borrower. In the event of insolvency
and consequent liquidation of the assets of Borrower, through bankruptcy, by an
assignment for the benefit of creditors, by voluntary liquidation, or
otherwise, the assets of Borrower applicable to the payment of the claims of
both Lender and Guarantor shall be paid to Lender and shall be first applied by
Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims
which it may have or acquire against Borrower or against any assignee or
trustee in bankruptcy of Borrower; provided however, that such assignment shall
be effective only for the purpose of assuring to Lender full payment in legal
tender of the Indebtedness. If Lender so requests, any notes or credit
agreements now or hereafter evidencing any debts or obligations of Borrower to
Guarantor shall be marked with a legend that the same are subject to this
Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is
hereby authorized, in the name of Guarantor, from time to time to file
financing statements and continuation statements and to execute documents and
to take such other actions as Lender deems necessary or appropriate to perfect,
preserve and enforce its rights under this Guaranty.

 

Miscellaneous
Provisions. The
following miscellaneous provisions are a part of this Guaranty:

 

AMENDMENTS. This Guaranty, together with any Related
Documents, constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Guaranty. No alteration of or amendment to
this Guaranty shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or amendment.

 

ATTORNEYS’
FEES; EXPENSES.
Guarantor agrees to pay upon demand all of Lenders costs and expenses,
including Lender’s attorneys’ fees and Lenders legal expenses, incurred in
connection with the enforcement of this Guaranty. Lender may hire or pay
someone else to help enforce this Guaranty, and Guarantor shall pay the costs
and expenses of such enforcement. Costs and expenses include Lenders attorneys
fees and legal expenses whether or not there is a lawsuit, including attorneys’
fees and legal expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Guarantor also shall pay all court costs and
such additional fees as may be directed by the court.

 

CAPTION
HEADINGS. Caption
headings in this Guaranty are for convenience purposes only and are not to be
used to interpret or define the provisions of this Guaranty.

 

6

 

GOVERNING LAW. This Guaranty will be governed by federal law
applicable to Lender and, to the extent not preempted by federal law, the laws
of the State of California without regard to its conflicts of law provisions.

 

CHOICE OF
VENUE. If there
is a lawsuit, Guarantor agrees upon Lender’s request to submit to the
jurisdiction of the courts of Los Angeles County, State of California.

 

INTEGRATION. Guarantor further agrees that Guarantor
has read and fully understands the terms of this Guaranty. Guarantor has had
the opportunity to be advised by Guarantor’s attorney with respect to entering
into this Guaranty. Guarantor further agrees that the Guaranty represents the
final agreement between Guarantor and Lender regarding the matters addressed
therein and therefore: (a) incorporates all negotiations of the parties
relating to the Guaranty; (b) there are no unwritten oral agreements
between Lender and Guarantor, and (c) this Guaranty may not be
contradicted by evidence of any prior, contemporaneous, or subsequent oral
agreements or understandings of Lender and Guarantor. Guarantor hereby
indemnifies and holds Lender harmless from all losses, claims, damages, and
costs (including Lender’s attorney’s fees) suffered by Lender as a result of any
breach by Guarantor of the warranties, representations and agreements of this
Paragraph.

 

INTERPRETATION. In all cases where there is more than
one Borrower or Guarantor, then all words used in this Guaranty in the singular
shall be deemed to have been used in the plural where the context and
construction so require; and where there is more than one Borrower named in
this Guaranty or when this Guaranty is executed by more than one Guarantor, the
words “Borrower’ and “Guarantor” respectively shall mean all and any one or
more of them. The words “Guarantor,” “Borrower,” and “Lender” include the
heirs, successors, assigns, and transferees of each of them. If a court finds
that any provision of this Guaranty is not valid or should not be enforced,
that fact by itself will not mean that the rest of this Guaranty will not be
valid or enforced. Therefore, a court will enforce the rest of the provisions
of this Guaranty even if a provision of this Guaranty may be found to be
invalid or unenforceable. If any one or more of Borrower or Guarantor are
corporations, partnerships, limited liability companies, or similar entities,
it is not necessary for Lender to inquire into the powers of Borrower or
Guarantor or of the officers, directors, partners, managers, or other agents
acting or purporting to act on their behalf, and any indebtedness made or
created in reliance upon the professed exercise of such powers shall be
guaranteed under this Guaranty.

