Document:

SecondModificationAgreement

SECOND MODIFICATION AGREEMENT 

This Second Modification Agreement ("Agreement") is made as of September 19, 2013, by and among KENNEDY-WILSON, INC., a Delaware corporation ("Borrower"), U.S. BANK NATIONAL ASSOCIATION, a national banking association, as administrative agent, lead arranger and book manager ("Agent") under the Loan Agreement described below, U.S. BANK NATIONAL ASSOCIATION, a national banking association, as a Lender ("U.S. Bank National Association"), EAST-WEST BANK,  a California banking corporation ("East-West Bank"), and THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND ("Bank of Ireland").  As used in this Agreement, U.S. Bank National Association and East-West Bank, and any bank that becomes a party to the Loan Agreement in the future, shall collectively be referred to herein as "Lenders".  As of the Effective Date (as defined below), Bank of Ireland shall be a Lender.
Factual Background
(1)    Under a Revolving Loan Agreement dated July 22, 2010 (as amended by the First Modification Agreement (as defined below), the "Loan Agreement"), Lenders agreed to make an unsecured revolving loan of up to $75,000,000 to Borrower (the "Loan"), subject to the terms and conditions specified therein.  Borrower, Agent, U.S. Bank National Association and East-West Bank previously executed that certain Modification Agreement dated as of June 29, 2012 (the "First Modification Agreement"), pursuant to which the parties thereto agreed to modify the terms of the Loan to, among other things, extend the term of the Loan to June 30, 2015, modify the interest rate payable under the Loan, and make additional Loan proceeds available under the Loan (so that the total available principal amount of the Loan is currently $100,000,000), as more fully set forth therein.  
(1)    Borrower's obligations under the Loan are evidenced by (i) a Promissory Note (Facility A) dated July 22, 2010 made payable to U.S. Bank National Association in the stated principal amount of Forty-Eight Million Seven Hundred Fifty Thousand Dollars ($48,750,000), (ii) a Promissory Note (Facility B) dated July 22, 2010 made payable to U.S. Bank National Association in the stated principal amount of Sixteen Million Two Hundred Fifty Thousand Dollars ($16,250,000), (iii) a Promissory Note (Facility A) dated July 22, 2010 made payable to East-West Bank in the stated principal amount of Twenty-Six Million Two Hundred Fifty Thousand Dollars ($26,250,000), and (iv) a Promissory Note (Facility B) dated July 22, 2010 made payable to East-West Bank in the stated principal amount of Eight Million Seven Hundred Fifty Dollars ($8,750,000) (collectively, as amended by the First Modification Agreement, the "Existing Notes").
(1)    As of September 17, 2013, (i) the principal balance outstanding under Facility A is $0, and $75,000,000 in Loan funds under Facility A are available for disbursement, and (ii) the principal balance outstanding under Facility B is $0, and $25,000,000 in Loan funds under Facility B are available for disbursement.
(1)    In connection with the Loan, Kennedy-Wilson Holdings, Inc., a Delaware corporation ("Initial Guarantor"), executed in favor of Agent and Lenders that certain Repayment 

	
			
	 
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Guaranty dated as of July 22, 2010 (as amended by the First Modification Agreement, the "Initial Repayment Guaranty").
(1)    Subject to the terms and conditions of this Agreement, Borrower, Agent and Lenders have agreed to modify the terms of the Loan to, among other things, extend the term of the Loan and make additional Loan proceeds available under the Loan (so that the total available principal amount of the Loan shall be $140,000,000), as more fully set forth herein.  Additionally, pursuant to that certain Assumption Agreement dated as of even date herewith executed by and among Borrower, Agent, Initial Guarantor, Bank of Ireland, U.S. Bank National Association and East-West Bank (the "Assumption Agreement"), Bank of Ireland shall be added as a Lender, and Bank of Ireland's commitments for Facility A and Facility B, and its Commitment Percentage in each, are set forth on Exhibit E attached hereto (as more fully described below).
(1)    As used in this Agreement, the term "Loan Documents" means the Loan Agreement, the Notes (as defined below), the Initial Repayment Guaranty, the First Modification Agreement, the Assumption Agreement and the other "Loan Documents" described in the Loan Agreement, all as amended or modified hereby.  This Agreement shall also constitute a Loan Document.  Capitalized terms used herein without definition have the meanings ascribed to them in the Loan Agreement, as modified by this Agreement.
Agreement
Therefore, Borrower, Agent and Lenders agree as follows:
1.Recitals.  The recitals set forth above in the Factual Background are true, accurate and correct, and such recitals hereby are incorporated herein as an agreement of Borrower, Agent and Lenders.
2.    Reaffirmation of Obligations.  Borrower reaffirms all of its Obligations under the Loan Documents, and Borrower acknowledges that it has no claims, offsets or defenses with respect to the payment of sums due under the Existing Notes or any other Loan Document.  Without limiting the foregoing, Borrower (a) reaffirms Agent's right, following the occurrence of any Event of Default, subject to the terms and conditions of Section 1.14 of the Loan Agreement, to apply any and all payments made by Borrower or otherwise received by Agent or Lenders with respect to the Loan to the obligations owing by Borrower under the Loan Documents in such order and manner deemed appropriate by Agent in its sole discretion (subject only, as between Agent and Lenders, to the provisions of Section 9.5(b) of the Loan Agreement, as amended hereby), and (b) expressly waives all of its rights under applicable law or otherwise to direct Agent as to such application or to designate the portion of the obligations to be satisfied.
3.    Increased Availability.  The Loan Documents are hereby amended as follows: 
(a)    On the Effective Date, pursuant to the Assumption Agreement, Bank of Ireland shall be a Lender.  

	
			
	 
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(b)    On the Effective Date, Lenders shall make available to or for the benefit of Borrower additional sums so that the total principal amount available to be borrowed by Borrower under the Loan Agreement and the Notes (as defined below) shall be $140,000,000, of which $105,000,000 shall constitute the new Facility A Committed Amount, and of which $35,000,000 shall constitute the new Facility B Committed Amount (such additional sums being referred to herein as the "Additional Advance").   As used herein and in the other Loan Documents going forward, the term "Loan" shall be deemed to include the Additional Advance.  U.S. Bank National Association, East-West Bank and Bank of Ireland agree that they shall each make available such portion of the Additional Advance to be made hereunder in an amount such that following the making of such Additional Advance, (i) U.S. Bank National Association shall have a commitment for Facility A of $56,250,000 and a commitment for Facility B of $18,750,000, and its Commitment Percentages shall be as set forth on Exhibit E to the Loan Agreement (as amended hereby), (ii) East-Bank shall have a commitment for Facility A of $30,000,000 and a commitment for Facility B of $10,000,000, and its Commitment Percentages shall be as set forth on Exhibit E to the Loan Agreement (as amended hereby), and (iii) Bank of Ireland shall have a commitment for Facility A of $18,750,000 and a commitment for Facility B of $6,250,000, and its Commitment Percentages shall be as set forth on Exhibit E to the Loan Agreement (as amended hereby).  On the Effective Date, the Exhibit E attached to this Agreement shall be deemed substituted in place of the Exhibit E attached to the Loan Agreement.
(c)    To evidence Borrower's obligation to repay all amounts outstanding to Bank of Ireland under Bank of Ireland's commitment for Facility A, Borrower shall execute and deliver to Bank of Ireland, on or prior to the Effective Date, that certain Promissory Note (Facility A) dated as of even date herewith made payable to Bank of Ireland in the stated principal amount of Eighteen Million Seven Hundred Fifty Thousand Dollars ($18,750,000) (the "Bank of Ireland Facility A Note").  To evidence Borrower's obligation to repay all amounts outstanding to Bank of Ireland under Bank of Ireland's commitment for Facility B, Borrower shall execute and deliver to Bank of Ireland, on or prior to the Effective Date, that certain Promissory Note (Facility B) dated as of even date herewith made payable to Bank of Ireland in the stated principal amount of Six Million Two Hundred Fifty Thousand Dollars ($6,250,000) (the "Bank of Ireland Facility B Note").  Upon the Effective Date, any reference(s) to the "Note" or "Notes" in the Loan Agreement or any other Loan Document shall be deemed to include the Bank of Ireland Facility A Note and the Bank of Ireland Facility B Note.  The Existing Notes, the Bank of Ireland Facility A Note and the Bank of Ireland Facility B Note shall collectively be referred to in this Agreement as the "Notes."   
(d)    Each reference in the Loan Documents to "Seventy Five Million Dollars" and "$75,000,000" is hereby deleted in its entirety and replaced with "One Hundred Five Million Dollars" and "$105,000,000", respectively.  Each reference in the Loan Documents to "Twenty Five Million Dollars" and "$25,000,000" is hereby deleted in its entirety and replaced with "Thirty Five Million Dollars" and "$35,000,000", respectively.  Each reference in the Loan Documents to "One Hundred Million Dollars" and "$100,000,000" is hereby deleted in its entirety and replaced with "One Hundred Forty Million Dollars" and "$140,000,000", respectively.  Each reference in the Loan Documents to " Forty-Eight Million Seven Hundred Fifty Thousand Dollars" and "$48,750,000" is hereby deleted in its entirety and replaced with "Fifty-Six Million Two Hundred Fifty Thousand Dollars" and "$56,250,000", respectively.  Each reference in the Loan Documents to " Sixteen 

	
			
	 
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Million Two Hundred Fifty Thousand Dollars " and "$16,250,000" is hereby deleted in its entirety and replaced with "Eighteen Million Seven Hundred Fifty Thousand Dollars" and "$18,750,000", respectively.  Each reference in the Loan Documents to " Twenty-Six Million Two Hundred Fifty Thousand Dollars" and "$26,250,000" is hereby deleted in its entirety and replaced with "Thirty Million Dollars" and "$30,000,000", respectively.  Each reference in the Loan Documents to " Eight Million Seven Hundred Fifty Thousand Dollars" and "$8,750,000" is hereby deleted in its entirety and replaced with "Ten Million Dollars" and "$10,000,000", respectively.                                  
4.    Maturity Date.  The definition of "Maturity Date" contained in the "Definitions" section of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"Maturity Date":  October 1, 2016.
5.    Further Modifications to the Loan Agreement.  The Loan Documents are hereby further amended as follows:
(a)    Financial Reporting and Financial Covenants.  
(i)    The definitions of "EBITDAR" and “Minimum Rent Adjusted Fixed Charge Coverage Ratio” contained in the "Definitions" section of the Loan Agreement are hereby deleted in their entirety and replaced with the following:
"EBITDAR: Means, with respect to any Person, the net income of such Person (excluding extraordinary items), for the applicable period, plus all interest expense (including such Person's allocable share of any interest expense relating to any joint venture in which such Person is a member, partner or joint venturer), income tax expense (including foreign income tax expense), depreciation and amortization (including such Person's allocable share of any depreciation and amortization relating to any joint venture in which such Person is a member, partner or joint venturer) and corporate rental lease expense (which, for the avoidance of doubt, does not include rental lease expense related to any investment property) for the period."
"Minimum Rent Adjusted Fixed Charge Coverage Ratio: Means, with respect to any Person, as of the end of the most recently concluded calendar quarter, and/or as of any other date specified in this Agreement, as applicable, (i) EBITDAR for that portion of the calendar year then concluded, minus cash taxes (including foreign income taxes), cash dividends (both preferred and common), and maintenance capital expenditures, divided by (ii) interest expense (excluding such Person's allocable share of any interest expense relating to any joint venture in which such Person is a member, partner or joint venturer), plus any mandatory debt retirement plus corporate 

