DESCRIPTION OF THE NOTES
In this description, (1) the words we, us, our and Issuer refer to
Kennedy-Wilson, Inc. and not to any of its subsidiaries; and (2) Kennedy-Wilson Holdings refers to Kennedy-Wilson Holdings, Inc. and its subsidiaries. Certain terms used in this description are defined under the subheading
Certain Definitions.
The Issuer issued $200.0 million aggregate principal amount of Notes on
April 5, 2011 and an additional $50.0 million aggregate principal amount of Notes on April 12, 2011 (together, the
Initial Notes
) under an Indenture dated as of April 5, 2011 (the
Indenture
) by and among the Issuer, the Guarantors party thereto and Wilmington Trust, National Association (as successor by merger to Wilmington Trust FSB), as trustee (the
Trustee
).
The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act
of 1939 (the
Trust Indenture Act
). The following description is only a summary of the material provisions of the Indenture. We urge you to read the Indenture because that agreement, and not this description, defines your
rights as holders of these Notes. You may request a copy of the Indenture at our address set forth under the heading Incorporation of Certain Documents by Reference.
Brief Description of the Notes
The Notes:
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are unsecured senior obligations of the Issuer;
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are senior in right of payment to all existing and any future Subordinated Obligations of the Issuer; and
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are guaranteed by Kennedy-Wilson Holdings, Inc. (
Parent
) and each Subsidiary Guarantor on a senior basis.
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Principal, Maturity and Interest
$350.0 million aggregate principal amount of Notes are currently outstanding. Notes are issuable only in denominations of $2,000 and any greater integral multiple of $1,000. The Notes will mature on
April 1, 2019. Subject to our compliance with the covenant described under the subheading Certain CovenantsLimitation on Indebtedness, we are permitted to issue more notes under the Indenture in an unlimited aggregate
principal amount (the
Additional Notes
),
provided
that if the Additional Notes are not fungible with the Notes for United States federal income tax purposes, the Additional Notes will have a separate CUSIP number.
The outstanding notes to which the exchange offer relates constitute Additional Notes. The Initial Notes and any Additional Notes subsequently issued under the Indenture will be treated as a single series of Notes for all purposes under the
Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Holders of the Initial Notes and any the Additional Notes will vote as one class under the Indenture.
Unless the context otherwise requires, for all purposes of the Indenture and this Description of the Notes, references to the
Notes include any Additional Notes actually issued, including the outstanding notes to which the exchange offer relates, and
Original Issue Date
refers to April 5, 2011, the date the Notes were initially issued.
Interest on the Notes will accrue at the rate of 8.750% per annum and, in the case of the outstanding notes to which the
exchange offer relates and any exchange notes issued pursuant to the exchange offer, will accrue from, and including, October 1, 2012. Interest on the Notes is payable semiannually in arrears on April 1 and October 1, commencing, in
the case of such outstanding notes and exchange notes, on April 1, 2013. We will make each interest payment to the holders of record of the Notes on the immediately preceding March 15 and September 15. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
Additional interest may accrue on the Notes in certain
circumstances pursuant to the Registration Rights Agreement.
Optional Redemption
Except as set forth below, we will not be entitled to redeem the Notes at our option.
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On and after April 1, 2015, we will be entitled at our option to redeem all or a
portion of these Notes upon not less than 30 nor more than 60 days notice, at the redemption prices (expressed in percentages of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date), if redeemed during the 12-month period commencing on April 1 of the years set forth below:
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Period
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Redemption Price
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2015
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104.375
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%
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2016
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102.188
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%
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2017 and thereafter
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100.000
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In addition, before April 1, 2014, we will be entitled at our option on one or more occasions to
redeem Notes (which includes Additional Notes, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Notes (which includes Additional Notes, if any) originally issued at a redemption price (expressed as
a percentage of principal amount ) of 108.750%, plus accrued and unpaid interest, if any, to the redemption date, with an amount not to exceed the net cash proceeds from one or more Equity Offerings (provided that if the Equity Offering is an
offering by Parent, a portion of the Net Cash Proceeds thereof equal to the amount required to redeem any such Notes is contributed to the equity capital of the Issuer); provided that:
(1) at least 65% of such aggregate principal amount of Notes (which includes Additional Notes, if any) remains outstanding
immediately after the occurrence of each such redemption (other than Notes held, directly or indirectly, by the Issuer or its Affiliates); and
(2) each such redemption occurs within 90 days after the date of the related Equity Offering.
Notice of any redemption upon any Equity Offering may be given prior to the completion thereof, and any such redemption or notice, may, at the Issuers discretion, be subject to the completion of the
related Equity Offering.
Prior to April 1, 2015, we will be entitled, at our option, to redeem all or a portion of the
Notes at a redemption price equal to 100% of the principal amount of the Notes plus the Applicable Premium as of, and accrued and unpaid interest, if any, to, the redemption date (subject to the right of holders on the relevant record date to
receive interest due on the relevant interest payment date). Notice of such redemption must be mailed by first-class mail to each holders registered address, not less than 30 nor more than 60 days prior to the redemption date.
Applicable Premium
means with respect to a Note at any redemption date, as provided by the Issuer, the greater
of (1) 1.00% of the principal amount of such Note and (2) the excess of (A) the present value at such redemption date of (i) the redemption price of such Note on April 1, 2015 (such redemption price being described in the
second paragraph in this Optional Redemption section exclusive of any accrued and unpaid interest) plus (ii) all required remaining scheduled interest payments due on such Note through April 1, 2015 (but excluding accrued
and unpaid interest, if any, to the redemption date), computed using a discount rate equal to the Adjusted Treasury Rate, over (B) the principal amount of such Note on such redemption date.
Adjusted Treasury Rate
means, with respect to any redemption date and as provided by the Issuer, (1) the
yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated H. 15(519) or any successor publication which is published weekly by the
Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption Treasury Constant Maturities, for the maturity
corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after April 1, 2015, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the
Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month) or (2) if such release (or any successor release) is not published during the week preceding the calculation
date or does not contain such yields, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such
redemption date, in each case calculated on the third Business Day immediately preceding the date that the applicable redemption notice is first mailed, in each case, plus 0.50%.
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Comparable Treasury Issue
means the United States Treasury
security selected by the Quotation Agent as having a maturity comparable to the remaining term of the Notes from the redemption date to April 1, 2015, that would be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of a maturity most nearly equal to April 1, 2015.
Comparable Treasury Price
means, with respect to any redemption date, if clause (2) of the Adjusted
Treasury Rate definition is applicable, the average of three, or such lesser number as is obtained by the Issuer, Reference Treasury Dealer Quotations for such redemption date.
Quotation Agent
means the Reference Treasury Dealer selected by the Issuer.
Reference Treasury Dealer
means Merrill Lynch, Pierce, Fenner & Smith Incorporated and its successors
and assigns and Morgan Stanley & Co. LLC (formerly Morgan Stanley & Co. Incorporated) and its successors and assigns.
Reference Treasury Dealer Quotations
means with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Issuer, of the bid and asked
prices for the Comparable Treasury Issue, expressed in each case as a percentage of its principal amount, quoted in writing to the Issuer by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day immediately
preceding date that the applicable redemption notice is first mailed.
Selection and Notice of Redemption
If we are redeeming less than all the Notes at any time, the Trustee will select Notes on a pro rata basis, by lot or
by such other method in accordance with the procedures of DTC.
We will redeem Notes of $2,000 or less in whole and not in
part. We will cause notices of redemption to be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address.
If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal
amount thereof to be redeemed. We will issue a new Note in a principal amount equal to the unredeemed portion of the original Note in the name of the holder thereof upon cancellation of the original Note. Notes called for redemption become due on
the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption.
No Sinking Fund; Open Market Purchases
We are not required to make any sinking fund payments with respect to the Notes. However, under certain circumstances, we may be required to offer to purchase Notes as described under the captions
Fundamental Change and Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock. We may at any time and from time to time purchase Notes in the open market or otherwise.
Guaranties
Parent and
each Subsidiary Guarantor of the Issuer jointly and severally guarantee, on a senior unsecured basis, our obligations under the Indenture and the Notes. The obligations of each Subsidiary Guarantor under its Subsidiary Guaranty are designed to be
limited as necessary to prevent such Subsidiary Guaranty from constituting a fraudulent conveyance under applicable law and, therefore, is be expressly limited to the maximum amount that such Subsidiary Guaranty could guarantee without such
Subsidiary Guaranty constituting a fraudulent conveyance. This limitation, however, may not be effective to prevent such Subsidiary Guaranty from constituting a fraudulent conveyance. See Risk FactorsRisks Related to the NotesA
subsidiary guarantee could be voided if it constitutes a fraudulent transfer under U.S. bankruptcy or similar state law, which would prevent the holders of the Notes from relying on that subsidiary to satisfy claims.
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If a Subsidiary Guaranty were rendered voidable, it could be subordinated by a court to all
other indebtedness (including guarantees and other contingent liabilities) of the applicable Subsidiary Guarantor, and, depending on the amount of such indebtedness, a Subsidiary Guarantors liability on its Subsidiary Guaranty could be reduced
to zero. See Risk FactorsRisks Related to the NotesA subsidiary guarantee could be voided if it constitutes a fraudulent transfer under U.S. bankruptcy or similar state law, which would prevent the holders of the Notes from relying
on that subsidiary to satisfy claims.
The Subsidiary Guaranty of a Subsidiary Guarantor will be released:
(1) upon the sale or other disposition (including by way of consolidation or merger) of a Subsidiary Guarantor;
(2) upon the sale or disposition of all or substantially all the assets of a Subsidiary Guarantor;
(3) upon the designation of such Subsidiary Guarantor as an Unrestricted Subsidiary pursuant to the terms of the
Indenture;
(4) upon the defeasance of the Notes, as provided under Defeasance and Satisfaction and
Discharge; or
(5) as described under Amendments and Waivers,
in the case of clause (1) or (2), other than to the Issuer or a Restricted Subsidiary and as permitted by the Indenture.
Not all of our Subsidiaries will guarantee the Notes. Also, the joint venture and fund entities in which we have investments and their
respective Subsidiaries (which are not Subsidiaries of the Issuer as of the date of the Indenture) are not guarantors and are not subject to any of the obligations and covenants described hereunder. In the event of a bankruptcy, liquidation or
reorganization of any of these non-guarantor Subsidiaries, the non-guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to us. For the nine months ended
September 30, 2012 and the year ended December 31, 2011, the revenues of our non-guarantor subsidiaries constituted approximately 50.0% and 54.7%, respectively, of Kennedy-Wilson Holdings consolidated revenues, and the operating
income of our non-guarantor subsidiaries for those periods was approximately $10.4 million and $23.9 million, respectively. As of September 30, 2012, the total assets of those subsidiaries constituted approximately 14.5% of Kennedy- Wilson
Holdings consolidated total assets, and those subsidiaries had $26.4 million of secured non-recourse mortgage indebtedness, of which none has recourse to us. However, these figures are as of September 30, 2012 and do not reflect
transactions that we have entered into after that date or future transactions that we may enter into. Depending on the particular terms of any acquisition or other transaction that one or more of our subsidiaries may enter into, those subsidiaries
may not be required by the terms of the Indenture to guarantee the Notes. Accordingly, these figures may fluctuate from time to time, and these figures may increase or decrease materially in future periods. For example, the instruments governing our
acquisitions (such as the relevant loan agreement, or the terms of the relevant partnership agreement, limited liability company operating agreement or other governing document of the borrower, or any related joint venture agreement or the terms of
any relevant Co-investment Vehicle or separate account or investment program) may prohibit the relevant subsidiary from guaranteeing the Notes. In many such cases, the Indenture does not require our subsidiaries, including those described above, to
guarantee the Notes.
Ranking
The indebtedness evidenced by the Notes and the Guaranties will be senior unsecured obligations and will rank
pari passu
in right of payment with all other unsecured Senior Indebtedness of the
Issuer or the applicable Guarantor, as the case may be.
As of September 30, 2012, on a pro forma basis after giving
effect to the issuance and sale of $55.0 million aggregate principal amount of the 2042 notes in November and December 2012 and the issuance and sale in December 2012 of $100.0 million aggregate principal amount of the outstanding notes to which the
exchange offer relates, after deducting discounts and commissions and estimated offering expenses to be paid by us:
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(a) the Issuer and the Subsidiary Guarantors would have had $409.4 million of outstanding
Senior Indebtedness, of which:
(1) $4.4 million would have been secured non-recourse mortgage indebtedness;
and
(2) $405.0 million would have been unsecured Senior Indebtedness, consisting of the $100.0 million
aggregate principal amount of outstanding notes to which the exchange offer relates, $250.0 million aggregate principal amount of the Exchange Notes outstanding as of the date of this prospectus and $55.0 million aggregate principal amount of the
2042 notes;
(b) the Issuer had no indebtedness outstanding under the Credit Facility and had $100.0 million of availability
thereunder; and
(c) the Issuer had $40.0 million of subordinated Indebtedness, consisting entirely of the Subordinated
Debentures.
In addition, as of such date, the Issuer and the Guarantors would have had $29.4 million aggregate principal
amount of Guarantees that the Issuer and the Guarantors provided in connection with loans secured by assets held in various joint ventures and that are recourse to the Issuer and the Guarantors.
The Notes and the Guaranties are unsecured obligations of the Issuer and the Guarantors, as the case may be. Secured debt and other
secured obligations of the Issuer and the Guarantors will be effectively senior to the Notes and the Guaranties to the extent of the value of the assets securing such debt or other obligations. In addition, all Indebtedness and trade payables of
non-guarantor Subsidiaries will be effectively senior to the Notes and the Guaranties.
Not all of our subsidiaries will
guarantee the notes. See Risk FactorsRisks Related to the NotesThe notes will not be guaranteed by all of our subsidiaries.
Although the Indenture contains limitations on the amount of additional Indebtedness that the Issuer and the Restricted Subsidiaries may incur, under certain circumstances the amount of such Indebtedness
could be substantial and, subject to the limitations set forth in the covenants described under Certain CovenantsLimitation on Liens, such Indebtedness may be secured Indebtedness. See Certain
CovenantsLimitation on Indebtedness and Limitation on Liens.
Fundamental Change
Upon the occurrence of a Fundamental Change, each noteholder shall have the right to require that the Issuer purchase such
noteholders Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
Within 30 days following any Fundamental Change,
unless we have exercised our option to redeem all the Notes as described under Optional Redemption, we will mail a notice to each noteholder with a copy to the Trustee (the
Fundamental Change Offer
)
stating:
(1) that a Fundamental Change has occurred and that such noteholder has the right to require us to purchase such
noteholders Notes at a purchase price in cash equal to 101 % of the principal amount thereof on the date of purchase, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of noteholders of record on the
relevant record date to receive interest on the relevant interest payment date);
(2) the circumstances and relevant facts
regarding such Fundamental Change (including information with respect to pro forma historical income, cash flow and capitalization, in each case after giving effect to such Fundamental Change);
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(3) the purchase date (which shall be no earlier than 30 days nor later than 60 days from
the date such notice is mailed); and
(4) the instructions, as determined by us, consistent with the covenant described
hereunder, that a noteholder must follow in order to have its Notes purchased.
We will not be required to make a Fundamental
Change Offer following a Fundamental Change if a third party makes the Fundamental Change Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Fundamental Change Offer made by
us and purchases all Notes validly tendered and not withdrawn under such Fundamental Change Offer or if we have exercised our option to redeem all the Notes pursuant to the provisions described under Optional Redemption.
We will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the purchase of Notes as a result of a Fundamental Change. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, we
will comply with the applicable securities laws and regulations and shall not be deemed to have breached our obligations under the covenant described hereunder by virtue of our compliance with such securities laws or regulations.
The Fundamental Change purchase feature of the Notes may in certain circumstances make more difficult or discourage a sale or takeover of
the Issuer and, thus, the removal of incumbent management. The Fundamental Change purchase feature is a result of negotiations between the Issuer and the Initial Purchasers. We have no present intention to engage in a transaction involving a Change
of Control and we do not foresee the occurrence of a Termination of Trading, although it is possible that, in the future, we could decide to engage in a transaction involving a Change of Control or a Termination of Trading occurs. Subject to the
limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture or result in a Termination of
Trading, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to Incur additional Indebtedness are contained in the covenants described
under Certain CovenantsLimitation on Indebtedness, and Limitation on Liens, which limitations may terminate as described under Defeasance and Satisfaction and Discharge below. Such
restrictions can only be waived with the consent of the holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenant, however, the Indenture will not contain any covenants or
provisions that may afford holders of the Notes protection in the event of a highly leveraged transaction.
Holders may not be
entitled to require us to purchase their Notes in certain circumstances involving a significant change in the composition of our Board of Directors, including in connection with a proxy contest where our Board of Directors does not approve a
dissident slate of directors but approves them as continuing directors, even if our Board of Directors initially opposed the directors.
The Credit Agreement provides that the occurrence of certain change of control events with respect to the Issuer would constitute a default thereunder. Future indebtedness that we may incur may contain
prohibitions on the occurrence of certain events that would constitute a Fundamental Change or require the purchase of such indebtedness upon a Fundamental Change. Moreover, the exercise by the holders of their right to require us to purchase the
Notes could cause a default under such indebtedness, even if the Fundamental Change itself does not, due to the financial effect of such purchase on us. Our ability to pay cash to the holders of Notes following the occurrence of a Fundamental Change
may be limited by our then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required purchases. See Risk FactorsRisks Related to the NotesWe may not have the
ability to raise the funds necessary to finance a fundamental change offer.
The occurrence of a Fundamental Change will
also trigger a redemption right held by the holders of Parents Series A Preferred Stock and Series B Preferred Stock under their respective certificates of designation. Pursuant to paragraph (a) and clause (11) of paragraph
(b) under the covenant described under Certain CovenantsLimitation on Restricted Payments, we may not make any Restricted Payment to redeem or repurchase Parents Series A Preferred Stock and Series B Preferred
Stock, unless we have sufficient restricted payment capacity or we have previously made an offer to noteholders to repurchase the Notes. If the noteholders, however, reject our Fundamental Change Offer or fail for any reason to tender all of their
Notes, and the stockholders of Parents Series A Preferred Stock and Series B Preferred Stock accept Parents offer to repurchase such shares of Series A Preferred Stock and Series B Preferred Stock, we may have to pay dividends or make
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other payments to Parent so that it can use cash to fund the repurchase or redemption of its Series A Preferred Stock and Series B Preferred Stock. In the event this occurs, it may be it more
difficult for us to make scheduled payments on the untendered Notes. See Risk FactorsRisks Related to the NotesIn the event of a change of control or termination of trading of our common stock, our Series A and Series B preferred
stock will be redeemable at the option of the stockholders thereof.
Notwithstanding anything to the contrary herein, a
Fundamental Change Offer may be made in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of such Fundamental Change Offer.
The phrase all or substantially all, as used with respect to the assets of the Issuer in the definition of Change of
Control, is subject to interpretation under applicable state law, and its applicability in a given instance would depend upon the facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or
transfer of all or substantially all the assets of the Issuer has occurred in a particular instance, in which case a holders ability to obtain the benefit of these provisions could be unclear.
The provisions under the Indenture relative to our obligation to make an offer to purchase the Notes as a result of a Fundamental Change
may be waived or modified with the written consent of the holders of a majority in principal amount of the Notes.
For
purposes of this discussion of a repurchase of the Notes following a Fundamental Change
Change of Control
means the occurrence of any of the following:
(1) any person or group (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 35% (or, in the case of any Permitted Holder, 50%) of the total voting power of the Voting Stock of the Parent;
(2) individuals who on the Original Issue Date constituted the Board of Directors (together with any new directors whose
election by such Board of Directors or whose nomination for election by the shareholders of the Parent was approved by a vote of a majority of the directors of the Parent then still in office who were either directors on the Original Issue Date or
whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Parent then in office;
(3) the adoption of a plan relating to the liquidation or dissolution of the Parent;
(4) the merger or consolidation of the Parent with or into another Person or the merger of another Person with or into the Parent, or the sale of all or substantially all the consolidated assets of Parent
(but in any event, upon the sale of more than 35% of the consolidated assets of the Parent), to another Person, other than a transaction following which (A) in the case of a merger or consolidation transaction, holders of securities that
represented 100% of the Voting Stock of the Parent immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own, directly or indirectly, at least a
majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction immediately after such transaction and (B) in the case of a sale of assets transaction, the transferee Person becomes the
obligor in respect of the Notes and a Subsidiary of the transferor of such assets; or
(5) the Parent ceases to own, directly,
100% of the Capital Stock of the Issuer.
For the avoidance of doubt, for purposes of determining beneficial ownership under
clause (1) above, no Permitted Holder shall be deemed to be a person or group (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) with Fairfax.
Fundamental Change
shall mean the occurrence of a Change of Control or a Termination of Trading.
Termination of Trading
shall mean the termination (but not the temporary suspension) of trading of the Common
Stock of Parent, which will be deemed to have occurred if the Common Stock or other securities into which the Parents Series A Preferred Stock and Series B Preferred Stock are convertible are not, or are not permitted to be, listed for trading
on the New York Stock Exchange or any other U.S. national securities exchange.