 

NOTICES. Any notice required to be given under
this Guaranty shall be given in writing, and, except for revocation notices by
Guarantor, shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Guaranty.
All revocation notices by Guarantor shall be in writing and shall be effective
upon delivery to Lender as provided in the section of this Guaranty entitled “DURATION
OF GUARANTY.” Any party may change its address for notices under this Guaranty
by giving formal written notice to the other parties, specifying that the
purpose of the notice is to change the party’s address. For notice purposes,
Guarantor agrees to keep Lender informed at all times of Guarantor’s current
address. Unless otherwise provided or required by law, 

 

7

 

if there
is more than one Guarantor, any notice given by Lender to any Guarantor is
deemed to be notice given to all Guarantors.

 

NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights
under this Guaranty unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Guaranty shall not prejudice or constitute a waiver of
Lender’s right otherwise to demand strict compliance with that provision or any
other provision of this Guaranty. No prior waiver by Lender, nor any course of
dealing between Lender and Guarantor, shall constitute a waiver of any of
Lender’s rights or of any of Guarantor’s obligations as to any future
transactions. Whenever the consent of Lender is required under this Guaranty,
the granting of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is required and
in all cases such consent may be granted or withheld in the sole discretion of
Lender.

 

SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Guaranty on
transfer of Guarantor’s interest, this Guaranty shall be binding upon and inure
to the benefit of the parties, their successors and assigns.

 

Definitions. The following capitalized words and
terms shall have the following meanings when used in this Guaranty. Unless
specifically stated to the contrary, all references to dollar amounts shall
mean amounts in lawful money of the United States of America. Words and terms
used in the singular shall include the plural, and the plural shall include the
singular, as the context may require. Words and terms not otherwise defined in
this Guaranty shall have the meanings attributed to such terms in the Uniform
Commercial Code:

 

BORROWER. The word “Borrower” means Fifth and Madison, LLC, a
Delaware limited liability company and includes all co-signers and co-makers
signing the Note and all their successors and assigns.

 

GAAP. The word “GAAP” means generally
accepted accounting principles.

 

GUARANTOR. The word “Guarantor” means everyone signing this
Guaranty, including without limitation KWI Property Fund I, L.P., a Delaware
limited partnership, and in each case, any signer’s successors and assigns.

 

GUARANTY. The word “Guaranty” means this guaranty from Guarantor
to Lender.

 

INDEBTEDNESS. The word “Indebtedness” means Borrower’s indebtedness
to Lender as more particularly described in this Guaranty.

 

LENDER. The word “Lender” means Pacific Western Bank, its
successors and assigns.

 

NOTE. The word “Note” means the promissory note dated February 13, 2008,
in the original principal amount of $13,500,000.00 from Borrower to Lender,
together with all renewals of, extensions of, modifications of, refinancings
of, consolidations of and substitutions for the promissory note or agreement

 

8

 

RELATED DOCUMENTS. The words “Related Documents” mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security deeds,
collateral mortgages, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
Indebtedness.

 

EACH
UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS
GUARANTY IS DATED JANUARY 16, 2009.

 

GUARANTOR:

 

 

KWI
PROPERTY FUND I, L.P., A DELAWARE
LIMITED PARTNERSHIP

 

KENNEDY-WILSON
PROPERTY SERVICES, INC., A DELAWARE CORPORATION, General partner of KWI
Property Fund I, L.P., a Delaware limited partnership

 

 

	
  By: 

  	
  /s/ Freeman Lyle

  	
   

  
	
  Freeman Lyle, Vice President/Secretary of

  	
   

  
	
  Kennedy-Wilson Property Services, Inc., a

  	
   

  
	
  Delaware corporation

  	
   

  

 

9

 

COMMERCIAL GUARANTY

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call/Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  710

  	
   

  	
   

  	
   

  

 

References in the boxes above are for Lender’s use only and do not
limit the applicability of this document to any particular loan or item.