	
			
	 
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rental lease expense (which, for the avoidance of doubt, does not include rental lease expense related to any investment property)."
(ii)    The following definitions are hereby added to the "Definitions" section of the Loan Agreement in the appropriate alphabetical order:
"Borrower Parties:  Means Borrower, Guarantor, and the Subsidiaries of the Borrower."
"Customary Recourse Exceptions:  With respect to any debt, personal recourse that is limited to fraud, misrepresentation, misapplication of cash, waste, environmental claims and liabilities, prohibited transfers, violations of single purposes entity covenants, voluntary insolvency proceedings and other circumstances customarily excluded by institutional lenders from exculpation provisions and/or included in separate guaranty or indemnification agreements in non-recourse financings."
"Joint Venture and Joint Ventures:  Means any Person in which Borrower owns an equity or economic interest."
"Non-Recourse Debt:  For any Person, any debt of such Person where (i) such Person has no personal liability for the repayment of such debt (other than for Customary Recourse Exceptions), or (ii) the sole recourse of the applicable holder of such debt for non-payment is limited to such holder’s Liens, if any, on a particular asset or group of assets (other than for Customary Recourse Exceptions).  For the avoidance of doubt, if any debt is partially guaranteed by Borrower, then the portion of such Indebtedness that is not so guaranteed shall still be Non-Recourse Debt if it otherwise satisfies the requirements in this definition."
"Non-Recourse Guaranties:  Guaranties by Borrower of Customary Recourse Exceptions with respect to any Non-Recourse Debt of Borrower’s Subsidiaries, Affiliates or Joint Ventures."
(iii)    Section 5.2 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"5.2    Financial Covenants.
"The Borrower Parties, on a consolidated basis, shall at all times maintain the following financial covenants:

	
			
	 
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(a)    Minimum Rent Adjusted Fixed Charge Coverage Ratio.  A Minimum Rent Adjusted Fixed Charge Coverage Ratio of not less than 1.50:1, measured on a four (4) quarter rolling average basis;
(b)    Minimum Liquidity.  Unrestricted cash, cash equivalents and publically traded marketable securities in the aggregate amount of at least Forty Million Dollars ($40,000,000), tested quarterly;
(c)    Maximum Balance Sheet Leverage.  Maximum Balance Sheet Leverage not greater than 1.50:1, measured at the end of each calendar quarter; and
(d)    Minimum Net Worth.  As determined in accordance with GAAP, Effective Tangible Net Worth equal to or greater than Two Hundred Fifty Million Dollars ($250,000,000), measured at the end of each calendar quarter."
(iv)    The first paragraph of Section 5.3 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"Deliver or cause to be delivered to Lenders: (a) as soon as available, but in any event within ninety (90) days after the end of each calendar year, consolidated financial statements including a balance sheet, income statement, and statement of cash flow of the Borrower Parties during such period, prepared and audited by a certified public accounting firm whose identity is approved in advance by Lenders; (b) as soon as available, but in any event within ninety (90) days after the end of each calendar quarter, consolidated financial statements of the Borrower Parties, prepared by Borrower or by a certified public accountant firm whose identity is approved in advance by Lenders; (c) as soon as available, but in any event within ninety (90) days following the commencement of each calendar year, an annual financial projection for such calendar year, including a balance sheet, income statement, and statement of cash flow of the Borrower Parties during such period, prepared by Borrower or by a certified public accounting firm whose identity is approved in advance by Lenders; and (d) such additional financial information as Lenders may reasonably request.  Each of the items in subsections (a) through (d), inclusive, above shall be accompanied by a certificate, without any qualifications, by such accountants or by Borrower (as applicable to the each document) to have been prepared in accordance with GAAP, together with a certificate of such accountants addressed to Lenders stating that such accountants do not have knowledge of the existence of any Event of Default or event that with notice and/or the passage of time would become an Event of Default.  Such audited financial statements shall include a balance sheet, profit and loss statement, and statement of cash flow and, if prepared, such accountants' letter to management.  In addition to the financial statements referred to 

	
			
	 
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above, Borrower agrees to deliver to Lenders, within the specified time periods, financial statements prepared on a consolidated basis so as to present the Borrower Parties on a consolidated basis.  Each quarter, together with the financial statements provided pursuant to this Section 5.3, Borrower shall deliver to Lenders a Compliance Certificate signed by its chief financial officer to the effect that: (i) all financial statements delivered or caused to be delivered to Lenders hereunder have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and fairly present the financial condition of the Borrower Parties, (ii) the representations and warranties of Borrower contained in this Agreement and the other Loan Documents are true and correct in all material respects on and as of the date of such certificate, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date), (iii) Borrower is in compliance at the end of such period with the applicable financial covenants contained in Section 5.2 (and demonstrating such compliance in reasonable detail), and (iv) on the date of delivery of such certificate to Lenders there does not exist any condition or event that constitutes an Event of Default, or with notice and/or the passage of time would constitute an Event of Default (or, in the case of clauses (i), (ii), or (iii), to the extent of any non-compliance, describing such non-compliance as to which he or she may have knowledge and what action Borrower has taken, is taking, or proposes to take with respect thereto)."
(v)    Section 6.1(e) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"(e)    any Non-Recourse Guaranties;"
(vi)    Section 6.1(f) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"(f)    debt which is guaranteed by Borrower, where such debt is incurred or assumed by Borrower’s Subsidiaries, Affiliates or Joint Ventures, and fully secured by (a)(i) commercial real property, including without limitation land, office, multifamily, residential, industrial, retail, hotel or mixed-use property, or (ii) pools of notes fully secured by liens on commercial real property, or (b) one hundred percent (100%) of the equity interests in an entity that owns (i) commercial real property, including without limitation land, office, multifamily, residential, industrial, retail, hotel or mixed-use property, or (ii) pools of notes fully secured by liens on commercial 

	
			
	 
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real property; provided that the aggregate outstanding principal amount which is guaranteed by Borrower under this clause (f) shall not exceed $100,000,000;"
(vii)    Section 6.2 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"6.2    Liens.  Create, incur, or permit to exist, directly or indirectly, any Lien on or with respect to any of its property or assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for (i) Permitted Liens, (ii) Liens given to vendors or lenders to secure Indebtedness permitted pursuant to Section 6.1(f) and the refinancing of such Indebtedness pursuant to Section 6.1(d), with respect to commercial real property or pools of notes secured by commercial real property after the Closing Date and fully secured exclusively by such property, (iii) Liens given to secure obligations under swap contracts permitted under Section 6.1(h), or (iv) Liens securing repayment of obligations of Borrower in an amount less than Ten Million Dollars ($10,000,000) in the aggregate."
(viii)    Section 6.8(b) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"(b)    Directly or indirectly, amend, modify, alter, increase, or change, materially and adversely, any of the terms or conditions of any agreement, instrument, document, indenture, or other writing evidencing or concerning Indebtedness permitted under Sections 6.1(b), (c), (d), (e), (f), (g), (h) and (i)."
(ix)    Exhibit C to the Loan Agreement is hereby deleted in its entirety and replaced with the Exhibit C attached hereto.
(b)    Subsidiary Guaranties.  
(i)    The definitions of "Change of Control", "Guarantor", "Reference Agreement" and "Repayment Guaranty" contained in the "Definitions" section of the Loan Agreement are hereby deleted in their entirety and replaced with the following:
"Change of Control:  Shall be deemed to have occurred at such time as there is (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), but excluding (i) Permitted Investors and (ii) any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan unless such plan is part of a group, becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the 

	
			
	 
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Securities Exchange Act of 1934), directly or indirectly, of thirty-five percent (35%) or more of the equity securities of Initial Guarantor entitled to vote for members of the board of directors or equivalent governing body of Initial Guarantor on a fully diluted basis or (b) during any period of 12 consecutive months, a majority of the members of the board of directors of Initial Guarantor cease to be composed of individuals (i) who were members of that board on the first day of such period, (ii) whose election or nomination to that board was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or (iii) whose election or nomination to that board was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors)."
"Guarantor:  Means, individually or collectively, as the case may warrant, the Initial Guarantor and each Subsidiary Guarantor."
“Reference Agreement:  Means, individually or collectively, as the case may warrant, the California Judicial Reference Agreement of even date herewith between Borrower, Initial Guarantor, Agent and Lenders, and any California Judicial Reference Agreement executed by Borrower, Agent, Lenders and one or more Subsidiary Guarantors, as each may be amended or modified.”
"Repayment Guaranty:  Means, individually or collectively, as the case may warrant, the Initial Repayment Guaranty and each Subsidiary Repayment Guaranty."
(ii)    The following definitions are hereby added to the "Definitions" section of the Loan Agreement in the appropriate alphabetical order:
"2011 Indenture:  Has the meaning set forth in Section 5.16(a)."
"2012 Indenture:  Has the meaning set forth in Section 5.16(a)."
"2019 Notes:  Has the meaning set forth in Section 5.16(a)."

	
			
	 
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"Initial Guarantor: Means Kennedy-Wilson Holdings, Inc., a Delaware corporation."
"Initial Repayment Guaranty: Means that certain Repayment Guaranty dated as of July 22, 2010 executed by the Initial Guarantor, as it has been and may hereafter be amended."
"Second Modification Agreement:  Means that certain Second Modification Agreement made as of September 19, 2013, by and among Borrower, Agent and the Lenders party thereto."
"Second Modification Agreement Effective Date:  Means the "Effective Date" under and as defined in the Second Modification Agreement."
"Senior Notes:  Has the meaning set forth in Section 5.16(a)."
"Senior Notes Indentures:  Has the meaning set forth in Section 5.16(a)."
"Subsidiary Repayment Guaranty:  Means a repayment guaranty executed by a Subsidiary Guarantor, which repayment guaranty shall be in form and substance substantially identical to the Initial Repayment Guaranty, and which shall incorporate such non-substantive changes as appropriate in light of the identity of the Subsidiary Guarantor(s)."
"Subsidiary Guarantor:  Means a Subsidiary of Borrower that has executed a Subsidiary Repayment Guaranty."
(iii)    Section 3.2(a) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"(a)    As of the date of each disbursement, no suit or proceeding at law or in equity, and no investigation or proceeding of any governmental body, has been instituted or, to the knowledge of Borrower, has been threatened, which in either case would substantially, negatively affect the condition or business operations of Borrower, Initial Guarantor or the Borrower Parties as a whole."
(iv)    Section 4.10 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"4.10    Solvency.  Borrower, Initial Guarantor and Borrower Parties as a whole are Solvent.  No transfer of property is being made by Borrower or Guarantor and no obligation is being incurred by Borrower or Guarantor in connection with the transactions 

	
			