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Certain Covenants
The Indenture contains, among others, the following covenants:
Limitation
on Indebtedness
(a) The Issuer will not, and will not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness;
provided
,
however
, that the Issuer and the Restricted Subsidiaries will be entitled to Incur Indebtedness (including revolving credit Indebtedness) if, on the date of such Incurrence and after giving
effect thereto, no Default has occurred and is continuing and the Maximum Balance Sheet Leverage Ratio is no greater than 1.5 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), the Issuer and the Restricted Subsidiaries will be entitled to Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred by the Issuer pursuant to any Credit Facility (including the Credit Agreement);
provided
,
however
, that, immediately after giving effect to any such Incurrence, the aggregate principal amount of all Indebtedness Incurred under this clause (1) and then outstanding does not exceed $100.0 million;
(2) Indebtedness owed to and held by the Issuer or a Restricted Subsidiary;
provided
,
however
, that
(A) any subsequent issuance or transfer of any Capital Stock which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Issuer or a Restricted
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the obligor thereon and (B) if the Issuer is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in
full in cash of all obligations with respect to the Notes;
(3) the Notes and the Exchange Notes (other than
any Additional Notes);
(4) Indebtedness of the Issuer and its Subsidiaries outstanding on the Original Issue
Date (other than Indebtedness described in clause (1), (2) or (3) of this covenant);
(5)
Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Subsidiary was acquired by the Issuer (other than Indebtedness Incurred in connection with, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Issuer);
provided
,
however
, at the time of such acquisition and after
giving effect thereto, the aggregate principal amount of all Indebtedness Incurred pursuant to this clause (5) and then outstanding does not exceed $15.0 million;
(6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (3),
(4), (5), or this clause (6);
provided
,
however
, that to the extent such Refinancing Indebtedness directly or indirectly Refinances Indebtedness of a Subsidiary Incurred pursuant to clause (5), such Refinancing Indebtedness shall be
Incurred only by such Subsidiary;
(7) Hedging Obligations of the Issuer or any Restricted Subsidiary entered
into in the ordinary course of business and not for the purpose of speculation;
(8) obligations in respect of
letters of credit, performance, bid and surety bonds, completion guarantees, budget guarantees, payment obligations in connection with self-insurance or similar requirements provided by the Issuer or any Restricted Subsidiary in the ordinary course
of business;
(9) Indebtedness arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument drawn against insufficient funds in the ordinary course of business;
provided
,
however
, that such Indebtedness is extinguished within five Business Days of its Incurrence;
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(10) Indebtedness with respect to workers compensation claims in the
ordinary course of business;
(11) any Guarantee (including the Subsidiary Guaranties) by the Issuer or a
Restricted Subsidiary of Indebtedness or other obligations of the Issuer or any of its Restricted Subsidiaries so long as the Incurrence of such Indebtedness by the Issuer or such Restricted Subsidiary is permitted under the terms of the Indenture;
(12) Indebtedness arising from agreements providing for indemnification, deposits, adjustment of purchase
price or similar obligations, in each case, Incurred or assumed in connection with the acquisition or disposition of any business, assets or a Subsidiary;
provided
,
however
, that (A) such Indebtedness is not reflected on the
balance sheet of the Issuer or any Restricted Subsidiary (contingent obligations referred to in a footnote or footnotes to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet
for purposes of this clause (A)) and (B) in the case of a disposition, the maximum liability in respect of such Indebtedness shall at no time exceed the gross proceeds including noncash proceeds (the fair market value of such noncash proceeds
being determined at the time received and without giving effect to any subsequent changes in value) actually received by the Issuer or such Restricted Subsidiary in connection with such disposition;
(13) Non-Recourse Indebtedness, Permitted Non-Recourse Carve-Out Guarantees and Permitted Co-investments;
(14) Indebtedness constituting Subordinated Obligations, the net cash proceeds of which are used to purchase, repurchase,
redeem, defease or otherwise acquire or retire for value the Subordinated Debentures and with a Stated Maturity that is no earlier than 180 days after the Stated Maturity of the Notes; and
(15) Indebtedness of the Issuer or any Restricted Subsidiary (together with any refinancing thereof) in an aggregate
principal amount which, when taken together with all other Indebtedness of the Issuer and the Restricted Subsidiaries outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (14) above or
paragraph (a)), does not exceed $25.0 million.
(c) Notwithstanding the foregoing (except to the extent provided in the
foregoing clause (14)), none of the Issuer or any Subsidiary Guarantor will Incur any Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinated Obligations of
the Issuer or any Subsidiary Guarantor unless such Indebtedness shall be subordinated to the Notes or the applicable Subsidiary Guaranty to at least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this covenant: (1) any Indebtedness outstanding under the Credit Agreement on the
Original Issue Date will be treated as having been incurred on the Original Issue Date under clause (1) of paragraph (b) above; (2) in the event that an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described above, the Issuer, in its sole discretion, will be permitted to classify all or a portion of such item of Indebtedness at the time of Incurrence, or later reclassify all or a portion of such item of Indebtedness, in one of the
above clauses in any manner that complies with the covenant; and (3) the Issuer will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described above. Notwithstanding the foregoing,
Indebtedness incurred under the Credit Agreement will be deemed to have been incurred under clause (1) of paragraph (b) above and the Issuer shall not be permitted to reclassify all or any portion of such Indebtedness. Indebtedness
permitted by this covenant need not be permitted solely by reference to one provision permitting such Indebtedness, but may be permitted in part by one such provision and in part by one or more other provisions of this covenant permitting such
Indebtedness. For the avoidance of doubt, the outstanding principal amount of any particular Indebtedness shall be counted only once and any obligations arising under any Guarantee, Lien, letter of credit or similar instrument supporting such
Indebtedness shall not be double counted.
(e) For purposes of determining compliance with any U.S. dollar restriction on the
Incurrence of Indebtedness where the Indebtedness Incurred is denominated in a different currency, the amount of such Indebtedness will be the U.S. Dollar Equivalent determined on the date of the Incurrence of such Indebtedness,
provided
,
however
, that if any such Indebtedness denominated in a different currency is subject to a Currency Agreement with respect to U.S. dollars covering all principal, premium, if any, and interest payable on such Indebtedness,
the amount of such Indebtedness expressed in U.S. dollars will be as provided in such Currency Agreement. The principal amount of any Refinancing Indebtedness Incurred in the same currency as the Indebtedness being Refinanced will be the
U.S. Dollar Equivalent of the Indebtedness Refinanced,
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except to the extent that (1) such U.S. Dollar Equivalent was determined based on a Currency Agreement, in which case the Refinancing Indebtedness will be determined in accordance with
the preceding sentence, and (2) the principal amount of the Refinancing Indebtedness exceeds the principal amount of the Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such excess will be determined on the date
such Refinancing Indebtedness is Incurred.
Limitation on Restricted Payments
(a) The Issuer will not, and will not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the
time the Issuer or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred
and be continuing (or would result therefrom);
(2) the Issuer is not entitled to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under Limitation on Indebtedness; or
(3) the aggregate amount of such Restricted Payment and all other Restricted Payments made on or after the Original Issue Date would exceed the sum of (without duplication):
(A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from April 1,
2011 to the end of the most recent fiscal quarter ended for which internal financial statements are available prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit);
plus
(B) 100% of the aggregate Net Cash Proceeds received by the Issuer from the issuance or sale of its
Capital Stock (other than Disqualified Stock) subsequent to Original Issue Date (other than an issuance or sale to a Subsidiary of the Issuer and other than an issuance or sale to an employee stock ownership plan or to a trust established by the
Issuer or any of its Subsidiaries for the benefit of their employees) and 100% of any cash capital contribution received by the Issuer from its shareholders subsequent to the Original Issue Date; plus
(C) the amount by which Indebtedness of the Issuer is reduced on the Issuers balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Issuer) subsequent to the Original Issue Date of any Indebtedness of the Issuer convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Issuer (less the amount of any cash, or
the fair value of any other property, distributed by the Issuer upon such conversion or exchange).
(b) The preceding
provisions will not prohibit:
(1) (A) any Restricted Payment made out of the Net Cash Proceeds of the
substantially concurrent sale of, or made by exchange for, Capital Stock of the Issuer (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Issuer or an employee stock ownership plan or to a trust
established by the Issuer or any of its Subsidiaries for the benefit of their employees) subsequent to the Original Issue Date or (B) any Restricted Payment made out of a substantially concurrent cash capital contribution received by the Issuer
from its shareholders subsequent to the Original Issue Date;
provided
,
however
, that (i) such Restricted Payment shall be excluded in the calculation of the amount of Restricted Payments and (ii) the Net Cash Proceeds from
such sale or such cash capital contribution (to the extent so used for such Restricted Payment) shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated
Obligations of the Issuer or a Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Subordinated Obligations which is permitted to be Incurred pursuant to the covenant described under
Limitation on Indebtedness; provided, however, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments;
52
(3) dividends paid within 60 days after the date of declaration thereof if
at such date of declaration such dividend would have complied with this covenant;
provided
,
however
, that such dividend shall be included in the calculation of the amount of Restricted Payments;
(4) (A) payments or distributions to employees of Parent, the Issuer or any Restricted Subsidiary pursuant to
incentive plans designed to pay employees amounts reflecting incentive compensation in recognition of performance thresholds achieved by such employees or (B) payments or distributions to employees of Parent, the Issuer or any Restricted
Subsidiary of co-investment return, carried interest or other form of incentive compensation or performance fees or any distribution of an equity interest in respect thereof, or any other incentive distributions from
Investment Subsidiaries or Co-investment Vehicles;
provided
,
however
, that such payments or distributions shall be excluded in the calculation of the amount of Restricted Payments;
(5) so long as no Default has occurred and is continuing, the repurchase or other acquisition of shares of Capital Stock
of Parent or the Issuer or any of the Issuers Subsidiaries from employees (including substantially full-time independent contractors), former employees, directors, former directors or consultants of the Issuer or any of its Subsidiaries (or
permitted transferees of such employees, former employees, directors, former directors or consultants), pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors of
Parent or its Subsidiaries under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such Capital Stock (including pursuant to any net exercise or net settlement provisions);
provided
,
however
, that the aggregate amount of such repurchases and other acquisitions for cash shall not exceed the sum of (A) $5.0 million, (B) the Net Cash Proceeds from the sale of Capital Stock to members of management, consultants or
directors of the Issuer and its Subsidiaries that occurs after the Original Issue Date (to the extent the Net Cash Proceeds from the sale of such Capital Stock have not otherwise been applied to the payment of Restricted Payments by virtue of clause
(3)(B) of paragraph (a) above) and (C) the cash proceeds of any key man life insurance policies that are used to make such repurchases;
provided further
,
however
, that (x) such repurchases and other
acquisitions shall be excluded in the calculation of the amount of Restricted Payments and (y) the Net Cash Proceeds from such sale shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above;
(6) dividends to Parent to be used by Parent solely to pay its franchise taxes and other fees required to
maintain its corporate existence and to pay for general corporate and overhead expenses (including salaries, insurance and other compensation of the employees) incurred by Parent in the ordinary course of its business;
provided
,
however
, that such dividends shall not exceed $1.5 million in any calendar year;
provided further
,
however
, that such dividends shall be excluded in the calculation of the amount of Restricted Payments;
(7) so long as no Event of Default has occurred and is continuing, dividends or other payments to Parent to be used by
Parent to pay dividends to the holders of the Parents Series A Preferred Stock and Series B Preferred Stock issued and outstanding as of the Original Issue Date,
provided
,
however
, that the aggregate amount of such dividends or
other payments shall not exceed $8.5 million per year (
provided
that any unused amounts in any year continue to carry forward and increase such limit in each subsequent year);
provided further
,
however
, that such dividends or
other payments shall be excluded in the calculation of the amount of Restricted Payments;
(8) payments to
Parent in respect of Federal, state and local taxes directly attributable to (or arising as a result of) the operations of the Issuer and its consolidated Subsidiaries;
provided
,
however
, that the amount of such payments in any fiscal
year do not exceed the amount that the Issuer and its consolidated Subsidiaries would be required to pay in respect of Federal, state and local taxes for such fiscal year were the Issuer to pay such taxes as a stand-alone taxpayer (whether or not
all such amounts are actually used by Parent for such purposes);
provided further
,
however
, that such payments shall be excluded in the calculation of the amount of Restricted Payments;
(9) Investments made pursuant to commitments to Invest if at the date such commitment was made, such Investment would have
complied with this covenant;
provided
,
however
, that such Investment shall be excluded in the calculation of the amount of Restricted Payments;
(10) upon the occurrence of a Change of Control (or similarly defined term in other Indebtedness) and within 90 days after completion of the Fundamental Change Offer (including the purchase of all Notes
tendered), any repayment, repurchase, redemption, defeasance or other acquisition or retirement for value of any Indebtedness
53
of the Issuer or the Subsidiary Guarantors that is contractually subordinated to the Notes or to any Subsidiary Guaranty that is required to be repurchased or redeemed pursuant to the terms
thereof as a result of such Change of Control (or similarly defined term in other Indebtedness), at a purchase price not greater than 101% of the outstanding principal amount or liquidation preference thereof (plus accrued and unpaid interest and
liquidated damages, if any);
(11) upon the occurrence of a Fundamental Change (or similarly defined term in
the certificates of designation of Parents Series A Preferred Stock and Series B Preferred Stock) and within 90 days after completion of the Fundamental Change Offer (including the purchase of all Notes tendered), any repayment, repurchase,
redemption, defeasance or other acquisition or retirement for value of Parents Series A Preferred Stock and Series B Preferred Stock (or any dividend or other payment to Parent for such purpose) that is required to be repurchased or redeemed
pursuant to the terms thereof as a result of such Fundamental Change (or similarly defined term in the certificates of designation of Parents Series A Preferred Stock and Series B Preferred Stock), at a purchase price not greater than the
respective purchase prices specified in the certificates of designation of Parents Series A Preferred Stock and Series B Preferred Stock as in effect on the Original Issue Date;
(12) within 90 days after completion of any offer to repurchase Notes pursuant to Limitation on Sales of
Assets and Subsidiary Stock (including the purchase of all Notes tendered), any repayment, repurchase, redemption, defeasance or other acquisition or retirement for value of any Indebtedness of the Issuer or the Subsidiary Guarantors that is
contractually subordinated to the Notes or to any Subsidiary Guaranty that is required to be repurchased or redeemed pursuant to the terms thereof as a result of such Asset Disposition (or similarly defined term in other Indebtedness), at a purchase
price not greater than 100% of the outstanding principal amount or liquidation preference thereof (plus accrued and unpaid interest and liquidated damages, if any);
(13) the payment of any amounts in respect of Capital Stock by any Restricted Subsidiary organized as a partnership or a
limited liability company or other pass-through entity: (a) to the extent of capital contributions made to such Restricted Subsidiary (other than capital contributions made to such Restricted Subsidiary by the Issuer or any Restricted
Subsidiary), or (b) to the extent necessary for holders thereof to pay taxes with respect to the net income of such Restricted Subsidiary;
provided
,
however
, that except in the case of clause (b), no Default or Event of Default
has occurred and is continuing at the time of such Restricted Payment or would result therefrom;
provided
,
further
,
however
, such amounts shall be excluded in the calculation of the amount of Restricted Payments;
(14) the payment of any dividend or distributions by a Restricted Subsidiary of the Issuer to the holders of its Capital
Stock pursuant to the terms of the relevant partnership agreement, limited liability company operating agreement or other governing document of the Restricted Subsidiary;
provided
,
however
, that such amounts shall be excluded in the
calculation of the amount of Restricted Payments; and
(15) Restricted Payments in an aggregate amount which,
when taken together with all Restricted Payments made pursuant to this clause (15) which have not been repaid, does not exceed $25.0 million;
provided
,
however
, that (A) at the time of such Restricted Payments, no Default
shall have occurred and be continuing (or result therefrom) and (B) such Restricted Payments shall be excluded in the calculation of the amount of Restricted Payments.
As of September 30, 2012, the sum of the amounts referred to in paragraphs (A), (B) and (C) of clause (a)(3) above, less the amount of Restricted Payments made pursuant to clause
(a) above on or before such date, was approximately $209.8 million.
Limitation on Restrictions on
Distributions from Restricted Subsidiaries
The Issuer will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock to the Issuer or a
Restricted Subsidiary or pay any Indebtedness owed to the Issuer, (b) make any loans or advances to the Issuer or (c) transfer any of its property or assets to the Issuer, except:
(1) with respect to clauses (a), (b) and (c),
54
(A) any encumbrance or restriction pursuant to an agreement of the Issuer or
any of its Subsidiaries in effect at or entered into on the Original Issue Date;
(B) any encumbrance or
restriction contained in the terms of any agreement pursuant to which such Indebtedness was issued if (x) either (i) the encumbrance or restriction applies only in the event of and during the continuance of a payment default or a default
with respect to a financial covenant contained in such Indebtedness or agreement or (ii) the Issuer determines at the time any such Indebtedness is Incurred (and at the time of any modification of the terms of any such encumbrance or
restriction) that any such encumbrance or restriction will not materially affect the Issuers ability to make principal or interest payments on the Notes and (y) the encumbrance or restriction is not materially more disadvantageous to the
holders of the Notes than is customary in comparable financings or agreements (as determined by the Board of Directors in good faith);
(C) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on which
such Restricted Subsidiary was acquired by the Issuer (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions
pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Issuer) and outstanding on such date;
(D) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (A), (B) or (C) of clause (1) of
this covenant or this clause (D) or contained in any amendment to an agreement referred to in clause (A), (B) or (C) of clause (1) of this covenant or this clause (D);
provided
,
however
, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are not materially less favorable, taken as a whole, to the noteholders than encumbrances and restrictions with respect to such
Restricted Subsidiary contained in such predecessor agreements;
(E) any encumbrance or restriction pursuant to
customary restrictions on, or customary conditions to the payment of dividends or other distributions on, equity interests owned by the Issuer or any Subsidiary in any joint venture or similar enterprise contained in the constitutive documents,
including shareholders or similar agreements, of such joint venture or enterprise, to the extent encumbrances or restrictions apply solely to the income of such joint venture or similar enterprise;
(F) any encumbrance or restriction pursuant to customary restrictions contained in (i) agreements governing any
Non-Recourse Indebtedness or Permitted Co-investments, or (ii) the terms of the relevant partnership agreement, limited liability company operating agreement or other governing document of the entity that is the borrower under any Non-Recourse
Indebtedness or of any Co-investment Vehicle;
(G) any encumbrance or restriction contained in the terms of any
agreement governing Indebtedness directly or indirectly secured by real property or other related assets that are customary for real property financing transactions, such as cash collateral accounts or impounds or reserves required for payment of
taxes, insurance, security deposits, capital expenditures and repairs, interest and tenant improvements and leasing commissions; and
(H) any encumbrance or restriction pursuant to applicable law; and
(2) with
respect to clause (c) only,
(A) any such encumbrance or restriction consisting of customary nonassignment
provisions in leases governing leasehold interests or licenses of intellectual property to the extent such provisions restrict the transfer of the lease or the property leased or licensed thereunder;
(B) restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the
extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages;
55
(C) restrictions on the transfer of assets subject to any Lien permitted
under the Indenture imposed by the holder of such Lien;
(D) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; and
(E) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of the property or assets of the Issuer or any Restricted Subsidiary in a manner material to the Issuer and its Restricted Subsidiaries, taken as a whole.
Limitation on Sales of Assets and Subsidiary Stock
(a) The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Disposition unless:
(1) the Issuer or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal
to the fair market value (including as to the value of all noncash consideration), as determined in good faith by members of the Issuers senior management, of the shares and assets subject to such Asset Disposition;
(2) at least 75% of the consideration thereof received by the Issuer or such Restricted Subsidiary is in the form of cash
or cash equivalents, Temporary Cash Investments or Replacement Assets or a combination of cash and cash equivalents, Temporary Cash Investments, and Replacement Assets;
provided
,
however
, that with respect to the sale of one or more
real estate properties, up to 75% of the consideration may consist of Indebtedness of the purchaser of such real estate properties so long as such Indebtedness is secured by a first or second priority Lien on the real estate property or properties
sold;
(3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the
Issuer (or such Restricted Subsidiary, as the case may be):
(A) first, to the extent the Issuer elects (or is
required by the terms of any Indebtedness), to prepay, repay, redeem or purchase secured Indebtedness of the Issuer or any Restricted Subsidiary or Indebtedness (other than Disqualified Stock) of any other Wholly Owned Subsidiary (in each case other
than Indebtedness owed to the Issuer or an Affiliate of the Issuer) within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash;
(B) second, to the extent of the balance of such Net Available Cash after application in accordance with clause (A), to
the extent the Issuer elects, to make a capital expenditure or to acquire Replacement Assets within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; and
(C) third, to the extent of the Excess Proceeds (as defined below), to make an offer to the holders of the Notes (and to
holders of other Senior Indebtedness of the Issuer designated by the Issuer) to purchase Notes (and such other Senior Indebtedness of the Issuer) pursuant to and subject to the conditions contained in the Indenture;
provided
,
however
, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause
(A) or (C) above, the Issuer or such Restricted Subsidiary shall permanently retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased;
provided further
,
however
, the Issuer will be deemed to have complied with clause (B) above if and to the extent that, within 365 days after the later of the Asset Disposition or the receipt of Net Available
Cash, the Issuer or any of its Restricted Subsidiaries has entered into and not abandoned or rejected a binding agreement to make a capital expenditure or to acquire Replacement Assets, and that such capital expenditure or acquisition is thereafter
completed within 180 days after the end of such 365-day period.
