-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ITLzLsTur2+0ntqB39H/Le/UMCKUEgsdNzBXAUe/Zb6MlfOfTz/XurZve4BvES3b QUT08LrlDrN/tSPsgJLTDA== 0000950172-98-000708.txt : 19980727 0000950172-98-000708.hdr.sgml : 19980727 ACCESSION NUMBER: 0000950172-98-000708 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19980724 SROS: NONE GROUP MEMBERS: COLONY CAPITAL III, L.P. GROUP MEMBERS: COLONY INVESTORS III, L.P. GROUP MEMBERS: COLONY K W LLC GROUP MEMBERS: COLONYGP III, INC. GROUP MEMBERS: KELVIN L. DAVIS GROUP MEMBERS: THOMAS J. BARRACK, JR. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KENNEDY WILSON INC CENTRAL INDEX KEY: 0000885720 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE AGENTS & MANAGERS (FOR OTHERS) [6531] IRS NUMBER: 954364537 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-42796 FILM NUMBER: 98671246 BUSINESS ADDRESS: STREET 1: 530 WILSHIRE BLVD STREET 2: STE 101 CITY: SANTA MONICA STATE: CA ZIP: 90401-1422 BUSINESS PHONE: 3103148400 MAIL ADDRESS: STREET 1: 530 WILSHIRE BLVD STREET 2: SUITE 101 CITY: SANTA MONICA STATE: CA ZIP: 90401 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: COLONY K W LLC CENTRAL INDEX KEY: 0001066893 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 1999 AVE OF THE STARS STREET 2: STE 1200 CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3108433660 MAIL ADDRESS: STREET 1: 1999 AVE OF THE STARS STREET 2: STE 1200 CITY: LOS ANGELES STATE: CA ZIP: 90067 SC 13D 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) Under the Securities Exchange Act of 1934 INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) KENNEDY-WILSON, INC. -------------------- (Name of Issuer) Common Stock, $.01 par value per share -------------------------------------- (Title of Class of Securities) 489399 20 4 --------------------------------------- (CUSIP Number of Class of Securities) Mark M. Hedstrom Colony K-W, LLC 1999 Avenue of the Stars Suite 1200 Los Angeles, California 90067 (310) 282-8820 --------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) with a copy to: Jonathan H. Grunzweig, Esq. Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue, Suite 3400 Los Angeles, California 90071-3144 (213) 687-5000 July 16, 1998 ------------------------------------------ (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: ___ / / CUSIP No. 489399 20 4 13D ____________________________________________________________________________ (1) NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS THOMAS J. BARRACK, JR. ###-##-#### ____________________________________________________________________________ (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: ___ (a)/ / ___ (b)/ X/ ____________________________________________________________________________ (3) SEC USE ONLY ____________________________________________________________________________ (4) SOURCE OF FUNDS* BK ____________________________________________________________________________ (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ___ / / ____________________________________________________________________________ (6) CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES ____________________________________________________________________________ : (7) SOLE VOTING POWER : : -0-** : _______________________________________ NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING OWNED BY EACH REPORTING : 572,111** PERSON WITH : _______________________________________ : (9) SOLE DISPOSITIVE : -0-** : _______________________________________ :(10) SHARED DISPOSITIVE : 572,111** ____________________________________________________________________________ (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 572,111 ____________________________________________________________________________ (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) __ EXCLUDES CERTAIN SHARES* / /** ____________________________________________________________________________ (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 12.6%** ____________________________________________________________________________ (14) TYPE OF REPORTING PERSON* IN ____________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! **SEE ITEMS 4 AND 5 CUSIP No. 489399 20 4 13D ____________________________________________________________________________ (1) NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS KELVIN L. DAVIS ###-##-#### ____________________________________________________________________________ (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: ___ (a)/ / ___ (b)/ X/ ____________________________________________________________________________ (3) SEC USE ONLY ____________________________________________________________________________ (4) SOURCE OF FUNDS* BK ____________________________________________________________________________ (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ___ / / ____________________________________________________________________________ (6) CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES ____________________________________________________________________________ : (7) SOLE VOTING POWER : : -0-** : _______________________________________ NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING OWNED BY EACH REPORTING : 572,111** PERSON WITH : _______________________________________ : (9) SOLE DISPOSITIVE : -0-** : _______________________________________ :(10) SHARED DISPOSITIVE : 572,111** ____________________________________________________________________________ (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 572,111 ____________________________________________________________________________ (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) __ EXCLUDES CERTAIN SHARES* / /** ____________________________________________________________________________ (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 12.6%** ____________________________________________________________________________ (14) TYPE OF REPORTING PERSON* IN ____________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! **SEE ITEMS 4 AND 5 CUSIP No. 489399 20 4 13D ____________________________________________________________________________ (1) NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS COLONYGP III, INC. ____________________________________________________________________________ (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: ___ (a)/ / ___ (b)/ X/ ____________________________________________________________________________ (3) SEC USE ONLY ____________________________________________________________________________ (4) SOURCE OF FUNDS* BK ____________________________________________________________________________ (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ___ / / ____________________________________________________________________________ (6) CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE ____________________________________________________________________________ : (7) SOLE VOTING POWER : : -0-** : _______________________________________ NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING OWNED BY EACH REPORTING : 572,111** PERSON WITH : _______________________________________ : (9) SOLE DISPOSITIVE : -0-** : _______________________________________ :(10) SHARED DISPOSITIVE : 572,111** ____________________________________________________________________________ (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 572,111 ____________________________________________________________________________ (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) __ EXCLUDES CERTAIN SHARES* / /** ____________________________________________________________________________ (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 12.6%** ____________________________________________________________________________ (14) TYPE OF REPORTING PERSON* CO ____________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! **SEE ITEMS 4 AND 5 CUSIP No. 489399 20 4 13D ____________________________________________________________________________ (1) NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS COLONY CAPITAL III, L.P. ____________________________________________________________________________ (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: ___ (a)/ / ___ (b)/ X/ ____________________________________________________________________________ (3) SEC USE ONLY ____________________________________________________________________________ (4) SOURCE OF FUNDS* BK ____________________________________________________________________________ (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ___ / / ____________________________________________________________________________ (6) CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE ____________________________________________________________________________ : (7) SOLE VOTING POWER : : -0-** : _______________________________________ NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING OWNED BY EACH REPORTING : 572,111** PERSON WITH : _______________________________________ : (9) SOLE DISPOSITIVE : -0-** : _______________________________________ :(10) SHARED DISPOSITIVE : 572,111** ____________________________________________________________________________ (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 572,111 ____________________________________________________________________________ (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) __ EXCLUDES CERTAIN SHARES* / /** ____________________________________________________________________________ (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 12.6%** ____________________________________________________________________________ (14) TYPE OF REPORTING PERSON* PN ____________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! **SEE ITEMS 4 AND 5 CUSIP No. 489399 20 4 13D ____________________________________________________________________________ (1) NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS COLONY INVESTORS III, L.P. ____________________________________________________________________________ (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: ___ (a)/ / ___ (b)/ X/ ____________________________________________________________________________ (3) SEC USE ONLY ____________________________________________________________________________ (4) SOURCE OF FUNDS* BK ____________________________________________________________________________ (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ___ / / ____________________________________________________________________________ (6) CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE ____________________________________________________________________________ : (7) SOLE VOTING POWER : : -0-** : _______________________________________ NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING OWNED BY EACH REPORTING : 572,111** PERSON WITH : _______________________________________ : (9) SOLE DISPOSITIVE : -0-** : _______________________________________ :(10) SHARED DISPOSITIVE : 572,111** ____________________________________________________________________________ (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 572,111 ____________________________________________________________________________ (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) __ EXCLUDES CERTAIN SHARES* / /** ____________________________________________________________________________ (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 12.6%** ____________________________________________________________________________ (14) TYPE OF REPORTING PERSON* PN *SEE INSTRUCTIONS BEFORE FILLING OUT! **SEE ITEMS 4 AND 5 CUSIP No. 489399 20 4 13D ____________________________________________________________________________ (1) NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS COLONY K-W, LLC ____________________________________________________________________________ (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: ___ (a)/ / ___ (b)/ X/ ____________________________________________________________________________ (3) SEC USE ONLY ____________________________________________________________________________ (4) SOURCE OF FUNDS* BK ____________________________________________________________________________ (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ___ / / ____________________________________________________________________________ (6) CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE ____________________________________________________________________________ : (7) SOLE VOTING POWER : : -0-** : _______________________________________ NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING OWNED BY EACH REPORTING : 572,111** PERSON WITH : _______________________________________ : (9) SOLE DISPOSITIVE : -0-** : _______________________________________ :(10) SHARED DISPOSITIVE : 572,111** ____________________________________________________________________________ (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 572,111 ____________________________________________________________________________ (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) __ EXCLUDES CERTAIN SHARES* / /** ____________________________________________________________________________ (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 12.6%** ____________________________________________________________________________ (14) TYPE OF REPORTING PERSON* OO ____________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! **SEE ITEMS 4 AND 5 ITEM 1. SECURITY AND ISSUER This Statement on Schedule 13D (the "Schedule 13D") relates to certain shares (the "Shares") of common stock, $.01 par value per share (the "Common Stock"), and warrants ("Warrants") to acquire additional shares of Common Stock (the Shares and Warrants collectively, the "Securities") of Kennedy-Wilson, Inc., a Delaware corporation (the "Issuer"). The principal executive offices of the Issuer are located at 530 Wilshire Boulevard, Suite 101, Santa Monica, California 90401. The information set forth in the Exhibits attached hereto is hereby expressly incorporated herein by reference and the response to each item of this statement is qualified in its entirety by the provisions of such Exhibits. ITEM 2. IDENTITY AND BACKGROUND This statement is being filed on behalf of ColonyGP III, Inc., a Delaware corporation ("GP"), Colony Capital III, L.P., a Delaware limited partnership ("Colony Capital"), Colony Investors III, L.P., a Delaware limited partnership ("Colony Investors"), Colony K-W, LLC, a Delaware limited liability company ("Colony"), and Thomas J. Barrack, Jr. and Kelvin L. Davis (collectively, the "Reporting Persons"). The Reporting Persons are making this joint filing because they may be deemed to constitute a "group" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Act"), although neither the fact of this filing nor anything contained herein shall be deemed to be an admission by the Reporting Persons that such a group exists. Colony is the registered owner of the Securities. The sole and managing member of Colony is Colony Investors. The general partner of Colony Investors is Colony Capital. The general partner of Colony Capital is GP. Mr. Barrack and Mr. Davis are the sole stockholders of GP and have agreed to jointly control GP. Mr. Barrack holds a 60% interest and Mr. Davis holds a 40% interest in GP. GP, on behalf of Colony Capital, on behalf of Colony Investors, is the signatory to the agreements referenced in Items 3 and 4. Colony's principal business is to be the registered owner of certain securities purchased by Colony Investors. Colony Investor's principal business is the acquisition, management and sale of primarily real estate-related investments. Colony Capital and GP's principal business is to make and hold investments. Mr. Barrack is the Chief Executive Officer of GP, Mr. Davis is the President, Secretary, and Treasurer, Richard A. Ekleberry is a Vice- President and Mark M. Hedstrom is a Vice-President thereof. GP has no other executive officers. Mr. Barrack and Mr. Davis are also the sole directors of GP. Mr. Barrack is the Chief Executive Officer and President, Mr. Davis is the Executive Vice President and Secretary, Mark M. Hedstrom is a Vice President and the Treasurer, John E. Viola is a Vice President and Joy Mallory is the Assistant Secretary of Colony. Colony has no other officers and has no directors. The principal occupation of Mr. Barrack is serving as Chairman and Chief Executive Officer of each of Colony Capital, Inc. ("Capital") and Colony Advisors, Inc. ("Advisors".) The principal occupation of Mr. Davis is serving as President and Chief Operating Officer of each of Capital and Advisors. The principal occupation of Mr. Ekleberry is serving as a Vice- President of each of Capital and Advisors. The principal occupation of Mr. Hedstrom is serving as Chief Financial Officer and Treasurer of each of Capital and Advisors, as well as a Vice-President of Advisors. The principal occupation of Mr. Viola is serving as a Vice President of Capital. The principal occupation of Ms. Mallory is serving as Assistant Secretary of Advisors. Each of Advisors and Capital is an affiliate of GP. The principal business address of each of the Reporting Persons, Mr. Hedstrom, Mr. Viola and Ms. Mallory is 1999 Avenue of the Stars, Suite 1200, Los Angeles, California 90067. The principal business address of Mr. Ekleberry is 201 Main Street, Suite 2420, Fort Worth, Texas 76102. None of the Reporting Persons nor any other person disclosed in response to this Item 2 has, during the last five years, been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws. Each of Messrs. Barrack, Davis, Ekleberry, Hedstrom and Viola and Ms. Mallory is a citizen of the United States of America. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The aggregate amount of funds required to purchase the 440,085 Shares and the Warrants to acquire 132,026 additional shares of Common Stock is $5,232,610. Pursuant to the Stock Purchase Agreement, dated July 16, 1998, and the Warrant Agreement, dated July 16, 1998, copies of which are attached hereto as Exhibits 1 and 4, the Reporting Persons purchased (a) 440,085 Shares and (b) Warrants to purchase an additional 132,026 shares of Common Stock for an aggregate purchase price of $5,232,610. The funds to be used to purchase such Securities were drawn from a $425 million revolving credit facility entered into by Colony Investors and the banks therein named, lead by Bankers Trust Company and The Chase Manhattan Bank. ITEM 4. PURPOSE OF TRANSACTION. Colony Investors has entered into an Investor's Agreement, dated July 16, 1998 (the "Investor's Agreement"), by and between Colony Investors and the Issuer, a copy of which is attached hereto as Exhibit 2, pursuant to which Issuer has agreed, during the term of the Investor's Agreement and subject to the provisions thereof (including the continued ownership of a specified minimum number of shares of Common Stock, as set forth in the Investor's Agreement), among other things, to take all action necessary such that the Board of Directors of the Issuer shall include one director designated by Colony Investors, and thereafter, to use its best efforts to cause a person designated by Colony Investors to be included in each slate of proposed directors put forth by Issuer and its stockholders and recommended for election in any proxy solicitation materials disseminated by the Issuer. With certain exceptions as described in the Investor's Agreement, the Reporting Persons have a preemptive purchase right to maintain their beneficial ownership percentage for so long as their investment continues to represent at least 5% of the Issuer, as discussed in the Investor's Agreement. Pursuant to the Investors Agreement, Colony Investors has agreed that, for a period of three years after the date of such Investors Agreement, without the prior written consent of the Issuer, it will not acquire beneficial ownership of any Common Stock or other securities exercisable for, or convertible or exchangeable into, Common Stock, other than the Securities, unless, after giving effect to such additional beneficial ownership, Colony Investors and its Affiliates (as defined) do not collectively own in excess of 20% of the Common Stock on a fully diluted basis as described in the Investor's Agreement. The above discussion is qualified in its entirety by reference to the Investor's Agreement. A copy of the Investor's Agreement is attached hereto as Exhibit 2 and is incorporated herein by reference. In connection with the purchase of the Securities, Colony Investors entered into a Registration Rights Agreement with Issuer dated July 16, 1998 (the "Registration Rights Agreement"), by and between Colony Investors and Issuer, a copy of which is attached hereto as Exhibit 3 and incorporated herein by reference. Pursuant to the Registration Rights Agreement, the Securities beneficially owned by the Reporting Persons will be entitled to customary demand and piggyback registration rights. Subject to the foregoing, the Reporting Persons have purchased the Securities to which this Statement on Schedule 13D relates for investment purposes, and, depending upon its evaluations of the Issuer's business and prospects, future development, market conditions and other factors, the Reporting Persons may from time to time purchase additional shares of Common Stock, or sell or cause to be sold all or a portion of the Shares over which the Reporting Persons exercise voting and dispositive power, either in open market or privately negotiated transactions or otherwise. Except as disclosed in this Item 4, the Reporting Persons have no current plans or proposals which relate to or would result in any of the events described in Items (a) through (j) of the instruction to Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) The Reporting Persons may be deemed to be the beneficial owners of the 440,085 Shares owned by them and the 132,026 shares of Common Stock that they have a right to acquire through the exercise of immediately exercisable Warrants at an exercise price of $15.00 per share. Accordingly, the Reporting Persons may be deemed to be the beneficial owners of 572,111 shares of Common Stock, or approximately 12.6% of the shares outstanding. The percentage of shares of Common Stock outstanding reported as beneficially owned by the Reporting Persons herein, on the date hereof, is based upon the 3,960,767 shares of Common Stock outstanding as reported in the Issuer's Form 10-Q for the quarterly period ended March 31, 1998, as filed with the Securities and Exchange Commission. (b) Mr. Barrack and Mr. Davis, as the sole stockholders of GP, acting as general partner of and on behalf of Colony Capital, acting as general partner of and on behalf of Colony Investors, acting as managing member of and on behalf of Colony, have the shared power to vote, or to direct the vote, and the shared power to dispose of, or direct the disposition of, the Securities beneficially owned by the Reporting Persons. (c) There have been no transactions effected in the Issuer's Common Stock during the past 60 days by the Reporting Persons or any other person or entity disclosed in Item 2. (d) No other person is known by the Reporting Persons to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Securities or the Common Stock to be issued upon exercise of the Warrants. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER The responses to Items 3 and 4 are incorporated herein by this reference. Pursuant to the Investor's Agreement, the Issuer has taken all action necessary to include Thomas J. Barrack, Jr., to its Board of Directors and will use its best efforts to cause Thomas J. Barrack, Jr. to be included in each slate of proposed directors put forth by the Issuer and its stockholders and recommended for election in any proxy solicitation materials disseminated by the Issuer, so long as the Reporting Persons beneficially own at least 50% of the Securities. The foregoing is qualified in its entirety by reference to the Investor's Agreement. A copy of the Investor's Agreement is attached hereto as Exhibit 2 and is incorporated herein by reference. Colony has entered into a Bridge Loan Agreement, dated July 16, 1998, with the Issuer and certain of its subsidiaries (the "Bridge Loan Agreement"). Pursuant to the Bridge Loan Agreement, Colony has agreed to lend to the Issuer on a subordinated basis $21,000,000 (the "Loan"). The Loan bears interest at a rate of 14% per annum and matures on January 15, 2000. The Loan is guaranteed by certain subsidiaries of the Issuer on a subordinated basis and is secured by a pledge of all of the outstanding shares of one of the subsidiary guarantors. In addition, the terms of the Loan restrict, among other things, certain borrowings, distributions and mergers involving the Issuer and the guarantors and is subject to additional customary restrictive covenants. Except as set forth above and as described in Items 3 and 4, none of the Reporting Persons nor any other person disclosed in Item 2 has any contract, arrangement, understanding, or relationship (legal or otherwise) with any person with respect to any securities of the Issuer. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1 Stock Purchase Agreement, dated July 16, 1998, by and between Colony Investors and Issuer. Exhibit 2 Investor's Agreement, dated July 16, 1998, by and between Colony Investors and Issuer. Exhibit 3 Registration Rights Agreement, dated July 16, 1998, by and between Colony Investors and Issuer. Exhibit 4 Warrant Agreement, dated July 16, 1998, between Colony Investors and the Issuer. Exhibit 5 Joint Filing Agreement SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 24, 1998 By: /s/ THOMAS J. BARRACK, JR. ------------------------------- Thomas J. Barrack, Jr. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 24, 1998 By: /s/ KELVIN L. DAVIS ------------------------------- Kelvin L. Davis SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 24, 1998 COLONYGP III, Inc., a Delaware corporation, By: /s/ KELVIN L. DAVIS ------------------------------ Kelvin L. Davis President SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 24, 1998 COLONY CAPITAL III, L.P., a Delaware limited partnership, By: ColonyGP III, Inc., a Delaware corporation, its general partner By: /s/ KELVIN L. DAVIS ---------------------------- Kelvin L. Davis President SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 24, 1998 COLONY INVESTORS III, L.P., a Delaware limited partnership, By: Colony Capital III, L.P., a Delaware limited partnership, its general partner By: ColonyGP III, Inc., a Delaware corporation, its general partner By: /s/ KELVIN L. DAVIS ---------------------------- Kelvin L. Davis President SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 24, 1998 COLONY K-W, LLC, a Delaware limited liability company By: Colony Investors III, L.P., a Delaware limited partnership, its sole and managing member By: Colony Capital III, L.P., a Delaware limited partnership, its general partner By: ColonyGP III, Inc., a Delaware corporation, its general partner By: /s/ KELVIN L. DAVIS ------------------------------ Kelvin L. Davis President EXHIBIT INDEX Page No. Exhibit 1 Stock Purchase Agreement, dated July 16, 1998, by and between Colony Investors and Issuer. Exhibit 2 Investor's Agreement, dated July 16, 1998, by and between Colony Investors and Issuer. Exhibit 3 Registration Rights Agreement, dated July 16, 1998, by and between Colony Investors and Issuer. Exhibit 4 Warrant Agreement, dated July 16, 1998, between Colony Investors and the Issuer. Exhibit 5 Joint Filing Agreement EX-99 2 EXHIBIT 1 - STOCK PURCHASE AGREEMENT EXHIBIT 1 STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (the "Agreement"), dated July 16, 1998, is by and between Kennedy-Wilson, Inc., a Delaware corporation (the "Company"), and Colony Investors III, L.P., a Delaware limited partnership ("Purchaser"). W I T N E S S E T H: WHEREAS, the Company wishes to issue and sell to Purchaser (i) certain shares of the Company's common stock, $.01 par value per share (the "Common Stock"), and (ii) warrants to acquire additional shares of Common Stock for an aggregate purchase price of $5,232,610 (the "Purchase Price"); and WHEREAS, Purchaser wishes to purchase the such securities on the terms and subject to the conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. THE SECURITIES Section 1.1 ISSUANCE, SALE AND PURCHASE OF THE SECURITIES. In reliance upon the representations and warranties made herein and subject to the satisfaction or waiver of the conditions set forth herein, the Company agrees to issue and sell to Purchaser, and Purchaser agrees to purchase from the Company, for the Purchase Price, (i) 440,085 shares (the "Common Shares") of Common Stock and (ii) warrants (the "Warrants" and, collectively with the Common Shares, the "Securities"), exercisable for seven years (as provided in the Warrant Agreement dated the date hereof between the Company and Purchaser, a form of which is attached hereto as Exhibit A (the "Warrant Agreement")), to acquire an additional 132,026 shares (the "Warrant Shares") of Common Stock at an initial exercise price of $15.00 per share, subject to adjustment as provided in the Warrant Agreement. Section 1.2 OTHER AGREEMENTS. Concurrently with the Closing referred to below, the Company will acquire 100% of the outstanding capital stock of Heitman Properties Ltd. pursuant to that certain Stock Purchase Agreement between the Company and Heitman Financial Ltd. dated as of the date hereof (the "Acquisition Agreement"). Concurrently with the execution of this Agreement, the Company will enter into the Warrant Agreement, an Investor's Agreement with Purchaser in the form attached as Exhibit B hereto (the "Investor's Agreement"), a Bridge Loan Agreement (including the pledges and guaranties thereunder and all exhibits thereto) with Purchaser in the form attached hereto as Exhibit C and a Registration Rights Agreement with Purchaser in the form attached as Exhibit D hereto (the "Registration Rights Agreement" and, collectively with the Warrant Agreement, the Investor's Agreement, a Bridge Loan Agreement (including the pledges and guaranties thereunder and all exhibits thereto) and the Acquisition Agreement, the "Other Documents"). Section 1.3 CLOSING. The closing (the "Closing") shall take place at the time of execution and delivery hereof at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue, Los Angeles, California 90071 or at such other location, date and time as may be agreed upon between Purchaser and the Company. At the Closing, the Company shall issue and deliver to Purchaser stock and warrant certificates in definitive form, registered in the name of Purchaser or its designee, representing the Securities. As payment in full for the Securities, and against delivery of the certificates therefor at the Closing, Purchaser shall initiate a wire transfer in immediately available United States funds in accordance with the Company's instructions in the amount of the Purchase Price. Each certificate representing the Securities shall bear the following legend in addition to any other legend that may be required from time to time under applicable law or pursuant to any other contractual obligation: THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF (A "TRANSFER") EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF AN INVESTOR'S AGREEMENT DATED JULY 16, 1998. SUCH SECURITIES ARE ALSO SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED JULY 16, 1998. ANY TRANSFEREE OF THESE SECURITIES TAKES SUBJECT TO THE TERMS OF SUCH AGREEMENTS, A COPY OF EACH OF WHICH IS ON FILE WITH THE COMPANY. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR STATE SECURITIES LAWS AND NO SALE OR TRANSFER OF THESE SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (B) PURSUANT TO AN EXEMPTION THEREFROM WITH RESPECT TO WHICH THE COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS. SECTION 2. REPRESENTATIONS AND WARRANTIES Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to Purchaser as follows: (a) Each of the Company and its subsidiaries (collectively, the "Subsidiaries") has been duly organized and is validly existing as a corporation, trust or partnership, as the case may be, (in the case of corporate subsidiaries) in good standing under the laws of the jurisdiction in which it is organized, with full corporate power and authority to own or lease and occupy its properties and conduct its business, and is duly qualified to do business, and (in the case of corporate subsidiaries) is in good standing, in each jurisdiction which requires such qualification, except where the failure to so qualify would not, individually or in the aggregate, have or be reasonably likely to result in a material adverse effect on the business, operations, business prospects, earnings, assets, liabilities or condition (financial or otherwise) of the Company (a "Material Adverse Effect"). All of the outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable, and, except as disclosed in the Company's reports, proxy statements, forms, and other documents with the Securities and Exchange Commission (the "SEC") filed during the 1998 and publicly available prior to the date hereof (the "1998 SEC Documents"), are owned by the Company, directly, or indirectly through another Subsidiary, free and clear of any lien, adverse claim, security interest or other encumbrance. (b) The Company and each of the Subsidiaries have all requisite power and authority, and all necessary material authorizations, approvals, orders, licenses, certificates and permits of and from all regulatory or governmental officials, bodies and tribunals, to own or lease their respective properties and to conduct their respective businesses as now being conducted, except as would not have a Material Adverse Effect on the Company or such Subsidiary; all such authorizations, approvals, licenses, certificates and permits are in full force and effect, except where the failure to be in full force and effect would not have a Material Adverse Effect on the Company or such Subsidiary; and the Company and each of the Subsidiaries are in compliance with all applicable laws, the violation of which could have a Material Adverse Effect on the Company and the Subsidiaries taken as a whole or on the Issuer and the Guarantors (as such terms are defined under the Bridge Loan Agreement) taken as a whole, as the case may be (collectively, a "Company Material Adverse Effect"). (c) Except as disclosed in the 1998 SEC Documents, (i) the Company and each Subsidiary have good and marketable title to their properties and assets (or a valid first lien as to mortgaged properties) owned (or mortgaged) by them, free and clear of all material liens, charges and encumbrances and equities of record; (ii) no person or entity, other than tenants under the leases or guarantors thereof pursuant to which the Company and its Subsidiaries lease all or a portion of their properties, has an option or right of first refusal or any other right to purchase any of such properties; (iii) each of the properties of the Company and its Subsidiaries, at the time such property was acquired or at the time the loan by the Company with respect to such property was made, had access to public rights of way, either directly or through insured easements, except as would not have a Company Material Adverse Effect; (iv) each of such properties is served by all public utilities necessary for the current operations on such property in sufficient quantities for such operations, except as would not have a Company Material Adverse Effect; (v) each of such properties complies with all applicable codes and zoning and subdivision laws and regulations, except for such failures to comply which would not have a Company Material Adverse Effect; (vi) the real property leases and equipment leases, if any, relating to each of such properties are in full force and effect, except where the failure to be in full force and effect would not have a Company Material Adverse Effect; and (vii) there is no pending or (to the Company's best knowledge) threatened condemnation, zoning change, or other proceeding or action that will in any manner affect the size of, use of, improvements on construction on or access to the properties of the Company and its Subsidiaries, except such proceedings or actions which would not have a Company Material Adverse Effect. (d) The Company and each Subsidiary maintains adequate insurance for the conduct of their respective business. (e) The Company, either directly or through the Subsidiaries, owns or licenses or otherwise has the right to use all patents, trademarks, trade names and trade secrets material to the Company's business; other than routine proceedings which if adversely determined would not result in a Company Material Adverse Effect, no claims have been asserted by any person with respect to the use of any such patents, trademarks, trade names or trade secrets or challenging or questioning the validity or effectiveness of any such patents, trademarks, trade names or trade secrets; to the best knowledge of the Company, the use, in connection with the business and operations of the Company and the Subsidiaries of such patents, trademarks and trade names does not infringe on the rights of any person. (f) The Company's authorized and outstanding capitalization (including all securities exercisable for, or convertible or exchangeable into, Common Stock) is as set forth in Schedule 1(f) hereto. The outstanding shares of Common Stock have been duly and validly authorized and issued in compliance with all Federal and state securities laws, and are fully paid and nonassessable; the Common Shares have been duly and validly authorized and, when issued and delivered pursuant to this Agreement, will be fully paid and nonassessable; and the holders of outstanding shares of capital stock of the Company are not entitled to preemptive or other rights to subscribe for the Common Shares. (g) There is no pending or, to the best knowledge of the Company, threatened, action, suit, proceeding or investigation before any court, governmental agency, authority or body or arbitrator involving the Company or any of the Subsidiaries or any of their respective officers (in their capacities as officers) or any of their respective properties, assets or rights which, if determined adversely, could have a Company Material Adverse Effect. (h) The Company and each of the Subsidiaries party thereto has full corporate power and authority to enter into and perform its obligations under this Agreement and the Other Documents and to issue, sell and deliver the Securities; all of the representations and warranties of the parties to the Acquisition Agreement made in the Acquisition Agreement (the "Acquisition Representations") are true and correct in all material respects as if made on and as of the date hereof; this Agreement and the Other Documents have been duly authorized, executed and delivered by the Company and each of the Subsidiaries party thereto and, when so executed, will each constitute a valid and binding obligation of the Company and each of the Subsidiaries party thereto, enforceable against the Company and each of the Subsidiaries party thereto in accordance with its terms, except to the extent that enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereinafter in effect relating to creditors' rights generally and (ii) general principles of equity (regardless of whether a proceeding is considered at law or in equity). (i) No consent, approval, authorization or order of any court or governmental agency, authority or body is required (and has not been received) for the execution by the Company and each of the Subsidiaries party thereto of this Agreement and the Other Documents, the performance by the Company and each of the Subsidiaries party thereto or their respective obligations hereunder and thereunder or the consummation by the Company and each of the Subsidiaries party thereto of the transactions contemplated herein and therein. (j) Neither the Company nor any or the Subsidiaries is in violation of, in conflict with, in breach of or in default under (and the Company does not know of an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default under) its charter or by-laws (and the Company does not know of an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a violation), and neither the Company nor any Subsidiary is in default in the performance of any obligation, agreement or condition contained in any loan, note or other evidence of indebtedness or in any indenture, mortgage, deed of trust or any other material agreement by which it or its properties are bound, except for such defaults as would not, individually or in the aggregate, have a Company Material Adverse Effect. (k) Neither the Company nor any of the Subsidiaries has violated any environmental, safety or similar law or regulation applicable to its business relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants, nor has the Company nor any of the Subsidiaries violated any Federal, state or local law relating to discrimination in the hiring, promotion, pay or terms or conditions of employment of employees nor any applicable wage or hour laws, nor has the Company nor any of the Subsidiaries engaged in any unfair labor practice, which in each case could reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. (l) Neither the issue and sale of the Securities nor the consummation by the Company and the Subsidiaries of any of the other transactions contemplated herein or in the Other Documents nor the fulfillment of the terms hereof and thereof will conflict with, result in a breach or violation of; or constitute a default under any law or the charter or bylaws of the Company or any of the Subsidiaries or the terms of any indenture or other agreement or instrument to which the Company or any of the Subsidiaries is a party or is bound or (except as would not have a Company Material Adverse Effect) any judgment, order or decree applicable to the Company or any of the Subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Company or any of the Subsidiaries. (m) The Company has fulfilled its obligations, if any, under the minimum funding standards of Section 302 of the Employee Retirement Income Security Act or 1974, as amended ("ERISA"), and the regulations and published interpretations thereunder with respect to each "pension plan" (as defined in ERISA and such regulations and published interpretations) in which employees of the Company are eligible to participate and each such plan is in compliance in all material respects with the presently applicable provisions of ERISA and such regulations and published interpretations (except for such failure to so comply that would not have, singularly or in the aggregate with all other such failures to comply, a Company Material Adverse Effect), and has not incurred any unpaid liability to the Pension Benefit Guaranty Corporation (other than for the payment of premiums in the ordinary course) or to any such plan under Title IV of ERISA. (n) Except as disclosed in the 1998 SEC Documents, other