 

Any item above containing “***” has been omitted due to text length
limitations.

 

	
  Borrower:

  	
   

  	
  Fifth
  and Madison, LLC, a Delaware limited liability company  

  9601
  Wilshire Boulevard, Suite 220

  Beverly Hills, CA 90210

  	
   

  	
  Lender:

  	
   

  	
  Pacific
  Western Bank  

  Beverly
  Hills Office  

  9454
  Wilshire Boulevard  

  Beverly
  Hills, CA 90212

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Guarantor:

  	
   

  	
  Kennedy-Wilson, Inc.,
  a Delaware corporation  

  9601
  Wilshire Boulevard, Suite 220

  Beverly
  Hills, CA 90210

  	
   

  	
   

  	
   

  	
   

  

 

CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration,
Guarantor absolutely and unconditionally guarantees full and punctual payment
and satisfaction of Guarantor’s Share of the Indebtedness of Borrower to
Lender, and the performance and discharge of all Borrower’s obligations under
the Note and the Related Documents. This is a guaranty of payment and
performance and not of collection, so Lender can enforce this Guaranty against
Guarantor even when Lender has not exhausted Lenders remedies against anyone
else obligated to pay the Indebtedness or against any collateral securing the
Indebtedness, this Guaranty or any other guaranty of the Indebtedness.
Guarantor will make any payments to Lender or its order, on demand, in legal
tender of the United States of America, in same-day funds, without set-off or
deduction or counterclaim, and will otherwise perform Borrower’s obligations
under the Note and Related Documents. Under this Guaranty, Guarantor’s
obligations are continuing.

 

INDEBTEDNESS. The word “Indebtedness as used in this
Guaranty means all of the principal amount outstanding from time to time and at
any one or more times, accrued unpaid interest thereon and all collection costs
and legal expenses related thereto permitted by law, attorneys’ fees, arising
from any and all debts, liabilities and obligations of every nature or form,
now existing or hereafter arising or acquired, that Borrower individually or
collectively or interchangeably with others, owes or will owe Lender. “Indebtedness”
includes, without limitation, loans, advances, debts, overdraft indebtedness,
credit card indebtedness, lease obligations, liabilities and obligations under
any interest rate protection agreements or foreign currency exchange agreements
or commodity price protection agreements, other obligations, and liabilities of
Borrower, and any present or future judgments against Borrower, future
advances, loans or transactions that renew, extend, modify, refinance,
consolidate or substitute these debts, liabilities and obligations whether:
voluntarily or involuntarily incurred; due or to 

 

 

become
due by their terms or acceleration; absolute or contingent; liquidated or
unliquidated; determined or undetermined; direct or indirect; primary or
secondary in nature or arising from a guaranty or surety; secured or unsecured;
joint or several or joint and several; evidenced by a negotiable or
non-negotiable instrument or writing; originated by Lender or another or
others; barred or unenforceable against Borrower for any reason whatsoever; for
any transactions that may be voidable for any reason (such as infancy,
insanity, ultra vires or otherwise); and originated then reduced or
extinguished and then afterwards increased or reinstated.

 

If
Lender presently holds one or more guaranties, or hereafter receives additional
guaranties from Guarantor, Lender’s rights under all guaranties shall be
cumulative. This Guaranty shall not (unless specifically provided below to the
contrary) affect or invalidate any such other guaranties. Guarantor’s liability
will be Guarantor’s aggregate liability under the terms of this Guaranty and
any such other unterminated guaranties.