	 
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contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of Borrower or Guarantor."
(v)    Section 4.15 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"4.15    Hazardous Substances.  Neither Borrower nor Guarantor (a) has received any notice or other communication or otherwise learned of any environmental liability for which it would have responsibility that would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability, financial or otherwise, of Borrower, Initial Guarantor or Borrower Parties as a whole to perform its obligations hereunder and under the other Loan Documents, arising in connection with (i) any non-compliance with or violation of the requirements of any law relating to the environment, or any permit issued under any law relating to the environment, or (ii) the release or threatened release of any Hazardous Material into the environment, and (b) has, to its actual knowledge, any liability in connection with a release or threatened release of any Hazardous Material into the environment that would reasonably be expected to have, individually or in the aggregate, such a material adverse effect."
(vi)    The following new Section 5.16 shall be added to the Loan Agreement immediately after the current Section 5.15:
"5.16    Subsidiary Guarantors.
(1)    Not later than sixty (60) days after the Second Modification Effective Date, Borrower shall cause each Subsidiary of Borrower that, on the Second Modification Effective Date, is a guarantor of either (i) the “Notes” (the "2019 Notes"), as defined in, and issued pursuant to, that certain Indenture dated as of April 5, 2011 among Borrower, as issuer, the guarantors party thereto and Wilmington Trust FSB, a federal savings bank, as trustee (as amended, modified or supplemented from time to time, the "2011 Indenture"), or (ii) the “Notes” (as amended, modified or supplemented from time to time, and together with the 2019 Notes, collectively, the "Senior Notes"), as defined in, and issued pursuant to, that certain Supplemental Indenture No. 1 dated as of November 28, 2012 to Indenture dated as of November 28, 2012, among Borrower, as issuer, Guarantor, as parent, the subsidiary guarantor parties thereto, and Wilmington Trust, National Association, as trustee, and any other supplement that supplements that certain Indenture dated as of November 28, 2012 among Borrower, as issuer, and Wilmington Trust, National Association, as trustee (as amended, modified or supplemented from time to time, the "2012 Indenture," and together with the 2011 Indenture, collectively, the "Senior Notes Indentures"), to execute and deliver to Agent an original Subsidiary Repayment Guaranty.  For 

	
			
	 
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the avoidance of doubt, a Subsidiary Repayment Guaranty may be executed by one or more Subsidiary Guarantors.
(1)    Subsequently, not later than ninety (90) days after any Subsidiary of Borrower that is not a Subsidiary Guarantor becomes a guarantor with respect to any of the Senior Notes and/or the Senior Notes Indentures, Borrower will cause such Subsidiary of Borrower to execute and deliver to Agent an original Subsidiary Repayment Guaranty.
(1)    On or prior to the execution and delivery to Agent of any Subsidiary Repayment Guaranty, the following conditions precedent shall be satisfied:
(1)    Borrower shall have delivered to Agent written notice of the proposed date of the execution and delivery of the applicable Subsidiary Repayment Guaranty at least forty-five (45) days before such delivery.
(2)    Borrower or the applicable Subsidiary Guarantor shall have provided the "Know Your Customer" due diligence items relating to the applicable Subsidiary Guarantor(s), as is requested by Agent in writing at least ten (10) Business Days prior to the applicable deadline.
(3)    Agent shall have received a copy of the applicable Subsidiary Guarantor's Governing Documents (certified by an officer of Borrower as being true, correct, complete, unamended and in full force and effect).
(4)    As of the date each Subsidiary Repayment Guaranty is delivered to Agent, the representations and warranties applicable to the applicable Subsidiary Guarantor or Guarantors in this Agreement and/or in the applicable Subsidiary Repayment Guaranty shall be true and correct in all material respects (except to the extent any such representations or warranties expressly relate solely to an earlier date).
(5)    Agent shall have received certificates from the applicable Subsidiary Guarantor(s) acceptable to the Agent certifying the due authorization of the execution, delivery and performance of the Subsidiary Repayment Guaranty, identifying all authorized officers, and as to such related matters as the Agent may require.
(6)    Agent shall have received a Reference Agreement executed by Borrower, Agent, the Lenders and each applicable Subsidiary Guarantor.
(7)    Agent shall have received a favorable written opinion of legal counsel to the applicable Subsidiary Guarantor(s) satisfactory to the Agent as to (A) the due organization, valid existence and good standing of the applicable Subsidiary Guarantor(s), and the due authorization of the Subsidiary Repayment Guaranty, and 

	
			
	 
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(B) the other matters covered by the representations and warranties of the applicable Subsidiary Guarantor(s) set forth in the Subsidiary Repayment Guaranty.
(8)    Agent shall have received a new Schedule 4.6 to this Agreement, which shall be modified to include each new Subsidiary Guarantor.
(9)    Agent shall have received such other agreements, documents and exhibits, without limitation, which may be required as a result of any change in law occurring after the Second Modification Agreement Effective Date to assure compliance with all applicable regulations."
(vii)    Section 6.19 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"6.19    Stock Repurchases.  Other than the purchase or repurchase of corporate stock or warrants for corporate stock of Initial Guarantor in an aggregate amount of Ten Million Dollars ($10,000,000) per fiscal year, Borrower shall not purchase or repurchase any corporate stock of Borrower or Borrower’s Subsidiaries unless, at the time of any such repurchase (i) there exists no Event of Default, (ii) Borrower is in strict compliance with all covenants contained herein, (iii) Borrower demonstrates, to the reasonable satisfaction of Agent, that Borrower shall remain in compliance with the covenants contained herein for the twelve (12) months following such repurchase, and (iv) Borrower provides the Agent with such updated financial projections as the Agent shall reasonably require, which projections shall be reasonably satisfactory to the Agent in all material respects."
(viii)    Section 6.24 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"6.24    Maintenance of Existence.  Borrower and Guarantor, shall each not fail to (i) maintain and preserve its respective existence and all rights and franchises material to its respective business, (ii) comply with all applicable laws, including laws relating to the environment and the Employee Retirement Income Security Act of 1974, as amended, and continue to conduct and operate its businesses substantially as conducted and operated on the date hereof; and (iii)  conduct business in accordance with its Governing Documents, including without limitation, any leverage restrictions provided therein as in effect on the date hereof."
(ix)    Section 7.1(g) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

	
			
	 
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"(g)    Except for the release of the Subsidiary Repayment Guaranty in accordance with the terms of Section 9.21 of this Agreement, the Repayment Guaranty at any time and for any reason ceases to be in full force and effect, or any Guarantor or indemnitor contests or denies the validity or enforceability of the Repayment Guaranty or gives notice to Agent to such effect, or otherwise attempts to revoke or repudiate any of the foregoing as to any existing or future obligations."
(x)    Section 7.1(j) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"(j)    Any material adverse change shall have occurred in the financial condition or in the assets or liabilities of Borrower, Initial Guarantor or Borrower Parties as a whole from those set forth in the latest financial statements for each furnished to Agent prior to the Second Modification Agreement Effective Date."
(xi)    Section 7.1(l) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"(l)    Any default shall occur with respect to (i) any other indebtedness of either Borrower or Initial Guarantor to the Agent or any Lender which default shall give the Agent or such Lender the right to accelerate the maturity of such indebtedness or exercise any other remedy, or (ii) any other recourse debt or guaranty obligations of Borrower or Initial Guarantor in an amount equal to $1,000,000 or more (in the aggregate), subject to any applicable cure periods provided in the documents evidencing or securing such debt."
(xii)    Section 7.1(n) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"(n)    If Borrower, Initial Guarantor or Borrower Parties as a whole, or a substantial portion of the assets of Borrower, Initial Guarantor or Borrower Parties as a whole, comes under the practical, beneficial, or effective control of any person or group of related persons other than those persons currently holding effective control."
(xiii)    Section 7.1(o) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"(o)    If Initial Guarantor ceases to own 100% of Borrower."
(xiv)    Section 7.1(p) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

	
			
	 
	14

	 

	 
	 
	 

"(p)    If (a) there shall be rendered against Borrower or Initial Guarantor one or more judgments or decrees involving an aggregate liability of $1,000,000 or more, which has or have become nonappealable and shall remain undischarged, unsatisfied by insurance, unstayed or not bonded over for more than thirty (30) days, or (b) a writ of attachment or garnishment against any property of Borrower or Initial Guarantor shall be issued and levied in an action claiming $1,500,000 or more and not released or appealed and bonded in an amount and manner satisfactory to the Agent within thirty (30) days after such issuance and levy, or (c) if a final judgment or order against Borrower or Initial Guarantor is entered which requires the divestiture of a substantial part of the assets of Borrower or Initial Guarantor and a stay of execution is not procured within thirty (30) days after the date of entry of such judgment or order.”
(xv)    The following new Section 9.21 shall be added to the Loan Agreement immediately after the current Section 9.20:
"9.21    Releases of Subsidiary Guarantors.  If at any time Subsidiary Guarantor is released as a guarantor under the Senior Notes, then, at the request of Borrower and such Subsidiary Guarantor, and so long as  no Event of Default or event that with the giving of notice and/or the passage of time could become an Event of Default then exists, the respective Subsidiary Guarantor shall be released as a Subsidiary Guarantor pursuant to this Agreement and the Subsidiary Repayment Guaranty (and the Agent is authorized and directed to execute and deliver such instruments of release as are reasonably satisfactory to it)."
(xvi)    Schedule 4.4 of the Loan Agreement is hereby deleted in its entirety and replaced with the Schedule 4.4 attached hereto.
(c)    Clean Up Change.  The reference to "Section 6.1" in Section 7.1(c) of the Loan Agreement is hereby deleted in its entirety and replaced with "Section 7.1."
(d)    No Other Modifications.  Except as expressly set forth in this Agreement, the Loan Documents shall be and remain unmodified and in full force and effect.
6.    General Release.  As further inducement to Agent and Lenders to enter into this Agreement, Borrower and Initial Guarantor hereby release Agent and Lenders as follows:
(a)    Borrower and Initial Guarantor and their heirs, successors and assigns (collectively, the "Releasing Parties") do hereby release, acquit and forever discharge Agent and Lenders of and from any and all claims, demands, obligations, liabilities, indebtedness, breaches of contract, breaches of duty or any relationship, acts, omissions, misfeasance, malfeasance, cause or causes of action, debts, sums of money, accounts, compensation, contracts, controversies, 

	
			
	 
	15

	 

	 
	 
	 

promises, damages, costs, losses and expenses of every type, kind, nature, description, or character, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, each as though fully set forth herein at length, which in any way, have, prior to the Effective Date, arisen out of, are connected with or related to the Loan Documents, this Agreement or any earlier and/or other agreement or document referred to therein (collectively, the "Released Claims").
(b)    The agreement of the Releasing Parties, as set forth in the preceding subparagraph (a) shall inure to the benefit of the successors, assigns, insurers, administrators, agents, employees, and representatives of Agent and Lenders.
(c)    The Releasing Parties have read the foregoing release, fully understand the legal consequences thereof and have obtained the advice of counsel with respect thereto.  The Releasing Parties further warrant and represent that they are authorized to make the foregoing release.
(d)    Each Releasing Party acknowledges that the foregoing release shall extend to Released Claims which the Releasing Party does not know or suspect to exist in Releasing Party's favor at the time of executing this Agreement, regardless of whether such Released Claims, if known by such Releasing Party, would have materially affected such Releasing Party's decision to enter into this Agreement.  Each Releasing Party acknowledges that they are familiar with Section 1542 of the Civil Code of the State of California which provides as follows:
A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.
Each Releasing Party waives and relinquishes any right or benefit which it has or may have under Section 1542 of the Civil Code of the State of California and any similar provision of the statutory or non-statutory law of any other jurisdiction, to the full extent that it may lawfully waive all such rights and benefits.  In connection with such waiver and relinquishment, each Releasing Party acknowledges that it is aware that it or its attorneys or agents may hereafter discover facts in addition to or different from those which it now knows or believes to exist with respect to the subject matter of this Section 6 or the other parties hereto, but that each Releasing Party intends hereby fully, finally and forever to settle, waive and release all of the Released Claims, known or unknown, suspected or unsuspected, which now exist or may exist hereafter between Releasing Parties and Agent and Lenders in connection with the Loan, except as otherwise expressly provided in this Section 6.  This foregoing release shall be and remain in effect notwithstanding the discovery or existence of any such additional or different facts.
(e)    Each Releasing Party warrants and represents that it is the sole and lawful owner of all right, title and interest in and to all of the respective Released Claims released hereby and that it has not heretofore voluntarily, by operation of law or otherwise, assigned or transferred or purported to assign or transfer to any person or entity any such claim or any portion thereof.