56
The Net Available Cash of an Asset Disposition not applied pursuant to
clauses (3)(A) and (B) above constitute
Excess Proceeds
. Excess Proceeds of less than $5.0 million will be carried forward and accumulated. When accumulated Excess Proceeds equal or exceed such amount, the Issuer
must, within 30 days, make an offer to purchase the Notes, in accordance with clause (3)(C) above. Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash shall be invested in Temporary Cash Investments or
applied to temporarily reduce revolving credit indebtedness.
For the purposes of this covenant, the following are deemed to
be cash or cash equivalents:
(1) the assumption of Indebtedness of the Issuer or any Restricted Subsidiary and
the release of the Issuer or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition; and
(2) securities received by the Issuer or any Restricted Subsidiary from the transferee that are converted by the Issuer or such Restricted Subsidiary into cash within 180 days of receipt.
(b) In the event of an Asset Disposition that requires the purchase of Notes (and other Senior Indebtedness of the Issuer) pursuant to
clause (a)(3)(C) above, the Issuer will purchase Notes tendered pursuant to an offer by the Issuer for the Notes (and such other Senior Indebtedness of the Issuer) at a purchase price of 100% of their principal amount (or, in the event such other
Senior Indebtedness of the Issuer was issued with significant original issue discount, 100% of the accreted value thereof), without premium, plus accrued but unpaid interest, if any, (or, in respect of such other Senior Indebtedness of the Issuer,
such lesser price, if any, as may be provided for by the terms of such Senior Indebtedness of the Issuer) in accordance with the procedures (including prorating in the event of oversubscription) set forth in the Indenture. If the aggregate purchase
price of the securities tendered exceeds the Net Available Cash allotted to their purchase, the Issuer will select the securities to be purchased on a pro rata basis but in round denominations, which in the case of the Notes will be denominations of
$2,000 principal amount or multiples of $1,000 greater thereof. The Issuer shall not be required to make such an offer to purchase Notes (and other Senior Indebtedness of the Issuer) pursuant to this covenant if the Excess Proceeds are less than
$5.0 million (which lesser amount shall be carried forward for purposes of determining whether such an offer is required with respect to the Net Available Cash from any subsequent Asset Disposition).
(c) The Issuer will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the purchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Issuer will comply with the
applicable securities laws and regulations and will not be deemed to have breached its obligations under this clause by virtue of its compliance with such securities laws or regulations.
Limitation on Affiliate Transactions
(a) The Issuer will not, and will not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property, employee
compensation arrangements or the rendering of any service) with, or for the benefit of, any Affiliate of the Issuer (an
Affiliate Transaction
) unless:
(1) the terms of the Affiliate Transaction are no less favorable to the Issuer or such Restricted Subsidiary than those
that could be obtained at the time of the Affiliate Transaction in arms-length dealings with a Person who is not an Affiliate;
(2) if such Affiliate Transaction involves an amount in excess of $10.0 million, the terms of the Affiliate Transaction are set forth in writing and a majority of the directors of the Issuer disinterested
with respect to such Affiliate Transaction have determined in good faith that the criteria set forth in clause (1) are satisfied and have approved the relevant Affiliate Transaction as evidenced by a resolution of the Board of Directors; and
57
(3) if such Affiliate Transaction involves an amount in excess of $20.0
million, the Board of Directors shall also have received a written opinion from an Independent Qualified Party to the effect that such Affiliate Transaction is fair, from a financial standpoint, to the Issuer and its Restricted Subsidiaries or is
not less favorable to the Issuer and its Restricted Subsidiaries than could reasonably be expected to be obtained at the time in an arms-length transaction with a Person who was not an Affiliate.
(b) The provisions of the preceding paragraph (a) will not prohibit:
(1) any Investment or other Restricted Payment, in each case permitted to be made pursuant to the covenant described under
Limitation on Restricted Payments;
(2) any issuance of securities, or other payments, awards
or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors;
(3) loans or advances to employees or consultants in the ordinary course of business of the Issuer or its Restricted
Subsidiaries;
(4) the payment of reasonable fees and compensation to, or the provision of employee benefit
arrangements and indemnity for the benefit of, directors, officers, employees and consultants of the Issuer and its Restricted Subsidiaries in the ordinary course of business;
(5) any transaction between or among the Issuer, any Restricted Subsidiary, any Co-investment Vehicle or joint venture or
similar entity (including any separate account or investment program managed, operated or sponsored by an Investment Subsidiary) which would constitute an Affiliate Transaction solely because the Issuer or a Restricted Subsidiary owns an equity
interest in or otherwise controls such Restricted Subsidiary, Co-investment Vehicle, joint venture or similar entity (including any separate account or investment program managed, operated or sponsored by an Investment Subsidiary);
(6) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Issuer or Parent;
(7) the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of its obligations under the
terms of any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) or warrant agreement to which it is a party as of the Original Issue Date and any similar agreements which it may enter into
thereafter;
provided
,
however
, that the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement
entered into after the Original Issue Date shall only be permitted by this clause (7) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the noteholders in any material respect;
(8) any agreement as in effect on the Original Issue Date and described in the Original Offering Memorandum, or any
renewals, extensions or amendments of any such agreement (so long as such renewals, extensions or amendments are not less favorable to the Issuer or the Restricted Subsidiaries) and the transactions evidenced thereby;
(9) transactions with customers, clients, suppliers or purchasers or sellers of goods or services in each case in the
ordinary course of business and otherwise in compliance with the terms of the applicable Indenture which are fair to the Issuer or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors of the Issuer or the senior
management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; and
(10) the repurchase or other acquisition of the Parents warrants outstanding as of the Original Issue Date, pursuant to the terms of a plan (or amendment thereto) approved by the Board of Directors
of Parent.
58
Limitation on Liens
The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Lien (the
Initial Lien
) of any nature whatsoever on any of its properties (including Capital Stock of a Restricted Subsidiary), whether owned at the Original Issue Date or thereafter acquired, securing any Obligations, other than
Permitted Liens, without effectively providing that the Notes (or a Subsidiary Guaranty in the case of an Initial Lien of a Subsidiary Guarantor) shall be secured equally and ratably with (or, in the event the Lien related to Subordinated
Obligations, prior to) the Obligations so secured for so long as such Obligations are so secured. Any Lien created for the benefit of the holders of the Notes pursuant to the preceding sentence shall provide by its terms that such Lien shall be
automatically and unconditionally released and discharged upon the release and discharge of the Initial Lien.
Limitation on Sale/Leaseback Transactions
The Issuer will not, and will not permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any property unless:
(1) the Issuer or such Restricted Subsidiary would be entitled to (A) Incur Indebtedness in an amount equal to the Attributable Debt
with respect to such Sale/Leaseback Transaction pursuant to the covenant described under Limitation on Indebtedness and (B) create a Lien on such property securing such Attributable Debt without equally and ratably securing
the Notes pursuant to the covenant described under Limitation on Liens;
(2) the net proceeds received by the
Issuer or any Restricted Subsidiary in connection with such Sale/ Leaseback Transaction are at least equal to the fair value (as determined by the Board of Directors of the Issuer) of such property; and
(3) the Issuer applies the proceeds of such transaction in compliance with the covenant described under Limitation on Sales of
Assets and Subsidiary Stock.
Merger and Consolidation
The Issuer will not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions,
directly or indirectly, all or substantially all its assets to, any Person, unless:
(1) the resulting, surviving or transferee
Person (the
Successor Company
) shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Issuer) shall
expressly assume, by an indenture supplemental thereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of the Issuer under the Notes and the Indenture;
(2) immediately after giving pro forma effect to such transaction (and treating any Indebtedness which becomes an obligation of the
Successor Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing;
(3) immediately after giving pro forma effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under Limitation on Indebtedness; and
(4) the Issuer shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture;
provided, however, that clause
(3) will not be applicable to (A) a Restricted Subsidiary consolidating with, merging into or transferring all or part of its properties and assets to the Issuer or (B) the Issuer merging with an Affiliate of the Issuer solely for the
purpose and with the sole effect of reincorporating the Issuer in another jurisdiction.
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The Successor Company will be the successor to the Issuer and shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer under the Indenture, and the predecessor Issuer, except in the case of a lease, shall be released from the obligation to pay the principal of and interest on the Notes.
The Issuer will not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease,
in one transaction or a series of transactions, all or substantially all of its assets to any Person unless:
(1) except in the
case of a Subsidiary Guarantor that has been disposed of in its entirety to another Person (other than to the Issuer or an Affiliate of the Issuer), whether through a merger, consolidation or sale of Capital Stock or assets, if in connection
therewith the Issuer provides an Officers Certificate to the Trustee to the effect that the Issuer will comply with its obligations under the covenant described under Limitation on Sales of Assets and Subsidiary Stock in
respect of such disposition, the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United
States of America, or any State thereof or the District of Columbia, and such Person shall expressly assume, by a Guaranty Agreement, all the obligations of such Subsidiary, if any, under its Subsidiary Guaranty;
(2) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes
an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and
(3) the Issuer delivers to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such Guaranty Agreement, if any, complies with the Indenture.
Parent will not consolidate with or
merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any Person unless:
(1) the resulting, surviving or transferee Person (if not Parent) shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia,
and such Person shall expressly assume, by a Guaranty Agreement, all the obligations of Parent, if any, under its Guaranty;
(2) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes
an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and
(3) the Issuer delivers to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such Guaranty Agreement, if any, complies with the Indenture.
Future Guarantors
On the Original Issue Date, Parent and each of the initial Subsidiary Guarantors executed and delivered to the Trustee
a Guaranty Agreement pursuant to which Parent and each such Subsidiary Guarantor fully and unconditionally Guaranteed the Notes on an unsecured, senior basis. The Issuer has agreed to cause each domestic Restricted Subsidiary, other than
Non-Material Subsidiaries and other than any Restricted Subsidiary prohibited from providing a Guarantee by any agreement governing Non-Recourse Indebtedness (or the terms of the relevant partnership agreement, limited liability company operating
agreement or other governing document of the entity that is the borrower under any Non-Recourse Indebtedness), any joint venture agreement or the terms of any Co-investment Vehicle or any separate account or investment program managed, operated or
sponsored by an Investment Subsidiary, to execute and deliver to the Trustee a Guaranty Agreement pursuant to which such domestic Restricted Subsidiary will Guarantee payment of the Notes on the same terms and conditions as those set forth in the
Indenture.
Not all of our subsidiaries that acquire properties or other assets in the future will become guarantors of the
Notes. For example, the terms of the Non-Recourse Indebtedness agreements, partnership agreements, limited liability company operating agreements, other governing documents, joint venture agreements, Co-investment Vehicles, separate accounts and
investment programs referred to above may prohibit the relevant subsidiary from guaranteeing the Notes. In many cases, the Indenture does not require these subsidiaries to guarantee the Notes. Accordingly, noteholders will not have a direct claim
against these subsidiaries for payments on the Notes. See Risk FactorsRisks Related to the NotesThe notes will not be guaranteed by all of our subsidiaries.
60
SEC Reports
Notwithstanding that the Issuer may not be subject to the reporting requirements of Sections 13(a) or 15(d) of the Exchange Act, the
Issuer will file with the SEC and make available to the Trustee and noteholders within 15 days after it files them with the SEC such annual reports and such information, documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections, such information, documents and other reports to be so filed with the SEC at the times specified for the filings of such information, documents and reports under such
Sections;
provided
,
however
, that the Issuer shall not be so obligated to file such reports with the SEC if the SEC does not permit such filing, in which event the Issuer will make available such information to the Trustee and
noteholders within 15 days after the time the Issuer would be required to file such information with the SEC if it were subject to Sections 13 or 15(d) of the Exchange Act;
provided further
,
however
, that (a) so long as Parent is
the Guarantor of the Notes, the reports, information and other documents required to be filed and provided as described hereunder may, at the Issuers option, be filed by and be those of Parent rather than the Issuer and (b) in the event
that Parent conducts any business or holds any significant assets other than the capital stock of the Issuer at the time of filing and providing any such report, information or other document containing financial statements of Parent, Parent shall
include in such report, information or other document summarized financial information (as defined in Rule 1-02(bb) of Regulation S-X promulgated by the SEC) with respect to the Issuer.
In addition, the Issuer will furnish to the holders of the Notes and to prospective investors, upon the requests of such holders, any
information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Notes are not freely transferable under the Securities Act.
Defaults
Each of the following is an Event of Default:
(1) a default in the payment of interest on the Notes when due, continued for 30 days;
(2) a default in the payment of principal of any Note when due at its Stated Maturity, upon redemption, upon required purchase, upon
declaration of acceleration or otherwise;
(3) the failure by the Issuer, Parent or any Subsidiary Guarantor to comply with its
obligations under Certain CovenantsMerger and Consolidation;
(4) the failure by the Issuer, Parent or
any Subsidiary Guarantor, as the case may be, to comply for 60 days after receipt of written notice with any of its agreements contained in the Indenture, including its obligations in the covenants described above under Fundamental
Change (other than a failure to purchase Notes), Certain CovenantsLimitation on Indebtedness, Certain CovenantsLimitation on Restricted Payments, Certain CovenantsLimitation on
Restrictions on Distributions from Restricted Subsidiaries, Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock (other than a failure to purchase Notes), Certain CovenantsLimitation on
Affiliate Transactions, Certain CovenantsLimitation on Liens, Certain CovenantsLimitation on Sale/Leaseback Transactions or Certain CovenantsFuture Guarantors;
(5) the failure by the Issuer or Parent, as the case may be, to comply for 180 days after receipt of written notice with any of its
obligations in the covenant described above under Certain CovenantsSEC Reports (provided that, if applicable, failure by the Issuer or Parent to comply with the provisions of Section 314(a) of the Trust Indenture Act
will not in itself be deemed a Default or an Event of Default under the Indenture);
(6) Indebtedness of the Issuer, any
Subsidiary Guarantor or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated
exceeds $20.0 million (the
cross acceleration provision
);
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(7) certain events of bankruptcy, insolvency or reorganization of the Issuer, any Subsidiary
Guarantor or any Significant Subsidiary (the
bankruptcy provisions
);
(8) any final judgment or
decree for the payment of money (other than judgments which are covered by enforceable insurance policies issued by solvent carriers) in excess of $10.0 million is entered against the Issuer, any Subsidiary Guarantor or any Significant Subsidiary,
remains outstanding for a period of 60 consecutive days following such judgment becoming final and is not discharged, waived or stayed within 10 days after notice (the
judgment default provision
); or
(9) the Parent Guaranty or a Subsidiary Guaranty ceases to be in full force and effect (other than in accordance with the terms of such
Guaranty) or a Guarantor denies or disaffirms its obligations under its Guaranty.
However, a default under clauses (4),
(5) and (8) will not constitute an Event of Default until the Trustee or the holders of 25% in principal amount of the outstanding Notes notify the Issuer of the default in writing and the Issuer does not cure such default within the time
specified after receipt of such notice. In the event of any Event of Default specified under clause (6), such Event of Default and all consequences thereof (excluding any resulting payment default, other than as a result of acceleration of Notes)
shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the holders, if within 30 days after such Event of Default arose: (a) holders thereof have rescinded or waived the acceleration, notice or action
(as the case may be) giving rise to such Event of Default or (b) the default that is the basis for such Event of Default has been cured.
If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the outstanding Notes may declare the principal of and accrued but unpaid interest, if
any, on all the Notes to be due and payable. Upon such declaration, such principal and interest shall be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Issuer occurs
and is continuing, the principal of and interest on all the Notes will
ipso facto
become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holders of the Notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties and rights of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any
of the rights or powers under the Indenture at the request or direction of any of the holders of the Notes unless such holders have offered to the Trustee indemnity or security satisfactory to it against any loss, liability or expense. Except to
enforce the right to receive payment of principal, premium (if any) or interest when due, no holder of a Note may pursue any remedy with respect to the Indenture or the Notes unless:
(1) such holder has previously given the Trustee written notice that an Event of Default is continuing;
(2) holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy;
(3) such holders have offered the Trustee security or indemnity satisfactory to it against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and
(5) holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent
with such request within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal amount
of the outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to
follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other holder of a Note or that would involve the Trustee in personal liability.
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Notwithstanding anything to the contrary in the Indenture, holders of the Notes will have an
absolute and unconditional right to receive payment of the principal of, and interest on, the Notes on or after the due dates expressed in the Indenture and the Notes and to institute suit for the enforcement of payment.
If a Default occurs, is continuing and is known to the Trustee, the Trustee must mail to each holder of the Notes notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment of principal of or interest on any Note, the Trustee may withhold notice if and so long as a committee of its trust officers determines that withholding notice is not
opposed to the interest of the holders of the Notes. In addition, we are required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred
during the previous year. We are required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action we are taking or propose to take in
respect thereof.
As to the waiver of defaults, see Amendments and Waivers.
Amendments and Waivers
Subject to certain exceptions, the Indenture may be amended with the consent of the holders of a majority in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer or exchange for the Notes) and any past default or compliance with any provisions may also be waived with the consent of the holders of a majority in principal amount of
the Notes then outstanding. However, without the consent of each holder of an outstanding Note affected thereby, an amendment or waiver may not, among other things:
(1) reduce the amount of Notes whose holders must consent to an amendment;
(2)
reduce the rate of or extend the time for payment of interest on any Note;
(3) reduce the principal of or extend the Stated
Maturity of any Note;
(4) reduce the amount payable upon the redemption of any Note or change the time at which any Note may
be redeemed as described under Optional Redemption;
(5) make any Note payable in money other than that
stated in the Notes;
(6) impair the right of any holder of the Notes to receive payment of principal of and interest on such
holders Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such holders Notes;
(7) make any change in the amendment provisions which require each holders consent or in the waiver provisions;
(8) make any change in the ranking or priority of any Note or Guaranty that would adversely affect the noteholders; or
(9) voluntarily release a Subsidiary Guarantor other than in accordance with the Indenture.
Notwithstanding the preceding, without the consent of any holder of the Notes, the Issuer, Parent, the Subsidiary Guarantors and Trustee may amend the Indenture:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption by a successor corporation of the obligations of the Issuer, Parent or any Subsidiary Guarantor under the Indenture;
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(3) to provide for uncertificated Notes in addition to or in place of certificated Notes
(
provided
that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code), or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code);
(4) to add guarantees with respect to the Notes, including any Subsidiary Guaranties, or to secure the Notes;
(5) to add to the covenants of the Issuer, Parent or any Subsidiary Guarantor for the benefit of the holders of the Notes or to surrender
any right or power conferred upon the Issuer, Parent or any Subsidiary Guarantor;
(6) to make any change that does not
materially adversely affect the rights of any holder of the Notes;
(7) to comply with any requirement of the SEC in connection
with any required qualification of the Indenture under the Trust Indenture Act;
(8) to conform the text of the Indenture,
Guaranties or the Notes to any provision of this Description of the Notes to the extent that such provision was intended to be a verbatim recitation of a provision of the Indenture, the Guaranties or the Notes as certified in an
Officers Certificate delivered to the Trustee; or
(9) to amend the provisions of the Indenture relating to the transfer
and legending of Notes;
provided
,
however
, that (i) compliance with the Indenture as so amended would not result in Notes being transferred in violation of the Securities Act or any applicable securities law and (ii) such
amendment does not materially and adversely affect the rights of holders to transfer Notes.
Notwithstanding the foregoing,
the lenders under the Credit Agreement have the right to consent to any amendment, supplement or other modification of the Indenture or any other change relating to the Notes that occurs after the Issue Date if such amendments, supplements or
changes would have a material adverse effect on the Issuers ability to repay its obligations under the Credit Agreement.
The consent of the holders of the Notes is not necessary under the Indenture to approve the particular form of any proposed amendment. It
is sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture
becomes effective, we are required to mail to holders of the Notes a notice briefly describing such amendment. However, the failure to give such notice to all holders of the Notes, or any defect therein, will not impair or affect the validity of the
amendment.
Neither the Issuer nor any Affiliate of the Issuer may, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to all
holders and is paid to all holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement.
Transfer
The Notes will be issued in registered form and will be
transferable only upon the surrender of the Notes being transferred for registration of transfer. We may require payment of a sum sufficient to cover any tax, assessment or other governmental charge payable in connection with certain transfers and
exchanges.
Defeasance and Satisfaction and Discharge
At any time, we may terminate all our and each Guarantors obligations under the Notes, the Guaranties and the Indenture (
legal defeasance
), except for certain obligations,
including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes.
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In addition, at any time we may terminate our obligations under Fundamental
Change and under the covenants described under Certain Covenants (other than the covenant described under Merger and Consolidation), the operation of the cross acceleration provision, the bankruptcy
provisions with respect to Significant Subsidiaries and the judgment default provision described under Defaults above and the limitations contained in clause (3) of the first paragraph under Certain
CovenantsMerger and Consolidation above and our Guarantors obligations under the Guaranties and the Indenture (
covenant defeasance
).
We may exercise our legal defeasance option notwithstanding our prior exercise of our covenant defeasance option. If we exercise our
legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If we exercise our covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default
specified in clause (4), (5), (7), (8) (with respect only to Significant Subsidiaries) or (9) under Defaults above or because of the failure of the Issuer to comply with clause (3) of the first paragraph under
Certain CovenantsMerger and Consolidation above. If we exercise our legal defeasance option or our covenant defeasance option, each Guarantor will be released from all of its obligations with respect to its Guaranty.
In order to exercise either of our defeasance options, we must irrevocably deposit in trust (the
defeasance
trust
) with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the
Trustee of an Opinion of Counsel to the effect that the holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance and will be subject to federal income tax on the same
amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable federal income tax law).