than the Warrants and grants of options to purchase an aggregate of 815,000 shares of Common Stock pursuant to the 1992 Incentive and Nonstatutory Stock Option Plan of the Company, as amended, and a warrant to acquire 30,000 shares of Common Stock, there are no outstanding warrants or options to purchase any shares of capital stock of the Company and there are no restrictions upon the voting or transfer of, or the declaration or payment of any dividend or distribution on, any shares of capital stock of the Company pursuant to the certificate or incorporation or by-laws of the Company, any agreement or other instrument to which the Company is a party or by which the Company is bound, or any order, law, rule, regulation or determination of any court, governmental agency or body (including, without limitation, any banking or insurance regulatory agency or body), or arbitrator having jurisdiction over the Company. (o) There are no registration or other rights entitling any person to registration by the Company under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the issued capital stock of the Company (other than pursuant to the Registration Rights Agreement), or to purchase or subscribe for capital stock of the Company (other than pursuant to the Investor's Agreement). (p) The Company files and has filed all required reports, proxy statements, forms, and other documents with the SEC since January 1, 1995 (the "SEC Documents"). True and complete copies of all 1998 SEC Documents have been delivered to Purchaser. As of their respective dates, (i) the SEC Documents complied in all material respects with the requirements of the Securities Act or the Securities Exchange Act of 1934, as amended, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Documents, and (ii) none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any SEC Document has been revised or superseded by a later filed SEC Document filed and publicly available prior to the date of this Agreement, none of the SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as of their respective dates, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved and fairly present the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year- end audit adjustments and the absence of footnotes). Except for liabilities and obligations incurred in the ordinary course of business, consistent with past practices, since the date of the most recent consolidated balance sheet included in the 1998 SEC Documents (the "Base Balance Sheet"), neither the Company nor any of the Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by generally accepted accounting principles to be set forth on a consolidated balance sheet of the Company and its consolidated Subsidiaries or in the notes thereto. (q) Except as disclosed in 1998 SEC Documents, since the date of the Base Balance Sheet, the Company and the Subsidiaries have conducted their respective businesses only in the ordinary course of business in accordance with past practices, and there has not been (i) any material adverse change in the Company, (ii) any split, combination or reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iii) any damage, destruction or loss, whether or not covered by insurance, that has or reasonably could be expected to have a Company Material Adverse Effect or (iv) any change in accounting methods, principles or practices by the Company materially affecting its assets, liabilities or business. (r) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that in all material respects (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (s) To the Company's knowledge, neither the Company nor any of its Subsidiaries nor any employee or agent of the Company or any Subsidiary has made any payment of funds of the Company or any Subsidiary or received or retained any funds in violation of any law, rule or regulation. (t) The Company and each of the Subsidiaries have filed all tax returns required to be filed (except to the extent extensions have been timely filed related thereto), which returns are complete and correct in all material respects, and neither the Company nor any Subsidiary is in default in the payment of any taxes which were payable pursuant to said returns or any assessments with respect thereto. (u) To the best of the Company's knowledge, no labor disturbance by the employees of the Company or the Subsidiaries exists or is imminent that would, individually or in the aggregate, have a Company Material Adverse Effect. No collective bargaining agreement exists with any of the Company's employees and, to the best of the Company's knowledge, no such agreement is imminent. (v) The Company has been advised concerning the Investment Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations thereunder, and has in the past conducted, and intends in the future to conduct, its affairs in such a manner as to ensure that it will not become an "investment company" or a company "controlled" by an "investment company" within the meaning of the 1940 Act and such rules and regulations. (w) The Company agrees that neither it, nor anyone acting on its behalf, will offer any of the Securities so as to bring the issuance and sale of the Securities within the provisions of Section 5 of the Securities Act, or offer any similar securities for issuance or sale to, or solicit any offer to acquire any of the same from, or otherwise approach or negotiate with respect thereto with, anyone if the sale of any of the Securities or any such similar securities would be integrated as a single offering for the purposes of the Securities Act, including, without limitation, Regulation D thereunder. (x) Except as set forth in Section 4(c) hereof, the Company has not retained, directly or indirectly, any broker or finder or incurred any liability or obligation for any brokerage fees or finder's fees with respect to this Agreement or the transactions contemplated hereby. (y) All the Company's representations and warranties herein (other than the Acquisition Representations, unless and to the extent the Company knows any such representation is untrue or incorrect) shall survive until ninety (90) days following the delivery to the Company of its signed, audited financial statements for the year ending December 31, 1998. Section 2.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and warrants to the Company that: (a) Purchaser is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite power and authority under such laws to own or lease and operate its properties and to carry on its business as now conducted. (b) Purchaser has the power and authority to execute, deliver and perform this Agreement and the Other Documents. All action on the part of Purchaser necessary for the authorization, execution and delivery of this Agreement and the other Documents and the performance of all obligations of Purchaser hereunder and thereunder have been taken or will be taken prior to the Closing. This Agreement and the Other Documents have been duly authorized, executed and delivered by Purchaser and each constitutes a valid and legally binding obligation of Purchaser, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity (whether enforcement is sought by proceedings in equity or at law). (c) The execution and delivery by Purchaser of this Agreement and the Other Documents and the performance by Purchaser of its obligations hereunder and thereunder will not violate any provision of law, rule or regulation, the organizational documents governing Purchaser or any order or decree of any court or other agency of government, or conflict with, result in a breach of or constitute (with notice or lapse of time or both) a default under any indenture, agreement or other instrument by which Purchaser or any of its properties or assets is bound, or result in the creation or imposition of any lien, charge, restriction, claim or encumbrance of any nature whatsoever known to Purchaser upon any of the properties or assets of Purchaser. (d) The Securities will be acquired for investment for Purchaser's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. Purchaser further represents that it does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. SECTION 3. CLOSING CONDITIONS Section 3.1 CONDITIONS TO OBLIGATION OF PURCHASER. The obligation of Purchaser to purchase the Securities shall be subject to satisfaction or waiver by it of the following conditions at or before the Closing: (a) The representations and warranties of the Company contained in Section 2.1 hereof that are qualified as to materiality shall be true and accurate, and those not so qualified shall be true and accurate in all material respects. (b) The Company shall have performed and complied in all material respects with all agreements, covenants and conditions contained herein that are required to be performed or complied with by it at or before the Closing and the Acquisition Agreement shall have been consummated in accordance with its terms. (c) The Company shall have entered into the Other Documents, Purchaser shall have been exempted from Section 203 of the Delaware General Corporation Law by Company Board of Director action so that Purchaser shall not be an "interested stockholder" thereunder despite any additional share purchases not in violation of the Investor's Agreement, and Purchaser's designee shall have been appointed to the board of director positions pursuant to the Investor's Agreement. (d) Purchaser shall have received a certificate, dated the Closing date and signed by the Chief Executive Officer and the Chief Financial Officer of the Company, certifying that the conditions in Sections 3.1(a) and (b) are satisfied on and as of such date. (e) Purchaser and its counsel shall have received copies of the following documents: (i) the Certificate of Incorporation, certified as of a recent date by the Secretary of State of the State of Delaware, and a certificate of such authority dated as of a recent date as to the due incorporation and good standing of the Company and listing all documents of the Company on file with said authority; (ii) a certificate of the Secretary or an Assistant Secretary of the Company dated the Closing date certifying: (A) that attached thereto is a true and complete copy of the Bylaws of the Company as in effect on the date of such certification; (B) that attached thereto is a true and complete copy of all resolutions adopted by the Board of Directors authorizing the execution, delivery and performance of this Agreement and the Other Documents and the issuance, sale and delivery of the Securities, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement; (C) that the Certificate of Incorporation of the Company has not been amended since the date of the last amendment referred to in the certificate delivered pursuant to clause (i) above; (D) that the Bylaws have not been amended since the date of the last amendment referred to in such certificate pursuant to subclause (ii)(A) above; and (E) that each officer of the Company executing this Agreement and the Other Documents, the certificates representing the Securities and any agreement, certificate or instrument furnished pursuant hereto, was, at the respective times of such execution and delivery of such documents, duly elected or appointed, qualified and acting as such officer, and the signatures of such persons appearing on such documents are their genuine signatures or true facsimiles thereof; and (iii) such additional supporting documents as Purchaser may reasonably request. (f) Purchaser shall have received an opinion (satisfactory to Purchaser and its counsel), dated the Closing date, from Kulik, Gottesman & Mouton, LLP in substantially the form of Exhibit E hereto. Section 3.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The Company's obligation to sell the Securities shall be subject to the satisfaction or waiver by it of the following conditions at or before the Closing: (a) The representations and warranties of Purchaser contained in Section 2.2 of this Agreement that are qualified as to materiality shall be true and accurate, and those not so qualified shall be true and accurate in all material respects. (b) Purchaser shall have performed and complied in all material respects with all agreements and conditions contained herein that are required to be performed or complied with by it at or before the Closing, including without limitation, payment of the Purchase Price. (c) Purchaser shall have entered into the Other Documents. SECTION 4. MISCELLANEOUS (a) The Company agrees to pay all of the expenses in connection with the transactions contemplated hereby (including without limitation the reasonable fees and expenses of counsel for Purchaser), whether or not such transactions shall be consummated. (b) Except as otherwise provided herein, covenants, agreements, representations and warranties made in this Agreement, or any certificate or instrument delivered pursuant to or in connection therewith shall survive the execution and delivery of this Agreement. (c) Each party hereto represents and warrants to the other that it has had no dealing with any broker or finder in connection with this Agreement or the transactions contemplated hereby other than a fee to Prudential Securities Incorporated to be paid by the Company. Each party hereto will indemnify and hold harmless the other against and in respect of any claim for brokerage or other commissions relative to this Agreement or to the transactions contemplated hereby, based in any way on agreements, arrangements or understandings made or claimed to have been made by such party with any third party. (d) All representations, covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not; provided that Purchaser shall not assign its rights in this Agreement to any unrelated third party without first obtaining the prior written consent of the Company, and provided further that, notwithstanding the above provision, Purchaser may assign its rights in this Agreement to any party under its control. (e) All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered in person or mailed by certified or registered mail; return receipt requested, addressed as follows: If to Purchaser, to: Colony Investors III, L.P. c/o Colony Capital, Inc. 201 Main Street, Suite 2400 Fort Worth, Texas 76102 Attention: Richard Ekleberry, Esq. Fax No.: (817) 871-4088 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue Los Angeles, California 90067 Telecopier No.: (213) 687-5600 Attention: Jonathan H. Grunzweig, Esq. If to the Company, to: Kennedy-Wilson, Inc.] 530 Wilshire Blvd., #101 Santa Monica, California 90401 Telecopier No.: (310) 314-8510 Attention: William J. McMorrow with copies to: Kulik, Gottesman & Mouton, LLP 1880 Century Park East, Suite 1150 Los Angeles, California 90067 Attention: Kent Mouton, Esq. Fax No.: (310) 557-0224 and White & Case LLP 633 West Fifth Street Los Angeles, California 90071-2007 Attention: Richard K. Smith, Jr., Esq. Fax No.: (213) 687-0758 or, in any such case, at such other address or addresses as shall have been furnished in writing by such party to the others. All notices, requests, consents and other communications hereunder shall be deemed to have been duly given or served on the date on which personally delivered or on the date actually received, with receipt acknowledged. (f) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws provisions thereof. (g) This Agreement and the Other Documents constitute the sole and entire agreement of the parties with respect to the subject matter hereof and supersedes any and all prior or contemporaneous agreements, discussions, representations, warranties or other communications. All Schedules and Exhibits hereto are hereby incorporated herein by reference. (h) This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (i) As used in this Agreement, knowledge shall mean, with respect to any person, actual, conscious knowledge of such person (without imputing any knowledge to such person), if an individual, or of any executive officer of such person, if not an individual. (j) This Agreement may not be amended or modified without the written consent of the Company and Purchaser, nor shall any waiver be effective against any party unless in a writing executed on behalf of such party. (k) If any provision of this Agreement shall be declared void or unenforceable by any judicial or administrative authority, the validity of any other provision and of the entire Agreement shall not be affected thereby. (l) The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting any term or provisions of this Agreement. IN WITNESS WHEREOF, the Company and Purchaser have caused this Agreement to be executed and delivered by the undersigned duly authorized officers as of the day and year first above written. KENNEDY-WILSON, INC. By: /s/ William J. McMorrow _________________________ Name: William J. McMorrow Title: CEO COLONY INVESTORS III, L.P. By: Colony Capital III, L.P. By: ColonyGP III, Inc. By: /s/ Mark M. Hedstrom ______________________________ Name: Mark M. Hedstrom Title: Vice President EX-99 3 EXHIBIT 2 - INVESTOR'S AGREEMENT EXHIBIT 2 INVESTOR'S AGREEMENT This Investor's Agreement (the "Agreement") is made and entered into on July 16, 1998, by and between Kennedy-Wilson, Inc., a Delaware corporation (the "Company"), and Colony Investors III, L.P., a Delaware limited partnership (the "Purchaser"). RECITALS The Purchaser has, upon the terms and subject to the conditions of a Stock Purchase Agreement, dated the date hereof (the "Stock Purchase Agreement"), by and between the Company and the Purchaser, agreed to acquire 440,085shares of Common Stock, $0.01 par value per share, of the Company ("Common Stock"), and warrants (the "Warrants") to purchase an additional 132,026 shares of Common Stock. The Purchaser and the Company each desire to enter into this Agreement for the purpose of regulating certain aspects of their relationship with regard to the Company. AGREEMENT NOW THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the Purchaser and the Company agree as follows: ARTICLE I DEFINITIONS As used herein, the terms below shall have the following meanings. Any such term, unless the context otherwise requires, may be used in the singular or plural, depending upon reference. "Affiliate" shall mean, with respect to any Person, (i) any Person or entity directly or indirectly controlling or controlled by or under direct or indirect common control with such Person, (ii) any spouse or non-adult child (including by adoption) of any natural person described in clause (i) above, (iii) any relative other than a spouse or non-adult child (including by adoption) who has the same principal residence of any natural person described in clause (i) above, (iv) any trust in which any such Persons described in clause (i), (ii) or (iii) above has a beneficial interest and (v) any corporation, partnership, limited liability company or other organization of which any such Persons described in clause (i), (ii) or (iii) above collectively own more than fifty percent (50%) of the equity of such entity. For purposes of this definition, beneficial ownership of more than ten percent (10%) of the voting common equity of a Person shall be deemed to be control of such Person. "Fully Diluted Common Stock" shall mean all of the Common Stock of the Company, assuming conversion, exercise or exchange of all outstanding convertible or exchangeable securities, options, rights, warrants and similar instruments into or for Common Stock (regardless of whether such convertible securities, options, warrants or similar securities are then convertible or exercisable), except for compensatory stock options which shall not be deemed outstanding unless they have vested. As provided in Section 4.4, all such calculations shall be appropriately adjusted for stock splits, stock dividends and other similar events as described therein. "Person" shall mean an individual, partnership, limited liability company, joint venture, corporation, trust or unincorporated organization or any other similar entity. "Restricted Securities" shall mean any securities of the Company issued and sold to the Purchaser pursuant to the Stock Purchase Agreement. ARTICLE II CORPORATE GOVERNANCE 2.1 Board of Directors. Upon the execution of this Agreement, and until such time as the Purchaser and its Affiliates no longer collectively beneficially own at least 50% of the Restricted Securities, the Company hereby agrees (a) to take all action necessary such that from and after the date hereof until the regularly scheduled 2001 annual meeting of the Company's stockholders, the Board of Directors of the Company (the "Board") shall include one Class III director designated by the Purchaser, and (b) thereafter to use its best efforts to cause a person designated by the Purchaser to be included in each slate of proposed Class III directors put forth by the Company to its stockholders and recommended for election in any proxy solicitation materials disseminated by the Company; provided, however, that the identity of any nominee so designated by the Purchaser other than Thomas J. Barrack, Jr. and Kelvin L. Davis shall be reasonably acceptable to the Company; and provided, further, that if at any time the nominee so designated by the Purchaser shall not be serving on the Board, (i) the Purchaser shall have the continuing right to receive copies of all materials distributed to members of the Board, (ii) the nominee designated by the Purchaser shall have the right to participate substantially in all meetings of the Board on a non-voting basis, and (iii) the Company shall grant the Purchaser such other rights as may be necessary for the Purchaser's investment in the Restricted Securities to continue to qualify as a "venture capital investment" within the meaning of 29 C.F.R. section 2510.3-101(d). The Company further agrees to cause the nominee designated by the Purchaser in accordance with the foregoing to serve on the Board of Directors of each subsidiary of the Company as the Purchaser may from time to time request. Upon the death, resignation or removal of a nominee designated by the Purchaser, the Company will use its best efforts to have the vacancy filled by a person designated by the Purchaser. Board members designated by the Purchaser shall be fully covered by any directors' and officers' liability insurance maintained from time to time on the same terms as the other members, shall be entitled to the benefit of any indemnification arrangements applicable to the other members and shall have the right to receive all fees paid and options and other awards granted and expenses reimbursed to non-employee directors generally. ARTICLE III CERTAIN PURCHASE RIGHTS AND RESTRICTIONS 3.1 General. If, at any time when the Purchaser and its Affiliates collectively own in excess of 5% of the Fully Diluted Common Stock, the Company proposes to issue for cash any of its Common Stock or other securities exercisable for, or convertible or exchangeable into, Common Stock (collectively, the "Securities"), other than as provided in Section 3.2, then the Company shall, no later than 30 days prior to the consummation of such issuance, give written notice to the Purchaser of such proposed issuance. Such notice shall describe the proposed issuance, and contain an offer to sell to the Purchaser, at the same price and for the same consideration to be paid by the proposed purchasers (but net of any underwriting or similar fees, discounts or commissions), up to the Purchaser's pro rata portion (which shall be a percentage equal to the percentage of the Fully Diluted Common Stock held by the Purchaser and its Affiliates) of the Securities to be sold. Subject to the foregoing, if Common Stock is being issued with other Securities as a unit and such Common Stock may only be purchased in connection therewith as a part of such unit, the Purchaser must purchase such unit in order for such acceptance to be valid. If the Purchaser fails to accept such offer by written notice within 20 days after its receipt of the Company's notice, the Company may proceed with such proposed issuance, free of any right on the part of the Purchaser under this Section 3.1 in respect thereof. 