	
			
	 
	16

	 

	 
	 
	 

(f)    This release is not to be construed and does not constitute an admission of liability on the part of Agent or Lenders.  This release shall constitute an absolute bar to any Released Claim of any kind, whether such claim is based on contract, tort, warranty, mistake or any other theory, whether legal, statutory or equitable.  The Releasing Parties specifically agree that any attempt to assert a claim barred hereby shall subject each of them to the provisions of applicable law setting forth the remedies for the bringing of groundless, frivolous or baseless claims or causes of action.
    ___/s/JE /s/KM___                      /s/ JE_/s/ KM_____ 
Borrower's Initials        Initial Guarantor's Initials

[Remainder of Page Left Intentionally Blank]

	
			
	 
	Section 6(f)
	 

	 
	 
	 

7.    Conditions Precedent.  Before this Agreement becomes effective and any party becomes obligated under it, all of the following conditions shall have been satisfied in a manner acceptable to Agent in the exercise of Agent's sole judgment (except as waived or reserved by Agent in writing):
(a)    Agent shall have received fully executed originals of this Agreement, the Bank of Ireland Facility A Note, the Bank of Ireland Facility B Note, the Assumption Agreement, a Reference Agreement executed by Borrower, Agent and the Lenders, and any other documents which Agent may require or request in accordance with this Agreement or the other Loan Documents.
(b)    Initial Guarantor shall have executed and delivered to Agent the attached Consent of Initial Guarantor.
(c)    Borrower shall have paid to U.S. Bank National Association all fees set forth in that certain Fee Letter of even date herewith between Borrower and U.S. Bank National Association.  
(d)    Agent and Lenders shall have received reimbursement, in immediately available funds, of all actual, out-of-pocket costs and expenses incurred by Agent and Lenders in connection with the Loan or this Agreement, including the legal fees, charges and expenses of Agent's counsel (determined on the basis of such counsel's generally applicable rates, which may be higher than the rates such counsel charges Agent in certain matters).
(e)    Agent shall have received all documents evidencing the formation, organization and valid existence of the Borrower and Initial Guarantor (to the extent such documents have been amended or modified since the original Closing Date) and the authorization for the execution, delivery, and performance of the Agreement.
(f)    No change shall have occurred in the financial condition of Borrower or Initial Guarantor, which would have, in Agent's sole judgment, a material adverse effect on Borrower's or Initial Guarantor's ability to repay the Loan or otherwise perform its obligations under the Loan Documents.
(g)    Agent shall have received from outside counsel for Borrower an opinion as to Borrower's power and authority to execute, deliver and perform this Agreement, in form and substance acceptable to Agent. 
(h)    Borrower's representations and warranties set forth in Section 8 below are  true and correct in all respects.
(i)    The conditions precedent shall have been satisfied prior to September 26, 2013 unless waived or reserved by Agent in writing.
8.    Borrower's Representations and Warranties.  Borrower represents and warrants to Agent and Lenders as follows:

	
			
	 
	12

	 

	 
	 
	 

(a)    Loan Documents.  Except as previously disclosed to Agent in writing, all representations and warranties made and given by Borrower in the Loan Documents are true, accurate and correct in all material respects.  Borrower is in compliance with all covenants, terms and conditions in effect and as required under the Loan Documents (as modified by this Agreement).
(b)    No Default.  No Event of Default has occurred and is continuing, and no event has occurred and is continuing which, with notice or the passage of time or both, would be an Event of Default.
(c)    Borrowing Entity.  Borrower is a corporation which is duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to conduct business, and is in good standing, in the State of California.  Except as previously disclosed in writing by Borrower to Agent, there have been no changes in the organization, composition, ownership structure or formation documents of Borrower since the Closing Date.  Borrower's execution and delivery of this Agreement and the continued performance by Borrower of its obligations under the Loan Documents to which it is a party have been duly authorized by all necessary action on the part of Borrower and any other required parties.  This Agreement has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights.
9.    Incorporation.  This Agreement shall form a part of each Loan Document, and all references to a given Loan Document shall mean that document as modified pursuant to this Agreement.  For purposes of this Agreement, the "Effective Date" shall be the date that Agent notifies Borrower that all of the conditions precedent set forth in Section 7 hereof have been satisfied in a manner acceptable to Agent in the exercise of Agent's sole judgment, or waived or reserved by Agent in writing.
10.    No Prejudice; Reservation of Rights.  Except as expressly set forth herein, this Agreement shall not prejudice any rights or remedies of Agent or Lenders under the Loan Documents.  Agent and Lenders reserve, without limitation, all rights which it has against any endorser of the Notes.
11.    No Impairment.  Except as specifically hereby amended, the Loan Documents shall each remain unaffected by this Agreement and all such documents shall remain in full force and effect.  
12.    Integration.  The Loan Documents, including this Agreement: (a) integrate all the terms and conditions mentioned in or incidental to the Loan Documents; (b) supersede all oral negotiations and prior and other writings with respect to their subject matter; and (c) are intended by the parties as the final expression of the agreement with respect to the terms and conditions set forth in those documents and as the complete and exclusive statement of the terms agreed to by the parties.  If there is any conflict between the terms, conditions and provisions of this Agreement and those of any other agreement or instrument in effect as of the Effective Date, including any of the other Loan Documents, the terms, conditions and provisions of this Agreement shall prevail.

	
			
	 
	13

	 

	 
	 
	 

13.    Miscellaneous.  This Agreement and any attached consents or exhibits requiring signatures may be executed in counterparts, and all counterparts shall constitute but one and the same document.  If any court of competent jurisdiction determines any provision of this Agreement or any of the other Loan Documents to be invalid, illegal or unenforceable, that portion shall be deemed severed from the rest, which shall remain in full force and effect as though the invalid, illegal or unenforceable portion had never been a part of the Loan Documents.  This Agreement shall be governed by the laws of the State of California, without regard to the choice of law rules of that State.  As used here, the word "include(s)" means "includes(s), without limitation," and the word "including" means "including, but not limited to." 
[Signatures on following page]

	
			
	 
	14

	 

	 
	 
	 

14.    No Reliance on Other Representations or Promises.  This Agreement constitutes the entire agreement between the parties with respect to the terms hereof.  This Agreement supersedes all previous negotiations, discussions and agreements between or among any of the parties, including, without limitation, any and all term sheets, and no parol evidence of any prior or other agreement shall be permitted to contradict or vary the terms of this Agreement.  By executing this Agreement, Borrower expressly acknowledges to Agent and Lenders that it did not rely on any promise, representation, assurance, agreement, statement or advice, oral or written, not expressly set forth in this Agreement in reaching its decision to enter into this Agreement and that no promises, representations, assurances, agreements, statements or advice, oral or written, have been made to Borrower which conflict with the written terms of this Agreement.  Borrower acknowledges to Agent and Lenders that it (i) has read and understands the terms and conditions contained in this Agreement, and (ii) has relied only on its review and interpretation of (and advice of its counsel in respect of) this Agreement (and it has not relied on any promises, representations, assurances, agreements, statements or advice from Agent, any Lender, or any of Agent's or any Lender's officers, employees, agents, attorneys or other representatives).  This Agreement may be amended only in a writing signed by the parties hereto.
Borrower's Initials: /s/ JE /s/ KM______________

	
		
	

	Borrower:
KENNEDY-WILSON, INC.,
a Delaware corporation

By:            /s/Justin Enbody______________________
Name:   Justin Enbody_______________________
Title:      Chief Financial Officer_________________

By:   /s/ Kent Mouton________________________
Name:  Kent Mouton__________________________
 Title:   Executive Vice President_________________

	
			
	 
	S-1
	 

	 
	 
	 

	
		
	Agent:
U.S. BANK NATIONAL ASSOCIATION, 
as Agent
By:   /s/ Laura L. Lynton____________
 
Name:   Laura L. Lynton______________
 
Title:   Senior Vice President____________

	 

	

	 

	Lender:
U.S. BANK NATIONAL ASSOCIATION, 
as a Lender
By:   /s/ Laura L. Lynton____________
 
Name:   Laura L. Lynton______________
 
Title:   Senior Vice President____________

	 

	
			
	

	S-2
	 

	 
	 
	 

	
		
	 
	 

	Lender:
EAST-WEST BANK,
as a Lender

By:   /s/ Kathleen Kwan
 
Name:  Kathleen Kwan
 
Title:   SVP

	 

	
			
	 
	S-3
	 

	 
	 
	 

	
		
	Lender:
THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND,
as a Lender

By:   /s/ Wendy Hobson_____________ 
Name:   Wendy Hobson_______________ 
Title:   Authorised Signatory___________
By:   /s/ Padraig Rushe 
Name:   Padraig Rushe 
Title:    Authorised Signatory
	 

	 
	 

	
			
	 
	S-4
	 

	 
	 
	 

CONSENT OF INITIAL GUARANTOR

The undersigned, having read and understood the foregoing Second Modification Agreement ("Agreement"), hereby (i) consents to all of the terms, conditions and provisions of the Agreement and the transactions contemplated by the Agreement, including, but not limited to, Sections 2 through 6, inclusive, thereof, (ii) agrees that the Agreement does not terminate any of the obligations of the undersigned to Agent and Lenders under the Initial Repayment Guaranty, (iii) reaffirms its obligations under the Initial Repayment Guaranty in light of the Agreement (including, but not limited to, Sections 2 through 6, inclusive, thereof), (iv) acknowledges and agrees that the total principal amount available to be borrowed by Borrower under the Loan Agreement and the Notes has been increased to $140,000,000.00, and acknowledges and agrees that (A) all references to "$100,000,000.00" in the Initial Repayment Guaranty are hereby changed to mean "$140,000,000.00", (B) all references to "$75,000,000.00" in the Initial Repayment Guaranty are hereby changed to mean "$105,000,000.00", and (C) all references to "$25,000,000" in the Initial Repayment Guaranty are hereby changed to mean "$35,000,000.00", (v) acknowledges and agrees that Bank of Ireland has been added as a Lender under the Loan Documents, and (vi) agrees that, by its execution of this Consent of Initial Guarantor, the undersigned Initial Guarantor shall be deemed to have joined in the provisions of Section 6 of the Modification Agreement as a Releasing Party, and hereby affirmatively joins in and makes each of the waivers and releases set forth in said Section 6 in favor of Agent and the Lenders, which Section 6 is incorporated into this Consent of Initial Guarantor in its entirety by this reference.  The undersigned, having reread the Initial Repayment Guaranty and with advice of its own counsel, hereby reaffirm and restate all waivers, authorizations, agreements and understandings set forth in the Initial Repayment Guaranty, as though set forth in full herein.  Capitalized terms used in this consent but not otherwise defined shall have the meanings ascribed to such terms in the Agreement.
Dated as of September 19, 2013.