 

GUARANTOR’S
SHARE OF THE INDEBTEDNESS. The words “Guarantor’s Share of the Indebtedness” as used in this
Guaranty mean an amount not to exceed Six Million Seven Hundred Fifty Thousand &
00/100 Dollars ($6,750,000.00) of all the principal amount, interest thereon to
the extent not prohibited by law, and all collection costs, expenses and
attorneys’ fees whether or not there is a lawsuit, and if there is a lawsuit,
any fees and costs for trial and appeals.

 

Guarantor’s
Share of the Indebtedness will only be reduced by sums actually paid by
Guarantor under this Guaranty, but will not be reduced by sums from any other
source including, but not limited to, sums realized from any collateral
securing the Indebtedness or this Guaranty, or payments by anyone other than
Guarantor, or reductions by operation of law, judicial order or equitable
principles. Lender has the sole and absolute discretion to determine how sums
shall be applied among guaranties of the Indebtedness.

 

The
above limitation on liability is not a restriction on the amount of the Note of
Borrower to Lender either in the aggregate or at any one time.

 

CONTINUING GUARANTY. THIS IS A “CONTINUING GUARANTY” UNDER WHICH GUARANTOR
AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION
OF THE GUARANTOR’S SHARE OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW
EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON A CONTINUING BASIS. ACCORDINGLY,
ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTOR’S
OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING
INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE
A ZERO BALANCE FROM TIME TO TIME.

 

DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor
or to Borrower, and will continue in full force until all the Indebtedness
incurred or contracted before receipt by Lender of any notice of revocation
shall have been fully and finally paid and satisfied and all of Guarantor’s
other obligations under this Guaranty shall have been performed in full. If
Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing.
Guarantor’s 

 

2

 

written
notice of revocation must be mailed to Lender, by certified mail, at Lender’s
address listed above or such other place as Lender may designate in writing.
Written revocation of this Guaranty will apply only to new Indebtedness created
after actual receipt by Lender of Guarantor’s written revocation. For this
purpose and without limitation, the term “new Indebtedness” does not include
the Indebtedness which at the time of notice of revocation is contingent,
unliquidated, undetermined or not due and which later becomes absolute,
liquidated, determined or due. For this purpose and without limitation, “new
Indebtedness” does not include all or part of the Indebtedness that is:
incurred by Borrower prior to revocation; incurred under a commitment that
became binding before revocation; any renewals, extensions, substitutions, and
modifications of the Indebtedness. This Guaranty shall bind Guarantor’s estate
as to the Indebtedness created both before and after Guarantor’s death or
incapacity, regardless of Lender’s actual notice of Guarantor’s death. Subject
to the foregoing, Guarantor’s executor or administrator or other legal
representative may terminate this Guaranty in the same manner in which
Guarantor might have terminated it and with the same effect. Release of any
other guarantor or termination of any other guaranty of the Indebtedness shall
not affect the liability of Guarantor under this Guaranty. A revocation Lender
receives from any one or more Guarantors shall not affect the liability of any
remaining Guarantors under this Guaranty. It is anticipated that fluctuations
may occur in the aggregate
amount of the Indebtedness covered by this Guaranty, and Guarantor specifically
acknowledges and agrees that reductions in the amount of the Indebtedness, even
to zero dollars ($0.00), shall not constitute a termination of this Guaranty.
This Guaranty is binding upon Guarantor and Guarantor’s heirs, successors and
assigns so long as any of the Guarantor’s Share of the Indebtedness remains
unpaid and even though the Guarantor’s Share of the Indebtedness may from time to time be zero dollars ($0.00).