3.2 Exceptions. The purchase right granted by Section 3.1 shall not apply to: (i) compensatory issuances to employees, directors or consultants or pursuant to related employee benefit or stock option plans approved by the Board of Directors; (ii) Securities distributed or set aside to all holders of Common Stock on a per share equivalent basis; (iii) derivative securities (e.g., warrants) issued as customary "yield enhancement" in connection with (a) the arrangement of bank credit or (b) the issuance of debt securities or redeemable, non-convertible preferred stock; (iv) any issuance of Securities upon the conversion, exercise or exchange of derivative equity securities contemplated by or issued in accordance with this Agreement; and (v) any issuance of Common Stock to the Purchaser on the date hereof and any subsequent issuance of Additional Warrants (as hereinafter defined). 3.3 Warrant Adjustment. In the event that, prior to January 16, 1999, (a) the Company completes an offering of its Common Stock or (b) announces (by the filing of any registration statement with the Securities and Exchange Commission, by press release or otherwise) an offering of its Common Stock and completes such an offering prior to July 16, 1999 (any such offering a "Subsequent Equity Offering"), the Company shall, upon each Subsequent Equity Offering, issue warrants to the Purchaser (the "Additional Warrants") initially exercisable for the number of shares necessary to maintain the aggregate amount of Common Stock issuable pursuant to the Warrants and the Additional Warrants at 3.0% of the Fully Diluted Common Stock. The Additional Warrants shall have terms substantially identical to the Warrants and shall have the same registration rights. 3.4 Standstill Agreement. After acquiring the Restricted Securities and except as further permitted under Section 3.1 or 3.3, the Purchaser agrees not to acquire beneficial ownership of any other Securities prior to July 15, 2001, without the prior written consent of the Company, unless (after giving effect to such additional beneficial ownership) Purchaser and its Affiliates do not collectively own in excess of 20% of the Fully Diluted Common Stock. ARTICLE IV MISCELLANEOUS 4.1 Transfer Restrictions. The Purchaser agrees that it will not transfer, sell or assign (other than transfers, sales or assignments to an Affiliate of the Purchaser) any of the Restricted Securities prior to July 15, 1999 without the express written consent of the Company. Restricted Securities sold to the public pursuant to an effective registration statement or pursuant to Rule 144 promulgated under the Securities Act of 1933 shall no longer be subject to any of the provisions of this Agreement. 4.2 Successors, Assigns and Transferees. This Agreement shall be binding upon and all rights hereto shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, legatees, successors and permitted assigns subject to the terms of this Agreement. 4.3 Notices. Any notice, request, instruction or other document to be given hereunder by any party hereto to another party hereto shall be in writing, shall be deemed to have been duly given or delivered when delivered personally or telecopied (receipt confirmed, with a copy sent by reputable overnight courier), or one business day after delivery to a reputable overnight courier, postage prepaid, to the address of the party set forth below such person's signature on this Agreement or to such address as the party to whom notice is to be given may provide in a written notice to each of the other parties to this Agreement, a copy of which written notice shall be on file with the Secretary of the Company. 4.4 Recapitalizations, etc. The provisions of this Agreement (including any calculation of share ownership) shall apply, except to the extent specifically set forth herein with respect to the Restricted Securities, to any and all shares of capital stock of the Company or any capital stock, partnership units or any other security evidencing ownership interests in any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for, or in substitution of the Common Stock by reason of any stock dividend, split, reverse split, combination, recapitalization, liquidation, reclassification, merger, consolidation or otherwise. 4.5 Inspection and Compliance with Law. Copies of this Agreement will be available for inspection or copying by any holder of Restricted Securities at the offices of the Company through the Secretary of the Company. The Company shall take all reasonable action to insure that the provisions of Delaware law relating to agreements similar to this Agreement are promptly complied with. 4.6 Choice of Law. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF). 4.7 Entire Agreement; Amendments and Waivers. This Agreement and the Other Documents (as defined in the Stock Purchase Agreement) embody the entire agreement and understanding of the parties hereto pertaining to the subject matter hereof. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. 4.8 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 4.9 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms to the fullest extent permitted by law. 4.10 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 4.11 Cumulative Remedies. All rights and remedies of either party hereto are cumulative of each other and of every other right or remedy such party may otherwise have at law or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies. 4.12 Term. Unless earlier terminated by an instrument in writing amending this Agreement pursuant to Section 4.7, this Agreement shall terminate upon the tenth anniversary of the effective date of this Agreement. Notwithstanding the foregoing, this Agreement shall in any event terminate with respect to the Purchaser when the Purchaser and its Affiliates no longer own any shares of Restricted Securities. IN WITNESS WHEREOF, the parties hereto have caused this Investor's Agreement to be duly executed as of the date first above written. KENNEDY-WILSON, INC. By: /s/ William J. McMorrow ________________________________ Name: William J. McMorrow Title: CEO Address: 530 Wilshire Blvd., #101 Santa Monica, California 90401 Telecopy: (310) 315-8510 COLONY INVESTORS III, L.P. By: Colony Capital III, L.P. By: ColonyGP III, Inc. By: /s/ Mark M. Hedstrom ________________________________ Name: Mark M. Hedstrom Title: Vice President Address: c/o Colony Capital, Inc. 201 Main Street, Suite 2420 Fort Worth, Texas 76102 Telecopy: (817) 871-4088 EX-99 4 EXHIBIT 3 - REGISTRATION RIGHTS AGREEMENT EXHIBIT 3 REGISTRATION RIGHTS AGREEMENT Kennedy-Wilson, Inc., a Delaware corporation (the "Company"), hereby grants to Colony Investors III, L.P. ("Purchaser") and any permitted assignee of the registration rights provided for herein. Section 1. DEFINITIONS. As used herein, the following terms shall have the following meanings: "Advice" has the meaning set forth in Section 5. "Additional Warrants" has the meaning set forth in Section 3.3 of the Investor's Agreement. "Affiliate" means, with respect to any Person, (a) any Person or entity directly or indirectly controlling or controlled by or under direct or indirect common control with such Person, (b) any spouse or non-adult child (including by adoption) of any natural person described in clause (a) above, (c) any relative other than a spouse or non-adult child (including by adoption) who has the same principal residence of any natural person described in clause (a) above, (d) any trust in which any such Persons described in clause (a), (b) or (c) above has a beneficial interest and (e) any corporation, partnership, limited liability company or other organization of which any such Persons described in clause (a), (b) or (c) above collectively own more than fifty percent (50%) of the equity of such entity. For purposes of this definition, beneficial ownership of more than ten percent (10%) of the voting common equity of a Person shall be deemed to be control of such Person. "Agreement" means this Registration Rights Agreement, dated as of July 16, 1998. "Business Day" means any day other than a day on which banks are authorized or required to be closed in the State of New York. "Certificate of Incorporation" means the Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware on March 27, 1992, as amended through and including April 30, 1998. "Commission" means the Securities and Exchange Commission or any other similar or successor agency of the Federal government administering the Securities Act and/or the Exchange Act from time to time. "Common Shares" means the shares of Common Stock issued pursuant to that certain Stock Purchase Agreement, dated July 16, 1998, between the Company and Purchaser. "Common Stock" means the common stock, par value $0.01 per share, of the Company. "Company" has the meaning set forth in the first paragraph hereof and shall include the Company's successors by merger, acquisition, reorganization or otherwise. "Controlling Persons" has the meaning set forth in Section 8(a). "Effective Period" has the meaning set forth in Section 4(b). "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute, and the rules and regulations of the Commission promulgated thereunder. "Holders" means the registered holders of Registrable Securities. "Inspectors" has the meaning set forth in Section 4(m). "Investor's Agreement" means that certain Investor's Agreement between the Company and Purchaser dated of even date herewith. "Market Value" means the number of shares of Common Stock to be registered (or issuable upon the conversion or exchange of other securities to be registered) pursuant to the demand for registration provided in Section 2 below multiplied by the then Per Share Price of the Common Stock. "NASD" has the meaning set forth in Section 4(q). "Objecting Party" has the meaning set forth in Section 4(a). "Per Share Price" means the daily closing price of the Common Stock on the NASDAQ on the trading day before the Company receives the written demand for registration. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. "Piggy-Back Registration" has the meaning set forth in Section 3(a). "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to the prospectus, including post-effective amendments, and in each case including all material incorporated by reference or deemed to be incorporated by reference in such prospectus. "Records" has the meaning set forth in Section 4(m). "Registrable Securities" means, collectively, the Common Shares, the Warrants, any Additional Warrants, the Warrant Shares and any other shares of Common Stock acquired by Purchaser or its permitted assigns (so long as not acquired in violation of the Investor's Agreement), unless (in the case of any such securities) such securities have been (a) effectively registered under Section 5 of the Securities Act and disposed of pursuant to an effective Registration Statement, or (b) such securities have been transferred pursuant to Rule 144 under the Securities Act or any successor rule such that, after any such transfer referred to in this clause (b), such securities may be freely transferred without restriction under the Securities Act. "Registration Expenses" has the meaning set forth in Section 7. "Registration Statement" means any registration statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Rule 144" has the meaning set forth in Section 9(a). "Rule 144A" has the meaning set forth in Section 9(b). "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor statute, and the rules and regulations of the Commission promulgated thereunder. "Suspension Notice" has the meaning set forth in Section 5(a). "Suspension Period" means the period from the date on which the Holders receive a Suspension Notice to the date on which any Holder receives either the Advice or copies of the supplemented or amended Prospectus contemplated by Section 4(f). "Warrants" means the warrants to acquire shares of Common Stock, issued pursuant to that certain Warrant Agreement, dated of even date herewith, between the Company and Purchaser. "Warrant Shares" means the shares of Common Stock issuable upon the exercise of the Warrants and any Additional Warrants. Section 2. DEMAND REGISTRATION. (a) Demand for Registration. The Holders may, at their option, at any time after the date hereof, require the Company to use its best efforts to effect a registration of Registrable Securities under the Securities Act (the "Demand Registration"); provided, however, that (i) the Company shall not be required to effect such Demand Registration unless the Company is requested to do so with respect to Registrable Securities having a Market Value of not less than $2,000,000; (ii) at its option, the Company shall not be required to effect such registration prior to three (3) months immediately following the date on which an underwritten public offering of equity securities (pursuant to an effective registration statement under the Securities Act) is commenced, if such public offering is commenced prior to the date of a request for the Demand Registration; provided, further, that, if in the opinion of an independent investment banking firm of national reputation such registration, if not deferred, materially and adversely would affect a proposed business or financial transaction of substantial importance to the Company's financial condition, the Company may defer such registration for a single period (specified in such notice) of not more than 180 days; and (iii) the Company shall not be required to use its best efforts to effect a registration of Registrable Securities under this Section 2 more than three times or more often than nine months following the completion of a Demand Registration. At the election of Holders requesting a Demand Registration, such registration statement shall be filed under Rule 415 promulgated under the Securities Act (a "Resale Registration Statement"), and the Company shall use its best efforts to keep a Resale Registration Statement continuously effective until the earlier of four (4) years and the date on which there are no more Registrable Securities unsold thereunder. The Company shall promptly cause a Resale Registration Statement to be amended to remove a Holder's Registrable Securities upon notice to the Company from such Holder. The Company shall not be required to file and effect more than one (1) Resale Registration Statement pursuant to this Section 2(a). If, after a Demand Registration becomes effective, the offering of securities thereunder is or becomes subject to any stop order, injunction or other order or requirement of the Commission that prevents or limits the sale of securities thereunder for a period of more than five (5) Business Days, then such Demand Registration shall be deemed not to have been effected for purposes of this Section 2(a). (b) Underwritten Offerings. If underwritten, the underwriter in a Demand Registration must be reasonably acceptable to the Company. In connection with any Demand Registration in which more than one Holder participates, in the event that such Demand Registration involves an underwritten offering and the managing underwriter or underwriters participating in such offering advise in writing the Holders of Registrable Shares to be included in such offering that the total number of Registrable Shares to be included in such offering exceeds the amount that can be sold in (or during the time of) such offering without delaying or jeopardizing the success of such offering (including the price per share of the Registrable Shares to be sold), then the amount of Registrable Shares to be offered for the account of such Holders shall be reduced pro rata on the basis of the number of Registrable Shares to be registered by each such Holder. The Company shall not include any securities that are not Registrable Securities in any Registration Statement filed pursuant to this Section 2 without the prior written consent of the Holders of a majority in number of the Registrable Securities covered by such Registration Statement. Section 3. PIGGY-BACK REGISTRATION. (a) Request for Registration. Each time the Company proposes to file a registration statement under the Securities Act with respect to an offering by the Company for its own account or for the account of any of its securityholders of any class of equity security (except, (i) a registration statement on Form S-4 or S-8 (or any substitute form that is adopted by the Commission), (ii) a registration statement filed in connection with a dividend reinvestment plan, stock option plan or unit investment trusts, or (iii) a registration statement filed in connection with an exchange offer or offering of securities solely to the Company's existing securityholders), and the form of registration statement to be used permits the registration of Registrable Securities, then the Company shall give written notice of such proposed filing to the Holders as soon as reasonably practicable (but in no event less than 20 days before the anticipated filing date and no less than 30 days before the anticipated effective date), and such notice shall offer the Holders the opportunity to register such Registrable Securities as the Holders may request (which request shall specify the Registrable Securities intended to be disposed of by the Holders and the intended method of distribution thereof) up to 20 days before the anticipated effective date (a "Piggy-Back Registration"). The Company shall cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on substantially the same terms and conditions as any similar securities of the Company or any other securityholder included therein and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method of distribution thereof. Any Holder shall have the right to withdraw such Holder's request for inclusion of its Registrable Securities in any Registration Statement pursuant to this Section 3 by giving written notice to the Company of such withdrawal no later than two Business Days prior to the anticipated effective date. The Company may withdraw a Piggy-Back Registration at any time prior to the time it becomes effective, provided that the Company shall give prompt notice of such withdrawal to the other Holders, if any, requested to be included in such Piggy-Back Registration. (b) Reduction of Offering. If the managing underwriter or underwriters of an underwritten offering with respect to which Piggy-Back Registration has been requested as provided in Section 3(a) hereof shall have informed the Company, in writing, that in the opinion of such underwriter or underwriters the total number of shares which the Company, the Holders and any other Persons participating in such registration intend to include in such offering is such as to materially and adversely affect the success of such offering (including without limitation any material decrease in the proposed public offering price), then the number of shares