[Remainder of Page Left Intentionally Blank]

	
			
	 
	CONSENT
	 

	 
	 
	 

	
		
	 
	"Initial Guarantor"

KENNEDY-WILSON HOLDINGS, INC., 
 
a Delaware corporation

By:   /s/Justin Enbody______________________
Name:   Justin Enbody_______________________
Title:   Chief Financial Officer_________________

By:   /s/ Kent Mouton________________________
Name:   Kent Mouton__________________________
 
Title:   Executive Vice President_________________

	 
	 

	
			
	 
	C-1
	 

	 
	 
	 

EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
This Compliance Certificate (this "Certificate") is delivered with reference to that certain Revolving Loan Agreement dated as of July 22, 2010 (as amended, extended, renewed, supplemented or otherwise modified from time to time, the "Loan Agreement"), by and between KENNEDY-WILSON, INC., a Delaware corporation ("Borrower"), U.S. BANK NATIONAL ASSOCIATION, a national banking association, as agent, lead arranger and book manager ("Agent"), U.S. BANK NATIONAL ASSOCIATION, a national banking association, THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND, and EAST-WEST BANK, a California banking corporation, as Lenders, and any other bank that becomes a party hereto in the future (collectively, the "Lenders").  Capitalized terms used but not defined in this Certificate shall have the same meanings that are given to such terms in the Loan Agreement.  Section references in this Certificate relate to the Loan Agreement unless stated otherwise.
This Certificate is delivered in accordance with Section 5.3 of the Loan Agreement, and has been executed by an authorized officer of Borrower.  This Certificate is delivered with respect to the calendar quarter ended _____________, 20__ (the "Test Calendar Quarter").
In accordance with Section 5.2 of the Loan Agreement, as of the end of the Test Calendar Quarter:
(1)    The Minimum Rent Adjusted Fixed Charge Coverage Ratio was ________;
(1)    The Borrower Parties had cash, cash equivalents and publicly traded marketable securities in an aggregate amount of at least $__________;
(1)    The Maximum Balance Sheet Leverage was ________________; and
(1)    The Effective Tangible Net Worth was $__________________.
A review of the activities of Borrower during the Test Calendar Quarter has been made under the supervision of the undersigned.  To the best knowledge of the undersigned, during the Test Calendar Quarter, (i) Borrower has observed, performed and/or satisfied all of the covenants, agreements and conditions and any other obligations to be observed, performed or satisfied by it under the Loan Documents, and (ii) no Event of Default or potential Event of Default has occurred and is continuing, with the exceptions set forth below in response to which Borrower has taken or proposes to take the following actions (if none, so state).
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________

	
			
	 
	EXHIBIT C
	 

	 
	 
	 

The undersigned certifies that the calculations made and the information contained herein are complete and correct and fairly present the financial position and results of operations of the Borrower Parties in accordance with GAAP, applied on a basis consistent with prior periods, and correctly reflect the books and records of the Borrower Parties.
To the best knowledge of the undersigned no event or circumstance has occurred that constitutes a material adverse change since the date the most recent Compliance Certificate was executed and delivered, with the exceptions set forth below (if none, so state).
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Dated:  ________________, 20___.

	
		
	 
	KENNEDY-WILSON, INC.,
a Delaware corporation

By:   ___________________________________
Name:   ___________________________________
Title:   ___________________________________

By:   ___________________________________
Name:   ___________________________________
Title:   ___________________________________

	
			
	 
	EXHIBIT C
	 

	 
	 
	 

EXHIBIT E
COMMITMENTS AND COMMITMENT PERCENTAGES 
OF LENDERS

	
			
	Bank

	Facility A Commitment
	Facility A Commitment Percentage

	U.S. Bank National Association:
	$56,250,000
	53.57142857%

	 
	Facility B Commitment
	Facility B Commitment Percentage

	 
	$18,750,000
	53.57142857%

	 
	 
	 

	East-West Bank:
	Facility A Commitment
	Facility A Commitment Percentage

	 
	$30,000,000
	28.57142857%

	 
	 
	 

	 
	Facility B Commitment
	Facility B Commitment Percentage

	 
	$10,000,000
	28.57142857%

	 
	 
	 

	Bank of Ireland:
	Facility A Commitment
	Facility A Commitment Percentage

	 
	$18,750,000
	17.85714286%

	 
	 
	 

	 
	Facility B Commitment
	Facility B Commitment Percentage

	 
	$6,250,000
	17.85714286%

	 
	 
	 

	 
	 
	 

	 
	 
	 

	
			
	 
	EXHIBIT E
	 

	 
	 
	 

Schedule 4.4
Schedule of Indebtedness

		
	1.
	2007 Junior Subordinated Debenture in the amount of $40 Million between Kennedy-Wilson Inc. and The Bank of New York Trust Company, National Association, as trustee for Merrill Lynch International.

		
	2.
	8.750% Senior Notes Indenture in the amount of $350 Million, due 2019 between Kennedy-Wilson Inc. and Wilmington Trust FSB, as trustee, as supplemented and amended from time to time. 

		
	3.
	7.750% Senior Notes Indenture in the amount of $55 Million, due 2042 between Kennedy-Wilson Inc. and Wilmington Trust, Nation Association, as trustee, as supplemented and amended from time to time.

	
			
	 
	SCHEDULE 4.4ex10-1.htm

Exhibit 10.1

 

Amended and Restated Credit Agreement

 

SkyMall, LLC

 

This Amended and Restated Credit Agreement (this “Agreement”) is dated as of September 18, 2013 is between JPMorgan Chase Bank, N.A. (together with its successors and assigns, the “Bank”), whose address is 201 N. Central Ave, 21st Floor, AZ1-1178, Phoenix, AZ 85004, and SkyMall, LLC (individually, the “Borrower” and if more than one, collectively, the “Borrowers”), whose address is 1520 E. Pima Street, Phoenix, AZ 85034-4639 and amends and restates that certain Credit Agreement dated May 10, 2013 between the parties (the “Credit Agreement”).

 

RECITALS

 

	
A.  

	
Pursuant to the Credit Agreement, Bank made a loan to Borrower secured and guaranteed by certain documents referred to therein as the “Related Loan Documents.”

 

	
B.  

	
This Agreement is entered into in connection with a Waiver and Consent Agreement dated September 18, 2013 (the “Consent”) between Bank and Borrower pursuant to which Bank consents, upon certain terms and conditions, to new borrowing by Borrower from SMXE Lending, LLC, a Delaware limited liability company (“New Lender”) pursuant to a Credit Agreement between New Lender and Borrower dated September 18, 2013 (the “Subordinated Credit Agreement”), a copy of which has been provided to Bank, the completeness and accuracy of which is a condition to all agreement of Bank herein, such Subordinated Credit Agreement to be expressly subordinated to this Agreement pursuant to the Subordination and Intercreditor Agreement between Borrower, Bank and New Lender, such Subordinated Credit Agreement granting to New Lender a second lien in collateral previously pledged to Bank by Borrower, SkyMall Interests, LLC, SkyMall Ventures, LLC, SHC Parent Corp., Xhibit Corp., Xhibit Interactive, LLC, FlyReply Corp., SpyFire Interactive, LLC and Stacked Digital, LLC (the “Related Loan Parties”).

 

AGREEMENTS

 

NOW, THEREFORE, in mutual consideration of the agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto hereby agree as follows:

 

	
1.  

	
Credit Facilities.

 

	
1.1.  

	
Scope. This agreement, unless otherwise agreed to in writing by the Bank and the Borrower or prohibited by any Legal Requirement (as hereafter defined), governs the Credit Facilities as defined below. Advances under any Credit Facilities shall be subject to the procedures established from time to time by the Bank. Any procedures agreed to by the Bank with respect to obtaining advances, including automatic loan sweeps, shall not vary the terms or conditions of this agreement or the other Related Documents regarding the Credit Facilities.

 

	
2.  

	
Definitions and Interpretations.

 

	
2.1.  

	
Definitions. As used in this agreement, the following terms have the following respective meanings:

 

A. “Affiliate” means any Person which, directly or indirectly Controls or is Controlled by or under common Control with, another Person, and any director or officer thereof. The Bank is under no circumstances to be deemed an Affiliate of the Borrower or any of its Subsidiaries

 

  

-1-

  

 

B. “Authorizing Documents” means certificates of authority to transact business, certificates of good standing, borrowing resolutions, appointments, officer’s certificates, certificates of incumbency, and other documents which empower and authorize or evidence the power and authority of all Persons (other than the Bank) executing any Related Document or their representatives to execute and deliver the Related Documents and perform the Person’s obligations thereunder.

 

C. “Collateral” means all Property, now or in the future subject to any Lien in favor of the Bank, securing or intending to secure, any of the Liabilities.

 

D. “Control” as used with respect to any Person, means the power to direct or cause the direction of, the management and policies of that Person, directly or indirectly, whether through the ownership of Equity Interests, by contract, or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

 

E. “Credit Facilities” means all extensions of credit from the Bank to the Borrower, whether now existing or hereafter arising, including but not limited to those described in Section 1, if any, and those extended contemporaneously with this agreement.

 

F. “Distributions” means all dividends and other distributions made to any Equity Owners, other than salary, bonuses, and other compensation for services expended in the current accounting period

 

G. “Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

 

H. “Equity Owner” means a shareholder, partner, member, holder of a beneficial interest in a trust or other owner of any Equity Interests.

 

I. “GAAP” means generally accepted accounting principles in effect from time to time in the United States of America, consistently applied.

 

J. “Legal Requirement” means any law, ordinance, decree, requirement, order, judgment, rule, regulation (or interpretation of any of the foregoing) of any foreign governmental authority, the United States of America, any state thereof, any political subdivision of any of the foregoing or any agency, department, commission, board, bureau, court or other tribunal having jurisdiction over the Bank, any Pledgor or any Obligor or any of its Subsidiaries or their respective Properties or any agreement by which any of them is bound.

 

K. “Liabilities” means all indebtedness, liabilities and obligations of every kind and character of the Borrower to the Bank, whether the obligations, indebtedness and liabilities are individual, joint and several, contingent or otherwise, now or hereafter existing, including, without limitation, all liabilities, interest, costs and fees, arising under or from any note, open account, overdraft, credit card, lease, Rate Management Transaction, letter of credit application, endorsement, surety agreement, guaranty, acceptance, foreign exchange contract or depository service contract, whether payable to the Bank or to a third party and subsequently acquired by the Bank, any monetary obligations (including interest) incurred or accrued during the pendency of any bankruptcy, insolvency, receivership or other similar proceedings, regardless of whether allowed or allowable in such proceeding, and all renewals, extensions, modifications, consolidations, rearrangements, restatements, replacements or substitutions of any of the foregoing.

 

  

-2-

  

L. “Lien” means any mortgage, deed of trust, pledge, charge, encumbrance, security interest, collateral assignment or other lien or restriction of any kind.

 

M. “Notes” means all promissory notes, instruments and/or contracts now or hereafter evidencing the Credit Facilities.

 

N. “Obligor” means any Borrower, guarantor, surety, co-signer, endorser, general partner or other Person who may now or in the future be obligated to pay any of the Liabilities.

 

O. “Organizational Documents” means, with respect to any Person, certificates of existence or formation, documents establishing or governing the Person or evidencing or certifying that the Person is duly organized and validly existing in accordance with all applicable Legal Requirements, including all amendments, restatements, supplements or modifications to such certificates and documents as of the date of the Related Document referring to the Organizational Document and any and all future modifications thereto approved by the Bank.

 

P. “Permitted Investments” means (1) readily marketable direct obligations of the United States of America or any agency thereof with maturities of one year or less from the date of acquisition; (2) fully insured (if issued by a bank other than the Bank) certificates of deposit with maturities of one year or less from the date of acquisition issued by any commercial bank operating in the United States of America having capital and surplus in excess of $500,000,000.00; and (3) commercial paper of a domestic issuer if at the time of purchase such paper is rated in one of the two highest rating categories of Standard and Poor’s Corporation or Moody’s Investors Service.