 

GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either
before or after any revocation hereof, without notice or demand and without
lessening Guarantor’s liability under this Guaranty, from time to time: (A) prior
to revocation as set forth above, to make one or more additional secured or
unsecured loans to Borrower, to lease equipment or other goods to Borrower, or
otherwise to extend additional credit to Borrower; (3) to alter,
compromise, renew, extend, accelerate, or otherwise change one or more times
the time for payment or other terms of the Indebtedness or any part of the
Indebtedness, including increases and decreases of the rate of interest on the
Indebtedness; extensions may be repeated and may be for longer than the
original loan term; (C) to take and hold security for the payment of this
Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail
or decide not to perfect, and release any such security, with or without the
substitution of new collateral; (D) to release, substitute, agree not to
sue, or deal with any one or more of Borrower’s sureties, endorsers, or other
guarantors on any terms or in any manner Lender may choose; (E) to
determine how, when and what application of payments and credits shall be made
on the Indebtedness; (F) to apply such security and direct the order or
manner of sale thereof, including without limitation, any nonjudicial sale
permitted by the terms of the controlling security agreement or deed of trust,
as Lender in its discretion may determine; (G) to sell, transfer, assign
or grant participations in all or any part of the Indebtedness; and (H) to
assign or transfer this Guaranty in whole or in part.

 

GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (A) no representations or agreements of any kind have been
made to 

 

3

 

Guarantor
which would limit or qualify in any way the terms of this Guaranty; (B) this
Guaranty is executed at Borrower’s request and not at the request of Lender; (C) Guarantor
has full power, right and authority to enter into this Guaranty; (D) the
provisions of this Guaranty do not conflict with or result in a default under
any agreement or other instrument binding upon Guarantor and do not result in a
violation of any law, regulation, court decree or order applicable to
Guarantor; (E) Guarantor has not and will not, without the prior written
consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or
otherwise dispose of all or substantially all of Guarantor’s assets, or any
interest therein; (F) upon Lender’s request, Guarantor will provide to
Lender financial and credit information in form acceptable to Lender, and all
such financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present Guarantor’s financial condition as of
the dates the financial information is provided; (G) no material adverse
change has occurred in Guarantor’s financial condition since the date of the
most recent financial statements provided to Lender and no event has occurred
which may materially adversely affect Guarantor’s financial condition; (H) no
litigation, claim, investigation, administrative proceeding or similar action
(including those for unpaid taxes) against Guarantor is pending or threatened; (I) Lender
has made no representation to Guarantor as to the creditworthiness of Borrower;
and (J) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower’s financial
condition. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Guarantor’s risks
under this Guaranty, and Guarantor further agrees that, absent a request for
information, Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of its relationship
with Borrower.

 

GUARANTOR’S
FINANCIAL STATEMENTS.
Guarantor agrees to furnish Lender with the following: Additional Requirements.

 

ANNUAL
STATEMENTS.
Guarantor to provide Lender with, as soon as available, but in no event later
than one hundred fifty (150) days after the end of each fiscal year end, a
consolidated balance sheet and income statement for the period ended in form
satisfactory to Lender, audited by a CPA acceptable to Lender. Statements may
be due more often if requested by Lender.

 

INTERIM
STATEMENTS.
Guarantor shall provide to Lender, as soon as available, but in no event later
than forty-five (45) days after the end of each fiscal quarter (including
fiscal year end), a self-prepared consolidated balance sheet and income
statement for the period ended in form satisfactory to Lender. Statements may
be due more often if requested by Lender.

 

All
financial reports required to be provided under this Guaranty shall be prepared
in accordance with GAAP, applied on a consistent basis, and certified by
Guarantor as being true and correct.

 

GUARANTOR’S
WAIVERS. Except
as prohibited by applicable law, Guarantor waives any right to require Lender
to (A) make any presentment, protest, demand, or notice of any kind, including
notice of change of any terms of repayment of the Indebtedness, default by
Borrower or any other guarantor or surety, any action or nonaction taken by
Borrower, Lender, or any other 

 

4

 

guarantor
or surety of Borrower, or the creation of new or additional Indebtedness; (B) proceed
against any person, including Borrower, before proceeding against Guarantor; (C) proceed
against any collateral for the Indebtedness, including Borrower’s collateral,
before proceeding against Guarantor; (D) apply any payments or proceeds received
against the Indebtedness in any order; (E) give notice of the terms, time, and
place of any sale of the collateral pursuant to the Uniform Commercial Code or
any other law governing such sale; (F) disclose any information about the
Indebtedness, the Borrower, the collateral, or any other guarantor or surety,
or about any action or nonaction of Lender; or (G) pursue any remedy or
course of action in Lender’s power whatsoever.