In addition, the Issuers obligations under the Notes and
with respect to the Notes under the Indenture, and each Guarantors obligations under its Guaranty, will terminate (a
satisfaction and discharge
), subject to certain limitations set forth in the Indenture, if:
(1) all Notes previously authenticated and delivered (other than (i) destroyed, lost or stolen Notes that have been
replaced or (ii) Notes that are paid or (iii) Notes for whose payment money or U.S. Government Obligations have been held in trust and then repaid to the Issuer in accordance with the Indenture) have been delivered to the Trustee for
cancellation and the Issuer has paid all sums payable by it under the Indenture; or
(2) (A) the Notes mature within 60
days, or all of them are to be called for redemption within 60 days under arrangements satisfactory to the Trustee for giving the notice of redemption,
(B) the Issuer irrevocably deposits in trust with the Trustee, as trust funds solely for the benefit of the holders, money or U.S. Government Obligations or a combination thereof sufficient, in the
opinion of a nationally recognized firm of independent public accountants expressed in a written certificate delivered to the Trustee, without consideration of any reinvestment, to pay principal of and interest on the Notes to maturity or
redemption, as the case may be, and to pay all other sums payable by it hereunder,
(C) no Default has occurred
and is continuing on the date of the deposit,
(D) the deposit will not result in a breach or violation of, or
constitute a default under, the Indenture or any other agreement or instrument to which the Issuer is a party or by which it is bound, and
(E) the Issuer delivers to the Trustee an Officers Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for in the Indenture relating to the
satisfaction and discharge of this Indenture have been complied with.
Concerning the Trustee
Wilmington Trust, National Association (as successor by merger to Wilmington Trust FSB), is the Trustee under the Indenture. We have
appointed Wilmington Trust, National Association, as Registrar and Paying Agent with regard to the Notes.
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The Indenture contains certain limitations on the rights of the Trustee, should it become a
creditor of the Issuer, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee is permitted to engage in other transactions;
provided
,
however
, if it acquires any conflicting interest and the Notes are in default, it must either eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.
Subject to certain rights of the Trustee, holders of a majority in principal amount of the outstanding Notes will have the right to
direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. If an Event of Default occurs (and is not cured), the Trustee is required, in the exercise of its
power, to use the degree of care of a prudent person in the conduct of such persons affairs. Subject to such provisions, the Trustee is be under no obligation to exercise any of its rights or powers under the Indenture at the request of any
holder of Notes, unless such holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense and then only to the extent required by the terms of the Indenture.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator, member or stockholder or control person of the Issuer or any Guarantor will have any liability for any obligations of the Issuer or any Guarantor under the
Notes, any Guaranty or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver and release may not be effective to waive liabilities under the U.S. federal securities laws, and it is the view of the SEC that such a waiver is against public policy.
Governing Law
The
Indenture and the Notes are governed by, and construed in accordance with, the laws of the State of New York.
Certain Definitions
Affiliate
of any specified Person means any other Person, directly or indirectly, controlling or
controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, control when used with respect to any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms controlling and controlled have meanings correlative to the foregoing. For purposes of the covenants
described under Certain CovenantsLimitation on Restricted Payments, Certain CovenantsLimitation on Affiliate Transactions and Certain CovenantsLimitation on Sales of Assets and
Subsidiary Stock only, Affiliate shall also mean any beneficial owner of Capital Stock representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Issuer or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. Solely for purposes of the covenant described under Certain
CovenantsLimitation on Affiliate Transactions the term Affiliate shall be deemed to exclude Fairfax Financial Holdings Limited, a corporation organized under the laws of Canada, or any subsidiary or affiliate thereof
(collectively, Fairfax); provided, however, that Fairfax will be deemed to be an Affiliate of the Issuer for purposes of clause (1) under paragraph (a) of Certain CovenantsLimitation on Affiliate
Transactions and shall comply with the requirements set forth under such clause; provided further, however, that such requirements shall be deemed to have been satisfied in respect of any agreement as in effect on the Original Issue Date or
any renewals, extension or amendments of any such agreements (so long as such renewals, extensions or amendments are not less favorable to the Issuer and its Restricted Subsidiaries) and the transactions evidenced thereby.
Asset Disposition
means any sale, lease, transfer or other disposition (or series of related sales, leases,
transfers or dispositions) by the Issuer or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a
disposition
), of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other than
directors qualifying shares or shares required by applicable law to be held by a Person other than the Issuer or a Restricted Subsidiary);
66
(2) all or substantially all the assets of any division or line of business of the Issuer or
any Restricted Subsidiary; or
(3) any other assets of the Issuer or any Restricted Subsidiary outside of the ordinary course
of business of the Issuer or such Restricted Subsidiary,
other than, in the case of clauses (1), (2) and (3) above,
(A) a disposition by a Restricted Subsidiary to the Issuer or by the Issuer or a Restricted Subsidiary to a Restricted Subsidiary;
(B) for purposes of the covenant described under Certain CovenantsLimitation on Sales of Assets and
Subsidiary Stock only, a disposition that constitutes a Restricted Payment permitted by the covenant described under Certain CovenantsLimitation on Restricted Payments or a Permitted Investment;
(C) any sale of Capital Stock in, or Indebtedness or other securities of, an Unrestricted Subsidiary;
(D) a disposition of Temporary Cash Investments in the ordinary course of business;
(E) the disposition of property or assets that are obsolete, damaged or worn out;
(F) the lease or sublease of office space in the ordinary course of business;
(G) the sale of interests or investments in real estate or related assets and related personal property by an Investment Subsidiary or
Co-investment Vehicle; and
(H) a disposition of assets with a fair market value of less than $2.5 million (a
de
minimis disposition
);
provided
,
however
, that a disposition of all or substantially all the assets of the Issuer
and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption Fundamental Change and/or the provisions described above under the caption Certain
CovenantsMerger and Consolidation and not by the provisions described above under the caption Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock covenant.
Attributable Debt
in respect of a Sale/Leaseback Transaction means, as at the time of determination, the
present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/ Leaseback Transaction (including any
period for which such lease has been extended);
provided
,
however
, that if such Sale/Leaseback Transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the
definition of Capital Lease Obligation.
Average Life
means, as of the date of
determination, with respect to any Indebtedness, the quotient obtained by dividing:
(1) the sum of the products of the number
of years from the date of determination to the dates of each successive scheduled principal payment of or redemption or similar payment with respect to such Indebtedness multiplied by the amount of such payment by
(2) the sum of all such payments.
Bank Indebtedness
means all Obligations pursuant to the Credit Agreement.
Board of Directors
means the Board of Directors of the Issuer or any committee thereof duly authorized to act on behalf of such Board.
67
Business Day
means each day other than a Saturday, Sunday or a day
on which commercial banking institutions are authorized or required by law to close in New York City.
Capital
Lease Obligation
means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall
be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may
be terminated by the lessee without payment of a penalty. For purposes of the covenant described under Certain CovenantsLimitation on Liens, a Capital Lease Obligation will be deemed to be secured by a Lien on the property
being leased. For the avoidance of doubt, Capital Lease Obligations will not include ground leases of real property entered into in the ordinary course of business of the Issuer or its Restricted Subsidiaries.
Capital Stock
of any Person means any and all shares, interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however designated) equity of such Person, whether outstanding at the Original Issue Date or issued thereafter, including any Preferred Stock, but excluding any debt securities convertible into
such equity.
Code
means the Internal Revenue Code of 1986, as amended.
Co-investment Vehicle
shall mean an entity (other than a Restricted Subsidiary) formed for the purpose of
investing principally, directly or indirectly, in (i) real estate related assets (including Indebtedness secured by real estate or equity interests in entities, directly or indirectly, owning real estate or related assets) or
(ii) unsecured loans that are part of a loan pool, more than 90% of the aggregate principal balance of which falls within the preceding clause (i).
Common Stock
shall mean the Class A common stock of Parent.
Consolidated Net Income
means, for any period, the net income or loss of the Issuer and its consolidated Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP after net income or loss attributable to the noncontrolling interests and before preferred stock dividends and accretion of issuance costs, plus depreciation and amortization of any real property (including furniture and
equipment and other real estate assets);
provided
,
however
, that there shall be excluded:
(a) the income of any
such consolidated subsidiary to the extent that the declaration or payment of dividends or similar distributions by such consolidated subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, statute, rule or governmental regulation applicable to such consolidated subsidiary,
(b) the net
income or net loss of any Person, other than the Issuer or a Restricted Subsidiary, except that, subject to the exclusion contained in clause (h) below, the aggregate amount of cash actually distributed by such Person to the Issuer or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in clause (a) above) shall be included in determining
Consolidated Net Income,
(c) the income or loss of any person accrued prior to the date it becomes a consolidated subsidiary
of the Issuer or is merged into or consolidated with the Issuer or any of its consolidated subsidiaries or the date that such persons assets are acquired by the Issuer or any of its consolidated subsidiaries,
(d) any reduction for charges made in accordance with Financial Accounting Standard No. 141, 141R, 142 or 144 or any amendments or
successors thereto,
(e) all extraordinary gains and extraordinary losses and any gains or losses attributable to sales of
assets out of the ordinary course of business (for the avoidance of doubt, the sale of real estate and real estate related assets shall always be deemed to be in the ordinary course of business),
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(f) any noncash compensation expense attributable to grants of stock options, restricted
stock or similar rights to officers, directors and employees of Parent, the Issuer or any of its consolidated Subsidiaries,
(g) any net noncash gain or loss resulting in such period from Hedging Obligations incurred in the ordinary course of business and made in
accordance with Financial Accounting Standard No. 815, and
(h) all gain or loss realized as a result of the cumulative
effect of changes in accounting principles;
provided further
,
however
, that Consolidated Net Income for any period shall be
increased (i) by cash received during such period by the Issuer or any of its consolidated subsidiaries in respect of commissions receivable (net of related commissions payable to brokers) on transactions that were completed by any acquired
business prior to the acquisition of such business and which purchase accounting rules under GAAP would require to be recognized as an intangible asset purchased, (ii) increased, to the extent otherwise deducted in determining Consolidated Net
Income for such period, by the amortization of intangibles relating to purchase accounting in connection with any acquisition permitted by the Indenture and (iii) increased (or decreased, as the case may be), in connection with the sale of real
estate during such period, to eliminate the effect of purchase price allocations to such real estate resulting from the consummation of any acquisition permitted by the Indenture.
Credit Agreement
means the Revolving Loan Agreement among the Issuer, as borrower, Parent and certain
Subsidiaries of the Issuer, as guarantors, U.S. Bank National Association as the administrative agent and the lenders from time to time party thereto, together with the related documents thereto (including the term loans and revolving loans
thereunder, any guarantees and security documents), as amended, extended, renewed, restated, supplemented or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time
to time, and any agreement (and related document) governing Indebtedness, including an indenture, incurred to Refinance, in whole or in part, the borrowings and commitments then outstanding or permitted to be outstanding under such Revolving Loan
Agreement or a successor Credit Agreement.
Credit Facilities
means one or more debt facilities
(including the Credit Agreement), commercial paper facilities, securities purchase agreement, indenture or similar agreement, in each case, with banks or other institutional lenders or investors providing for revolving loans, term loans, receivables
financing (including through the sale of receivables to lenders or to special purpose entities formed to borrow from lenders against such receivables), letters of credit or the issuance of securities, including any related notes, guarantees,
collateral documents, instruments and agreement executed in connection therewith, and, in each case, as amended, restated, replaced (whether upon or after termination or otherwise), refinanced, supplemented, modified or otherwise changed (in whole
or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time.
Currency Agreement
means in respect of a Person any foreign exchange contract, currency swap agreement or other
similar agreement designed to protect such Person against fluctuations in currency values.
Default
means any event which is, or after notice or passage of time or both would be, an Event of Default.
Disqualified
Stock
means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any
event:
(1) matures (excluding any maturities as a result of an optional redemption by the issuer thereof) or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise;
(2) is convertible or exchangeable at the option of the holder
for Indebtedness or Disqualified Stock; or
(3) is mandatorily redeemable or must be purchased upon the occurrence of certain
events or otherwise, in whole or in part;
in each case on or prior to the first anniversary of the Stated Maturity of the Notes;
provided
,
however
, that if such Capital Stock is issued to any employee or to any plan for the benefit of employees of Parent or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute
Disqualified Stock solely because it may be required to be
69
repurchased by the Parent or its Subsidiaries in order to satisfy obligations as a result of such employees death or disability;
provided further
,
however
, that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock upon the occurrence of an asset sale, change of
control or termination of trading occurring prior to the first anniversary of the Stated Maturity of the Notes shall not constitute Disqualified Stock if:
(1) the asset sale, change of control or termination of trading provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock
than the terms applicable to the Notes and described under Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock and Fundamental Change; and
(2) any such requirement only becomes operative after compliance with such terms applicable to the Notes, including the purchase of any
Notes tendered pursuant thereto.
For the avoidance of doubt, the following shall not constitute Disqualified Stock:
(x) the Series A Preferred Stock and the Series B Preferred Stock outstanding on the Original Issue Date; and
(y) future issuances of Capital Stock having terms substantially similar to those of the Series A Preferred Stock and the Series B
Preferred Stock,
provided
that, the change of control or termination of trading provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the
Notes and described under Fundamental Change; and any such requirement only becomes operative after compliance with such terms applicable to the Notes, including the purchase of any Notes tendered pursuant thereto.
The amount of any Disqualified Stock that does not have a fixed redemption, repayment or repurchase price will be calculated in
accordance with the terms of such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or repurchased on any date on which the amount of such Disqualified Stock is to be determined pursuant to the Indenture;
provided
,
however
, that if such Disqualified Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price will be the book value of such Disqualified Stock as
reflected in the most recent financial statements of such Person.
Effective Tangible Net Worth
means as of any date of determination, stockholders equity of the Issuer and its Restricted Subsidiaries (excluding any amounts attributable to Disqualified Stock), less Intangible Assets.
Equity Offering
means any primary offering of Capital Stock of Parent or the Issuer (other than Disqualified
Stock) to Persons who are not Affiliates of Parent or the Issuer other than (1) public offerings with respect to the Parents Common Stock registered on Form S-8 and (2) issuances upon exercise of options by employees of the Parent or
any of its Restricted Subsidiaries.
Exchange Act
means the Securities Exchange Act of 1934, as
amended.
Exchange Notes
means the debt securities of the Issuer issued pursuant to the Indenture in
exchange for, and in an aggregate principal amount at maturity equal to, the Notes, in compliance with the terms of the Registration Rights Agreement.
GAAP
means generally accepted accounting principles in the United States of America as in effect from time to time,
provided
,
however
, that GAAP shall mean the
generally accepted accounting principles in the United States of America as in effect as of the Original Issue Date in the event of a change in GAAP after the Original Issue Date that would have a material adverse or positive effect on the Issuer,
including those set forth in:
(1) the opinions and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants;
(2) statements and pronouncements of the Financial Accounting Standards Board;
70
(3) such other statements by such other entity as approved by a significant segment of the
accounting profession; and
(4) the rules and regulations of the SEC governing the inclusion of financial statements (including
pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of
the SEC.
Guarantee
means any obligation, contingent or otherwise, of any Person directly or
indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership or other ownership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or
(2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);
provided
,
however
, that the term Guarantee shall not include (i) endorsements for collection or deposit in the
ordinary course of business, (ii) customary environmental indemnities and non-recourse carve-out guarantees requested by lenders in financing transactions secured by real property or (iii) completion and budget guarantees. The term
Guarantee used as a verb has a corresponding meaning.
Guarantor
means Parent and/or a
Subsidiary Guarantor.
Guaranty
means the Parent Guaranty and/or a Subsidiary Guaranty.
Guaranty Agreement
means the Indenture as of the Original Issue Date or any supplemental indenture, in a form
satisfactory to the Trustee, pursuant to which a Guarantor guarantees the Issuers obligations with respect to the Notes on the terms provided for in the Indenture.
Hedging Obligations
of any Person means the obligations of such Person pursuant to any Interest Rate Agreement, Currency Agreement, commodity price protection or hedging
agreement or other similar agreements.
The term
holder
or
noteholder
means the Person in whose name a Note is registered on the Registrars books.
Incur
means
issue, assume, Guarantee, incur or otherwise become liable for;
provided
,
however
, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary. The term Incurrence when used as a noun shall have a correlative meaning. Solely for purposes of determining
compliance with Certain CovenantsLimitation on Indebtedness, (1) amortization of debt discount or the accretion of principal with respect to a noninterest bearing or other discount security and (2) the payment of
regularly scheduled interest in the form of additional Indebtedness of the same instrument or the payment of regularly scheduled dividends on Capital Stock in the form of additional Capital Stock of the same class and with the same terms will not be
deemed to be the Incurrence of Indebtedness.
Indebtedness
means, with respect to any Person on any
date of determination (without duplication):
(1) the principal in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable, including, in each case, any premium on such indebtedness to the extent such premium
has become due and payable;
(2) all Capital Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person;
71
(3) all obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business);
(4) all obligations of such Person for the reimbursement of any obligor on any letter of credit, bankers acceptance or similar
credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the 20th Business Day following payment on the letter of credit);
(5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock
of such Person or, with respect to any Preferred Stock of any Subsidiary of such Person, the principal amount of such Preferred Stock to be determined in accordance with the Indenture (but excluding, in each case, any accrued dividends),
provided
that, provisions relating to waterfall priority returns, carried interest and tax allocations included in partnership agreements, shareholder agreements, limited liability company operating agreements or other constitutive documents
entered into in the ordinary course of business shall not constitute Preferred Stock of any Subsidiary of such Person;
(6) all
obligations of the type referred to in clauses (1) through (5) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee;
(7) all obligations of the type referred to in clauses
(1) through (6) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such
property or assets and the amount of the obligation so secured; and
(8) to the extent not otherwise included in this
definition, Hedging Obligations of such Person.
Notwithstanding the foregoing, in connection with the purchase by the Issuer
or any Restricted Subsidiary of any business or real property, the term Indebtedness will exclude post-closing payment adjustments to which the seller may become entitled to the extent such payment is determined by a final closing
balance sheet or post-closing prorations or such payment depends on the performance of such business after the closing;
provided
,
however
, that, at the time of closing, the amount of any such payment is not determinable and, to the
extent such payment thereafter becomes fixed and determined, the amount is paid within 60 days thereafter. Indebtedness of any Person shall include all Indebtedness of any partnership or other entity in which such Person is a general partner or
other equity holder with unlimited liability other than (x) Indebtedness which is non-recourse to such Person and its assets (other than pursuant to Permitted Non-Recourse Carve-Out Guarantees) and (y) if such Person is an Investment
Subsidiary, the indebtedness of a related Co-investment Vehicle.
The amount of Indebtedness of any Person at any date shall
be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date; provided,
however, that the principal amount of any noninterest bearing or other discount security at any date will be the principal amount thereof that would be shown on a balance sheet of such Person dated such date prepared in accordance with GAAP.
For purposes of calculating the Maximum Balance Sheet Leverage Ratio under paragraph (a) of the covenant described under
Certain CovenantsLimitation on Indebtedness, the term Indebtedness shall exclude Hedging Obligations of the Issuer and its Restricted Subsidiaries.
Independent Qualified Party
means an investment banking firm, accounting firm or appraisal firm of national standing;
provided
,
however
, that such firm is not an
Affiliate of the Issuer.
Initial Purchasers
means, collectively, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley & Co. LLC.
72
Intangible Assets
means, as of any date of determination,
intangible assets of the Issuer and its Restricted Subsidiaries under GAAP.
Interest Rate Agreement
means in respect of a Person any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect such Person against fluctuations in interest rates.
Investment
in any Person means any direct or indirect advance, loan (other than advances to customers in the
ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. Except as otherwise
provided for herein, the amount of an Investment shall be its fair market value at the time the Investment is made and without giving effect to subsequent changes in value. For the avoidance of doubt, leases to tenants in the ordinary course of
business of the Issuer or any Restricted Subsidiary shall not be deemed to constitute Investments.
For purposes
of the definition of Unrestricted Subsidiary, the definition of Restricted Payment and the covenant described under Certain CovenantsLimitation on Restricted Payments:
(1) Investment shall include the portion (proportionate to the Issuers equity interest in such Subsidiary) of the fair
market value of the net assets of any Subsidiary of the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary;
provided
,
however
, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the
Issuer shall be deemed to continue to have a permanent Investment in an Unrestricted Subsidiary equal to an amount (if positive) equal to (A) the Issuers Investment in such Subsidiary at the time of such
redesignation less (B) the portion (proportionate to the Issuers equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer,
in each case as determined in good faith by the Board of Directors.
Investment Subsidiary
shall
mean (1) any Subsidiary engaged principally in the business of directly or indirectly buying, holding, transferring or selling real estate related assets, including securities of companies engaged principally in such business and Indebtedness
secured by real estate or equity interests in entities directly or indirectly owning real estate or related assets, and (2) any Subsidiary engaged principally in the business of investment management, including investing in and/or managing
Co-investment Vehicles.
Issue Date
means December 6, 2012.
Lien
means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any
conditional sale or other title retention agreement or lease in the nature thereof). For the avoidance of doubt, the grant by any Person of a non-exclusive license to use intellectual property owned by, licensed to, or developed by such Person and
such license activity shall not constitute a grant by such Person of a Lien on such intellectual property.