 

Q. “Person” means any individual, corporation, partnership, limited liability company, joint venture, joint stock association, association, bank, business trust, trust, unincorporated organization, any foreign governmental authority, the United States of America, any state of the United States and any political subdivision of any of the foregoing or any other form of entity.

 

R. “Pledgor” means any Person providing Collateral.

 

S. “Property” means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.

 

T. “Rate Management Transaction” means any transaction (including an agreement with respect thereto) that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option, derivative transaction or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

 

U. “Related Documents” means this agreement, the Notes, applications for letters of credit, all loan agreements, credit agreements, reimbursement agreements, security agreements, mortgages, deeds of trust, pledge agreements, assignments, guaranties, and any other instrument or document executed in connection with this agreement or with any of the Liabilities.

 

V. “Subsidiary” means, as to any particular Person (the “parent”), a Person the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of the date of determination, as well as any other Person of which fifty percent (50%) or more of the Equity Interests is at the time of determination directly or indirectly owned, Controlled or held, by the parent or by any Person or Persons Controlled by the parent, either alone or together with the parent.

 

  

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2.2.  

	
Interpretations. Whenever possible, each provision of the Related Documents shall be interpreted in such manner as to be effective and valid under applicable Legal Requirements. If any provision of this agreement cannot be enforced, the remaining portions of this agreement shall continue in effect. In the event of any conflict or inconsistency between this agreement and the provisions of any other Related Documents, the provisions of this agreement shall control. Use of the term “including” does not imply any limitation on (but may expand) the antecedent reference. Any reference to a particular document includes all modifications, supplements, replacements, renewals or extensions of that document, but this rule of construction does not authorize amendment of any document without the Bank’s consent. Section headings are for convenience of reference only and do not affect the interpretation of this agreement. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP. Whenever the Bank’s determination, consent, approval or satisfaction is required under this agreement or the other Related Documents or whenever the Bank may at its option take or refrain from taking any action under this agreement or the other Related Documents, the decision as to whether or not the Bank makes the determination, consents, approves, is satisfied or takes or refrains from taking any action, shall be in the sole and exclusive discretion of the Bank, and the Bank’s decision shall be final and conclusive.

 

	
3.  

	
Conditions.

 

	
3.1.  

	
Conditions Precedent to Initial Extension of Credit under each of the Credit Facilities. Before the first extension of credit governed by this agreement and any initial advance under any of the Credit Facilities, whether by disbursement of a loan, issuance of a letter of credit, or otherwise, the Borrower shall deliver to the Bank, in form and substance satisfactory to the Bank:

 

A. Loan Documents. The Notes, and as applicable, the letter of credit applications, reimbursement agreements, the security agreements, the pledge agreements, financing statements, mortgages or deeds of trust, the guaranties, the subordination agreements, and any other documents which the Bank may reasonably require to give effect to the transactions described in this agreement or the other Related Documents;

 

B. Organizational  and  Authorizing  Documents.  The  Organizational  Documents  and  Authorizing Documents of the Borrower and any other Persons (other than the Bank) executing the Related Documents in form and substance satisfactory to the Bank that at a minimum: (i) document the due organization, valid existence and good standing of the Borrower and every other Person (other than the Bank) that is a party to this agreement or any other Related Document; (ii) evidence that each Person (other than the Bank) which is a party to this agreement or any other Related Document has the power and authority to enter into the transactions described therein; and (iii) evidence that the Person signing on behalf of each Person that is a party to the Related Documents (other than the Bank) is duly authorized to do so; and

 

C. Liens. The termination, assignment or subordination, as determined by the Bank, of all Liens on the Collateral in favor of any secured party (other than the Bank).

 

	
3.2.  

	
Conditions Precedent to Each Extension of Credit. Before any extension of credit governed by this agreement, whether by disbursement of a loan, issuance of a letter of credit or otherwise, the following conditions must be satisfied:

 

A. Representations. The representations of the Borrower and any other parties, other than the Bank, in the Related Documents are true on and as of the date of the request for and funding of the extension of credit;

 

B. No Event of Default. No default, event of default or event that would constitute a default or event of default but for the giving of notice, the lapse of time or both, has occurred in any provision of this agreement, the Notes or any other Related Documents and is continuing or would result from the extension of credit;

 

  

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C. Additional Approvals, Opinions, and Documents. The Bank has received any other approvals, opinions and documents as it may reasonably request; and

 

D. No Prohibition or Onerous Conditions. The making of the extension of credit is not prohibited by and does not subject the Bank, any Obligor, or any Subsidiary of the Borrower to any penalty or onerous condition under, any Legal Requirement.

 

	
3.3.  

	
Conditions to Amendment.  The effectiveness of this Amended and Restated Credit Agreement is conditioned upon the satisfaction of all conditions set forth in Section 1 of the Consent and the condition that all representations and warranties set forth therein are true and correct.

 

	
4.  

	
Affirmative Covenants. The Borrower agrees to do, and cause each of its Subsidiaries to do, each of the following:

 

	
4.1.  

	
Insurance. Maintain insurance with financially sound and reputable insurers, with such insurance and insurers to be satisfactory to the Bank, covering its Property and business against those casualties and contingencies and in the types and amounts as are in accordance with sound business and industry practices, and furnish to the Bank, upon request of the Bank, reports on each existing insurance policy showing such information as the Bank may reasonably request.

 

	
4.2.  

	
Existence. Maintain its existence and business operations as presently in effect in accordance with all applicable Legal Requirements, pay its debts and obligations when due under normal terms, and pay on or before their due date, all taxes, assessments, fees and other governmental monetary obligations, except as they may be contested in good faith if they have been properly reflected on its books and, at the Bank’s request, adequate funds or security has been pledged or reserved to insure payment.

 

	
4.3.  

	
Financial Records. Maintain proper books and records of account, in accordance with GAAP consistently applied.

 

	
4.4.  

	
Inspection. Permit the Bank, its agents and designees to: (a) inspect and photograph its Property, to examine and copy files, books and records, and to discuss its business, operations, prospects, assets, affairs and financial condition with the Borrower’s or its Subsidiaries’ officers and accountants, at times and intervals as the Bank reasonably determines; (b) perform audits or other inspections of the Collateral, including the records and documents related to the Collateral; and (c) confirm with any Person any obligations and liabilities of the Person to the Borrower or its Subsidiaries. The Borrower will, and will cause its Subsidiaries to cooperate with any inspection or audit. The Borrower will pay the Bank the reasonable costs and expenses of any audit or inspection of the Collateral (including fees and expenses charged internally by the Bank for asset reviews) promptly after receiving the invoice.

 

	
4.5.  

	
Financial Reports. Furnish to the Bank whatever information, statements, books and records the Bank may from time to time reasonably request, including at a minimum:

 

A. Within forty-five (45) days after each quarterly period, the consolidated financial statements of the Borrower and its Subsidiaries prepared and presented in accordance with GAAP, including a balance sheet as of the end of that period, and income statement for that period, and, if requested at any time by the Bank, statements of cash flow and retained earnings for that period, all certified as correct by one of its authorized agents.

 

B. Within one hundred and twenty (120) days after and as of the end of each of its fiscal years, the consolidated financial statements of the Borrower and its Subsidiaries prepared and presented in accordance with GAAP, including a balance sheet and statements of income, cash flow and retained earnings, such financial statements to be audited by an independent certified public accountant of recognized standing satisfactory to the Bank.

 

  

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C. Each statement, record and report that Borrower is required to provide to New Lender pursuant to the Subordinated Credit Agreement shall be provided to the Bank not later than the time at which it is requested to be provided to New Lender.

 

	
4.6.  

	
Notices of Claims, Litigation, Defaults, etc. Promptly inform the Bank in writing of: (1) all existing and all threatened litigation, claims, investigations, administrative proceedings and similar actions or changes in Legal Requirements affecting it which could materially affect its business, assets, affairs, prospects or financial condition; (2) the occurrence of any event which gives rise to the Bank’s option to terminate the Credit Facilities; (3) the institution of steps by it to withdraw from, or the institution of any steps to terminate, any employee benefit plan as to which it may have liability; (4) any reportable event or any prohibited transaction in connection with any employee benefit plan; (5) any additions to or changes in the locations of its businesses; and (6) any alleged breach by the Bank of any provision of this agreement or of any other Related Document.

 

	
4.7.  

	
Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between it and any other Person.

 

	
4.8.  

	
Title to Assets and Property. Maintain good and marketable title to all of its Properties, and defend them against all claims and demands of all Persons at any time claiming any interest in them.

 

	
4.9.  

	
Additional Assurances. Promptly make, execute and deliver any and all agreements, documents, instruments and other records that the Bank may request to evidence any of the Credit Facilities, cure any defect in the execution and delivery of any of the Related Documents, perfect any Lien, comply with any Legal Requirement applicable to the Bank or the Credit Facilities or describe more fully particular aspects of the agreements set forth or intended to be set forth in any of the Related Documents.

 

	
4.10.  

	
Employee Benefit Plans. Maintain each employee benefit plan as to which it may have any liability, in compliance with all Legal Requirements.

 

	
4.11.  

	
Banking Relationship. Establish and maintain its primary banking depository and disbursement relationship with the Bank.

 

	
5.  

	
Negative Covenants.

 

	
5.1.  

	
Unless otherwise noted, the financial requirements set forth in this section will be computed in accordance with GAAP consistently applied.

 

	
5.2.  

	
Without the written consent of the Bank, the Borrower will not and no Subsidiary of the Borrower will:

 

A. Distributions. Redeem, retire, purchase or otherwise acquire, directly or indirectly, any of its Equity Interests, return any contribution to an Equity Owner or, other than stock dividends and dividends paid to the Borrower, declare or pay any Distributions; provided, however, that if there is no existing default under this agreement or any other Related Document and to do so will not cause a default under any of such agreements the Borrower may pay Distributions to its Equity Owners sufficient in amount to pay their income tax obligations attributable to the Borrower’s taxable income if the Borrower is a sub S corporation, limited liability company or partnership.

 

B. Sale of Equity Interests. Issue, sell or otherwise dispose of its Equity Interests

 

  

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C. Debt. Incur, contract for, assume, or permit to remain outstanding, indebtedness for borrowed money, installment obligations, or obligations under capital leases or operating leases, other than (1) unsecured trade debt incurred in the ordinary course of business, (2) indebtedness owing to the Bank, (3) indebtedness reflected in its latest financial statement furnished to the Bank prior to execution of this agreement and that is not to be paid with proceeds of borrowings under the Credit Facilities, (4) indebtedness outstanding as of the date hereof that has been disclosed to the Bank in writing and that is not to be paid with proceeds of borrowings under the Credit Facilities, and (5) indebtedness pursuant to the Subordinated Credit Agreement, subject to the Subordination and Intercreditor Agreement.

 

D. Guaranties. Guarantee or otherwise become or remain secondarily liable on the undertaking of another, except for (1) endorsement of drafts for deposit and collection in the ordinary course of business and (2) indebtedness pursuant to the Subordinated Credit Agreement subject to the Subordination and Intercreditor Agreement.

 

E. Liens. Create or permit to exist any Lien on any of its Property except: existing Liens known to and approved by the Bank; Liens to the Bank; Liens incurred in the ordinary course of business securing current non- delinquent liabilities for taxes, worker’s compensation, unemployment insurance, social security and pension liabilities; and a second lien on the collateral previously pledged to the Bank by Borrower pursuant to the Subordinated Credit Agreement, subject to the Subordination and Intercreditor Agreement.