 

Guarantor
also waives any and all rights or defenses arising by reason of (H) any
disability or other defense of Borrower, any other guarantor or surety or any
other person; (I) the cessation from any cause whatsoever, other than
payment in full, of the Indebtedness; (J) the application of proceeds of the
Indebtedness by Borrower for purposes other than the purposes understood and
intended by Guarantor and Lender; (K) any act of omission or commission by
Lender which directly or indirectly results in or contributes to the discharge
of Borrower or any other guarantor or surety, or the Indebtedness, or the loss
or release of any collateral by operation of law or otherwise; (L) any
statute of limitations in any action under this Guaranty or on the
Indebtedness; or (M) any modification or change in terms of the
Indebtedness, whatsoever, including without limitation, the renewal, extension,
acceleration, or other change in the time payment of the Indebtedness is due
and any change in the interest rate, and including any such modification or
change in terms after revocation of this Guaranty on the Indebtedness incurred
prior to such revocation.

 

Guarantor
waives all rights of subrogation, reimbursement, indemnification, and
contribution and any other rights and defenses that are or may become available
to Guarantor by reason of California Civil Code Sections 2787 to 2855,
inclusive.

 

Guarantor
waives all rights and any defenses arising out of an election of remedies by
Lender even though that the election of remedies, such as a non- judicial
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 California Code of Civil Procedure or
otherwise.

 

Guarantor
waives all rights and defenses that Guarantor may have because Borrower’s
obligation is secured by real property. This means among other things: (N) Lender
may collect from Guarantor without first foreclosing on any real or personal
property collateral pledged by Borrower. (0) If Lender forecloses on any real
property collateral pledged by Borrower: (1) the amount of Borrower’s
obligation may be reduced only by the price for which the collateral is sold at
the foreclosure sale, even if the collateral is worth more than the safe price.
(2) Lender may collect from Guarantor even if Lender, by foreclosing on
the real property collateral, has destroyed any right Guarantor may have to
collect from Borrower. This is an unconditional and irrevocable waiver of any
rights and defenses Guarantor may have because Borrower’s obligation is secured
by real property. These rights and defenses include, but are not limited to,
any rights and defenses based upon Section 580a, 580b, 580d, or 726 of the
Code of Civil Procedure.

 

5

 

Guarantor
understands and agrees that the foregoing waivers are unconditional and
irrevocable waivers of substantive rights and defenses to which Guarantor might
otherwise be entitled under state and federal law. The rights and defenses
waived include, without limitation, those provided by California laws of
suretyship and guaranty, anti-deficiency laws, and the Uniform Commercial Code.
Guarantor acknowledges that Guarantor has provided these waivers of rights and
defenses with the intention that they be fully relied upon by Lender. Guarantor
further understands and agrees that this Guaranty is a separate and independent
contract between Guarantor and Lender, given for full and ample consideration,
and is enforceable on its own terms. Until all of the Indebtedness is paid in
full, Guarantor waives any right to enforce any remedy Guarantor may have
against the Borrower or any other guarantor, surety, or other person, and
further, Guarantor waives any right to participate in any collateral for the
Indebtedness now or hereafter held by Lender.

 

Guarantor’s
Understanding With Respect To Waivers. Guarantor warrants and agrees that each of the
waivers set forth above is made with Guarantor’s full knowledge of its
significance and consequences and that, under the circumstances, the waivers
are reasonable and not contrary to public policy or law. If any such waiver is
determined to be contrary to any applicable law or public policy, such waiver
shall be effective only to the extent permitted by law or public policy.