Maximum Balance Sheet Leverage Ratio
means as of any date of determination with respect to the Issuer and its
Restricted Subsidiaries, the ratio of total Indebtedness (excluding Non-Recourse Indebtedness) to Effective Tangible Net Worth, in each case as of the previous quarter end;
provided
,
however
, that:
(1) if the Issuer or any Restricted Subsidiary has issued any Indebtedness (including if the proceeds of such Indebtedness have been
deposited in an escrow account (as described in the definition of Refinancing Indebtedness)) since the previous quarter end that remains outstanding or if the transaction giving rise to the need to calculate the Maximum Balance Sheet
Leverage Ratio is an issuance of Indebtedness, or both, the Maximum Balance Sheet Leverage Ratio shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been issued on the last day of the
previous quarter, and
73
(2) if the Issuer or any Restricted Subsidiary has repaid, repurchased, defeased or
otherwise discharged any Indebtedness (including any discharge of Indebtedness to occur upon release of such funds from any escrow account as referenced above) since the previous quarter end or if the transaction giving rise to the need to calculate
Maximum Balance Sheet Leverage Ratio will include the repayment, repurchase, defeasance or discharge of Indebtedness, or both, the Maximum Balance Sheet Leverage Ratio shall be calculated after giving effect on a pro forma basis to the discharge of
such Indebtedness, as if such discharge had occurred on the last day of the previous quarter.
For purposes of this
definition, whenever pro forma effect is to be given to an issuance of Indebtedness or the discharge of Indebtedness, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Issuer and
shall comply with the requirements of Rule 11-02 of Regulation S-X promulgated by the SEC.
Solely for purposes of calculating
the Maximum Balance Sheet Leverage Ratio under paragraph (a) of the covenant described under Certain CovenantsLimitation on Indebtedness, the term Indebtedness shall exclude Guarantees of Indebtedness of a Co-investment
Vehicle or separate account or investment program managed, operated or sponsored by an Investment Subsidiary in an amount not to exceed $50.0 million in the aggregate at any time outstanding and Permitted Non-Recourse Carve-Out Guarantees.
Moodys
means Moodys Investors Service, Inc.
Net Available Cash
from an Asset Disposition means cash payments received therefrom (including any cash
payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but
excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form), in each case net of:
(1) all legal, accounting, investment banking and brokerage fees, title and recording tax expenses, commissions and other fees and
expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with
respect to such assets, or which must, by applicable law, be repaid out of the proceeds from such Asset Disposition;
(3) all
distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Disposition; and
(4) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset
Disposition and retained by the Issuer or any Restricted Subsidiary after such Asset Disposition.
Net Cash
Proceeds
, with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys fees, accountants fees, underwriters or placement agents fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.
Non-Material Subsidiaries
means all domestic Restricted Subsidiaries designated as Non-Material Subsidiaries by the Issuer;
provided
that all such domestic Restricted
Subsidiaries may not, in the aggregate at any time have assets (attributable to the Issuer and its domestic Restricted Subsidiaries equity interest in such entities) constituting more than 5% of the Issuers total assets on a consolidated basis
based on the Issuers most recent internal financial statements.
Non-Recourse Indebtedness
means Indebtedness (including any and all refinancings thereof that would meet the criteria set forth below) of an Investment Subsidiary;
provided
,
however
, that (1) such Indebtedness is incurred solely in relation to the
permitted investment activities (including investments in Permitted Mortgage Investments) or real estate related activities of such Investment Subsidiary or a Co-investment Vehicle or a separate account or investment program managed, operated or
sponsored by an Investment Subsidiary, and (2) such Indebtedness is not Guaranteed by, or otherwise recourse to the Issuer or any Restricted Subsidiary (other than pursuant to a Permitted Non-Recourse Carve-Out Guarantee)
74
other than the Investment Subsidiary that is the borrower;
provided
,
further
, that, if any such Indebtedness is partially Guaranteed by or otherwise recourse to the Issuer or any
Restricted Subsidiary (other than pursuant to a Permitted Non-Recourse Carve-Out Guarantee and other than with respect to the Investment Subsidiary that is the borrower) and therefore does not meet the criteria set forth above, the portion of such
Indebtedness that does meet the criteria set forth above shall be Non-Recourse Indebtedness hereunder.
Notes
means the Issuers 8.750% Senior Notes due 2019.
Obligations
means with respect to any Indebtedness all obligations for principal, premium, interest, penalties,
fees, indemnifications, reimbursements and other amounts payable pursuant to the documentation governing such Indebtedness.
Officer
means the chairman of the board of directors, the chief executive officer, the president, the chief
financial officer, any executive vice president, senior vice president or vice president, the treasurer or any assistant treasurer or the secretary or any assistant secretary of Parent or the Issuer.
Officers Certificate
means a certificate signed on behalf of Parent or the Issuer, as the case may be, by
an Officer of Parent or the Issuer, respectively.
Opinion of Counsel
means a written opinion signed
by legal counsel, who may be an employee of or counsel to Parent or the Issuer, satisfactory to the Trustee.
Original Issue Date
means April 5, 2011.
Original Offering Memorandum
means the confidential Offering Memorandum dated March 31, 2011, pursuant to
which the outstanding notes to which the exchange offer relates were initially offered to investors.
Parent
means Kennedy-Wilson Holdings, Inc., a Delaware corporation, and its successors.
Parent Guaranty
means the Guarantee by Parent of the Issuers obligations with respect to the Notes
contained in the Indenture.
Permitted Co-investment
means any Investment by the Issuer or any of
its Restricted Subsidiaries in, or any Guarantee by the Issuer or any of its Restricted Subsidiaries of the Indebtedness of, a Co-investment Vehicle or separate account or investment program managed, operated or sponsored by an Investment
Subsidiary; provided, however, that if, and only if such Investment or Guarantee (other than a Permitted Non-Recourse Carve-Out Guarantee), as applicable, is in an amount greater than $10.0 million, then (i) such Investment shall not be greater
than 25% of the aggregate commitment (including both committed equity and Indebtedness) of such Co-investment Vehicle or separate account or investment program and (ii) such Guarantee (other than a Permitted Non-Recourse Carve-Out Guarantee)
shall not be greater than 25% of the aggregate committed Indebtedness of such Co-investment Vehicle or separate account or investment program; provided further, however, that the total amount of such Guarantees (other than Permitted Non-Recourse
Carve-Out Guarantees) shall not exceed $50.0 million in the aggregate at any time outstanding.
Permitted
Holders
means (1) William J. McMorrow, (2) any per Person both the Capital Stock and Voting Stock of which (or in the case of a trust, the beneficial interests of which) are majority owned by William J. McMorrow or a family
member of William J. McMorrow, and (3) any family member of William J. McMorrow, or the estate or heirs of William J. McMorrow or any of his family members.
Permitted Investment
means an Investment by the Issuer or any Restricted Subsidiary in:
(1) the Issuer, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary;
provided
,
however
, that (A) the primary business of
such Restricted Subsidiary is a Related Business and (B) such Restricted Subsidiary is not restricted from making dividends or similar distributions by contract, operation of law or otherwise, other than restrictions on dividends or
distributions permitted pursuant to the covenant described under Certain CovenantsLimitation on Restrictions on Distributions from Restricted Subsidiaries;
75
(2) another Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its assets to, the Issuer or a Restricted Subsidiary;
provided
,
however
, that such Persons primary business is a Related Business;
(3) Investments made by Parent or its Restricted Subsidiaries as a result of consideration received in connection with an Asset
Disposition made in compliance with the covenant described above under Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock or from any other disposition or transfer of assets not constituting an Asset
Disposition;
(4) Investments represented by guarantees that are otherwise permitted by the Indenture;
(5) cash and Temporary Cash Investments;
(6) receivables owing to the Issuer or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms;
provided
,
however
, that such trade terms may include such concessionary trade terms as the Issuer or any such Restricted Subsidiary deems reasonable under the circumstances;
(7) payroll, travel, moving and similar advances to cover matters that are expected at the time of such advances ultimately to be treated
as expenses for accounting purposes and that are made in the ordinary course of business;
(8) loans or advances to employees
or independent contractors made in the ordinary course of business of the Issuer or such Restricted Subsidiary;
(9) stock,
obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Issuer or any Restricted Subsidiary or in satisfaction of judgments;
(10) any Person where such Investment was acquired by the Issuer or any of its Restricted Subsidiaries (a) in exchange for any other
Investment or accounts receivable held by the Issuer or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or
(b) as a result of a foreclosure by the Issuer or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
(11) Hedging Obligations entered into in the ordinary course of the Issuers or any Restricted Subsidiarys business and not for
the purpose of speculation;
(12) any Person to the extent such Investment exists on the Original Issue Date or replaces or
refinances an Investment in such Person existing on the Original Issue Date in an amount not exceeding the amount of the Investment being replaced or refinanced;
provided
,
however
, that the new Investment is on terms and conditions no
less favorable than the Investment being renewed or replaced;
(13) Investments in insurance on the life of any participant in
any deferred compensation plan of the Issuer made in the ordinary course of business;
(14) Permitted Co-investments; Permitted
Non-Recourse Carve-Out Guarantees; Permitted Mortgage Investments and Capital Stock of any Qualified REIT; and
(15) so long as
no Default shall have occurred and be continuing (or result therefrom), any Person in an aggregate amount which, when added together with the amount of all the Investments made pursuant to this clause (15) which at such time have not been
repaid through repayments of loans or advances or other transfers of assets, does not exceed $20.0 million at any time outstanding (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent
changes in value).
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Permitted Liens
means, with respect to any Person:
(1) pledges or deposits by such Person under workers compensation laws, unemployment insurance laws or similar legislation, or good
faith deposits in connection with bids, tenders, contracts, including deposits under agreements that provide that such deposit constitutes liquidated damages upon breach of such agreement (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business;
(2)
Liens imposed by law, such as carriers, warehousemens, landlords, mechanics, materialmens and repairmens Liens and other similar Liens, in each case for sums not yet due and payable or being contested in good
faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review and Liens arising solely by virtue of
any statutory or common law provision relating to bankers Liens, rights of setoff or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution;
provided
,
however
, that
(A) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Issuer in excess of those set forth by regulations promulgated by the Federal Reserve Board and (B) such deposit
account is not intended by the Issuer or any Restricted Subsidiary to provide collateral to the depository institution;
(3)
Liens for taxes, fees, assessments or other governmental charges not yet subject to penalties for nonpayment or which are being contested in good faith by appropriate proceedings;
(4) Liens in favor of issuers of surety bonds or letters of credit issued pursuant to the request of and for the account of such Person in
the ordinary course of its business;
provided
,
however
, that such letters of credit do not constitute Indebtedness;
(5) Liens to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations and Attributable Debt), statutory obligations, appeal bonds,
performance bonds, mechanics lien release bonds and other obligations of a like nature, in each case in the ordinary course of business;
(6) survey exceptions, encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or
conditions, covenants and restrictions, deed restrictions, zoning or other restrictions as to the use of real property or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in
connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;
(7) Liens securing Indebtedness (including Capital Lease Obligations and Attributable Debt) Incurred to finance the construction, purchase
or lease of, or repairs, improvements or additions to, property (real or personal, tangible or intangible), plant or equipment of such Person;
provided
,
however
, that the Lien may not extend to any other property owned by such Person
or any of its Restricted Subsidiaries at the time the Lien is Incurred (other than assets and property affixed or appurtenant thereto), and the Indebtedness (other than any interest thereon) secured by the Lien may not be Incurred more than 180 days
after the later of the acquisition, completion of construction, repair, improvement, addition or commencement of full operation of the property subject to the Lien;
(8) Liens arising out of judgments or awards in respect of which the Issuer or any Restricted Subsidiary shall in good faith be prosecuting an appeal or proceedings for review in respect of which there
shall be secured a subsisting stay of execution pending such appeal or proceedings;
provided
that the aggregate amount of all such judgments or awards (and any cash and the fair market value of any property subject to such Liens) does not
exceed $10.0 million at any time outstanding;
(9) Liens existing on the Original Issue Date (other than the Liens securing
Indebtedness pursuant to any Credit Facility);
(10) Liens on property (real or personal, tangible or intangible) or shares of
Capital Stock of another Person at the time such other Person becomes a Subsidiary of such Person;
provided
,
however
, that the Liens may not extend to any other property owned by such Person or any of its Restricted Subsidiaries (other
than assets and property affixed or appurtenant thereto);
77
(11) Liens on property at the time such Person or any of its Subsidiaries acquires such
property, including any acquisition by means of a merger or consolidation with or into such Person or a Subsidiary of such Person;
provided
,
however
, that the Liens may not extend to any other property owned by such Person or any of
its Restricted Subsidiaries (other than assets and property affixed or appurtenant thereto);
(12) Liens securing Indebtedness
or other obligations of a Subsidiary of such Person owing to such Person or a Subsidiary of such Person;
(13) Liens securing
Hedging Obligations so long as such Hedging Obligations relate to Indebtedness that is, and is permitted to be under the Indenture, secured by a Lien on the same properly securing such Hedging Obligations;
(14) (A) Liens securing Senior Indebtedness Incurred in compliance with the covenant described under Certain
CovenantsLimitation on Indebtedness in an aggregate amount not to exceed the amount of Indebtedness Incurred under clause (b)(1) of such covenant and then outstanding, and (B) Liens on Senior Indebtedness securing any Refinancing
(or successive Refinancings) as a whole, or in part, of any Indebtedness secured by Liens permitted by this clause (14);
(15)
Liens on specific items of inventory or other goods of such Person securing such Persons obligations in respect of bankers acceptances issued or created for the account of such Person solely to facilitate the purchase, shipment or
storage of such inventory or other goods;
(16) Liens arising solely by virtue of any statutory or common law provision
relating to bankers liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution;
provided
,
however
, that (A) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against access by the Issuer or any Subsidiary of the Issuer in excess of those set forth by regulations promulgated by the Board of Governors of the Federal Reserve System of the
United States and (B) such deposit account is not intended by the Issuer or any Subsidiary to provide collateral to such depository institution;
(17) Liens securing Non-Recourse Indebtedness or guarantees thereof (and Refinancings of any of the foregoing) on assets or Capital Stock of Restricted Subsidiaries formed solely for the purpose of, and
which engage in no business other than the business of, making Permitted Co-investments;
(18)
|
Liens encumbering the assets of or secured by Permitted Mortgage Investments or Co-investment Vehicles;
|
(19) Liens securing Indebtedness which, taken together with all other Indebtedness secured by Liens (excluding Liens permitted by clauses
(1) through (18) above or clause (20) below) at the time of determination, does not exceed $25.0 million; and
(20) Liens to secure any Refinancing (or successive Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien referred
to in the foregoing clause (7), (9), (10) or (11);
provided
,
however
, that:
(A) such new
Lien shall be limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and accessions to, such properly or
proceeds or distributions thereof); and
(B) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (x) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clause (7), (9), (10) or (11) at the time the original Lien became a Permitted
Lien and (y) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement.
78
Permitted Mortgage Investment
means any Investment in secured
notes, mortgages, deeds of trust, collateralized mortgage obligations, commercial mortgage-backed securities, other secured debt securities, secured debt derivatives or other secured debt instruments, so long as such Investment does not individually
exceed $10.0 million and relates directly or indirectly to real property that constitutes or is used as land, office, multifamily, residential, industrial, retail, hotel or mixed-use property.
Permitted Non-Recourse Carve-Out Guarantees
means customary completion or budget guarantees, indemnities or
other customary guarantees provided to lenders (including by means of separate indemnification agreements or carve-out guarantees) provided in the ordinary course of business and consistent with past practice by the Issuer or a Restricted Subsidiary
in financing transactions that are directly or indirectly secured by real property or other related assets (including Capital Stock) of a Restricted Subsidiary (including an Investment Subsidiary), Co-Investment Vehicle, joint venture, Unrestricted
Subsidiary or a separate account or investment program managed, operated or sponsored by an Investment Subsidiary and that may be full or partial recourse or non-recourse to the Restricted Subsidiary (including an Investment Subsidiary),
Co-Investment Vehicle, joint venture, Unrestricted Subsidiary or separate account or investment program managed, operated or sponsored by an Investment Subsidiary, in each case that is the borrower in such financing, but is non-recourse to Issuer or
any other Restricted Subsidiary except for such customary completion or budget guarantees, indemnities or other customary guarantees (including by means of separate indemnification agreements or carve-out guarantees).
Person
means any individual, corporation, partnership, limited liability company, joint venture, association,
joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
Preferred Stock
as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends
or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.
The
principal
of a Note means the principal of the Note plus the premium, if any, payable on the Note which is
due or overdue or is to become due at the relevant time.
Qualified REIT
means a REIT or its
operating partnership subsidiary into which Parent, the Issuer or its Restricted Subsidiaries contribute direct or indirect interests in real estate and related assets in exchange for the Capital Stock of the REIT or its operating partnership
subsidiary.
Refinance
means, in respect of any Indebtedness, to refinance, extend, renew, refund,
repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such indebtedness.
Refinanced
and
Refinancing
shall have correlative meanings.
Refinancing Indebtedness
means Indebtedness that Refinances any Indebtedness of the Issuer or any Restricted
Subsidiary existing on the Original Issue Date or Incurred in compliance with the Indenture, including Indebtedness that Refinances Refinancing Indebtedness;
provided
,
however
, that:
(1) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced;
(2) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to
or greater than the Average Life of the Indebtedness being Refinanced;
(3) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or
committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; and
(4) if the Indebtedness being Refinanced is subordinated in right of payment to the Notes, such Refinancing Indebtedness is subordinated
in right of payment to the Notes at least to the same extent as the Indebtedness being Refinanced;
79
provided further
,
however
, that Refinancing Indebtedness shall not include
(A) Indebtedness of a Restricted Subsidiary that Refinances Indebtedness of the Issuer or (B) Indebtedness of the Issuer or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary; and
provided further
,
however
, that to the extent any new Indebtedness to be applied to Refinance any Indebtedness of the Issuer or its Restricted Subsidiaries:
(x) is incurred in compliance with clauses (1), (2), (3) and (4) above and with the covenant described under Certain CovenantsLimitation on Indebtedness,
(y) the net proceeds of which are deposited into an escrow account at a bank or trust company which is organized under the
laws of the United States of America, any State thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50.0 million (or the
foreign currency equivalent thereof) and has outstanding debt which is rated A (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under
the Securities Act) to be held in escrow for a period of not more than 90 days from the date of receipt of such net proceeds, and
(z) are to be held in such escrow account (together with any additional necessary funds) for the satisfaction and discharge, defeasance or other extinguishment of the Indebtedness to be Refinanced in
connection with its Stated Maturity or in connection with an irrevocable notice of redemption,
then such new Indebtedness shall be deemed to
be Refinancing Indebtedness for the purposes of this definition, notwithstanding that such old Indebtedness remains outstanding pending release of such funds from escrow.
Registration Rights Agreement
means the Registration Rights Agreement dated the Issue Date, among the Issuer,
Parent, the Subsidiary Guarantors, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC.
Related Business
means any business in which the Issuer was engaged on the Original Issue Date and any business related, ancillary or complementary to any business of the Issuer
in which the Issuer was engaged on the Original Issue Date.
Replacement Assets
means (1) any
property or other assets (other than Indebtedness and Capital Stock) used or useful in a Related Business, (2) substantially all the assets of a Related Business or a majority of the Voting Stock of any Person engaged in a Related Business that
will become on the date of acquisition thereof a Restricted Subsidiary, (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary that is engaged in a Related Business, (4) any Permitted
Co-investment, or (5) Capital Stock of any Qualified REIT.
Restricted Payment
with respect to
any Person means:
(1) the declaration or payment of any dividends or any other distributions of any sort in respect of its
Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Issuer or a Restricted Subsidiary, and other than dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary in accordance
with its organizational documents to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation));
(2) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Issuer held by any Person or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of
the Issuer (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Issuer that is not Disqualified Stock);
(3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated Obligations of such Person, if such Person is the Issuer or a Subsidiary Guarantor (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase or other acquisition); or
80
(4) the making of any Investment (other than a Permitted Investment) in any Person.
Restricted Subsidiary
means any Subsidiary of the Issuer that is not an Unrestricted Subsidiary.
S&P
means Standard & Poors Ratings Group.
Sale/Leaseback Transaction
means an arrangement relating to property owned by the Issuer or a Restricted
Subsidiary on the Original Issue Date or thereafter acquired by the Issuer or a Restricted Subsidiary whereby the Issuer or a Restricted Subsidiary transfers such property to a Person and the Issuer of a Restricted Subsidiary leases it from such
Person.
SEC
means the Securities and Exchange Commission.
Securities Act
means the Securities Act of 1933, as amended.
Senior Indebtedness
means with respect to any Person:
(1) Indebtedness of such Person, whether outstanding on the Original Issue Date or thereafter Incurred; and
(2) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization
relating to such Person whether or not post-filing interest is allowed in such proceeding) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable,
unless, in the case of clauses (1) and (2), in the instrument
creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the Notes or the Guaranty of such Person, as the case may be;
provided
,
however
,
that Senior Indebtedness shall not include:
(1) any obligation of such Person to any Subsidiary;
(2) any liability for Federal, state, local or other taxes owed or owing by such Person;
(3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities);
(4) any Indebtedness of such Person (and any accrued and unpaid interest in respect
thereof) which is subordinate or junior in any respect to any other Indebtedness or other obligation of such Person;
(5) any
Capital Stock; or
(6) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of the
Indenture;
provided
,
however
, that such Indebtedness shall be deemed not to have been Incurred in violation of the Indenture for purposes of this clause (6) if (x) the holders of such Indebtedness or their representative or
the Issuer shall have furnished to the Trustee an opinion of recognized independent legal counsel, unqualified in all material respects, addressed to the Trustee (which legal counsel may, as to matters of fact, rely upon an Officers
Certificate) to the effect that the Incurrence of such Indebtedness does not violate the provisions of the Indenture or (y) such Indebtedness consists of Bank Indebtedness, and the holders of such Indebtedness or their agent or representative
(1) had no actual knowledge at the time of the Incurrence that the Incurrence of such Indebtedness violated the Indenture and (2) shall have received an Officers Certificate to the effect that the Incurrence of such Indebtedness does
not violate the provisions of the Indenture.