 

F. Use of Proceeds. Use, or permit any proceeds of the Credit Facilities to be used, directly or indirectly, for: (1) any personal, family or household purpose; or (2) the purpose of “purchasing or carrying any margin stock” within the meaning of Federal Reserve Board Regulation U. At the Bank’s request, it will furnish a completed Federal Reserve Board Form U-1.

 

G. Continuity of Operations. (1) Engage in any business activities substantially different from those in which it is presently engaged; (2) cease operations, liquidate, merge, transfer, acquire or consolidate with any other Person, change its name, dissolve, or sell any assets out of the ordinary course of business; (3) enter into any arrangement with any Person providing for the leasing by it of Property which has been sold or transferred by it to such Person; or (4) change its business organization, the jurisdiction under which its business organization is formed or organized, or its chief executive office, or any places of its businesses.

 

H. Limitation on Negative Pledge Clauses. Enter into any agreement other than the Subordinated Credit Agreement and the related documents referred to therein with any Person other than the Bank which prohibits or limits its ability to create or permit to exist any Lien on any of its Property, whether now owned or hereafter acquired.

 

I. Conflicting Agreements. Enter into any agreement containing any provision which would be violated or breached by the performance of its obligations under this agreement or any of the other Related Documents.

 

J. Transfer of Ownership. Permit any pledge of any Equity Interest in it or any sale or other transfer of any Equity Interest in it.

 

K. Limitation on Loans, Advances to and Investments in Others and Receivables from Others. Purchase, hold or acquire any Equity Interest or evidence of indebtedness of, make or permit to exist any loans or advances to, permit to exist any receivable from, or make or permit to exist any investment or acquire any interest whatsoever in, any Person, except: (1) extensions of trade credit to customers in the ordinary course of business on ordinary terms; (2) Permitted Investments; and (3) loans, advances, investments and receivables existing as of the date of this agreement that have been disclosed to and approved by the Bank in writing and that are not to be paid with proceeds of borrowings under the Credit Facilities.

 

  

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L. Organizational Documents. Alter, amend or modify any of its Organizational Documents.

 

M. Government Regulation. (1) Be or become subject at any time to any Legal Requirement or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits the Bank from making any advance or extension of credit to it or from otherwise conducting business with it, or (2) fail to provide documentary and other evidence of its identity as may be requested by the Bank at any time to enable the Bank to verify its identity or to comply with any applicable Legal Requirement, including, without limitation, Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

 

N. Subsidiaries. Form, create or acquire any Subsidiary.

 

	
6.  

	
Representations.

 

	
6.1.  

	
Representations and Warranties by the Borrower. To induce the Bank to enter into this agreement and to extend credit or other financial accommodations under the Credit Facilities, the Borrower represents and warrants as of the date of this agreement and as of the date of each request for credit under the Credit Facilities that each of the following statements is and shall remain true and correct throughout the term of this agreement and until all Credit Facilities and all Liabilities under the Notes and other Related Documents are paid in full: (a) its principal residence or chief executive office is at the address shown above, (b) its name as it appears in this agreement is its exact name as it appears in its Organizational Documents, (c) the execution and delivery of this agreement and the other Related Documents to which it is a party, and the performance of the obligations they impose, do not violate any Legal Requirement, conflict with any agreement by which it is bound, or require the consent or approval of any other Person, (d) this agreement and the other Related Documents have been duly authorized, executed and delivered by all parties thereto (other than the Bank) and are valid and binding agreements of those Persons, enforceable according to their terms, except as may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally and by general principles of equity, (e) all balance sheets, profit and loss statements, and other financial statements and other information furnished to the Bank in connection with the Liabilities are accurate and fairly reflect the financial condition of the Persons to which they apply on their effective dates, including contingent liabilities of every type, which financial condition has not changed materially and adversely since those dates, (f) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) is pending or threatened against it, and no other event has occurred which may in any one case or in the aggregate materially adversely affect it or any of its Subsidiaries’ financial condition, properties, business, affairs or operations, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by the Bank in writing, (g) all of its tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being contested by it in good faith and for which adequate reserves have been provided, (h) it is not an “investment company” or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended, (i) it is not a “holding company”, or a “subsidiary company” of a “holding company” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, (j) there are no defenses or counterclaims, offsets or adverse claims, demands or actions of any kind, personal or otherwise, that it could assert with respect to this agreement or the Credit Facilities, (k) it owns, or is licensed to use, all trademarks, trade names, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted, and (l) the execution and delivery of this agreement and the other Related Documents to which it is a party and the performance of the obligations they impose, if the Borrower is other than a natural Person (i) are within its powers, (ii) have been duly authorized by all necessary action of its governing body, and (iii) do not contravene the terms of its Organizational Documents or other agreement or document governing its affairs.  Borrower incorporates herein by this reference all its representations and warranties contained in the Consent.

 

  

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7.  

	
Default/Remedies.

 

	
7.1.  

	
Events of Default/Acceleration. If any of the following events occurs, the Notes shall become due immediately, without notice, at the Bank’s option:

 

A. Any Obligor fails to pay when due any of the Liabilities or any other debt to any Person, or any amount payable with respect to any of the Liabilities, or under any Note, any other Related Document, or any agreement or instrument evidencing other debt to any Person.

 

B. Any Obligor or any Pledgor: (i) fails to observe or perform or otherwise violates any other term, covenant, condition or agreement of any of the Related Documents; (ii) makes any materially incorrect or misleading representation, warranty, or certificate to the Bank; (iii) makes any materially incorrect or misleading representation in any financial statement or other information delivered to the Bank; or (iv) defaults under the terms of any agreement or instrument relating to any debt for borrowed money (other than the debt evidenced by the Related Documents) and the effect of such default will allow the creditor to declare the debt due before its stated maturity.

 

C. In the event (i) there is a default under the terms of any Related Document, (ii) any Obligor terminates or revokes or purports to terminate or revoke its guaranty or any Obligor’s guaranty becomes unenforceable in whole or in part, (iii) any Obligor fails to perform promptly under its guaranty, or (iv) any Obligor fails to comply with, or perform under any agreement, now or hereafter in effect, between the Obligor and the Bank, or any Affiliate of the Bank or their respective successors and assigns.

 

D. There is any loss, theft, damage, or destruction of any Collateral not covered by insurance.

 

E. Any event occurs that would permit the Pension Benefit Guaranty Corporation to terminate any employee benefit plan of any Obligor or any Subsidiary of any Obligor.

 

F. Any Obligor or any of its Subsidiaries or any Pledgor: (i) becomes insolvent or unable to pay its debts as they become due; (ii) makes an assignment for the benefit of creditors; (iii) consents to the appointment of a custodian, receiver, or trustee for itself or for a substantial part of its Property; (iv) commences any proceeding under any bankruptcy, reorganization, liquidation, insolvency or similar laws; (v) conceals or removes any of its Property, with intent to hinder, delay or defraud any of its creditors; (vi) makes or permits a transfer of any of its Property, which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or (vii) makes a transfer of any of its Property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid.

 

G. A custodian, receiver, or trustee is appointed for any Obligor or any of its Subsidiaries or any Pledgor or for a substantial part of their respective Property.

 

H. Any Obligor or any of its Subsidiaries, without the Bank’s written consent: (i) liquidates or is dissolved; (ii) merges or consolidates with any other Person; (iii) leases, sells or otherwise conveys a material part of its assets or business outside the ordinary course of its business; (iv) leases, purchases, or otherwise acquires a material part of the assets of any other Person, except in the ordinary course of its business; or (v) agrees to do any of the foregoing; provided, however, that any Subsidiary of an Obligor may merge or consolidate with any other Subsidiary of that Obligor, or with the Obligor, so long as the Obligor is the survivor.

 

I. Proceedings are commenced under any bankruptcy, reorganization, liquidation, or similar laws against any Obligor or any of its Subsidiaries or any Pledgor and remain undismissed for thirty (30) days after commencement; or any Obligor or any of its Subsidiaries or any Pledgor consents to the commencement of those proceedings.

 

  

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J. Any judgment is entered against any Obligor or any of its Subsidiaries, or any attachment, seizure, sequestration, levy, or garnishment is issued against any Property of any Obligor or any of its Subsidiaries or of any Pledgor or any Collateral.

 

K. Any individual Obligor or Pledgor dies, or a guardian or conservator is appointed for any individual Obligor or Pledgor or all or any portion of their respective Property, or the Collateral.

 

L. Any material adverse change occurs in: (i) the reputation, Property, financial condition, business, assets, affairs, prospects, liabilities, or operations of any Obligor or any of its Subsidiaries; (ii) any Obligor’s or Pledgor’s ability to perform its obligations under the Related Documents; or (iii) the Collateral.

 

	
7.2.  

	
Remedies. At any time after the occurrence of a default, the Bank may do one or more of the following: (a) cease permitting the Borrower to incur any Liabilities; (b) terminate any commitment of the Bank evidenced by any of the Notes; (c) declare any of the Notes to be immediately due and payable, without notice of acceleration, presentment and demand or protest or notice of any kind, all of which are hereby expressly waived; (d) exercise all rights of setoff that the Bank may have contractually, by law, in equity or otherwise; and (e) subject to Section 7.3, exercise any and all other rights pursuant to any of the Related Documents, at law, in equity or otherwise.

 

A. Generally. The rights of the Bank under this Agreement and the other Related Documents are in addition to other rights (including without limitation, other rights of setoff) the Bank may have contractually, by law, in equity or otherwise, all of which are cumulative and hereby retained by the Bank. Each Obligor agrees to stand still with regard to the Bank’s enforcement of its rights, including taking no action to delay, impede or otherwise interfere with the Bank’s rights to realize on any Collateral.

 

B. Expenses. To the extent not prohibited by applicable Legal Requirements and whether or not the transactions contemplated by this agreement are consummated, the Borrower is liable to the Bank and agrees to pay on demand all reasonable costs and expenses of every kind incurred (or charged by internal allocation) in connection with the negotiation, preparation, execution, filing, recording, modification, supplementing and waiver of the Related Documents, the making, servicing and collection of the Credit Facilities and the realization on any Collateral and any other amounts owed under the Related Documents, including without limitation reasonable attorneys’ fees (including counsel for the Bank that are employees of the Bank or its Affiliates) and court costs. These costs and expenses include without limitation any costs or expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or other similar proceeding involving any Obligor, Pledgor, or Property of any Obligor, Pledgor, or Collateral. The obligations of the Borrower under this section shall survive the termination of this agreement.

 

C. Bank’s Right of Setoff. The Borrower grants to the Bank a security interest in the Deposits, and the Bank is authorized to setoff and apply, all Deposits, Securities and Other Property, and Bank Debt against any and all Liabilities. This right of setoff may be exercised at any time from time to time after the occurrence of any default, without prior notice to or demand on the Borrower and regardless of whether any Liabilities are contingent, unmatured or unliquidated. In this paragraph: (a) the term “Deposits” means any and all accounts and deposits of the Borrower (whether general, special, time, demand, provisional or final) at any time held by the Bank (including all Deposits held jointly with another, but excluding any IRA or Keogh Deposits, or any trust Deposits in which a security interest would be prohibited by any Legal Requirement); (b) the term “Securities and Other Property” means any and all securities and other personal Property of the Borrower in the custody, possession or control of the Bank, JPMorgan Chase & Co. or their respective Subsidiaries and Affiliates (other than Property held by the Bank in a fiduciary capacity); and (c) the term “Bank Debt” means all indebtedness at any time owing by the Bank, to or for the credit or account of the Borrower and any claim of the Borrower (whether individual, joint and several or otherwise) against the Bank now or hereafter existing.