 

Subordination
of Borrower’s Debts to Guarantor. Guarantor agrees that the Indebtedness, whether now
existing or hereafter created, shall be superior to any claim that Guarantor
may now have or hereafter acquire against Borrower, whether or not Borrower
becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor
may have against Borrower, upon any account whatsoever, to any claim that
Lender may now or hereafter have against Borrower. In the event of insolvency
and consequent liquidation of the assets of Borrower, through bankruptcy, by an
assignment for the benefit of creditors, by voluntary liquidation, or
otherwise, the assets of Borrower applicable to the payment of the claims of
both Lender and Guarantor shall be paid to Lender and shall be first applied by
Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims
which it may have or acquire against Borrower or against any assignee or
trustee in bankruptcy of Borrower; provided however, that such assignment shall
be effective only for the purpose of assuring to Lender full payment in legal
tender of the Indebtedness. If Lender so requests, any notes or credit
agreements now or hereafter evidencing any debts or obligations of Borrower to
Guarantor shall be marked with a legend that the same are subject to this
Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is
hereby authorized, in the name of Guarantor, from time to time to file
financing statements and continuation statements and to execute documents and
to take such other actions as Lender deems necessary or appropriate to perfect,
preserve and enforce its rights under this Guaranty.

 

Miscellaneous
Provisions. The
following miscellaneous provisions are a part of this Guaranty:

 

AMENDMENTS. This Guaranty, together with any
Related Documents, constitutes the entire understanding and agreement of the
parties as to the matters set forth in this Guaranty. No alteration of or
amendment to this Guaranty shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration
or amendment.

 

ATTORNEYS’ FEES; EXPENSES. Guarantor agrees to pay upon demand all of Lender’s
costs and expenses, including Lender’s attorneys’ fees and Lender’s legal
expenses, incurred in 

 

6

 

connection
with the enforcement of this Guaranty. Lender may hire or pay someone else to
help enforce this Guaranty, and Guarantor shall pay the costs and expenses of
such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal
expenses whether or not there is a lawsuit, including attorneys’ fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Guarantor also shall pay all court costs and such
additional fees as may be directed by the court.

 

CAPTION HEADINGS. Caption headings in this Guaranty are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Guaranty.

 

GOVERNING
LAW. This
Guaranty will be governed by federal law applicable to Lender and, to the
extent not preempted by federal law, the laws of the State of California
without regard to its conflicts of law provisions.

 

CHOICE OF
VENUE. If there
is a lawsuit, Guarantor agrees upon Lender’s request to submit to the
jurisdiction of the courts of Los Angeles County, State of California.

 

INTEGRATION. Guarantor further agrees that Guarantor
has read and fully understands the terms of this Guaranty. Guarantor has had
the opportunity to be advised by Guarantor’s attorney with respect to entering
into this Guaranty. Guarantor further agrees that the Guaranty represents the
final agreement between Guarantor and Lender regarding the matters addressed
therein and therefore: (a) incorporates all negotiations of the parties
relating to the Guaranty; (b) there are no unwritten oral agreements
between Lender and Guarantor, and (c) this Guaranty may not be
contradicted by evidence of any prior, contemporaneous, or subsequent oral
agreements or understandings of Lender and Guarantor. Guarantor hereby
indemnifies and holds Lender harmless from all losses, claims, damages, and
costs (including Lender’s attorney’s fees) suffered by Lender as a result of
any breach by Guarantor of the warranties, representations and agreements of
this Paragraph.

 

INTERPRETATION. In all cases where there is more than
one Borrower or Guarantor, then all words used in this Guaranty in the singular
shall be deemed to have been used in the plural where the context and
construction so require; and where there is more than one Borrower named in
this Guaranty or when this Guaranty is executed by more than one Guarantor, the
words “Borrower” and “Guarantor” respectively shall mean all and any one or
more of them. The words “Guarantor,” “Borrower,” and “Lender” include the
heirs, successors, assigns, and transferees of each of them. If a court finds
that any provision of this Guaranty is not valid or should not be enforced,
that fact by itself will not mean that the rest of this Guaranty will not be
valid or enforced. Therefore, a court will enforce the rest of the provisions
of this Guaranty even if a provision of this Guaranty may be found to be
invalid or unenforceable. If any one or more of Borrower or Guarantor are
corporations, partnerships, limited liability companies, or similar entities,
it is not necessary for Lender to inquire into the powers of Borrower or
Guarantor or of the officers, directors, partners, managers, or other agents
acting or purporting to act on their behalf, and any indebtedness made or
created in reliance upon the professed exercise of such powers shall be
guaranteed under this Guaranty.