Series A Preferred Stock
means the Parents 6.00%
Series A Preferred Stock.
Series B Preferred Stock
means the Parents 6.452% Series B
Preferred Stock.
81
Significant Subsidiary
means any Restricted Subsidiary that would
be a Significant Subsidiary of the Issuer within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.
Stated Maturity
means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and
payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has
occurred).
Subordinated Debentures
means the Issuers junior subordinated debentures due 2037,
outstanding on the Original Issue Date.
Subordinated Obligation
means, with respect to a Person,
any Indebtedness of such Person (whether outstanding on the Original Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Notes or a Guaranty of such Person, as the case may be, pursuant to a written agreement
to that effect.
Subsidiary
means, with respect to any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by:
(1) such Person;
(2) such Person and one or more Subsidiaries of such Person; or
(3) one or more Subsidiaries of such Person,
and the accounts of which would be consolidated with those of such Person in its
consolidated financial statements in accordance with GAAP, if such statements were prepared as of such date.
Subsidiary Guarantor
means each Subsidiary of the Issuer that executed the Indenture as a guarantor on the
Original Issue Date and each other Subsidiary of the Issuer that thereafter guarantees the Notes pursuant to the terms of the Indenture. The following Subsidiaries of the Issuer are Subsidiary Guarantors as of the date of this prospectus:
Kennedy-Wilson Properties, Ltd., a Delaware corporation; Kennedy-Wilson Property Services, Inc., a Delaware corporation; Kennedy-Wilson Property Services II, Inc., a Delaware corporation; Kennedy Wilson Property Services III, L.P., a Delaware
limited partnership; Kennedy-Wilson Property Equity, Inc., a Delaware corporation; Kennedy-Wilson Property Equity II, Inc., a Delaware corporation; Kennedy-Wilson Property Special Equity, Inc., a Delaware corporation; Kennedy-Wilson Property Special
Equity II, Inc., a Delaware corporation; Kennedy Wilson Property Special Equity III, LLC, a Delaware limited liability company; K-W Properties, a California corporation; Kennedy Wilson Property Services III GP, LLC, a Delaware limited liability
company; KW BASGF II Manager, LLC, a Delaware limited liability company; KWF Investors I, LLC, a Delaware limited liability company; KWF Investors II, LLC, a Delaware limited liability company; KWF Investors III, LLC, a Delaware limited liability
company; KWF Manager I, LLC, a Delaware limited liability company; KWF Manager II, LLC, a Delaware limited liability company; KWF Manager III, LLC, a Delaware limited liability company; Kennedy Wilson Overseas Investments, Inc., a Delaware
corporation; Fairways 340 Corp., a Delaware corporation; KWRichmond, LLC, a Delaware limited liability company; SG KW Venture I Manager LLC, a Delaware limited liability company; KW Loan Partners I LLC, a Delaware limited liability company; KW
Loan Partners II LLC, a California limited liability company; KW Summer House Manager, LLC, a Delaware limited liability company; KW Montclair, LLC, a Delaware limited liability company; KW Blossom Hill Manager, LLC, a Delaware limited liability
company; KW Serenade Manager, LLC, a Delaware limited liability company; K-W Santiago Inc., a California corporation; KW Redmond Manager, LLC, a Delaware limited liability company; Dillingham Ranch Aina LLC, a Delaware limited liability company;
68-540 Farrington, LLC, a Delaware limited liability company; KW Dillingham Aina LLC, a Delaware limited liability company; Kennedy Wilson Fund Management Group, LLC, a California limited liability company; Kennedy-Wilson International, a California
corporation; Kennedy- Wilson Tech, Ltd., a California corporation; KWP Financial I, a California corporation; Kennedy-Wilson Properties, LTD., an Illinois corporation; Kennedy Wilson Auction Group Inc., a California corporation; KWF Manager IV, LLC,
a Delaware limited liability company; KWF Manager V, LLC, a Delaware limited liability company; KW Ireland, LLC, a Delaware limited liability company; Kennedy Wilson Property Equity IV, LLC, a Delaware limited liability company; KW Builder Marketing
Services, Inc., a California corporation; KW Fund IVKohanaiki, LLC, a Delaware limited liability company; KW Telstar Partners, LLC, a Delaware limited liability company; KWF Investors IV, LLC, a Delaware limited liability company; KWF
Investors V, LLC, a Delaware limited liability company; Meyers Research, LLC, a Delaware limited liability company; KW Armacost, LLC, a Delaware limited liability company; Santa Maria Land Partners Manager, LLC, a
82
Delaware limited liability company; KW Investment Adviser, LLC, a Delaware limited liability company; Kennedy-Wilson Capital, a California corporation; KW Captowers Partners, LLC, a Delaware
limited liability company; KW Four Points, LLC, a Delaware limited liability company; KW Loan Partners VII, LLC, a Delaware limited liability company; KWF Investors VII, LLC, a Delaware limited liability company; KWF Manager VII, LLC, a Delaware
limited liability company; KW Residential Capital, LLC, a Delaware limited liability company; KW Boise Plaza, LLC, a Delaware limited liability company; KW Loan Partners VIII, LLC, a Delaware limited liability company; KW UR Investments 1, LLC, a
Delaware limited liability company; KW UR Investments 2, LLC, a Delaware limited liability company; Kennedy Wilson Property Services IV, L.P., a Delaware limited partnership; Kennedy Wilson Property Services IV GP, LLC, a Delaware limited liability
company; KW/CV Third-Pacific Manager, LLC, a Delaware limited liability company; KW EU Loan Partners II, LLC, a Delaware limited liability company; KWF Investors VIII, LLC, a Delaware limited liability company; KWF Manager VIII, LLC, a Delaware
limited liability company; KW 1200 Main, LLC, a Delaware limited liability company; KW Harrington LLC, a Delaware limited liability company; KW 5200 Lankershim Manager, LLC, a Delaware limited liability company; KWF Manager X, LLC, a Delaware
limited liability company; KWF Manager XI, LLC, a Delaware limited liability company; and KWF Manager XII, LLC, a Delaware limited liability company.
Subsidiary Guaranty
means a Guarantee by a Subsidiary Guarantor of the Issuers obligations with respect to the Notes.
Temporary Cash Investments
means any of the following:
(1) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United
States of America or any agency thereof;
(2) investments in time deposit accounts, bankers acceptances, certificates of
deposit and money market deposits maturing within one year of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any State thereof or any foreign country recognized by
the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50.0 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated A (or
such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker-dealer or mutual fund
distributor;
(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described
in clause (1) above and clauses (4) and (5) below entered into with a bank meeting the qualifications described in clause (2) above;
(4) investments in commercial paper, maturing not more than one year from the date of creation thereof, issued by a corporation (other than an Affiliate of the Issuer) organized and in existence under the
laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moodys or A-1
(or higher) according to S&P; and
(5) investments in securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by S&P or A by
Moodys.
Unrestricted Subsidiary
means:
(1) any Subsidiary of the Issuer that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of the Issuer (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Issuer or any other Subsidiary of the Issuer that is not a Subsidiary
83
of the Subsidiary to be so designated;
provided
,
however
, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary
has assets greater than $1,000, such designation would be permitted under the covenant described under Certain CovenantsLimitation on Restricted Payments.
The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided
,
however
, that
immediately after giving effect to such designation (A) the Issuer could Incur $1.00 of additional Indebtedness under paragraph (a) of the covenant described under Certain CovenantsLimitation on Indebtedness
(irrespective of whether that covenant remains in effect) and (B) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the resolution of the Board of Directors giving effect to such designation and an Officers Certificate certifying that such designation complied with the foregoing provisions.
U.S. Dollar Equivalent
means with respect to any monetary amount in a currency other than U.S. dollars, at any
time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as
published in The Wall Street Journal in the Exchange Rates column under the heading Currency Trading on the date two Business Days prior to such determination.
Except as described under Certain CovenantsLimitation on Indebtedness, whenever it is necessary to determine
whether the Issuer has complied with any covenant in the Indenture or a Default has occurred and an amount is expressed in a currency other than U.S. dollars, such amount will be treated as the U.S. Dollar Equivalent determined as of the date
such amount is initially determined in such currency.
U.S. Government Obligations
means direct
obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuers option.
Voting Stock
of a Person means
all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees
thereof.
Wholly Owned Subsidiary
means a Restricted Subsidiary all the Capital Stock of which
(other than directors qualifying shares) is owned by the Issuer or one or more Wholly Owned Subsidiaries.
Book-Entry, Delivery and
Form
The exchange notes will be issued in registered, global form (the
Global Notes
) in minimum
denominations of $2,000 and integral multiples of $1,000 in excess thereof.
The Global Notes will be deposited upon issuance
with the Trustee as custodian for The Depository Trust Company (
DTC
), and registered in the name of DTC or its nominee, in each case for credit to an account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for Notes in certificated
form except in the limited circumstances described below. See Book-Entry, Delivery and FormExchange of Global Notes for Certificated Notes. Except in the limited circumstances described below, owners of beneficial interests
in the Global Notes will not be entitled to receive physical delivery of Notes in certificated form.
Depositary Procedures
The following description of the operations and procedures of DTC, Euroclear System (
Euroclear
) and Clearstream
Banking, S.A. (
Clearstream
) are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. We take no
responsibility for these operations and procedures and urge investors to contact the system or their participants directly to discuss these matters.
84
DTC has advised us that DTC is a limited-purpose trust company created to hold securities
for its participating organizations (collectively, the
Participants
) and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts
of its Participants. The Participants include securities brokers and dealers (including the initial purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTCs system is also available to other
entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the
Indirect Participants
). Persons who
are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of
DTC are recorded on the records of the Participants and Indirect Participants.
DTC has also advised us that, pursuant to
procedures established by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on, and the transfer of ownership of these interests
will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interests in the Global Notes).
Investors in the Global Notes who are Participants in DTCs system may hold their interests therein directly through DTC. Investors
in the Global Notes who are not Participants may hold their interests therein indirectly through organizations (including Euroclear and Clearstream) which are Participants in such system. Euroclear and Clearstream will hold interests in the Global
Notes on behalf of their participants through customers securities accounts in their respective names on the books of their respective depositories, which are Euroclear Bank S.A. /N.V., as operator of Euroclear, and Citibank, N.A., as operator
of Clearstream. All interests in a Global Note, including those held through Euroclear or Clearstream, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the
procedures and requirements of such systems. The laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to
such Persons will be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge such interests to
Persons that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests.
Except as described below, owners of an interest in the Global Notes will not have Notes registered in their names, will not receive
physical delivery of Notes in certificated form and will not be considered the registered owners or holders thereof under the Indenture for any purpose.
Payments in respect of the principal of, and interest and premium and additional interest, if any, on a Global Note registered in the name of DTC or its nominee will be payable to DTC in its capacity as
the registered holder under the Indenture. Under the terms of the Indenture, the Issuer and the Trustee will treat the Persons in whose names the Notes, including the Global Notes, are registered as the owners of the Notes for the purpose of
receiving payments and for all other purposes. Consequently, none of the Issuer, the Trustee nor any agent of the Issuer or the Trustee has or will have any responsibility or liability for:
(1) any aspect of DTCs records or any Participants or Indirect Participants records relating to or
payments made on account of beneficial ownership interest in the Global Notes or for maintaining, supervising or reviewing any of DTCs records or any Participants or Indirect Participants records relating to the beneficial
ownership interests in the Global Notes; or
(2) any other matter relating to the actions and practices of DTC
or any of its Participants or Indirect Participants.
85
DTC has advised us that its current practice, upon receipt of any payment in respect of
securities such as the Notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each
relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to
the beneficial owners of Notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee or the Issuer.
Neither the Issuer nor the Trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the Notes, and the Issuer and the Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Transfers between Participants in DTC will be effected in accordance
with DTCs procedures, and will be settled in same-day funds, and transfers between participants in Euroclear and Clearstream will be effected in accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and Euroclear or Clearstream participants, on the other hand,
will be effected through DTC in accordance with DTCs rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf of delivering or receiving interests in the relevant Global Note in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositories for Euroclear or Clearstream.
DTC has advised the Issuer that it will take any action permitted to be taken by a holder of Notes only at the direction of one or more
Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the Notes as to which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the right to exchange the Global Notes for legended Notes in certificated form, and to distribute such Notes to its Participants.
Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes
among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. None of the Issuer, the Trustee or any of their respective
agents will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for Certificated Notes if:
(1) DTC
(a) notifies the Issuer that it is unwilling or unable to continue as depositary for the Global Notes and DTC fails to appoint a successor depositary or (b) has ceased to be a clearing agency registered under the Exchange Act;
(2) the Issuer, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Certificated Notes; or
(3) there has occurred and is continuing a Default with respect to the Notes.
In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes under prior written notice given to the
Trustee by or on behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with its customary procedures).
86
Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any Global Note unless the transferor first delivers to the Trustee a
written certificate (in the form provided in the Indenture)
Same Day Settlement and Payment
The Issuer will make payments in respect of the Notes represented by the Global Notes (including principal, premium, if any, interest and
additional interest, if any) by wire transfer of immediately available funds to the accounts specified by the Global Note holder. The Issuer will make all payments of principal, interest and premium and additional interest, if any, with respect to
Certificated Notes by wire transfer of immediately available funds to the accounts specified by the holders of the Certificated Notes or, if no such account is specified, by mailing a check to each such holders registered address. The Notes
represented by the Global Notes are expected to trade in DTCs Same-Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by DTC to be settled in immediately available funds.
The Issuer expects that secondary trading in any Certificated Notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global
Note from a Participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. DTC has advised the Issuer that cash received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a Euroclear or Clearstream participant to a
Participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTCs settlement date.
87
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND
OFFICERS
Kennedy-Wilson Holdings, Inc. and Kennedy-Wilson, Inc.
Kennedy-Wilson, Inc.s Amended and Restated Certificate of Incorporation provides as follows:
SEVENTH.
1. Actions, Suits and
Proceedings Other than by or in the Right of the Corporation.
The Corporation shall indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the
fact that he is or was, or has agreed to become a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an Indemnitee), or by reason of any action alleged to have been taken or omitted in
such capacity, against all expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a action or proceeding, had no reasonable cause to believe his conduct was unlawful. The plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 6 below, the Corporation shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by the Indemnitee unless the
initiation thereof was approved by the Board of Directors of the Corporation.
2. Actions of Suits by or in the Right of the Corporation.
The Corporation shall indemnify any Indemnitee who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has
agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason
of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys fees) and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action of suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses (including attorneys fees) which the Court of Chancery of Delaware
of such other court shall deem proper.
3. Indemnification for Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that an Indemnitee has been successful, on the merits or otherwise,
in defense of any action, suit or proceeding referred to in Sections I and 2 of this Article, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, he shall be indemnified against all expenses
(including attorneys fees) actually and reasonably incurred by him or on his behalf in connection therewith. Without limiting the foregoing, if any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition
without prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv) an
adjudication that
II - 1
the Indemnitee did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal
proceeding, an adjudication that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Indemnitee shall be considered for the purpose hereof to have been wholly successful with respect thereto.
4. Notification and Defense of Claim.
As a condition precedent to his right to be indemnified, the Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving him for
which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense
thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the Corporation to the Indemnitee of its election so to assume such defense, the Corporation shall not be liable to the Indemnitee for any
legal or other expenses subsequently incurred by the Indemnitee in connection with such claim, other than as provided below in this Section 4. The Indemnitee shall have the right to employ his own counsel in connection with such claim, but the
fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the
Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and the Indemnitee in the conduct of the defense of such action or
(iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel for the Indemnitee shall be at the expense of the Corporation, except as otherwise
expressly provided by this Article. The Corporation shall not be entitled, without the consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for the Indemnitee shall have
reasonably made the conclusion provided for in clause (ii) above.
5. Advance of Expenses.
Subject to the provisions of Section 6 below, in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of which the Corporation receives notice under this Article, any expenses (including attorneys fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter, provided, however, that the payment of such expenses incurred by an Indemnitee in advance of the
final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the indemnitee is not entitled to be
indemnified by the Corporation as authorized in this Article. Such undertaking may be accepted without reference to the financial ability of such person to make such repayment.
6. Procedure for Indemnification.
In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the Indemnitee shall submit to the Corporation a written request, including in such request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification or advancement of expenses. Any such indemnification or advancement of expenses shall be made promptly, and in any event
within 60 days after receipt by the Corporation of the written request of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the Corporation determines, by clear and convincing evidence, within such 60-day period that the
Indemnitee did not meet the applicable standard of conduct set forth in Section 1 or 2, as the case may be. Such determination shall be made in each instance by (i) a majority vote of the directors of the Corporation who are not at that
time parties to the action, suit or proceeding in question (disinterested directors), even though less than a quorum, (ii) if there are no such disinterested directors, or if such disinterested directors so direct, by independent
legal counsel (who may be regular legal counsel to the corporation) in a written opinion, (iii) a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum
shall consist of stockholders who are not at that time parties to the action, suit or proceeding in question, or (iv) the Delaware Court of Chancery.
7. Remedies.
The right to indemnification or advances as granted by this Article
shall be enforceable by the Indemnitee in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within the 60-day period referred to above in Section 6. Unless
otherwise provided by law, the burden of proving that the
II - 2
Indemnitee is not entitled to indemnification or advancement of expenses under this Article shall be on the Corporation. Neither the failure of the Corporation to have made a determination prior
to the commencement of such action that indemnification is proper in the circumstances because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Section 6 that the Indemnitee
has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. The Indemnitees expenses (including attorneys fees) incurred in
connection with successfully establishing his right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment.
No amendment, termination or repeal of this Article or
of the relevant provisions of the General Corporation Law of the State of Delaware or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any
action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal.
9. Other Rights.
The indemnification and advancement of expenses provided by
this Article shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to
the benefit of the estate, heirs, executors and administrators of the Indemnitee. Nothing contained in this Article shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors
providing indemnification rights and procedures different from those set forth in this Article. In addition, the Corporation may, to the extent authorized from time (0 time by its Board of Directors, grant indemnification rights to other employees
or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article.
10.
|
Partial Indemnification.
|
If an
Indemnitee is entitled under any provision of this Article to indemnification by the Corporation for some or a portion of the expenses (including attorneys fees), judgments, fines or amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnitee for the portion of such
expenses (including attorneys fees), judgments, fines or amounts paid in settlement to which the Indemnitee is entitled.
The Corporation may
purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan)
against any expense, liability or loss incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General
Corporation Law of the State of Delaware.
12.
|
Merger or Consolidation.
|
If
the Corporation is merged into or consolidated with another corporation and the Corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the Corporation under this Article with respect to any action,
suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the date of such merger or consolidation.
If this
Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys fees), judgments, fines and
amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by an applicable
portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law.
II - 3
Terms used herein
and defined in Section l45(h) and Section l45(i) of the General Corporation Law of the State of Delaware shall have the respective meanings assigned to such terms in such Section l45(h) and Section l45(i).
15.
|
Subsequent Legislation.
|
If the
General Corporation Law of the State of Delaware is amended after adoption of this Article to expand further the indemnification permitted to Indemnitees, then the Corporation shall indemnify such persons to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as so amended.
Kennedy-Wilson, Inc.s Amended and Restated
By-Laws provides as follows:
Article VII.Indemnification.
7.1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding), by reason of being or having been a director or officer of the Corporation or serving or having served at the request of the
Corporation as a director, trustee, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an Indemnitee), whether the
basis of such proceeding is alleged action or failure to act in an official capacity as a director, trustee, officer, employee or agent or in any other capacity while serving as a director, trustee, officer, employee or agent, shall be indemnified
and held harmless by the Corporation to the fullest extent authorized by the Delaware GCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than permitted prior thereto) (as used in this Article 7, the Delaware Law), against all expense, liability and loss (including attorneys fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, trustee, officer, employee or agent and
shall inure to the benefit of the Indemnitees heirs, executors and administrators; provided, however, that, except as provided in §7.2 hereof with respect to Proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such Indemnitee in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification
conferred in this Article 7 shall be a contract right and shall include the right to be paid by the Corporation the expenses (including attorneys fees) incurred in defending any such Proceeding in advance of its final disposition (an
Advancement of Expenses); provided, however, that, if the Delaware Law so requires, an Advancement of Expenses incurred by an Indemnitee shall be made only upon delivery to the Corporation of an undertaking (an Undertaking),
by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a Final Adjudication) that such Indemnitee is not
entitled to be indemnified for such expenses under this Article 7 or otherwise.