 

  

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7.3.  

	
Notice Right.  As a condition to the exercise of any rights pursuant to Section 7.2(d) and  (e), Bank shall provide notice of default to Borrower, to Subordinated Secured Party, and to Innovative Brands, LLC 10 Business Days prior to such exercise.

 

	
8.  

	
Miscellaneous.

 

A. Notice. Any notices and demands under or related to this agreement shall be in writing and delivered to the intended party at its address stated in this agreement, and if to the Bank, at its main office if no other address of the Bank is specified in this agreement, by one of the following means: (a) by hand; (b) by a nationally recognized overnight courier service; or (c) by certified mail, postage prepaid, with return receipt requested. Notice shall be deemed given: (a) upon receipt if delivered by hand; (b) on the Delivery Day after the day of deposit with a nationally recognized courier service; or (c) on the third Delivery Day after the notice is deposited in the mail. “Delivery Day” means a day other than a Saturday, a Sunday or any other day on which national banking associations are authorized to be closed. Any party may change its address for purposes of the receipt of notices and demands by giving notice of the change in the manner provided in this provision.

 

	
8.2.  

	
No Waiver. No delay on the part of the Bank in the exercise of any right or remedy waives that right or remedy. No single or partial exercise by the Bank of any right or remedy precludes any other future exercise of it or the exercise of any other right or remedy. The making of an advance during the existence of any default or subsequent to the occurrence of a default or when all conditions precedent have not been met shall not constitute a waiver of the default or condition precedent. No waiver or indulgence by the Bank of any default is effective unless it is in writing and signed by the Bank, nor shall a waiver on one occasion bar or waive that right on any future occasion.

 

	
8.3.  

	
Integration; Severability. This agreement, the Notes, and the other Related Documents embody the entire agreement and understanding between the Borrower and the Bank and supersede all prior agreements and understandings relating to their subject matter. If any one or more of the obligations of the Borrower under this agreement, the Notes, or the other Related Documents or any provision thereof is held to be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining obligations of the Borrower and the remaining provisions shall not in any way be affected or impaired; and the invalidity, illegality or unenforceability in one jurisdiction shall not affect the validity, legality or enforceability of such obligations or provisions in any other jurisdiction.

 

	
8.4.  

	
Joint and Several Liability. Each party executing this agreement as the Borrower is individually, jointly and severally liable under this agreement.

 

	
8.5.  

	
Governing Law and Venue. This agreement shall be governed by and construed in accordance with the laws of the State of Arizona (without giving effect to its laws of conflicts). The Borrower agrees that any legal action or proceeding with respect to any of its obligations under this agreement may be brought by the Bank in any state or federal court located in the State of Arizona, as the Bank in its sole discretion may elect. By the execution and delivery of this agreement, the Borrower submits to and accepts, for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of those courts. The Borrower waives any claim that the State of Arizona is not a convenient forum or the proper venue for any such suit, action or proceeding.

 

  

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8.6.  

	
Survival of Representations and Warranties. The Borrower understands and agrees that in extending the Credit Facilities, the Bank is relying on all representations, warranties, and covenants made by the Borrower in this agreement or in any certificate or other instrument delivered by the Borrower to the Bank under this agreement or in any of the other Related Documents. The Borrower further agrees that regardless of any investigation made by the Bank, all such representations, warranties and covenants will survive the making of the Credit Facilities and delivery to the Bank of this agreement, shall be continuing in nature, and shall remain in full force and effect until such time as the Liabilities shall be paid in full.

 

	
8.7.  

	
Non-Liability of the Bank. The relationship between the Borrower on one hand and the Bank on the other hand shall be solely that of borrower and lender. The Bank shall have no fiduciary responsibilities to the Borrower. The Bank undertakes no responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower’s business or operations.

 

	
8.8.  

	
Indemnification of the Bank. The Borrower agrees to indemnify, defend and hold the Bank, its parent companies, Subsidiaries, Affiliates, their respective successors and assigns and each of their respective shareholders, directors, officers, employees and agents (collectively, the “Indemnified Persons”) harmless from any and against any and all loss, liability, obligation, damage, penalty, judgment, claim, deficiency, expense, interest, penalties, attorneys’ fees (including the fees and expenses of any attorneys engaged by the Indemnified Person) and amounts paid in settlement (“Claims”) to which any Indemnified Person may become subject arising out of or relating to the Credit Facilities, the Liabilities under this agreement or any other Related Documents or the Collateral, except to the limited extent that the Claims are proximately caused by the Indemnified Person’s gross negligence or willful misconduct. The indemnification provided for in this paragraph shall survive the termination of this agreement and shall not be affected by the presence, absence or amount of or the payment or nonpayment of any claim under, any insurance.

 

	
8.9.  

	
Counterparts. This agreement may be executed in multiple counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts, taken together, shall constitute one and the same agreement.

 

	
8.10.  

	
Advice of Counsel. The Borrower acknowledges that it has been advised by counsel, or had the opportunity to be advised by counsel, in the negotiation, execution and delivery of this agreement and any other Related Documents.

 

	
8.11.  

	
Recovery of Additional Costs. If the imposition of or any change in any Legal Requirement, or the interpretation or application of any thereof by any court or administrative or governmental authority (including any request or policy not having the force of law) shall impose, modify, or make applicable any taxes (except federal, state, or local income or franchise taxes imposed on the Bank), reserve requirements, liquidity requirements, capital adequacy requirements, Federal Deposit Insurance Corporation (FDIC) deposit insurance premiums or assessments, or other obligations which would (A) increase the cost to the Bank for extending, maintaining or funding the Credit Facilities, (B) reduce the amounts payable to the Bank under the Credit Facilities, or (C) reduce the rate of return on the Bank’s capital as a consequence of the Bank’s obligations with respect to the Credit Facilities, then the Borrower agrees to pay the Bank such additional amounts as will compensate the Bank therefor, within five (5) days after the Bank’s written demand for such payment. The Bank’s demand shall be accompanied by an explanation of such imposition or charge and a calculation in reasonable detail of the additional amounts payable by the Borrower, which explanation and calculations shall be conclusive in the absence of manifest error.

 

	
8.12.  

	
Expenses. The Borrower agrees to pay or reimburse the Bank for all its out-of-pocket costs and expenses and reasonable attorneys’ fees (including the fees of in-house counsel) incurred in connection with the preparation and execution of this agreement, any amendment, supplement, or modification thereto, and any other Related Documents.

 

  

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8.13.  

	
Reinstatement. The Borrower agrees that to the extent any payment or transfer is received by the Bank in connection with the Liabilities, and all or any part of the payment or transfer is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid or transferred by the Bank or paid or transferred over to a trustee, receiver or any other entity, whether under any proceeding or otherwise (any of those payments or transfers is hereinafter referred to as a “Preferential Payment”), then this agreement and the Notes shall continue to be effective or shall be reinstated, as the case may be, even if all those Liabilities have been paid in full and whether or not the Bank is in possession of the Notes and whether any of the Notes has been marked, paid, released or cancelled, or returned to the Borrower and, to the extent of the payment, repayment or other transfer by the Bank, the Liabilities or part intended to be satisfied by the Preferential Payment shall be revived and continued in full force and effect as if the Preferential Payment had not been made. The obligations of the Borrower under this section shall survive the termination of this agreement.

 

	
8.14.  

	
Assignments. The Borrower agrees that the Bank may provide any information or knowledge the Bank may have about the Borrower or about any matter relating to the Notes or the other Related Documents to JPMorgan Chase & Co., or any of its Subsidiaries or Affiliates or their successors, or to any one or more purchasers or potential purchasers of the Notes or the Related Documents. The Borrower agrees that the Bank may at any time sell, assign or transfer one or more interests or participations in all or any part of its rights and obligations in the Notes to one or more purchasers whether or not related to the Bank.

 

	
8.15.  

	
Waivers. To the maximum extent not prohibited by applicable Legal Requirements, each Obligor waives (a) any right to receive notice of the following matters before the Bank enforces any of its rights: (i) any demand, diligence, presentment, dishonor and protest, or (ii) any action that the Bank takes regarding any Person, any Collateral, or any of the Liabilities, that it might be entitled to by law or under any other agreement; (b) any right to require the Bank to proceed against the Borrower, any other Obligor or any Collateral, or pursue any remedy in the Bank’s power to pursue; (c) any defense based on any claim that any Obligor’s obligations exceed or are more burdensome than those of the Borrower; (d) the benefit of any statute of limitations affecting liability of any Obligor or the enforcement hereof; (e) any defense arising by reason of any disability or other defense of the Borrower or by reason of the cessation from any cause whatsoever (other than payment in full) of the obligation of the Borrower for the Liabilities; and (f) any defense based on or arising out of any defense that the Borrower may have to the payment or performance of the Liabilities or any portion thereof. Each Obligor consents to any extension or postponement of time of its payment without limit as to the number or period, to any substitution, exchange or release of all or any part of any Collateral, to the addition of any other party, and to the release or discharge of, or suspension of any rights and remedies against, any Obligor. The Bank may waive or delay enforcing any of its rights without losing them. Any waiver affects only the specific terms and time period stated in the waiver. No modification or waiver of any provision of the Notes is effective unless it is in writing and signed by the Person against whom it is being enforced. Without limiting any foregoing waiver, consent or agreement, each Obligor further waives any and all benefits under Arizona Revised Statutes Sections 12-1641 through 12-1646, inclusive, and Rule 17(f) of the Arizona Rules of Civil Procedure, including any revision or replacement of such statutes or rules hereafter enacted.

 

	
8.16.  

	
Time is of the Essence. Time is of the essence under this agreement and in the performance of every term, covenant and obligation contained herein.

 

	
9.  

	
USA PATRIOT ACT NOTIFICATION. The following notification is provided to the Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

 

  

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IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each Person that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for the Borrower: When the Borrower opens an account, if it is an individual the Bank will ask for its name, taxpayer identification number, residential address, date of birth, and other information that will allow the Bank to identify it, and, if it is not an individual the Bank will ask for its name, taxpayer identification number, business address, and other information that will allow the Bank to identify it. The Bank may also ask, if the Borrower is an individual, to see its driver’s license or other identifying documents, and if it is not an individual, to see its Organizational Documents or other identifying documents.

 

	
10.  

	
WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.

 

	
11.  

	
JURY WAIVER. TO THE MAXIMUM EXTENT NOT PROHIBITED BY APPLICABLE LAW, THE BORROWER AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN THE BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE OTHER RELATED DOCUMENTS. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE FINANCING DESCRIBED HEREIN.

 

	
Address(es) for Notices:

1520 E. Pima Street

Phoenix, AZ 85034-4639

Attn:  Scott Wiley

	
Borrower:

SkyMall, LLC

 

By:  /s/ Scott Wiley

   Scott Wiley                                         CFO

     Printed Name                                     Title

Date Signed:  September 18, 2013

	
Address for Notices:

201 N. Central Ave, 21st Floor, AZ1-1178

Phoenix, AZ 85004

Attn:  Mike Pickerd

	
Bank:

JPMorgan Chase Bank, N.A.

 

By:  /s/ Jeffrey M. Hoyt

 

     Jeffrey M. Hoyt                                 SVP

     Printed Name                                     Title

Date Signed:  September 18, 2013

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