 

7

 

NOTICES. Any notice required to be given under
this Guaranty shall be given in writing, and, except for revocation notices by
Guarantor, shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Guaranty.
All revocation notices by Guarantor shall be in writing and shall be effective
upon delivery to Lender as provided in the section of this Guaranty entitled “DURATION
OF GUARANTY.” Any party may change its address for notices under this Guaranty
by giving formal written notice to the other parties, specifying that the
purpose of the notice is to change the party’s address. For notice purposes,
Guarantor agrees to keep Lender informed at all times of Guarantor’s current
address. Unless otherwise provided or required by law, if there is more than
one Guarantor, any notice given by Lender to any Guarantor is deemed to be
notice given to all Guarantors.

 

NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights
under this Guaranty unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Guaranty shall not prejudice or constitute a waiver of
Lender’s right otherwise to demand strict compliance with that provision or any
other provision of this Guaranty. No prior waiver by Lender, nor any course of
dealing between Lender and Guarantor, shall constitute a waiver of any of Lender’s
rights or of any of Guarantor’s obligations as to any future transactions.
Whenever the consent of Lender is required under this Guaranty, the granting of
such consent by Lender in any instance shall not constitute continuing consent
to subsequent instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of Lender.

 

SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Guaranty on
transfer of Guarantor’s interest, this Guaranty shall be binding upon and inure
to the benefit of the parties, their successors and assigns.

 

Definitions. The following capitalized words and
terms shall have the following meanings when used in this Guaranty. Unless
specifically stated to the contrary, all references to dollar amounts shall
mean amounts in lawful money of the United States of America. Words and terms
used in the singular shall include the plural, and the plural shall include the
singular, as the context may require. Words and terms not otherwise defined in
this Guaranty shall have the meanings attributed to such terms in the Uniform
Commercial Code:

 

BORROWER. The word “Borrower” means Fifth and
Madison, LLC, a Delaware limited liability company and includes all co-signers
and co-makers signing the Note and all their successors and assigns.

 

GAAP. The word “GAAP” means generally
accepted accounting principles.

 

GUARANTOR. The word “Guarantor” means everyone signing this
Guaranty, including without limitation Kennedy-Wilson, Inc., a Delaware
corporation, and in each case, any signer’s successors and assigns.

 

8

 

GUARANTOR’S SHARE OF THE INDEBTEDNESS. The words “Guarantor’s Share of the
Indebtedness” mean Guarantor’s indebtedness to Lender as more particularly
described in this Guaranty.

 

GUARANTY. The word “Guaranty” means this guaranty from Guarantor
to Lender.

 

INDEBTEDNESS. The word “Indebtedness” means Borrower’s
indebtedness to Lender as more particularly described in this Guaranty.

 

LENDER. The word “Lender” means Pacific Western Bank, its
successors and assigns.

 

NOTE. The word “Note” means the promissory
note dated February 13, 2008, in the original principal amount of
$13,500,000.00 from Borrower to Lender, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of and
substitutions for the promissory note or agreement.

 

RELATED DOCUMENTS. The words “Related Documents” mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security deeds,
collateral mortgages, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
Indebtedness.

 

EACH
UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS
GUARANTY IS DATED JANUARY 16, 2009.

 

GUARANTOR:

 

 

	
  KENNEDY-WILSON,
  INC., A DELAWARE CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ Freeman Lyle

  	
   

  
	
  Freeman A. Lyle, CFO/Secretary of Kennedy-

  	
   

  
	
  Wilson, Inc., a Delaware corporation

  	
   

  
			

 

9

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