7.2. Right of Indemnitee to Bring Suit. If a
claim under §7.1 hereof is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an Advancement of Expenses, in which case the applicable
period shall be twenty days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to
recover an Advancement of Expenses pursuant to the terms of an Undertaking, the Indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the Indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an Advancement of Expenses) it shall be a defense that, and (ii) in any suit by the Corporation to recover an Advancement of Expenses pursuant to the
terms of an Undertaking the Corporation shall be entitled to recover such expenses upon a Final Adjudication that, the Indemnitee has not met the applicable standard of conduct set forth in the Delaware Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has
met the applicable standard of conduct set forth in the Delaware Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the Indemnitee has not met such applicable
standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to enforce
a right to indemnification or to an Advancement of Expenses hereunder, or by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified,
or to such Advancement of Expenses, under this Article 7 or otherwise shall be on the Corporation.
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7.3. Non-Exclusivity of Rights. The rights to indemnification and to the Advancement of
Expenses conferred in this Article 7 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Corporations Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
7.4. Insurance. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under this Article 7 or under the Delaware Law.
7.5.
Indemnification of Employees and Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and to the Advancement of Expenses, to any employee or agent of
the Corporation to the fullest extent of the provisions of this Article 7 with respect to the indemnification and Advancement of Expenses of directors and officers of the Corporation.
Kennedy-Wilson Holdings, Inc.s second amended and restated certificate of incorporation provides as follows:
SEVENTH
: The following paragraphs shall apply with respect to liability and indemnification of the Corporations
officers and directors and certain other persons:
A. A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the directors duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit.
If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL,
as so amended. Any repeal or modification of this paragraph (A) by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation with respect to events occurring prior to the time of
such repeal or modification.
B. The Corporation, to the full extent permitted by Section 145 of the DGCL,
as amended from time to time, shall indemnify all persons whom it may indemnify pursuant thereto. Expenses (including attorneys fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action,
suit or proceeding for which such officer or director may be entitled to indemnification hereunder shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized hereby.
Kennedy-Wilson Holdings, Inc.s amended and restated by-laws provides as follows:
Article VII Indemnification of Directors and Officers
7.1 The
Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or
in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
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7.2 The Corporation shall indemnify any person who was or is a party, or is threatened
to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other
court shall deem proper.
7.3 To the extent that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 or 2 of this Article VII, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including
attorneys fees) actually and reasonably incurred by him or her in connection therewith.
7.4 Any indemnification
under sections 1 or 2 of this Article VII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of conduct set forth in such section. Such determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or
(b) If such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or
(c) By the stockholders.
7.5 Expenses (including attorneys fees) incurred by an officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Section. Such expenses (including attorneys fees) incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
7.6 The indemnification and advancement of expenses
provided by, or granted pursuant to the other sections of this Article VII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.
7.7 The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VII.
7.8 For purposes of this Article VII, references to the Corporation shall include, in addition to the resulting Corporation, any constituent Corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent Corporation, or is or was serving at the request of such constituent Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this Article VII with respect to the resulting or surviving Corporation as he would have with respect to such constituent Corporation if its separate existence had continued.
7.9 For purposes of this Article VII, references to other enterprises shall include employee benefit plans;
references to fines shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to serving at the request of the Corporation shall include any service as a director, officer,
employee or agent of the
II - 6
Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the
Corporation as referred to in this Article VII.
7.10 The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
7.11 No director or officer of the Corporation shall be personally liable
to the Corporation or to any stockholder of the Corporation for monetary damages for breach of fiduciary duty as a director or officer, provided that this provision shall not limit the liability of a director or officer (i) for any breach of
the directors or the officers duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of Delaware, or (iv) for any transaction from which the director or officer derived an improper personal benefit.
Section 145 of the DGCL concerning indemnification of officers, directors, employees and agents is set forth below.
Section 145. Indemnification of officers, directors, employees and agents; insurance.
(a) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe the persons conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that the persons conduct was unlawful.
(b) A corporation shall
have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that
the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys fees) actually and reasonably incurred by such person in connection
therewith.
(d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall
be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable
standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made, with respect to a person who is a director or officer of the corporation at the time of such determination, (1) by a majority
vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if
there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.
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(e) Expenses (including attorneys fees) incurred by an officer or director of the
corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys fees) incurred
by former directors and officers or other employees and agents of the corporation or by persons serving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other
enterprise may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.
(f) The
indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such persons official capacity and as to action in another capacity while holding such office. A right to indemnification
or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to such provision after the occurrence of the act or omission that is the subject of the
civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or
impairment after such action or omission has occurred.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such persons status as such, whether or not the corporation would have the power to indemnify such
person against such liability under this section.
(h) For purposes of this section, references to the corporation
shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as such person would
have with respect to such constituent corporation if its separate existence had continued.
(i) For purposes of this section,
references to other enterprises shall include employee benefit plans; references to fines shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to serving at the
request of the corporation shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner not opposed to the best interests of the corporation as referred to in this section.
(j) The
indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested
with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporations obligation to advance expenses (including attorneys fees).
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Subsidiary Guarantors
Delaware Corporate Subsidiary Guarantors
The subsidiary guarantors
that are Delaware corporations are subject to the provisions of the DGCL described above with respect to Kennedy-Wilson, Inc. and Kennedy-Wilson Holdings, Inc.
The Certificates of Incorporation of each of Kennedy-Wilson Property Services II, Inc., Kennedy-Wilson Property Equity II, Inc. and Kennedy-Wilson Property Special Equity II, Inc. provide as follows:
Ninth: A Director of the corporation shall not be personally liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the directors duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. If the Delaware General
Corporation Law is amended after approval by the stockholders of this article to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated
or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.
The Certificate of
Incorporation of Fairways 340 Corp. provides as follows:
EIGHTH. To the fullest extent permitted by applicable law,
this corporation is authorized to provide indemnification of (and advancement of expenses to) agents of this corporation (and any other persons to which the General Corporation Law permits this corporation to provide indemnification) through bylaw
provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law, subject
only to limits created by applicable General Corporation Law (statutory or non-statutory), with respect to actions for breach of duty to this corporation, its stockholders and others.
The By-Laws of each of Kennedy-Wilson Property Services II, Inc., Kennedy-Wilson Property Equity II, Inc. and Kennedy-Wilson Property
Special Equity II, Inc. provide as follows:
ARTICLE VIIIINDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a proceeding), by reason of the fact that he or she is or was a director or an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an indemnitee), whether the basis of such proceeding is alleged action in an official
capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation
to provide prior to such amendment), against all expense, liability and loss (including attorneys fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in
connection therewith; provided, however, that, except as provided in Section 3 of this ARTICLE VIII with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.
Section 2. Right to Advancement of Expenses.
The right to indemnification
conferred in Section 1 of this ARTICLE VIII shall include the right to be paid by the Corporation the expenses (including attorneys fees) incurred in defending any such proceeding in advance of its final disposition (hereinafter an
advancement of expenses); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an undertaking), by or on behalf
of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a final adjudication) that such indemnitee is not entitled
to be indemnified for such expenses under this Section 2 or otherwise. The rights to indemnification and to the advancement of
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expenses conferred in sections Section 1 and Section 2 of this ARTICLE VIII shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the indemnitees heirs, executors and administrators.
Section 3. Right
of Indemnitee to Bring Suit.
If a claim under Section 1 and Section 2 of this ARTICLE VIII is not paid in full by
the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee
may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has
met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not
met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is
not entitled to be indemnified, or to such advancement of expenses, under this ARTICLE VIII or otherwise shall be on the Corporation.
Section 4. Non-Exclusivity of Rights.
The rights to indemnification and to the advancement of expenses conferred in this ARTICLE VIII shall not be exclusive of any other right which any person may have or hereafter acquire under any statute,
the Corporations Certificate of Incorporation, By-laws, agreement, vote of stockholders or disinterested directors or otherwise.
Section 5. Insurance.
The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section 6. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.
The Bylaws of Fairways 340 Corp. provides as follows:
Section 16. Indemnification of Agents of the Corporation; Purchase of Liability Insurance.
(a) For the purpose of this Section, agent shall means any person who is or was a director, officer, employee, or other agent
of this Corporation, or is or was serving at the request of this Corporation as a director, officer, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, or was a director, officer,
employee, or agent of a foreign or domestic corporation that predecessor corporation of this Corporation or of another enterprise at the request of such predecessor corporation; proceeding shall mean any threatened, pending, or completed
action or proceeding, whether civil, criminal, administrative, or investigative; and expenses shall include, without limitation, attorneys fees and all expenses of establishing a right to indemnification under subdivisions
(d) or (e) of this Section 16.
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(b) This Corporation shall indemnify any person who was or is a party, or is threatened to
be made a party, to any proceeding (other than an action by or in the right of this Corporation to procure a judgment in its favor) by reason of the fact that such person is or was an agent of this Corporation, against expenses, judgments, fines,
settlements, and other amounts actually and reasonable incurred in connection with such proceeding if such person acted in good faith and in a manner such person reasonably believed to be in the best interests of this Corporation and, in the case of
a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere
or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in the best interests of this Corporation or that the person had reasonable cause to believe that the persons
conduct was unlawful.
(c) This Corporation shall indemnify any person who was or is a party, or is threatened to be made a
party, to any threatened, pending or completed action by or in the right of this Corporation to procure a judgment in its favor by reason of the fact that such person is or was an agent of this Corporation, against expenses actually and reasonably
incurred by such person in connection with the defense or settlement of such action if such person acted in good faith, in a manner such person believed to be in the best interests of this Corporation and its stockholders. No indemnification shall
be made under this subdivision for any of the following: (1) In respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable to this Corporation in the performance of such persons duty to this
Corporation and its stockholders, unless and only to the extent that the court in which such proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for expenses and then only to the extent that the court shall determine; (2) Of amounts paid in settling or otherwise disposing of a pending action without court approval; or (3) Of expenses incurred in defending a
pending action which is settled or otherwise disposed of without court approval.
(d) To the extent that an agent of this
Corporation has been successful on the merits in defense of any proceeding referred to in subdivisions (b) or (c) of this Section 16, or in defense of any claim, issue, or matter therein, the agent shall be indemnified against
expenses actually and reasonably incurred by the agent in connection therewith.
(e) Except as provided in the Certificate of
Incorporation or in subdivision (d) of this Section 16, any indemnification under this Section shall be made by this Corporation only if authorized in the specific case, upon a determination that indemnification. of the agent is proper in
the circumstances because the agent has met the applicable standard of conduct set forth in subdivisions (b) or ( c) of this Section 16; by any of the following: (1) A majority vote of a quorum consisting of directors who are not
parties to such proceeding; (2) If such a quorum of directors is not obtainable, by independent legal counsel in a written opinion; (3) Approval or ratification by the affirmative vote of a majority of the shares of this Corporation
entitled to vote represented at a duly held meeting at which a quorum is present or by written consent of holders of a majority of the outstanding shares entitled to vote. For such purpose, the shares owned by the person to be indemnified shall not
be considered outstanding or entitled to vote thereon; or (4) The court in which such proceeding is or was pending, upon application made by this Corporation or the agent or the attorney or other person rendering services in connection with the
defense, whether or not such application by the agent, attorney, or person is opposed by this Corporation.
(f) This
Corporation may advance expenses incurred by an agent in defending any proceeding prior to the final disposition of such proceeding upon receipt of an undertaking by or on behalf of the agent to repay such amount if it shall be determined ultimately
that the agent is not entitled to be indemnified as authorized in this Section 16.
(g) The rights to indemnity hereunder
shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of the person. Nothing contained in this Section 16 shall affect any right to
indemnification to which persons other than directors and officers of this Corporation or any subsidiary hereof may be entitled by contract or otherwise.
(h) No indemnification or advance shall be made under this Section 16, except as provided in subdivisions (d) or (e)(3) of this Section 16, in any circumstance where it appears:
(1) That it would be inconsistent with the Certificate of Incorporation, a resolution of the stockholders, or an agreement in effect at the time of the accrual of the alleged cause of action asserted in the proceeding in which the expenses were
incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or (2) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.
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(i) Upon and in the event of a determination-by the Board of Directors to purchase such
insurance, this Corporation shall purchase and maintain insurance on behalf of any agent of the Corporation against any liability asserted against or incurred by the agent in such capacity or arising out of the agents status as such whether or
not this Corporation would have the power to indemnify the agent against such liability under the provisions of this Section 16.
The Certificates of Incorporation and Bylaws of each of Kennedy-Wilson Properties, Ltd., Kennedy-Wilson Property Services, Inc., Kennedy Wilson Property Services III, L.P., Kennedy-Wilson Property Equity,
Inc., Kennedy-Wilson Property Special Equity, Inc., Kennedy Wilson Overseas Investments, Inc., and Kennedy Wilson Property Services IV, L.P. are silent with respect to indemnification.
Delaware Limited Liability Company Subsidiary Guarantors
The
subsidiary guarantors that are Delaware limited liability companies are subject to the provisions of the Delaware Limited Liability Company Act. Section 18-108 of the Delaware Limited Liability Company Act provides that subject to such
standards and restrictions, if any, as are set forth in its limited liability company agreement, a company may indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever.
The Certificates of Formation of each of KWF Investors I, LLC, KWF Investors II, LLC, KWF Investors III, LLC, KW- Richmond, LLC, SG KW
Venture I Manager LLC, KW Loan Partners I LLC, KWF Investor IV, LLC, KWF Investor V, LLC, Dillingham Ranch Aina LLC, KW Ireland, LLC, Kennedy Wilson Property Equity IV, LLC, KW Fund IVKohanaiki, LLC, KW Telstar Partners, LLC, KW BASGF II
Manager, LLC, 68-540 Farrington, LLC, KW Summer House Manager, LLC, KWF Manager I, LLC, KWF Manager II, LLC, KWF Manager III, LLC, KWF Manager IV, LLC, KWF Manager V, LLC, Kennedy-Wilson Property Special Equity III, LLC, Kennedy Wilson Property
Services III GP, LLC, KW Montclair, LLC, KW Blossom Hill Manager, LLC, KW Serenade Manager, LLC, KW Redmond Manager, LLC, KW Dillingham Aina LLC, Meyers Research, LLC, KW Armacost, LLC, Santa Maria Land Partners Manager, LLC, KW Investment Adviser,
LLC, KW Captowers Partners, LLC, KW Four Points, LLC, KW Loan Partners VII, LLC, KWF Investors VII, LLC, KWF Manager VII, LLC, KW Residential Capital, LLC, KW Boise Plaza, LLC, KW Loan Partners VIII, LLC, KW UR Investments 1, LLC, KW UR Investments
2, LLC, Kennedy Wilson Property Services IV GP, LLC, KW/CV Third Pacific Manager, LLC, KW EU Loan Partners II, LLC, KWF Investors VIII, LLC, KWF Manager VIII , LLC, KW 1200 Main, LLC, KW Harrington, LLC, KW 5200 Lankershim Manager, LLC, KWF Manager
X, LLC, KWF Manager XI, LLC, and KWF Manager XII, LLC are are silent with respect to indemnification.
The Limited Liability
Company Agreements of each of KWRichmond, LLC, KWF Investors I, LLC, KWF Investors II, LLC, KWF Investors III, LLC, SG KW Venture I Manager, LLC, KW Loan Partners I, LLC, KWF Investors V, LLC and KWF Investors IV, LLC provide as follows:
ARTICLE XI: INDEMNIFICATION
11.l Indemnification. The Company shall indemnify and hold harmless each of the Members and Manager, and each of their respective officers, directors, shareholders, partners, members, trustees,
beneficiaries, employees, agents, heirs, assigns, successors-in-interest and Affiliates, (collectively, Indemnified Persons) from and against any and all losses, damages, liabilities and expenses, (including costs and reasonable
attorneys fees), judgments, fines, settlements and other amounts (collectively Liabilities) reasonably incurred by any such Indemnified Person in connection with the defense or disposition of any action, suit or other proceeding,
whether civil, criminal, administrative or investigative and whether threatened, pending or completed (collectively a Proceeding), in which any such Indemnified Person may be involved or with which any such Indemnified Person may be
threatened, with respect to or arising out of any act performed by the Indemnified Person or any omission or failure to act if (a) the performance of the act or the omission or failure was done in good faith and within the scope of the
authority conferred upon the Indemnified Person by this Agreement or by the Act, except for acts of willful misconduct, gross negligence or reckless disregard of duty, or acts which constitute a material breach of this Agreement or from which such
Indemnified Person derived an improper personal benefit or (b) a court of competent jurisdiction determines upon application that, in view of all of the circumstances, the Indemnified Person is fairly and reasonably entitled to indemnification
from the Company for such Liabilities as such court may deem proper. The Companys indemnification obligations hereunder shall apply not only with respect to any Proceeding brought by the Company or a Member but also with respect to any
Proceeding brought by a third party. As a condition to the indemnification and other rights granted to an Indemnified Person pursuant to this Article, however, that Indemnified Person may not settle any action, suit or proceeding without the written
consent of the Manager.
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11.2 Contract Right: Expenses. The right to indemnification conferred in this ARTICLE XI
shall be a contract right and shall include the right to require the Company to advance the expenses incurred by the Indemnified Person in defending any such Proceeding in advance of its final disposition: provided, however, that, if the Act so
requires, the payment of such expenses in advance of the final disposition of a Proceeding shall be made only upon receipt by the Company of an undertaking, by or on behalf of the indemnified Person, to repay all amounts so advanced if it shall
ultimately be determined that such Person is not entitled to be indemnified under this ARTICLE XI or otherwise.
11.3
Indemnification of Officers and Employees. The Company may, to the extent authorized from time to time by the Manager, grant rights to indemnification and to advancement of expenses to any officer, employee or agent of the Company to the fullest
extent of the provisions of this ARTICLE XI with respect to the indemnification and advancement of expenses of Members and Manager of the Company.
11.4 Insurance. The Company may purchase and maintain insurance on behalf of any Person who is or was an agent of the Company against any liability asserted against that Person and incurred by that Person
in any such capacity or arising out of that Persons status as an agent, whether or not the Company would have the power to indemnify that Person against liability under the provisions of Section 11.1 or under applicable law.
The Amended and Restated Limited Liability Company Agreement of Dillingham Ranch Aina, LLC and the Limited Liability Company
Agreements of each of KW Telstar Partners, LLC, KW Ireland, LLC, KW Fund IVKohanaiki, LLC, Kennedy Wilson Property Equity IV, LLC, Santa Maria Land Partners Manager, LLC, KW Captowers Partners, LLC, KW Four Points, LLC, KW Loan Partners
VII, LLC, KW Residential Capital, LLC, KW Boise Plaza, LLC, KW Loan Partners VIII, LLC, KW/CV Third Pacific Manager, LLC, KW EU Loan Partners II, LLC, KWF Investors VIII, LLC, KWF Manager VIII, LLC, KW 1200 Main, LLC, KW Harrington, LLC, and KW 5200
Lankershim Manager, LLC provide as follows:
14. Exculpation; Indemnification by the Company. To the maximum extent
permitted by law, the Sole Member shall not be liable to the Company or any other Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by the Sole Member in good faith on behalf of the Company in the
conduct of the business or affairs of the Company. Further, to the maximum extent permitted by law, the Company shall defend, indemnify and hold harmless the Sole Member and, if the Sole Member so elects by notice to any such other Person, any of
the Sole Members Affiliates and members, and any of its or their respective shareholders, members, directors, officers, employees, agents, attorneys or Affiliates, from and against any and all liabilities, losses, claims, judgments, fines,
settlements and damages incurred by the Sole Member, or by any such other Person, arising out of any claim based upon any acts performed or omitted to be performed by the Sole Member, or by any such other Person on behalf of the Sole Member, in
connection with the organization, management, business or property of the Company, including costs, expenses and attorneys fees (which may be paid as incurred) expended in the settlement or defense of any such claims.
The Limited Liability Company Agreements of each of Kennedy Wilson Property Special Equity III, LLC, Kennedy Wilson Property Services III
GP, LLC, and Kennedy Wilson Property Services IV GP, LLC provide as follows:
Section 7. Liability: Indemnification.
(a) Any Member, Manager or officer, employee or agent of the Company (including a person having more than one such capacity) shall not be
personally liable for any expenses, liabilities, debts or obligations of the Company solely by reason of acting in such capacity, except as otherwise provided by the Act.
(b) To the fullest extent permitted by applicable law, the Company shall indemnify and hold harmless each Member, Manager and officer, employee and agent of the Company from and against any and all
losses, claims, damages, liabilities or expenses of whatever nature (each, a Claim), as incurred, arising out of or relating to the management or business of the Company; provided that such indemnification shall not apply to any such
person if a court of competent jurisdiction has made a formal determination that such person (x) failed to act in good faith or, (y) was either grossly negligent or engaged in willful misconduct.
The Limited Liability Company Agreements of each of KWF Manager I, LLC, KWF Manager II, LLC, KWF Manager III, LLC, KWF Manager IV, LLC,
KWF Manager V, LLC, KWF Manager XI, LLC, and KWF Manager XII, LLC provide as follows:
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14. Exculpation; Indemnification by the Company. To the maximum extent permitted by
law, the Sole Member shall not be liable to the Company or any other Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by the Sole Member in good faith on behalf of the Company in the conduct of the
business or affairs of the Company. Further, to the maximum extent permitted by law, the Company shall defend, indemnify and hold harmless the Sole Member and, if the Sole Member so elects by notice to any other Person, any of the Sole Members
Affiliates and members, and any of its or their respective shareholders, members, directors, officers employees, agents, attorneys or Affiliates, from and against any and all liabilities, losses, claims, judgments, fines, settlements and damages
incurred by the Sole Member or by any such other person, arising out of any claim based on any acts performed or omitted to be performed by the Sole Member, or by any such other Person on behalf of the Sole Member, in connection with the
organization, management, business or property of the Company, including costs, expense and attorneys fees (which may be paid as incurred) expended in the settlement or defense of any such claims.