to be offered for the account of all Persons and Holders (other than the Company) participating in such registration shall be reduced or limited (to zero if necessary) pro rata in proportion to the respective number of shares requested to be registered by such Persons to the extent necessary to reduce the total number of shares requested to be included in such offering to the number of shares, if any, recommended by such managing underwriter or underwriters. (c) Underwriting. In the case of a Piggy-Back Registration, if the Company has determined to enter into an underwriting agreement in connection therewith, all Registrable Securities to be included in such Registration Statement shall be subject to such underwriting agreement, and no Holder may participate in such Registration unless such Holder agrees to sell its Registrable Securities on the basis provided for in such underwriting arrangements approved by the Company and completes and/or executes all reasonable and customary questionnaires, powers of attorney, indemnities, underwriting agreements and other reasonable documents which must be executed under the terms of such underwriting arrangements. Section 4. REGISTRATION PROCEDURES. In connection with the obligations of the Company to effect or cause the registration of any Registrable Securities pursuant to the terms and conditions of this Agreement, the Company shall use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the terms of this Agreement as quickly as reasonably practicable, and in connection therewith: (a) Prior to filing a Registration Statement or Prospectus or any amendments or supplements thereto, excluding for purposes of this Section 4(a) documents incorporated by reference after the initial filing of the Registration Statement, the Company will furnish to the Holders covered by such Registration Statement (the "Selling Holders") and the underwriters, if any, draft copies of all such documents proposed to be filed at least ten Business Days prior thereto (or, in the case of amendments or supplements, such shorter period as may be reasonably permitted under the circumstances), which documents will be subject to the reasonable review of the Holders and the underwriters, if any, and the Company will not, unless required by law, file any Registration Statement or amendment thereto or any Prospectus or any supplement thereto to which Selling Holders of at least a majority in interest of the Registrable Securities (the "Objecting Party") shall reasonably object pursuant to notice given to the Company prior to the filing of such amendment or supplement (the "Objection Notice") and no later than five Business Days after receipt of the documents to which the Objection Notice relates. The Objection Notice shall set forth the objections and the specific areas in the draft documents where such objections arise. The Company shall have five Business Days after receipt of the Objection Notice to correct such deficiencies to the reasonable satisfaction of the Objecting Party, and will notify each Selling Holder of any stop order issued or threatened by the Commission in connection therewith and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (b) The Company promptly shall prepare and file with the Commission such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for a period of not more than 60 days or (in the case of a Resale Registration Statement) up to four (4) years (as applicable, the "Effective Period"); shall cause the Prospectus to be supplemented by any required Prospectus supplements, and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and shall comply with the provisions of the Securities Act applicable to it with respect to the disposition of all Registrable Securities covered by such Registration Statement during the Effective Period in accordance with the intended methods of disposition by the Holders set forth in such Registration Statement or supplement to the Prospectus. (c) The Company promptly shall furnish to any Holder and the underwriters, if any, without charge, such reasonable number of conformed copies of each Registration Statement and any post-effective amendment thereto and such number of copies of the Prospectus (including each preliminary Prospectus) and any amendments or supplements thereto, any documents incorporated by reference therein and such other documents as such Holder or underwriter reasonably may request in order to facilitate the public sale or other disposition of the Registrable Securities being sold by such Holder. (d) The Company shall, (i) on or prior to the date on which a Registration Statement is declared effective, use its reasonable best efforts to register or qualify the Registrable Securities covered by such Registration Statement under such other securities or "blue sky" laws of such states of the United States as any Holder or underwriter requests; (ii) do any and all other acts and things which may be reasonably necessary to enable such Holder to consummate the disposition of such Registrable Securities owned by such Holder in accordance with the intended methods for distribution set forth therein; and (iii) use its reasonable best efforts to keep each such registration or qualification (or exemption therefrom) effective during the Effective Period; provided, however, that the Company shall not be required (A) to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 4(d) or (B) to file any general consent to service of process. (e) The Company shall cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be reasonably necessary by virtue of the business and operations of the Company to enable the Holders to consummate the disposition of such Registrable Securities. (f) The Company promptly shall notify each Holder and any underwriter in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any state securities authority for amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) of the issuance by any state securities commission or other regulatory authority of any order suspending the qualification or exemption from qualification of any of the Registrable Securities under state securities or "blue sky" laws or the initiation of any proceedings for that purpose, and (v) of the happening of any event which makes any statement made in a Registration Statement or related Prospectus untrue or which requires the making of any changes in such Registration Statement or Prospectus so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (g) The Company shall make generally available to the Holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 45 days (90 days in the event it relates to a fiscal year) after the end of the 12-month period beginning with the first day of the Company's first fiscal quarter commencing after the effective date of a Registration Statement, which earnings statement shall cover said 12-month period, and which requirement will be deemed to be satisfied if the Company timely files complete and accurate information on forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act. (h) The Company promptly shall use its reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement, and in the event a stop order is issued, use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment. (i) If requested by the managing underwriter or underwriters, if any, or any Holder, the Company promptly shall incorporate in a Prospectus supplement or post-effective amendment such information as such managing underwriter or underwriters or such Holder reasonably requests to be included therein, including, without limitation, with respect to the Registrable Securities being sold by such Holder to such underwriter or underwriters, the purchase price being paid therefor by such underwriter or underwriters and with respect to any other terms of an underwritten offering of the Registrable Securities to be sold in such offering, and promptly make all required filings of such Prospectus supplement or post-effective amendment. (j) The Company shall deliver a copy of each document incorporated by reference into a Registration Statement (in the form in which it was incorporated) to each Holder as promptly as practicable after filing such documents with the Commission. (k) The Company shall cooperate with the Holders and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (which shall not bear any restrictive legends unless required under applicable law) representing securities sold under a Registration Statement, and enable such securities to be in such denominations and registered in such names as the Holders and the managing underwriter or underwriters, if any, reasonably may request and keep available and make available to the Company's transfer agent prior to the effectiveness of such Registration Statement a supply of such certificates. (l) The Company shall enter into such customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as the Holders, or the underwriters, if any, retained by the Holders participating in an underwritten public offering, if any, reasonably may request in order to expedite or facilitate the disposition of Registrable Securities. (m) The Company promptly shall make available to each Holder, any underwriter participating in any disposition pursuant to a Registration Statement, and any attorney, accountant or other agent or representative retained by any such Holder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such Registration Statement; provided that, unless the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement or the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, the Company shall not be required to provide any information under this paragraph if (i) the Company believes, after consultation with counsel for the Company and counsel for the Holders, that to do so would cause the Company to forfeit an attorney-client privilege that was applicable to such information or (ii) either (A) the Company has requested and been granted from the Commission confidential treatment of such information contained in any filing with the Commission or documents provided supplementally or otherwise or (B) the Company reasonably determines in good faith that such Records are confidential and so notifies the Inspectors in writing unless, prior to furnishing any such information with respect to (A) or (B), such Holder requesting such information agrees to enter into a confidentiality agreement in customary form and subject to customary exceptions reasonably acceptable to the Company; and, provided, further, that each Holder agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action and to prevent disclosure of the Records deemed confidential. (n) In the case of any underwritten offering, the Company shall furnish to each Holder and to each underwriter, if any, a signed counterpart, addressed to such Holder or underwriter, of (i) an opinion or opinions of counsel to the Company, and (ii) a comfort letter or comfort letters from the Company's independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the managing underwriter therefor reasonably requests. (o) The Company shall cause the Registrable Securities to be authorized for quotation and/or listing, as applicable, on such exchange or quotation system as the Common Stock is listed or quoted. (p) The Company shall provide a CUSIP number for all Registrable Securities covered by a Registration Statement not later than the effective date of such Registration Statement. (q) The Company shall cooperate with each Holder and each underwriter participating in the disposition of Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. ("NASD"). (r) During the period when the Prospectus is required to be delivered under the Securities Act, the Company promptly shall file all documents required to be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. (s) The Company shall appoint a transfer agent and registrar for all the shares of Common Stock covered by a Registration Statement not later than the effective date of such Registration Statement. (t) In connection with an underwritten offering, the Company will participate, to the extent reasonably requested by the managing underwriter for the offering or the Holders, in customary efforts to sell the securities under the offering, including without limitation, participating in "road shows." Each Selling Holder shall provide the Company with such information about the Selling Holder and its intended manner of distribution of the Registrable Securities, and otherwise shall cooperate with the Company and the underwriters, if any, as may be needed or helpful to complete any obligation of the Company hereunder. Section 5. LIMITATIONS ON SALES. (a) Suspension Period. Each Holder, upon receipt of any notice (a "Suspension Notice") from the Company of the happening of any event of the kind described in Section 4(f)(v), forthwith shall discontinue disposition of the Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(f) or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus, and, if so directed by the Company, such Holder will, or will request the managing underwriter or underwriters, if any, to deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice; provided, however, that the Company shall not give a Suspension Notice until after the Registration Statement has been declared effective. In the event that the Company shall give any Suspension Notice, (i) the Company shall use its reasonable best efforts and take such actions as are reasonably necessary to end the Suspension Period as promptly as practicable and (ii) immediately following expiration of the Suspension Period, the Company shall, to the extent necessary, prepare and file with the Commission and furnish a supplement or amendment to such Prospectus so that, as thereafter deliverable to the purchasers of such Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (b) Lock-up. If on any occasion of registration in which the Company proposes to file a registration statement under the Securities Act with respect to the proposed sale of Common Stock pursuant to a fully-underwritten public offering, and the managing underwriter or underwriters shall request an agreement by each Holder not to sell any of the Registrable Securities so held by such Holder for a period of 90 days after the date of the underwriting agreement in order to effect an orderly public distribution thereof, then so long as (i) the Holder and its Affiliates own five percent (5%) or more of the Company's outstanding securities or the Holder has a representative on the Company's Board of Directors and (ii) the Holder is deemed to be an Affiliate of the Company for purposes of the Securities Act, each Holder shall enter into and execute such an agreement with such managing underwriter or underwriters and the Company pertaining to a restriction on the transfer of any equity securities of the Company during such period. Each Holder further agrees, upon request of the managing underwriter or underwriters, to enter into and execute an agreement with such managing underwriter or underwriters and the Company pursuant to the terms of which such Holder will agree not to transfer any securities of the Company during the seven-day period immediately preceding the effectiveness of such registration statement to the extent necessary to avoid violation of the Exchange Act. Section 6. HOLDER INFORMATION. If any Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right, to the extent permitted by law, to require (a) the insertion therein of language, in form and substance reasonably satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (b) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act or any similar Federal or state "blue sky" statute and the rules and regulations thereunder then in force, the deletion of the reference to such Holder. Section 7. REGISTRATION EXPENSES. Any and all expenses incident to the Company's performance of or compliance with this Agreement, including without limitation all Commission and securities exchange, NASDAQ or NASD registration and filing fees, all fees and reasonable expenses incurred in connection with compliance with state securities or "blue sky" laws (including reasonable fees and disbursements of one counsel for all underwriters in connection with "blue sky" qualifications of the Registrable Securities), printing expenses, messenger and delivery expenses, internal expenses of the Company (including, without limitation, all salaries and expenses of the Company's officers and employees performing legal or accounting duties), all reasonable expenses for word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, the fees and expenses incurred in connection with the listing of the Registrable Securities, the fees and disbursements of counsel for the Company and of the independent certified public accountants of the Company (including the expenses of any special audit or comfort letters), Securities Act liability insurance (if the Company elects to obtain such insurance), the fees and expenses of any special experts or other Persons retained by the Company in connection with any registration (all such expenses being herein called "Registration Expenses"), will be borne by the Company whether or not the Registration Statement to which such expenses relate becomes effective; provided, however, that Registration Expenses shall not include underwriting fees, discounts or commissions attributable to the sale or disposition of Registrable Securities or the fees and expenses of legal counsel and accountants retained by the Holders. Section 8. INDEMNIFICATION AND CONTRIBUTION. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless, to the fullest extent permitted by law, each Holder, its partners, officers, directors, trustees, stockholders, employees, agents and investment advisers, and each Person who controls such Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under common control with, or is controlled by, such Holder, together with the partners, officers, directors, trustees, stockholders, employees and agents of such controlling Person (collectively, the "Controlling Persons"), from and against all losses, claims, damages, liabilities and expenses (including without limitation any reasonable legal or other fees and expenses actually incurred in connection with defending or investigating any action or claim in respect thereof, provided, however, that such legal fees shall be limited to those incurred by one individual counsel for all indemnified parties under this paragraph (a), together with any appropriate or necessary local counsel, if any) (collectively, the "Damages") to which such Holder, its partners, officers, directors, trustees, stockholders, employees, agents and investment advisers, and any such Controlling Person may become subject under the Securities Act, insofar as such Damages (or proceedings in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of material fact contained in any Registration Statement or Prospectus (or any amendment thereto) pursuant to which Registrable Securities were registered under the Securities Act, including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, except insofar as such Damages arise out of or are based upon any such untrue statement or omission based upon information relating to such Holder furnished in writing to the Company by such Holder (or by a Person authorized to provide such information on behalf of such Holder) expressly for use therein. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents, employees and each Person who controls such Persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided with respect to the indemnification of the Holders. (b) Indemnification by the Holders. Each Holder agrees, severally and not jointly, to indemnify and hold harmless, to the fullest extent permitted by law the Company, its directors, officers, stockholders, employees, agents, attorneys, and investment advisers and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under common control with, or is controlled by, the Company, together with its Controlling Person, from and against all Damages to which the Company and any Controlling Persons may become subject under the Securities Act insofar as such Damages (or proceedings in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Registrable Securities were registered under the Securities Act (including all documents incorporated therein by reference), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, to the extent, but only if and to the extent that such Damages arise out of or are based upon any such untrue statement or alleged untrue statement or omission or alleged omission based upon information relating to such Holder furnished in writing to the Company by such Holder (or by a Person authorized to provide such information on behalf of such Holder) expressly for inclusion therein; provided, however, that (i) such selling Holder shall not be liable in any such case to the extent that such Damages result from the failure of the Company to promptly amend or take action to correct or supplement any such Registration Statement or Prospectus on the basis of corrected or supplemental information provided in writing by such selling Holder to the Company expressly for such purpose and (ii) the total amount for which a Holder shall be liable hereunder shall not in any event exceed the aggregate proceeds received by such Holder from the sale of Registrable Securities in such registration. (c) Indemnification Procedures. In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to either paragraph (a) or (b) above, such Person (the "indemnified party") promptly shall notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceedings and shall pay the reasonable fees and disbursements of such counsel relating to such proceeding; provided, however, that (i) in the case of any proceeding in respect of which indemnity may be sought pursuant to both paragraphs (a) and (b) above, a Holder shall not be required to assume the defense thereof and the fees and expenses of such counsel shall be at the expense of the Company and (ii) the Company shall not be obligated to pay the fees and expenses of more than one individual counsel (together with any appropriate or necessary local counsel, if any) for all indemnified parties, including the Company. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, or (ii) the indemnifying party fails promptly to assume the defense of such proceeding or fails to employ counsel reasonably satisfactory to such indemnified party or parties, or (iii) (A) the named parties to any such proceeding (including any impleaded parties) include both such indemnified party or parties and any indemnifying party or an Affiliate of such indemnified party or parties or of any indemnifying party, (B) there may be one or more legal defenses available to such indemnified party or parties or such Affiliate of such indemnified party or parties that are different from or additional to those available to any indemnifying party or such Affiliate of any indemnifying party and (C) such indemnified party or parties shall have been advised by such counsel that there may exist a legal conflict of interest between or among such indemnified party or parties or such Affiliate of such indemnified party or parties and any indemnifying party or such Affiliate of any indemnifying party, in which case, if such indemnified party or parties notifies the indemnifying party or parties in writing that it elects to employ separate counsel of its choice at the reasonable expense of the indemnifying parties, the indemnifying parties shall not have the right to assume the defense thereof and such counsel shall be at the reasonable expense of the indemnifying parties, it being understood, however, that unless there exists a conflict among indemnified parties, the indemnifying parties shall not, in connection with any one such proceeding or separate but substantially similar or related proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys at any time for such indemnified party or parties. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which will not be unreasonably withheld) but, if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party or parties from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent (which will not be unreasonably withheld) of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which such indemnified party is a party, and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) Contribution. To the extent that the indemnification provided for in paragraph (a) or (b) of this Section 8 is unavailable to an indemnified party or insufficient in respect of any Damages, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such Damages in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holders on the other hand in connection with the statements or omissions that resulted in such Damages, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Holders on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding the provisions of this Section 8(d), no Holder shall be required to contribute any amount in excess of the amount at which the net sale proceeds from the Registrable Securities to such Holder exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue statement or omission. Each Holder's obligation to contribute pursuant to this Section 8(d) is several in the proportion that the proceeds of the offering received by such Holder bears to the total proceeds of the offering received by all the Holders and not joint. If indemnification is available under paragraph (a) or (b) of this Section 8, the indemnifying parties shall indemnify each indemnified party to the full extent provided in such paragraphs without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 8(d). The Company and each Holder agrees that it would not be just or equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the Damages referred to in this Section 8 shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses incurred (and not otherwise reimbursed) by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (e) Survival. The parties' indemnification and contribution obligations pursuant to this Section 8 shall survive the sale, transfer, assignment or other disposition of any Registrable Securities and shall survive any termination of this Agreement. Section 9. AVAILABLE INFORMATION. (a) Rule 144. The Company covenants that it will file any reports required to be filed by it under the Securities Act and the Exchange Act (or, if the Company is not required to file such reports, it will, upon the request of any Holder, make publicly available other information so long as necessary to permit sales under Rule 144 under the Securities Act, as such rule may be amended from time to time or any similar rule or regulation hereafter adopted by the Commission ("Rule 144"), and it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. (b) Rule 144A. Upon the request of any Holder, the Company shall deliver to such holder within 20 days following receipt by the Company of such request, the information required by Section (d)(4) of Rule 144A under the Securities Act, as such rule may be amended from time to time or any similar rule or regulation hereafter adopted by the Commission ("Rule 144A"), and will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitations or the exemptions provided by Rule 144A. All information shall be "reasonably current" as defined in Rule 144A. Section 10. MISCELLANEOUS. (a) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of the Holders of a majority in interest of the Registrable Securities then outstanding. (b) Notices. All notices, requests and other communications provided for herein shall be given or made in writing: if to the Company: Kennedy-Wilson, Inc. 530 Wilshire Blvd., #101 Santa Monica, California 90401 Attention: William J. McMorrow Fax No.: (310) 314-8510 with copies to: Kulik, Gottesman & Mouton, LLP 1880 Century Park East, Suite 1150 Los Angeles, California 90067 Attention: Kent Mouton, Esq. Fax No.: (310) 557-0224 and White & Case LLP 633 West Fifth Street Los Angeles, California 90071-2007 Attention: Richard K. Smith, Jr., Esq. Fax No.: (213) 687-0758 if to Purchaser: Colony Investors III, L.P. c/o Colony Capital, Inc. 201 Main Street, Suite 2420 Fort Worth, Texas 76102 Attention: Richard Ekleberry, Esq. Fax No.: (817) 871-4088 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue Los Angeles, California 90071 Attention: Jonathan H. Grunzweig, Esq. Fax No.: (213) 687-5600 if to any other person who is a registered Holder, to the address for such Holder as it appears in the stock or warrant ledger of the Company; or, in the case of any Holder, at such other address as shall be designated by such party in a notice to the Company; or, in the case of the Company, at such other address as the Company may designate in a notice to the Holders. All such notices, requests and other communications shall be: (i) personally delivered, sent by courier guaranteeing overnight delivery or sent by registered or certified mail, return receipt requested, postage prepaid, in each case given or addressed as aforesaid; and (ii) effective upon receipt. (c) Successors and Assigns. Subject to restrictions on the transfer of Common Stock set forth in the Company's Certificate of Incorporation and the Investor's Agreement of even date herewith between the Company and Purchaser, this Agreement shall inure to the benefit of and be binding only upon (i) Purchaser, (ii) the general and limited partners of Purchaser, and (iii) assigns of the Purchaser (so long as the Registrable Securities are not acquired in violation of the Investor's Agreement and the Company's Certificate of Incorporation). (d) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (e) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of law. (f) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the Holders shall be enforceable to the fullest extent permitted by law. (g) Attorneys' Fees. In any action or proceeding brought to enforce any provision of this Agreement or where any provision hereof is validly asserted as a defense, the successful party shall, to the extent permitted by applicable law, be entitled to recover reasonable attorneys' fees and expenses in addition to any other available remedy. (h) Further Assurances. Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby. (i) Remedies. In the event of a breach or a threatened breach by the Company of its obligations under this Agreement, any party injured or to be injured by such breach will be entitled to specific performance of its rights under this Agreement or to injunctive relief, in addition to being entitled to exercise all rights granted by law. The parties agree that the provisions of this Agreement shall be specifically enforceable, it being agreed by the parties that the remedy at law, including monetary damages, is inadequate and that any objection in any action for specific performance or injunctive relief that a remedy at law would be adequate is waived. KENNEDY-WILSON, INC. By /s/ William J. McMorrow ___________________________ Name: William J. McMorrow Title: CEO COLONY INVESTORS III, L.P. By: Colony Capital III, L.P. By: ColonyGP III, Inc. By /s/ Mark M. Hedstrom _____________________________ Name: Mark M. Hedstrom Title: Vice President EX-99 5 EXHIBIT 4 - WARRANT AGREEMENT EXHIBIT 4 WARRANT AGREEMENT This Warrant Agreement (the "Agreement"), dated as of July 16, 1998, is by and between Kennedy-Wilson, Inc., a corporation duly organized and validly existing under the laws of Delaware (the "Company"), and Colony Investors III, L.P. (the "Holder"). WITNESSETH: WHEREAS, the Company wishes to issue and sell to the Holder (i) certain shares of the Company's common stock, $.01 par value per share (the "Stock"), pursuant to the Stock Purchase Agreement dated as of the date hereof, between the Company and the Holder, and (ii) warrants to acquire additional shares of Stock for an aggregate purchase price of $5,232,610, and may issue certain additional warrants in connection therewith; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE I DEFINITIONS, ACCOUNTING TERMS AND DETERMINATIONS As used herein: "Additional Warrants" has the meaning set forth in Section 3.3 of the Investor's Agreement. "Board" means the Board of Directors of the Company. "Bylaws" means the Amended and Restated Bylaws of the Company as adopted on April 2, 1992. "Certificate of Incorporation" means the Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware on March 27, 1992, as amended through and including April 30, 1998. "Commission" means the Securities and Exchange Commission or any other similar or successor agency of the Federal government administering the Securities Act and/or the Securities Exchange Act of 1934, as amended from time to time (the "Exchange Act"). "Date of Issuance" shall mean July 16, 1998. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled (whether through ownership of securities or other ownership interests, by contract or otherwise) by any of the foregoing. "Holder" shall have the meaning set forth at the head of this Agreement and each other Person who acquires the original Warrant Certificate or any Warrant Certificate issued upon transfer, division, combination, partial exercise of Warrants or in replacement or substitution therefor or who acquires Warrant Shares pursuant to the provisions of this Agreement. "Include" and "Including" shall be construed as if followed by the phrase "without being limited to." "Investor's Agreement" means that certain Investor's Agreement between the Company and the initial Holder dated of even date herewith. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or a Governmental Authority. "Registration Rights Agreement" means the Registration Rights Agreement of even date herewith between the Company and the Holder relating to the registration of the Registrable Securities (as defined therein) under and pursuant to the Securities Act, as said Registration Rights Agreement shall be modified and supplemented in accordance with its terms and in effect from time to time. "Restricted Securities" means the Warrants, any Additional Warrants and any Warrant Shares or other securities which have been issued or are issuable upon the exercise of such Warrants until such time as any such Restricted Securities (a) have been sold pursuant to an effective registration statement under the Securities Act or (b) are distributed pursuant to Rule 144 (or any similar provision then in force) under the Securities Act and, if it has so requested, the Company has received an opinion of counsel (either its own counsel or, if the Company so requests, counsel to the holders of such Restricted Securities) reasonably acceptable to the Company that such Restricted Securities may be so transferred without registration or pursuant to an exemption under the Securities Act, and in each such instance the Company has delivered new Warrant Certificates not bearing the legend prescribed by Section 2.03 hereof. "Rule 144" means Rule 144 promulgated by the Commission under the Securities Act (as such rule may be amended from time to time or any successor or similar rule then in force). "Securities Act" means at any time the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Stockholder" means any Person (excluding any Holder) who owns any shares of common or preferred stock of the Company (or any successor thereto). "Transfer" means, unless the context otherwise requires, any disposition of any Restricted Securities, or of any interest in any thereof, which would constitute an offer or sale thereof within the meaning of the Securities Act. "Warrants" shall have the meaning assigned to such term in Section 2.01. "Warrant Certificate" shall have the meaning assigned to such term in Section 2.01. "Warrant Shares" means (a) the shares of Stock purchased or purchasable by the Holder upon the exercise of the originally issued Warrant or any Additional Warrants, including any Stock into which such Stock may thereafter be changed or converted, and (b) if required hereunder, any additional shares of Stock issued or distributed by way of a dividend, stock split or other distribution in respect of the Stock referred to in clause (a) above, or acquired by way of any rights offering or similar offering made in respect of the Stock referred to in clause (a) above. Except as otherwise may be expressly provided herein, all accounting terms used herein shall be interpreted in accordance with generally accepted accounting principles consistently applied. All calculations made for the purposes of determining compliance with the terms of this Agreement and the Warrants shall be made by application of United States generally accepted accounting principles consistently applied (except as otherwise may be expressly provided herein). ARTICLE II ISSUANCE AND EXECUTION OF WARRANTS Section 2.01. AUTHORIZATION AND ISSUANCE OF SHARES AND WARRANTS. The Company has authorized: (a) the issuance of warrant certificates substantially in the form of Annex 1 to this Agreement (each, a "Warrant Certificate"), each evidencing warrants to purchase shares of Stock (such Warrant Certificate issued on the Date of Issuance, other Warrant Certificates issued in connection with Additional Warrants or upon transfer, partial exercise, division or combination of, or in substitution or replacement for any Warrant Certificate or the rights to purchase Stock evidenced by each of the foregoing, is, as the context requires, sometimes referred to herein as a "Warrant" or "Warrants"); and (b) the issuance of such number of shares of Stock as shall permit the compliance by the Company with its obligations to issue Stock pursuant to the Warrants. In addition, each Warrant Certificate may have such letters, numbers or other marks of identification or designation and such legends, summaries, or endorsements stamped, printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as, in any particular case, may be required to comply with any law or with any rule or regulation of any regulatory authority or agency, or to conform to customary usage; provided, however, that no such change shall be made which affects the duties or obligations of the Company without the consent of the Company. Section 2.02. EXECUTION AND DELIVERY OF WARRANT CERTIFICATE. Each Warrant Certificate shall be executed on behalf of the Company by the Chairman of the Board or the Company's President or any Vice President and attested to by its Secretary or Assistant Secretary, either manually or by facsimile signature printed thereon. In case any authorized officer of the Company who shall have signed any Warrant Certificate shall cease to be such officer of the Company either before or after delivery thereof by the Company to the Holder, the signature of such person on such Warrant Certificate shall be valid nevertheless and such Warrant Certificate may be issued and delivered to the person entitled to receive the Warrants represented thereby with the same force and effect as though the person who signed such Warrant Certificate had not ceased to be such officer of the Company. The Warrant Certificate originally issued to the Holder shall be delivered on the Date of Issuance. The Company shall maintain books (the "Warrant Register") for the registration of Warrants and the registration of transfers and exchanges of Warrants. Section 2.03. TRANSFER AND EXCHANGE OF WARRANTS. (a) Warrant Certificates evidencing Restricted Securities (and only such Warrant Certificates) will bear a legend in substantially the following form: NEITHER THE EXERCISE OF THE WARRANTS EVIDENCED BY THIS CERTIFICATE NOR THE ISSUANCE OF SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE, AND SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH TRANSFER IS PURSUANT TO (i) A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT AND THE RULES AND REGULATIONS THEREUNDER OR (ii) AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND, IF IT HAS SO REQUESTED, THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL (EITHER ITS OWN COUNSEL OR, IF THE COMPANY SO REQUESTS, COUNSEL TO THE HOLDERS OF SUCH SECURITIES) REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH SECURITIES MAY BE SO TRANSFERRED. FURTHERMORE, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN THE COMPANY'S CERTIFICATE OF INCORPORATION AND IN A REGISTRATION RIGHTS AGREEMENT AND AN INVESTOR'S AGREEMENT, BOTH DATED JULY 16, 1998. (b) In connection with the transfer or exchange of a Restricted Security or Securities (other than pursuant to an effective registration statement under the Securities Act) the transferor of such Restricted Security or Securities, upon request of the Company, shall deliver to the Company an opinion of counsel, in substance reasonably satisfactory to the Company, to the effect that such Restricted Security to be issued upon such transfer or exchange may be so issued without the foregoing legend; provided that such Restricted Security nonetheless shall contain a legend referencing the restrictions contained in the Investor's Agreement of even date herewith. (c) Subject to paragraphs (a) and (b) above, the Company shall register the transfer of all or any whole number of Warrants covered by any outstanding Warrant Certificate in the Warrant Register upon surrender to the Company of Warrant Certificates accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Company, duly executed by the registered Holder or his attorney duly authorized in writing. Upon any such registration of transfer a new Warrant Certificate shall be issued to the transferee and the surrendered Warrant Certificate promptly shall be canceled by the Company. Warrant Certificates may be exchanged at the option of the Holder thereof, upon surrender, properly endorsed by the registered Holders, at the Company, with written instructions, for other Warrant Certificates evidencing in the aggregate a like number of Warrants. The Company may require the payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any such exchange or transfer. Section 2.04. TRANSFER AND EXCHANGE OF WARRANTS. All the restrictions imposed by this Article II upon the transferability of the Restricted Securities shall cease and terminate as to any particular Restricted Security when such Restricted Security shall have been effectively registered under the Securities Act and applicable state securities laws and sold by the Holder thereof in accordance with such registration or sold under and pursuant to Rule 144. Whenever the restrictions imposed by this Article II shall terminate as to any Restricted Security as herein above provided, the Holder thereof shall be entitled to receive from the Company, without expense (other than payment by the Holder of any tax or governmental charge that may be imposed), a new certificate evidencing such Restricted Security not bearing the restrictive legend otherwise required to be borne by a certificate evidencing such Restricted Security. ARTICLE III COMPANY'S REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Holder as follows: Section 3.01. EXISTENCE; QUALIFICATION. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Section 3.02. CORPORATE ACTION. The Company has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement, the Warrants and the Registration Rights Agreement; the execution, delivery and performance by the Company of this Agreement, the Warrants and the Registration Rights Agreement have been duly authorized by all necessary corporate action on the part of the Company; this Agreement has been duly executed and delivered by the Company and constitutes, and the Registration Rights Agreement when executed and delivered by the Company will constitute, the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except to the extent that enforcement thereof may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, or (b) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law); the Warrants and any Additional Warrants, when executed, issued and delivered pursuant to this Agreement, will constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, or (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law); the Warrant Shares initially covered by the Warrants and any Additional Warrants will be duly and validly authorized and reserved for issuance and when paid for, issued and delivered in accordance with the Warrants, shall be duly and validly issued, fully paid and nonassessable and free and clear of any Liens; and none of the Warrant Shares issued pursuant to the terms hereof or the Warrants or Additional Warrants shall be in violation of any preemptive rights of any Stockholder. Section 3.03. APPROVALS. Except as contemplated by the Registration Rights Agreement, no authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority or any other Person which shall not have been obtained on or prior to the Date of Issuance are necessary for the execution, delivery or performance by the Company of this Agreement, the Warrants or the Registration Rights Agreement or for the validity or enforceability thereof. Section 3.04. CAPITALIZATION. As of the Date of Issuance of the original Warrant to Holder, the capitalization of the Company consists solely of Stock and options and warrants to acquire Stock. ARTICLE IV HOLDER'S REPRESENTATIONS AND WARRANTIES The Holder represents and warrants to the Company as follows: Section 4.01. PURCHASE ENTIRELY FOR OWN ACCOUNT. The Warrant is being acquired and, if such Warrant is exercised, the Stock issuable upon such exercise will be acquired, for investment for the Holder's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the federal or state securities laws. Section 4.02. INVESTMENT EXPERIENCE. The Holder represents that it can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Stock issuable upon exercise thereof. The Holder also represents it has not been organized solely for the purpose of acquiring the Warrant or the Stock issuable upon exercise thereof. Section 4.03. RESTRICTED SECURITIES. The Holder understands that the Warrant and the Stock issuable upon exercise of such Warrant are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and have not been registered under the Securities Act nor qualified under applicable state securities laws and that under such laws and applicable regulations such securities may not be resold without registration under the Securities Act, except in certain limited circumstances. In this connection, the Holder represents that it is familiar with Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. Section 4.04. ACCREDITED INVESTOR. The Holder is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act. ARTICLE V HOLDERS; RIGHTS Section 5.01. DELIVERY EXPENSES. If any Holder surrenders any Warrant Certificate or Warrant Shares to the Company or a transfer agent of the Company for exchange for instruments of other denominations or registered in another name or names, the Company shall cause such new instruments to be issued and shall deliver, in each case at the cost of the Holder, from the office of such Holder or from or to the Company or its transfer agent, the surrendered instrument and any new instruments issued in substitution or replacement for the surrendered instrument. Section 5.02. TAXES. The Company shall pay all transfer taxes which may be payable in connection with the execution and delivery of this Agreement or the Registration Rights Agreement or the issuance of the Warrants and Warrant Shares hereunder or in connection with any modification of this Agreement, the Registration Rights Agreement or the Warrants and shall hold each Holder harmless without limitation as to time against any and all liabilities with respect to all such taxes. The Company shall not, however, be required to pay: (i) federal, state or local income tax; (ii) any intangible personal property, franchise or similar tax; or (iii) any transfer tax which may be payable in respect of any transfer of a Warrant or any transfer involved in the issue and delivery of shares of Stock in a name other than that in which a Warrant is registered, and no such issue or delivery shall be made unless and until the Person requesting such issue has established, to the satisfaction of the Company, that such tax has been paid. The obligations of the Company under this Section 5.02 shall survive any termination of this Agreement or the Registration Rights Agreement, and any cancellation or termination of the Warrants. Section 5.03. REPLACEMENT OF INSTRUMENTS. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any certificate or instrument evidencing any Warrants or Warrant Shares, and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it, or (b) in the case of mutilation, upon surrender or cancellation, thereof, the Company, at the Holder's expense, shall execute, register and deliver, in lieu thereof, a new certificate or instrument for (or evidencing the right to purchase) an equal number of Warrants or Warrant Shares. Section 5.04. CERTAIN RESTRICTIONS. The Company shall not at any time enter into an agreement or other instrument, and has not entered into an agreement currently in effect, making performance hereunder or the issuance of shares of Stock upon the exercise of any Warrant a default under any such agreement or instrument. Section 5.05. INDEMNIFICATION. Each party hereto hereby irrevocably indemnifies the other and saves it harmless against any and all reasonable out of pocket losses, expenses or liabilities, including judgments, costs and reasonable counsel fees and expenses arising out of or in connection with a breach of this Agreement, except as a direct result of the gross negligence, bad faith or willful misconduct of such other party. ARTICLE VI MISCELLANEOUS Section 6.01. WAIVER. No failure on the part of any Holder to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement, the Warrants or the Registration Rights Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement, the Warrants or the Registration Rights Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. Section 6.02. NOTICES. (a) All notices, requests and other communications provided for herein and in the Warrants (including any waivers or consents under, this Agreement and the Warrants) shall be given or made in writing: if to the Company: Kennedy-Wilson, Inc. 503 Wilshire Blvd, #101 Santa Monica, California 90401 Attention: William J. McMorrow Fax No.: (310) 314-8510 with copies to: Kulik, Gottesman & Mouton, LLP 1880 Century Park East, Suite 1150 Los Angeles, California 90067 Attention: Kent Mouton, Esq. Fax No.: (310) 557-0224 and White & Case LLP 633 West Fifth Street Los Angeles, California 90071-2007 Attention: Richard K. Smith, Jr., Esq. Fax No.: (213) 687-0758 if to the initial Holder: Colony Investors III, L.P. c/o Colony Capital, Inc. 201 Main Street, Suite 2400 Fort Worth, Texas 76102 Attention: Richard Ekleberry, Esq. Fax No.: (817) 871-4088 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue Los Angeles, California 90071 Attention: Jonathan H. Grunzweig, Esq. Fax No.: (213) 687-5600 if to any other person who is the registered Holder of any Warrants or Warrant Shares, to the address for such Holder as it appears in the stock or warrant ledger of the Company; or, in the case of any Holder, at such other address as shall be designated by such party in a notice to the Company; or, in the case of the Company, at such other address as the Company may designate in a notice to the Holders. (b) All such notices, requests and other communications shall be: (i) personally delivered, sent by courier guaranteeing overnight delivery or sent by registered or certified mail, return receipt requested, postage prepaid, in each case given or addressed as aforesaid; and (ii) effective upon receipt. Section 6.03. AMENDMENTS, ETC. Any provision of this Agreement may be amended or modified only by an instrument in writing signed by (a) the Company and (b) the Holders of at least a majority of the Warrant Shares issued or issuable upon exercise of the Warrants; provided, however, that no such amendment or waiver, without the written consent of all Holders of such shares and Warrants at the time outstanding, shall amend this Section 6.03. Section 6.04. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Section 6.05. SURVIVAL. (a) All representations and warranties made by the Company herein or in any certificate or other instrument delivered by it or on its behalf under this Agreement or the Registration Rights Agreement shall be considered to have been relied upon by each Holder and shall survive the issuance of the Warrants or the Warrant Shares regardless of any investigation made by or on behalf of any Holder. All statements in any such certificate or other instrument so delivered shall constitute representations and warranties by the Company hereunder. (b) All representations and warranties made by the Holders herein shall be considered to have been relied upon by the Company and shall survive the issuance to the Holders of the Warrants or the Warrant Shares regardless of any investigation made by the Company or on its behalf. Section 6.06. CAPTIONS. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. Section 6.07. COUNTERPARTS. This Agreement may be executed on counterpart signature pages or in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart signature page or counterpart. Section 6.08. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be fully performed in such State. Section 6.09. SEVERABILITY. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. Section 6.10. DEFECTS IN NOTICE. Failure to file any certificate or notice or to mail any notice, or any defect in any certificate or notice pursuant to this Agreement shall not affect in any way the rights of any registered Holder of a Warrant Certificate or the legality or validity of any adjustment made pursuant to the provisions of the Warrant, or any transaction giving rise to any such adjustment, or the legality or validity of any action taken or to be taken by the Company. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. KENNEDY-WILSON, INC. By: /s/ William J. McMorrow ____________________________ Name: William J. McMorrow Title: CEO COLONY INVESTORS III, L.P. By: Colony Capital III, L.P. By: ColonyGP III, Inc. By: /s/ Mark M. Hedstrom ____________________________ Name: Mark M. Hedstrom Title: Vice President [FORM OF WARRANT CERTIFICATE] DATE OF ISSUANCE: ____ __, 199_ WARRANT CERTIFICATE NO. W-_ NEITHER THE EXERCISE OF THE WARRANTS EVIDENCED BY THIS CERTIFICATE NOR THE ISSUANCE OF SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE, AND SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH TRANSFER IS PURSUANT TO (i) A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT AND THE RULES AND REGULATIONS THEREUNDER OR (ii) AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND, IF IT HAS SO REQUESTED, THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL (EITHER ITS OWN COUNSEL OR, IF THE COMPANY SO REQUESTS, COUNSEL TO THE HOLDERS OF SUCH SECURITIES) REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH SECURITIES MAY BE SO TRANSFERRED. FURTHERMORE, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN THE COMPANY'S CERTIFICATE OF INCORPORATION AND IN A REGISTRATION RIGHTS AGREEMENT AND AN INVESTOR'S AGREEMENT, BOTH DATED JULY 16, 1998. WARRANT TO PURCHASE COMMON STOCK OF KENNEDY-WILSON, INC. THIS IS TO CERTIFY THAT, subject to the terms and conditions set forth below, __________, its successors and permitted assigns (generally, the "Holder"), is entitled from time to time to subscribe for and purchase from Kennedy-Wilson, Inc., a Delaware corporation (the "Company"), ____________ (______) shares of the Company's common stock, $.01 par value (the "Common Stock"). The number, character and exercise price of such shares of Common Stock are subject to adjustment as provided below. The shares of Common Stock subject to this Warrant may be referred to herein as the "Warrant Shares." This Warrant is subject to the following provisions, terms and conditions: ARTICLE I CERTAIN DEFINITIONS Each capitalized term used herein without definition shall have the meaning assigned thereto (or incorporated by reference) in the Warrant Agreement (as hereinafter defined). As used in this Warrant, unless the context otherwise requires: "Affiliate" means, with respect to any Person, (a) any Person or entity directly or indirectly controlling or controlled by or under direct or indirect common control with such Person, (b) any spouse or non-adult child (including by adoption) of any natural person described in clause (a) above, (c) any relative other than a spouse or non-adult child (including by adoption) who has the same principal residence of any natural person described in clause (a) above, (d) any trust in which any such Persons described in clause (a), (b) or (c) above has a beneficial interest and (e) any corporation, partnership, limited liability company or other organization of which any such Persons described in clause (a), (b) or (c) above collectively own more than fifty percent (50%) of the equity of such entity. For purposes of this definition, beneficial ownership of more than ten percent (10%) of the voting common equity of a Person shall be deemed to be control of such Person. "Business Day" means any day on which commercial banks are not authorized or required to close in New York City. "Certificate of Incorporation" means the Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware on March 27, 1992, as amended through and including April 30, 1998. "Include" and "including" shall be construed as if followed by the phrase "without being limited to,". "Investor's Agreement" means the Investor's Agreement dated July16, 1998, between the Company and Colony Investors III, L.P., as such agreement shall be modified and supplemented in accordance with its terms and in effect from time to time. "Market Value" of a share of Common Stock shall be the market price determined as follows: (i) if the shares of Common Stock are listed or admitted to trading on any securities exchange or the NASDAQ-National Market System, the average closing price, regular way, for the ten trading day period ending on such day, or if no such sale takes place on any such day, the average of the closing bid and asked prices on such day, (ii) if the shares of Common Stock are not listed or admitted to trading on any securities exchange or the NASDAQ-National Market System, the average last reported sale price for the ten trading day period ending on such day or, if no sale takes place on any such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the Company, or (iii) if the shares of Common Stock are not listed or admitted to trading on any securities exchange or the NASDAQ- National Market System and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices for the ten trading day period ending on such day, as reported by a reliable quotation source designated by the Company, or if there shall be no bid and asked prices on any such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported; provided that if there are no bid and asked prices reported during the ten trading days prior to the date in question, the Market Value of the shares of Common Stock shall be determined by the Company acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. "Transfer" means, unless the context otherwise requires, any disposition of this Warrant or the Warrant Shares, or of any interest in any thereof, which would constitute an offer or sale thereof within the meaning of the Securities Act. "Warrant Agreement" shall mean the Warrant Agreement dated as of July 16, 1998, between the Company and Colony Investors III, L.P., as such Warrant Agreement shall be modified and supplemented and in effect from time to time. "Warrants" shall mean: (a) this Warrant originally issued by the Company pursuant to the Warrant Agreement on the Date of Issuance, evidencing rights to purchase all or a portion of the Warrant Shares; and (b) all Warrants issued upon transfer, division or combination of, or in substitution or replacement for, any Warrants described in clause (a). ARTICLE II EXERCISE AND ISSUANCE Section 2.01. TERM OF WARRANT. This Warrant shall be immediately exercisable as to all of the Warrant Shares. The Holder shall have until 5:00 p.m., Los Angeles time, on July 16, 2005, in which to exercise the rights represented by this Warrant, at which time all of the Holder's rights hereunder shall terminate. Section 2.02. EXERCISE PRICE AND ADJUSTMENTS. The exercise price at which this Warrant may be exercised is Fifteen Dollars ($15.00) per share of Common Stock, subject to adjustment as set forth below (as adjusted, the "Exercise Price"). Section 2.03. EXERCISE OF WARRANTS. (a) The rights represented by this Warrant may be exercised by the Holder, in whole or in part, by the Holder delivering to the Company, at its office maintained for such purpose pursuant to Section 11.01, (i) a written notice of the Holder's election to exercise this Warrant (or any portion thereof), which notice shall specify the number of Warrant Shares to be purchased pursuant to such exercise, (ii) a certified or bank check or checks payable to the Company in an aggregate amount equal to the aggregate Exercise Price for the number of Warrant Shares specified in clause (i) above, and (iii) this Warrant Certificate. (b) Notwithstanding Section 2.03(a), at the election of the Holder, which election shall be set forth in a written notice to the Company together with this Warrant Certificate, this Warrant may be exercised (in whole or in part) by means of a cashless exercise procedure whereby the number of Warrant Shares issued to the Holder upon such cashless exercise shall be equal to the quotient obtained by dividing (A) the product of (x) the Market Value per share of Common Stock as of the trading day immediately preceding the date such notice is given to the Company (the "Exercise Date") less the Exercise Price on such Exercise Date, multiplied by (y) the number of Warrant Shares as to which the Holder elects to be issued pursuant to this Section 2.03(b) (which election shall reduce the number of Warrant Shares available for any subsequent exercise), divided by (B) the Market Value per share of Common Stock as of the trading day immediately preceding such Exercise Date. The number of Warrant Shares issued pursuant to this Section 2.03(b) shall be excluded from the calculation of the amount paid pursuant to Section 2.03(a)(ii) above. (c) Each notice of exercise shall be in substantially the form of exercise attached to this Warrant Certificate. Upon receipt thereof, the Company shall, as promptly as practicable and in any event within 10 Business Days thereafter, cause to be executed and delivered to such Holder a stock certificate or certificates representing the aggregate number of duly and validly issued, fully paid and nonassessable Warrant Shares issuable upon such exercise, free and clear of any Liens. Section 2.04. ISSUANCE. The stock certificate or certificates for Warrant Shares so delivered shall be in such denominations as may be specified in such notice and shall be registered in the name of the Holder or such other name or names as shall be designated in such notice. Such stock certificate or certificates shall be deemed to have been issued and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares, including to the extent permitted by law the right to vote such shares or to consent or to receive notice as a stockholder, as of the time such notice and payment is received by the Company as aforesaid. Unless this Warrant has expired, if this Warrant shall have been exercised only in part, at the time of delivery of said stock certificate or certificates, the Company shall execute and deliver to the Holder a new Warrant Certificate, dated the Date of Issuance, representing the number of Warrant Shares with respect to which this Warrant shall not then have been exercised, which new Warrant Certificate shall in all other respects be identical with this Warrant Certificate, or, at the request of the Holder, appropriate notation may be made on this Warrant Certificate and the same returned to the Holder. Each certificate evidencing Warrant Shares shall be marked on its reverse as follows: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH LAWS OR PURSUANT TO WRITTEN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN THE COMPANY'S CERTIFICATE OF INCORPORATION AND IN A REGISTRATION RIGHTS AGREEMENT AND AN INVESTOR'S AGREEMENT, BOTH BETWEEN THE COMPANY AND COLONY INVESTORS III, L.P. DATED JULY 16, 1998. All shares of Common Stock issuable upon the exercise of this Warrant, upon payment therefor in accordance herewith, shall be duly and validly issued, fully paid and nonassessable and free and clear of any Liens. The Company shall not be obligated to issue fractional shares of Common Stock upon any exercise of this Warrant. Notwithstanding anything herein to the contrary, the Company shall not be obligated to issue any shares of Common Stock to the extent such issuance is otherwise prohibited by law, including federal or state securities law, but the Company shall use all best efforts to effect such issuance. ARTICLE III ADJUSTMENTS Section 3.01. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company should, at any time or from time to time after the Date of Issuance, fix a record date for a split, subdivision, or combination of the outstanding shares of Common Stock, then as of such record date (or the date of such stock split, subdivision, or combination if no record date is fixed) the number of shares of Common Stock that this Warrant is exercisable to purchase as of such time shall be adjusted to be the same number of shares of Common Stock that the Holder would have if this Warrant had been exercised immediately prior to such split, subdivision, or combination. The Exercise Price shall be adjusted to be the then Exercise Price multiplied by a fraction, the numerator of which is the number of shares of Common Stock purchasable under this Warrant immediately prior to such stock split, subdivision, or combination, and the denominator of which is the number of shares of Common Stock purchasable by this Warrant immediately after such event. Section 3.02. ADJUSTMENT FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR PROPERTY. If the Company should, at any time or from time to time after the Date of Issuance, fix a record date for the determination of eligible stockholders to receive, without payment therefor, other or additional stock or other securities or property, including any right to receive any securities or property (including any beneficial interest in an entity established by the Company or any distribution by an entity whose beneficial interests are owned by the Company or the Company's shareholders in substantially the same proportion as their ownership of Common Stock) not otherwise covered by this Article III (but other than cash in an amount not in excess of 125% of the regular cash dividend paid with respect to the preceding calendar quarter) of the Company by way of dividend, then and in each case, the Holder shall be entitled to receive, in addition to the number of shares of the Common Stock receivable upon exercise of this Warrant, and on such record date, and without payment of any additional consideration therefor upon such exercise, additional consideration (which may include such other or additional stock or other securities or property) so that the Holder will continue to have, in the aggregate, the same economic value as was represented by this Warrant prior to such dividend as if such Warrant had been exercised immediately prior to such dividend or distribution. Section 3.03. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. If the Common Stock issuable upon the exercise of this Warrant shall be changed into the same or different number of shares of any class or classes of stock, whether by reclassification, exchange, substitution, or otherwise (other than a stock split, combination or dividend provided for in Sections 3.01 or 3.02 hereof, or a reorganization, merger, consolidation, or sale of assets provided for in Section 3.04 hereof), then and in such event the Holder shall have the right thereafter to receive upon exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable upon such reclassification, exchange, substitution, or other change as a holder of the number of shares of Common Stock for which this Warrant would have been exercisable immediately prior to such reclassification, exchange, substitution, or other change would have had. Section 3.04. REORGANIZATION, MERGER, CONSOLIDATION OR SALE OF ASSETS. If at any time or from time to time, there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Article III) or a merger or consolidation of the Company with or into another entity where the Company is not the surviving entity, or the transfer or sale of all or substantially all of the Company's assets to any other person, then as a part of such reorganization, merger, consolidation, transfer or sale, effective provision shall be made so that the Holder thereafter shall be entitled to receive upon exercise of this Warrant the number of shares of stock or other securities, instruments or property of the Company or of the successor entity resulting from such merger, consolidation, or sale to which a holder of the Common Stock issuable upon exercise of this Warrant would have been entitled upon such capital reorganization, merger, consolidation, or sale as if such Warrants had been exercised immediately prior to such event. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 3.04 with respect to the rights of the Holder after such reorganization, merger, consolidation, or sale to the end that the provisions of this Article III (including adjustment of the exercise price then in effect) shall be applicable after that event as nearly equivalent as may be practicable. The provisions of this Section 3.04 shall similarly apply to successive reorganizations, mergers, consolidations or sale of assets, and to the stock, securities or instruments of any other entity which are at the time receivable upon the exercise of this Warrant. Section 3.05. ADJUSTMENT FOR COMMON STOCK ISSUE. If the Company issues to all holders of Common Stock or to any Affiliate (other than a wholly owned subsidiary) any shares of Common Stock for a consideration per share less than the Market Value per share in effect on the date the Company fixes the offering price of such additional shares, the Exercise Price shall be adjusted to the price calculated in accordance with the following formula: E' equals the product of (a) E and(b) the quotient of (i) the quantity O plus the quantity P divided by M, divided by (ii) A. where: E' = the adjusted Exercise Price. E = the current Exercise Price. O = the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares. P = the aggregate consideration received for the issuance of such additional shares. M = the Market Value per share of Common Stock on the date of issuance of such additional shares. A = the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. The adjustment under this Section 3.05 shall be made successively whenever any such issuance is made and shall become effective immediately after such issuance. This Section 3.05 does not apply to: (a) any of the transactions described in any other Section of this Article III, and (b) the (i) exercise of the Warrants and Additional Warrants, (ii) exercise of rights, options or warrants for which an adjustment has been made hereunder pursuant to any other Section of this Article III, (iii) conversion or exchange of other securities convertible or exchangeable for Common Stock for which an adjustment has been made hereunder pursuant to any other Section of this Article III and (iv) exercise of rights, options or warrants in connection with pension plans or employment compensation programs equating to less than 10% in the aggregate of the Company's outstanding Common Stock on the date hereof. Section 3.06. LIMITS ON ADJUSTMENTS. No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least five cents ($0.05) in such price; provided, however, that any adjustments which by reason of this sentence are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All such calculations shall be made to the nearest cent. Notwithstanding anything in this Section 3.06 to the contrary, the Exercise Price shall not be reduced to less than the then existing par value of the Common Stock as a result of any adjustment made hereunder. Section 3.07. NOTICE OF ADJUSTMENT. Whenever an adjustment is to be made pursuant to this Article III, the Company shall issue and promptly provide to the Holder a certificate signed by the Company's Secretary setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of shares or amount of property purchasable hereunder, after giving effect to the adjustment. ARTICLE IV TRANSFER, DIVISION AND COMBINATION This Warrant and all rights hereunder are Transferable, in whole or in part, on the books of the Company to be maintained for such purpose, upon surrender of this Warrant Certificate at the office of the Company maintained for such purpose pursuant to Section 11.01, together with a written assignment of this Warrant Certificate (in substantially the form annexed hereto) duly executed by the Holder or its agent or attorney. Upon such surrender and payment the Company shall execute and deliver one or more new Warrant Certificates in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and this Warrant Certificate promptly shall be canceled. This Warrant Certificate, if properly assigned in compliance with this Article IV, may be exercised by an assignee for the purchase of shares of Common Stock without having a new Warrant Certificate issued. Each assignee, by accepting a new Warrant Certificate issued to such assignee or this Warrant Certificate assigned in blank, agrees to be bound by the restrictions on the transferability of this Warrant set forth in the Company's Certificate of Incorporation, in this Warrant Certificate, in the Warrant Agreement, the Investor's Agreement and the Registration Rights Agreement. This Warrant may be divided or combined with other Warrants upon presentation of this Warrant Certificate at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its authorized agent or attorney. Subject to compliance with the next preceding paragraph, as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Company shall maintain at its aforesaid office books for the registration and transfer of the Warrants. ARTICLE V CONSOLIDATION, MERGER, ETC. In case a consolidation or merger of the Company shall be effected with another Person on or after the Date of Issuance, or the sale, lease or transfer of all or substantially all its assets to another Person shall be effected on or after the Date of Issuance, then, as condition of such consolidation, merger, sale, lease or transfer, lawful and adequate provision shall be made whereby the registered Holder of this Warrant Certificate thereafter shall have the right to purchase and receive upon the basis and upon the terms and conditions specified herein, such shares of stock, securities, cash or other property to which the Holder would have been entitled if immediately prior to such consolidation, merger, sale, lease or transfer the Holder had exercised this Warrant for Common Stock. In any such case, appropriate and equitable provision also shall be made with respect to the rights and interests of the registered Holder of this Warrant Certificate to the end that the provisions hereof, of the Warrant Agreement and of the Registration Rights Agreement thereafter shall be applicable, as nearly as may be, in relation of any shares of stock, securities, cash or other property thereafter deliverable upon the exercise of this Warrant. The Company shall not effect any such consolidation, merger, sale, lease or transfer unless prior to or simultaneously with the consummation thereof the successor Person (if other than the Company) resulting from such consolidation or merger or the Person purchasing, leasing or otherwise acquiring such assets shall assume the obligation to deliver to the Holder such shares of stock, securities, cash or other property as, in accordance with the foregoing provisions, the Holder may be entitled to purchase. The above provisions of this Article similarly shall apply to successive consolidations, mergers, sales, leases or transfers. ARTICLE VI NOTICE TO WARRANT HOLDERS In case the Company proposes to (a) pay any dividend to the holders of its Common Stock or to make any other distribution to the holders of its Common Stock, (b) offer to the holders of its Common Stock rights to subscribe for or to purchase any additional shares of Common Stock or shares of any other class of stock or any other securities, rights or options, (c) effect any reclassification of its Common Stock (other than a reclassification involving only the subdivision, or combination, of outstanding shares of Common Stock), (d) effect any capital reorganization, (e) effect any consolidation, merger or sale, lease, transfer or other disposition of all or substantially all of its property, assets or business, or (f) effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to the Holder notice of such proposed action, which shall specify the date on which a record is to be taken for the purposes of such stock dividend, distribution or rights, or the date on which such reclassification, reorganization, consolidation, merger, sale, lease, transfer, disposition, liquidation, dissolution or winding up is to take place, if any such date is to be fixed, and shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action on the Common Stock and the number and kind of any other shares of stock which the Holder is entitled in accordance herewith, and the purchase price or prices thereof, after giving effect to any adjustment which will be required as a result of such action. Such notice shall be so given in the case of any action covered by clause (a) or (b) above at least 10 Business Days prior to the record date for determining holders of the Common Stock for purposes of such action, and in the case of any other such action, at least 10 Business Days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier. ARTICLE VII RESERVATION AND AUTHORIZATION OF STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY The Company shall at all times reserve and keep available for issue upon the exercise or conversion of Warrants such number of its authorized but unissued shares of Common Stock as shall be sufficient to permit the exercise or conversion in full of all outstanding Warrants. All shares of Common Stock which shall be so issuable, when issued upon exercise of any Warrant and payment of the Exercise Price therefor, or upon such conversion, as the case may be, shall be duly and validly issued, fully paid and nonassessable and free and clear of any Liens. Before taking any action which would result in an adjustment in the number of Warrant Shares issuable upon exercise of this Warrant, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. If any shares of Common Stock required to be reserved for issue upon exercise or conversion of this Warrant require registration with any Governmental Authority under any federal or state law (otherwise than in connection with a registration under the Securities Act or applicable state securities laws) before such shares may be so issued, the Company shall in good faith and as expeditiously as possible and at its expense endeavor to cause such shares to be duly registered. ARTICLE VIII WARRANT TRANSFER BOOKS The Company shall not at any time, except upon complete dissolution, liquidation or winding up, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise, conversion or transfer of this Warrant, unless otherwise required by any applicable federal, state or local law. ARTICLE IX EXPENSES, TRANSFER TAXES AND OTHER CHARGES The Company shall pay any and all expenses, transfer taxes (other than income taxes) and other charges in accordance with and to the extent provided in the Warrant Agreement. ARTICLE X NO SHAREHOLDER RIGHTS Except as expressly provided herein or in the Warrant Agreement, this Warrant does not entitle the Holder to any voting, dividend or other rights as a stockholder of the Company. ARTICLE XI MISCELLANEOUS Section 11.01. OFFICE OF THE COMPANY. So long as any this Warrant remains outstanding, the Company shall maintain an office in the continental United States of America where this Warrant may be presented for exercise, transfer, division or combination hereof as herein provided. Such office shall be at the Company's principal executive office, unless and until the Company shall designate and maintain some other office for such purposes and give notice thereof to the Holder. Section 11.02. NOTICES GENERALLY. Any notices and other communications pursuant to the provisions hereof shall be sent in accordance with Section 6.02 of the Warrant Agreement. Section 11.03. AMENDMENTS. The terms of this Warrant may be amended, and the observance of any term therein may be waived, but only with the written consent of the holders of Warrants evidencing a majority of the total number of Warrant Shares at the time purchasable upon the exercise of all then outstanding Warrants. For the purposes of determining whether the holders of outstanding Warrants entitled to purchase a requisite number of Warrant Shares at any time have taken any action authorized by this Warrant, any Warrants owned by the Company or any Affiliate of the Company shall be deemed not to be outstanding. Section 11.04. GOVERNING LAW. This Warrant shall be governed by, and construed in accordance with, the law of the State of Delaware applicable to contracts executed in and to be fully performed in such State. Section 11.05. LIMITATION OF LIABILITY. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of such Holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company, any creditor of the Company or any other Person. Section 11.06. INFORMATION. So long as this Warrant remains outstanding, the Company will furnish to the registered Holder (at the same time as made available generally to Stockholders) annual and quarterly financial reports. IN WITNESS WHEREOF, The Company has duly executed this Warrant. Dated: July 16, 1998 KENNEDY-WILSON, INC. By___________________________ Name: Title: By___________________________ Name: Title: FORM OF ASSIGNMENT (To be executed by the registered Holder hereof) FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers to the assignee set forth below all of the rights of the undersigned under the attached Warrant (Certificate No. W-__) with respect to the number of Warrant Shares set forth below: Name of Assignee Address Number of Warrant Shares Dated: Name: Title: FORM OF EXERCISE (To be executed by the registered Holder hereof) The undersigned hereby exercises this Warrant to subscribe for and purchase ____________ Warrant Shares at the Exercise Price and herewith makes payment therefor in full. Kindly issue certificates and/or other instruments covering the Warrant Shares in accordance with the instructions given below. A new Warrant Certificate for the unexercised balance of the Warrant Shares covered by the attached Warrant (Certificate No. W-__), if any, will be registered in the name of the undersigned. In exercising its rights to purchase such Common Stock, the undersigned hereby confirms that it will not sell or transfer such stock unless such transfer is pursuant to (a) a registration statement in effect with respect to such securities under the Securities Act of 1933, as amended (the "Securities Act") and the rules and regulations thereunder or (b) an exemption from the registration requirements of the Securities Act and any applicable state securities laws. Dated: Name: Title: Instructions for registration of Warrant Name (please print) Social Security or Other Identifying Number: ___________________ Address: EX-99 6 EXHIBIT 5 - JOINT FILING AGREEMENT EXHIBIT 5 JOINT FILING AGREEMENT In accordance with Rule 13d-1(f) under the Securities Exchange Act of 1934, as amended, each of the persons named below agrees to the joint filing on behalf of each of them of a Statement on Schedule 13D (including amendments thereto) with respect to shares of common stock, par value $.01 per share, of Kennedy-Wilson, Inc., a Delaware corporation, and warrants exercisable for additional shares, and further agrees that this Joint Filing Agreement be included as an exhibit to such filings provided that, as contemplated by Section 13d-1(f)(l)(ii), no person shall be responsible for the completeness or accuracy of the information concerning the other persons making the filing, unless such person knows or has reason to believe that such information is inaccurate. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. Dated: July 24, 1998 By: /s/ THOMAS J. BARRACK, JR. --------------------------------- Thomas J. Barrack, Jr. By: /s/ KELVIN L. DAVIS --------------------------------- Kelvin L. Davis COLONYGP III, Inc., a Delaware corporation, By: /s/ KELVIN L. DAVIS --------------------------------- Kelvin L. Davis President COLONY CAPITAL III, L.P., a Delaware limited partnership, By: ColonyGP III, Inc., a Delaware corporation, its general partner By: /s/ KELVIN L. DAVIS ---------------------------- Kelvin L. Davis President COLONY INVESTORS III, L.P., a Delaware limited partnership, By: Colony Capital III, L.P., a Delaware limited partnership, its general partner By: ColonyGP III, Inc., a Delaware corporation, its general partner By: /s/ KELVIN L. DAVIS ----------------------- Kelvin L. Davis President COLONY K-W, LLC, a Delaware limited liability company, By: Colony Investors III, L.P., a Delaware limited partnership, its sole and managing member By: Colony Capital III, L.P., a Delaware limited partnership, its general partner By: ColonyGP III, Inc., a Delaware corporation, its general partner By: /s/ KELVIN L. DAVIS --------------------------- Kelvin L. Davis President -----END PRIVACY-ENHANCED MESSAGE-----