The Limited Liability Company Agreement of 68-540 Farrington, LLC provides as follows:
Section 5.6. Indemnification. Subject to the limitations contained in Article 11 of the Act, the Company, to the fullest extent
permitted by law and to the extent of its assets legally available for that purpose, will indemnify and hold harmless the Members and any partner, shareholder, director, officer, agent and Affiliate (collectively, the Indemnified
Persons), from and against any and a1110s8, damage, expense (including without limitation reasonable fees and expenses of attorneys and other advisors and any court costs incurred by any Indemnified Person) or liability by reason of anything
any Indemnified Person does or refrains from doing for, or in connection with, the business or affairs of, the Company (including, without limitation, recordkeeping and reporting activities under Sections 6.1 and tax matters under Sections 6.2. 6.5
and 6.6), except to the extent that the loss, damage, expense or liability results primarily from the Indemnified Persons gross negligence or willful breach of a material provision of this Agreement which in either event causes actual,
material damage to the Company.
The Limited Liability Company Agreement of KW Summer House Manager, LLC provides as
follows:
5.4 Indemnification of Member. The Company, its receiver or trustee, shall indemnify and hold harmless Member
and its affiliates, and their respective officers, directors, shareholders, partners, members, employees, agents, subsidiaries and assigns, from and against any liability, loss or damage incurred by them by reason of any act performed or omitted to
be performed by them in connection with the Company business, including costs and attorneys fees, and any amounts expended in the settlement of any claims of liability, loss or damage, unless the loss, liability or damage was caused by the
willful misconduct or fraud of Member or the indemnified person. Indemnification shall be made out of the assets or revenues of the Company without requiring additional capital contributions.
The Operating Agreements of each of KW Montclair, LLC, KW Blossom Hill Manager, LLC, KW Serenade Manager, LLC, KW Redmond Manager, LLC
and KW Dillingham Aina LLC provide as follows:
Indemnification. The Company shall indemnify, defend, and hold harmless
the Manager from and against any and all liabilities of every kind, arising from or relating to the Companys Business, except as to those matters arising from such Managers fraud, gross negligence, willful misconduct, or breach of
fiduciary duty.
The Limited Liability Company Agreement of KW BASGF II Manager, LLC provides as follows:
The Company shall indemnify, defend, protect and hold harmless each officer duly appointed hereunder from any claim, damage, loss
or liability which he or she may suffer which arises from or relates to the performance of the duties assigned to him or her by the President and/or Member. Any individual may hold any number of offices. No officer need be a resident of the State of
California, Delaware or citizen of the United States. If the Member is a corporation, such corporations officers may serve as officers of Company if appointed by the Member.
The Limited Liability Company Agreement of Meyers Research, LLC, KW UR Investments 1, LLC, and KW UR Investments 2, LLC provides as
follows:
13. Exculpation; Indemnification by the Company. To the maximum extent permitted by law, the Sole Member shall
not be liable to the Company or any other Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by the Sole Member in good faith on behalf of the Company in the conduct of the business or affairs of the
Company. Further, to the maximum extent permitted by law, the Company shall defend, indemnify and hold harmless the Sole Member and, if the Sole Member so elects by notice to any such other Person, any of the Sole Members Affiliates and
members, and any of its or their respective shareholders, members, directors, officers, employees, agents, attorneys or Affiliates, from and against any and all liabilities, losses, claims, judgments, fines, settlements and damages incurred by the
II - 14
Sole Member, or by any such other Person, arising out of any claim based upon any acts performed or omitted to be performed by the Sole Member, or by any such other Person on behalf of the Sole
Member, in connection with the organization, management, business or property of the Company, including costs, expenses and attorneys fees (which may be paid as incurred) expended in the settlement or defense of any such claims.
The Limited Liability Company Agreement of KW Armacost, LLC provides as follows:
Section 19. Exculpation and Indemnification.
(a) None of the Member, any Officer, any employee or any agent of the Company, or any employee, representative, agent or Affiliate of the Member (collectively, the Covered Persons) shall, to
the fullest extent permitted by law, be liable to the Company or any other Person that is a party to or is otherwise bound by this Agreement, for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such
Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss,
damage or claim incurred by reason of such Covered Persons gross negligence or willful misconduct.
(b) To the fullest
extent permitted by applicable law, a Covered Person shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in
good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such Covered Person by reason of such Covered Persons gross negligence or willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Section 20 by the
Company shall be provided out of and to the extent of Company assets only, and the Member shall not have personal liability on account thereof.
(c) To the fullest extent permitted by applicable law, expenses (including reasonable legal fees) incurred by a Covered Person defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined that
the Covered Person is not entitled to be indemnified as authorized in this Section 19.
(d) A Covered Person shall be
fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other
Persons professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, or any other
facts pertinent to the existence and amount of assets from which distributions to the Member might properly be paid.
(e) To
the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any other Covered Person, a Covered Person acting under this Agreement shall not be liable to the
Company or to any other Covered Person for its good faith reliance on the provisions of this Agreement or any approval or authorization granted by the Company or any other Covered Person. The provisions of this Agreement, to the extent that they
restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Member to replace such other duties and liabilities of such Covered Person.
(f) The foregoing provisions of this Section 19 shall survive any termination of this Agreement.
The Limited Liability Company Agreement of KW Investment Advisor, LLC provides as follows:
14. Indemnification. The Company shall indemnify and hold harmless the Member to the full extent permitted by law from and against
any and all losses, claims, demands, costs, damages, liabilities, expenses of any nature (including attorneys fees and disbursements), judgments, fines, settlements, and other amounts (collectively, Costs) arising from any and all
claims, demands, actions, suits, or proceedings (civil, criminal, administrative, or investigative) (collectively, Actions) in which the Member may be involved, or threatened to be involved as a party or otherwise, relating to the
performance or nonperformance of any act concerning the activities of the Company. In addition, to the extent permitted by law, the Member may cause the Company to indemnify and hold harmless any managers and/or officers from and against any and all
Costs arising from any or all actions arising in connection with the business of the Company or by virtue of such persons capacity as an agent of the Company. Notwithstanding the foregoing, any and all indemnification obligations of the
Company shall be satisfied only from the assets of the Company, and the Member shall have no liability or responsibility therefor.
II - 15
The Limited Liability Company Agreement of KWF Investors VII, LLC and KWF Manager VII, LLC
provides as follows:
14. Exculpation; Indemnification by the Company. To the maximum extent permitted by law, the Sole
Member shall not be liable to the Company or any other Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by the Sole Member in good faith on behalf of the Company in the conduct of the business or
affairs of the Company. Further, to the maximum extent permitted by law, the Company shall defend, indemnify and hold harmless the Sole Member, the named officers of the Company under Section 11 and any other person that is appointed as an
officer of the Company pursuant to Section 11 and, if the Sole Member so elects by notice to any such other Person, any of the Sole Members Affiliates and members, and any of its or their respective shareholders, members, directors,
officers, employees, agents, attorneys or Affiliates, from and against any and all liabilities, losses, claims, judgments, fines, settlements and damages incurred by the Sole Member, or by any such other Person, arising out of any claim based upon
any acts performed or omitted to be performed by the Sole Member, or by any such other Person on behalf of the Sole Member, in connection with the organization, management, business or property of the Company, including costs, expenses and
attorneys fees (which may be paid as incurred) expended in the settlement or defense of any such claims.
The
Limited Liability Company Agreement of KWF Manager X, LLC provides as follows:
14. Exculpation; Indemnification by the
Company. To the maximum extent permitted by law, neither the Sole Member nor any Company officer shall be liable to the Company or any other Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by the
Sole Member or officer in good faith on behalf of the Company in the conduct of the business or affairs of the Company. Further, to the maximum extent permitted by law, the Company shall defend, indemnify and hold harmless the Sole Member and each
officer and, if the Sole Member or officer so elects by notice to any such other Person, any of the Sole Members Affiliates and members and any officer, and any of its or their respective shareholders, members, directors, officers, employees,
agents, attorneys or Affiliates, from and against any and all liabilities, losses, claims, judgments, fines, settlements and damages incurred by the Sole Member or officer, or by any such other Person, arising out of any claim based upon any acts
performed or omitted to be performed by the Sole Member or officer, or by any such other Person on behalf of the Sole Member, in connection with the organization, management, business or property of the Company, including costs, expenses and
attorneys fees (which may be paid as incurred) expended in the settlement or defense of any such claims.
California
Corporate Subsidiary Guarantors
The subsidiary guarantors that are California corporations are subject to the
provisions of the California Corporations Code (the CCC). Section 317 of the CCC authorizes a corporation to indemnify a person who is a party or is threatened to be made a party to any suit (other than a suit by or in the right of
the corporation) by reason of the fact that such person is or was the corporations director or officer, or is or was serving at the corporations request as a director or officer of another entity, for expenses (including attorneys
fees) and other liabilities actually and reasonably incurred by such person in connection with any such suit, provided such person acted in good faith and in a manner reasonably believed to be in the best interests of the corporation and, with
respect to criminal actions, had no reasonable cause to believe his or her conduct was unlawful. Section 317 provides further that a corporation may indemnify a director or officer for expenses (including attorneys fees) actually and
reasonably incurred in connection with the defense or settlement of a suit by or in the right of the corporation, provided such person acted in good faith and in a manner reasonably believed to be in the best interests of the corporation and its
shareholders. To the extent a corporations director or officer is successful on the merits in the defense of any such suit, that person shall be indemnified against expenses actually and reasonably incurred. Under Section 317 of the CCC,
expenses incurred in defending any suit may be advanced by the corporation prior to the final disposition of the proceeding upon receipt of any undertaking by or on behalf of the director or officer to repay that amount if it is ultimately
determined that he or she is not entitled to indemnification.
The Articles of Incorporation of each of K-W Properties, K-W
Santiago Inc., Kennedy-Wilson Tech Ltd. and KWP Financial I provides as follows:
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FIVE: The corporation is authorized to indemnify the directors and officers of the
corporation to the fullest extent permissible under California law.
The Articles of Incorporation of Kennedy-Wilson
Capital provides as follows:
ARTICLE SIX: The corporation is authorized to indemnify the directors, officers, employees
and agents of the corporation to the fullest extent permissible under California law.
The Articles of Incorporation of
each of each of Kennedy Wilson Auction Group Inc., Kennedy-Wilson International and KW Builder Marketing Services, Inc. are silent with respect to indemnification.
The Bylaws of each of K-W Properties, K-W Santiago Inc., Kennedy-Wilson Tech Ltd., KWP Financial I, Kennedy Wilson Auction Group Inc. and KW Builder Marketing Services, Inc. provides as follows:
Article II, Section 5: Indemnification of Directors, Officers, Employees and Agents
The corporation may indemnify any Director, Officer, agent or employee as to those liabilities and on those terms and conditions as are
specified in Section 317. In any event, the corporation shall have the right to purchase and maintain insurance on behalf of any such persons whether or not the corporation would have the power to indemnify such person against the liability
insured against.
The Bylaws of each of Kennedy-Wilson International are silent with respect to indemnification.
The Bylaws of Kennedy-Wilson Capital provides as follows:
ARTICLE VI. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS.
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES. For the purposes of this Article, agent means any person who is or was a
director, officer, employee, or other agent of this corporation, or who is or was serving at the request of this corporation as a director, officer, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, or
other enterprise, or who was a director, officer, employee, or agent of a foreign or domestic corporation that was a predecessor corporation of this corporation or of another enterprise at the request of such predecessor corporation;
proceeding means any threatened, pending, or completed action or proceeding, whether civil, criminal, administrative, or investigative; and expenses includes, without limitation, attorney fees and any expenses of establishing
a right to indemnification under Section 4 or Section 5( d) of this Article VI.
Section 2. ACTIONS OTHER THAN
BY THE CORPORATION. This corporation will have the power to indemnify any person who was or is a party, or is threatened to be made a party, to any proceeding (other than an action by or in the right of this corporation to procure a judgment in its
favor) by reason of the fact that such person is or was an agent of this corporation, against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with such proceeding if that person acted in good
faith and in a manner that the person reasonably believed to be in the best interests of this corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of that person was unlawful. The termination of any
proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, will not, of itself, create a presumption either that the person did not act in good faith and in a manner that the person reasonably
believed to be in the best interests of this corporation or that the person had reasonable cause to believe that the persons conduct was not unlawful.
Section 3. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. This corporation will have the power to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened,
pending, or completed action by or in the right of this corporation to procure a judgment in its favor, by reason of the fact that such person is or was an agent of this corporation, against expenses actually and reasonably incurred by such person
in connection with the defense or settlement of that action, if such person acted in good faith, in a manner such person believed to be in the best interests of this corporation and its shareholders. No indemnification will be made under this
Section 3 for the following:
(a) Any claim, issue, or matter on which such person has been adjudged to be liable to this
corporation in the performance of such persons duty to the corporation and its shareholders, unless and only to the extent that the court in which such proceeding is or was pending will determine on application that, in view of all the
circumstances of the case, such person is fairly and reasonably entitled to indemnity for expenses, and then only to the extent that the court will determine;
II - 17
(b) Amounts paid m settling or otherwise disposing of a pending action without court
approval; or
(c) Expenses incurred in defending a pending action that is settled or otherwise disposed of without court
approval.
Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of this corporation has been successful on
the merits in defense of any proceeding referred to in Sections 2 or 3 of this Article VI, or in defense of any claim, issue, or matter therein, the agent will be indemnified against expenses actually and reasonably incurred by the agent in
connection therewith.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4 of this Article VI, any
indemnification under this section will be made by the corporation only if authorized in the specific case, after a determination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standard of
conduct set forth in Section 2 or 3 by one of the following:
(a) A majority vote of a quorum consisting of directors who
are not parties to such proceeding;
(b) Independent legal counsel in a written opinion if a quorum of directors who are not
parties to such a proceeding is not available.
(c) (i) The affirmative vote of a majority of shares of this corporation
entitled to vote represented at a duly held meeting at which a quorum is present; or
(ii) the written consent of holders of a
majority of the outstanding shares entitled to vote (for purposes of this subsection 5(c), the shares owned by the person to be indemnified will not be considered outstanding or entitled to vote thereon); or
(d) The court in which the proceeding is or was pending, on application made by this corporation or the agent or the attorney or other
person rendering services in connection with the defense, whether or not such application by the agent, attorney, or other person is opposed by this corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any proceeding may be advanced by the corporation before the final disposition of such proceeding on receipt of an undertaking by or on
behalf of the agent to repay such amounts if it will be determined ultimately that the agent is not entitled to be indemnified as authorized in this Article VI.
Section 7. OTHER CONTRACTUAL RIGHTS. The indemnification provided by this Article VI will not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under,
e.g., any bylaw, agreement, or vote of shareholders or disinterested directors, both regarding action in an official capacity and regarding action in another capacity while holding such office, to the extent that such additional rights to
indemnification are authorized in the articles of the corporation. Nothing in this section will affect any right to indemnification to which persons other than such directors and officers may be entitled by contract or otherwise.
Section 8. LIMITATIONS. No indemnification or advance will be made under this Article VI, except as provided in Section 4 or
Section 5(d), in any circumstance if it appears:
(a) That it would be inconsistent with a provision of the articles or
bylaws, a resolution of the shareholders, or an agreement which prohibits or otherwise limits indemnification; or (b) That it would be inconsistent with any condition expressly imposed by a court in approving settlement.
Section 9. INSURANCE. This corporation may purchase and maintain insurance on behalf of any agent of the corporation insuring
against any liability asserted against or incurred by the agent in that capacity or arising out of the agents status as such, whether or not this corporation would have the power to indemnify the agent against that liability under the
provisions of this Article VI. Despite the foregoing, if this corporation owns all or a portion of the shares of the company issuing the policy of insurance, the insuring company or the policy will meet the conditions set forth in Corporations Code
§317(i).
Section 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This Article VI does not apply to any
proceeding against any trustee, investment manager, or other fiduciary of an employee benefit plan in that persons capacity as such, even though that person may also be an agent of the corporation. The corporation will have the power, to the
extent permitted by Corporations Code §207(f), to indemnify, and to purchase and maintain insurance on behalf of any such trustee, investment manager, or other fiduciary of any benefit plan for any or all of the directors, officers, and
employees of the corporation or any of its subsidiary or affiliated corporations.
II - 18
Section 11. SURVIVAL OF RIGHTS. The rights provided by this Article VI will continue
for a person who has ceased to be an agent and will inure to the benefit of the heirs, executors, and administrators of such person.
Section 12. EFFECT OF AMENDMENT. Any amendment, repeal, or modification of this Article VI will not adversely affect an agents right or protection existing at the time of such amendment,
repeal, or modification.
Section 13. SETTLEMENT OF CLAIMS. The corporation will not be liable to indemnify any agent
under this Article VI for (a) any amounts paid in settlement of any action or claim effected without the corporations written consent, which consent will not be unreasonably withheld, or (b) any judicial award, if the corporation was
not given a reasonable and timely opportunity to participate, at its expense, in the defense of such action.
Section 14.
SUBROGATION. In the event of payment under this Article VI, the corporation will be subrogated, to the extent of such payment, to all of the rights of recovery of the agent, who will execute all papers required and will do everything that may be
necessary to secure such rights, including the execution of such documents as may be necessary to enable the corporation effectively to bring suit to enforce such rights.
Section 15. NO DUPLICATION OF PAYMENTS. The corporation will not be liable under this Article VI to make any payment in connection with any claim made against the agent to the extent the agent has
otherwise actually received payment, whether under a policy of insurance, an agreement, or a vote, or through other means, of the amounts otherwise indemnifiable under this Article.
California Limited Liability Company Subsidiary Guarantors
The
subsidiary guarantors that are California limited liability companies are subject to the provisions of the California Limited Liability Company Act. Under Section 17153 of the California Limited Liability Company Act, except for a breach of
duty, the articles of organization or written operating agreement of a limited liability company may provide for indemnification of any person, including, without limitation, any manager, member, officer, employee or agent of the limited liability
company, against judgments, settlements, penalties, fines or expenses of any kind incurred as a result of acting in that capacity. A limited liability company shall have the power to purchase and maintain insurance on behalf of any manager, member,
officer, employee or agent of the limited liability company against any liability asserted against on incurred by the person in that capacity or arising out of the persons status as a manager, member, officer, employee or agent of the limited
liability company.
The Operating Agreement of Kennedy Wilson Fund Management Group, LLC provides as follows:
4.5 Indemnification of Member.
Except as otherwise provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of
the Company , and the Member shall not be obligated for any such debt, obligation or liability of the Company by reason of being a member of the Company. The Company shall fully indemnify the Member for any claim against the Member in the
Members capacity as a member or a manager.
The Limited Liability Company Agreement of KW Loan Partners II LLC
provides as follows:
The Company shall indemnify, defend, protect and hold harmless each officer from any claim,
damage, loss or liability which he or she may suffer which arises from or relates to the performance or nonperformance of the duties assigned to him or her by the Member, as applicable. Any individual may hold any number of offices.
Illinois Corporate Subsidiary Guarantor
The subsidiary guarantor that is an Illinois corporation is subject to the provisions of the Illinois Business Corporation Act of 1983, as amended (the IBCA). Under Section 8.75 of the
IBCA, an Illinois corporation may indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or who is or was serving at the
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request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys
fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
In addition, an Illinois corporation may indemnify any person who was or is a party, or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, provided that no
indemnification shall be made with respect to any claim, issue, or matter as to which such person has been adjudged to have been liable to the corporation, unless, and only to the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper.
Section 8.75 of the IBCA also provides that, to the extent that a present or former director, officer or employee of a corporation
has been successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in either of the foregoing paragraphs, or in defense of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys fees) actually and reasonably incurred by such person in connection therewith, if the person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the
corporation.
The Articles of Incorporation and Bylaws of Kennedy-Wilson Properties, Ltd. are silent with respect to
indemnification.
SEC Position on Indemnification for Securities Act Liabilities
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling
persons pursuant to the foregoing provisions, or otherwise, the registrants have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
The attached exhibit index is incorporated by reference
herein.
(B) FINANCIAL STATEMENT SCHEDULES
Financial schedules are omitted because they are not applicable or the information is incorporated herein by reference.
ITEM 22. UNDERTAKINGS
(a) Each of the undersigned registrants hereby
undertakes:
(1) to file, during any period in which offers or sales are being made, a post-effective amendment
to this registration statement:
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(i)
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to include any prospectus required by Section 10(a)(3) of the Securities Act;
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(ii)
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to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement.; and
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(iii)
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to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such
information in the registration statement;
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(2) that, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the offering;
(4) that, for the
purpose of determining liability under the Securities Act to any purchaser, if the registrants are subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however,
that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use;
(5) that, for the purpose of determining
liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to
this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will
be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
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(i)
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any preliminary prospectus or prospectus of the undersigned registrants relating to the offering required to be filed pursuant to Rule 424;
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(ii)
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any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrants or used or referred to by the undersigned registrants;
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(iii)
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the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrants or their securities provided
by or on behalf of the undersigned registrants; and
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(iv)
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any other communication that is an offer in the offering made by the undersigned registrants to the purchaser.
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(b) Each undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each
filing of such registrants annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plans annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of any registrant pursuant to the foregoing provisions, or otherwise, each registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by any registrant of expenses incurred or paid by a director, officer or
controlling person of such registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, each registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(d) Each undersigned registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
(e) Each undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not
the subject of and included in the registration statement when it became effective.
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