<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by party other than Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
[X] Definitive Proxy Statement the Rule 14a-6(e)(2))
[ ] Definitive additional materials [ ] Soliciting Materials pursuant to
Rule 14a-11(c) or Rule 14a-12
Kennedy-Wilson, Inc.
(Name of Registrant as Specified in Its Charter)
-------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of shares to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it is determined.):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing fee for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
KENNEDY-WILSON, INC.
9601 Wilshire Boulevard
Suite 220
Beverly Hills, California 90210-5205
-----------------------
NOTICE OF ANNUAL MEETING
To be Held on June 23, 1999
-----------------------
We invite you to attend the Annual Meeting of Kennedy-Wilson,
Inc., a Delaware corporation, to be held at the Regent Beverly Wilshire Hotel,
located at 9500 Wilshire Boulevard, Beverly Hills, California 90210 on June 23,
1999 at 9:30 a.m. Pacific Time, and at any adjournments thereof, for the
following purposes:
1. To elect three (3) directors to serve on our board of directors
until our 2002 Annual Meeting or such later time as their
successors may be elected and are qualified.
2. To transact such other business as may properly come before the
meeting.
Our Board of Directors has fixed the close of business on May 26,
1999 as the record date for determining the Stockholders entitled to notice
of the meeting, as well as for determining the Stockholders entitled to vote
at the meeting.
It is important that your shares be represented whether or not you
are able to attend in person. We urge you to read the accompanying Proxy
Statement and specify your choices on the matters presented by filling in the
appropriate boxes on the enclosed Proxy Card and returning it promptly. If
you attend the meeting and prefer to vote in person, you may do so even if
you have returned your Proxy Card. You may also revoke a proxy at any time
before it is exercised.
Thank you for your cooperation and continued support and interest
in Kennedy-Wilson, Inc.
KENNEDY-WILSON, INC.
/s/ FREEMAN A. LYLE
Executive Vice President,
Chief Financial Officer and Secretary
Beverly Hills, California
Wednesday, June 2, 1999
<PAGE>
KENNEDY-WILSON, INC.
9601 Wilshire Boulevard
Suite 220
Beverly Hills, California 90210-5205
----------------------------
PROXY STATEMENT
Annual Meeting
June 23, 1999
----------------------------
The Board of Directors (the "Board") of Kennedy-Wilson,
Inc., a Delaware corporation (the "Company"), is soliciting proxies for use
at the 1999 Annual Meeting (the "Annual Meeting") to be held at the Regent
Beverly Wilshire Hotel, located at 9500 Wilshire Boulevard, Beverly Hills,
California 90210 on June 23, 1999 at 9:30 a.m. Pacific Time, and at any
adjournments thereof. On or about June 2, 1999, the Company began sending the
attached Notice of Annual Meeting, this Proxy Statement, and the enclosed
Proxy Card to all Stockholders of record entitled to vote.
VOTING
The purposes of the Annual Meeting is to elect three
directors and to transact any other business that may properly be presented.
The Board recommends that you and your fellow Stockholders vote "FOR" the
nominees for director selected by the Board. The enclosed Proxy Card
represents the shares that you are eligible to vote at the meeting. Shares
represented by a properly executed and returned proxy will be voted at the
meeting in accordance with the directions noted thereon or, if no directions
are indicated, they will be voted in favor of the nominees for director
recommended by the Board. A Stockholder giving a proxy has the power to
revoke it by attending the meeting and electing to vote in person, or by
filing with the Secretary of the Company, prior to the meeting, a written
revocation or a duly executed proxy bearing a later date.
WHO CAN VOTE
Stockholders of record at the close of business on May 26,
1999 (the "Record Date") are eligible to vote at the Annual Meeting. The only
outstanding class of stock of the Company is its common stock, par value
$0.01 per share ("Common Stock"). On the Record Date, there were 9,070,277
shares of Common Stock issued and outstanding.
<PAGE>
VOTING RIGHTS OF COMMON STOCK
Each holder of Common Stock (or her proxy) shall be
entitled to one vote per share of Common Stock held as of the Record Date for
each item voted on at the Annual Meeting.
HOW TO VOTE
You can vote on matters that come before the meeting in two
ways:
- You can come to the Annual Meeting and vote in person; or
- You can vote by filling out, signing and returning the
enclosed Proxy Card. If you do so, the individuals named
on the card as proxies (the "Appointees") will vote your
shares as directed in the Proxy Card.
If you sign and return the Proxy Card but do not make
specific choices, the Appointees will vote your shares "FOR" the election of
all nominees for director recommended by the Board and listed on the Proxy
Card. If any other matters are presented for action at the meeting, the
Appointees will vote your shares according to their best judgment. At the
time this Proxy Statement was printed, the Company knew of no matters to be
voted on at the Annual Meeting other than those discussed in this Proxy
Statement.
William McMorrow and Freeman Lyle have agreed to represent
Stockholders submitting properly executed Proxy Cards as the Appointees and
to vote for the election of the nominees listed herein, unless otherwise
directed by the authority granted or withheld on the Proxy Cards. Mr.
McMorrow is the Chairman of the Board of Directors and Chief Executive
Officer of the Company and Mr. Lyle is Executive Vice President, Chief
Financial Officer and Secretary of the Company.
You may revoke your proxy after you have signed and
returned it at any time before the proxy is voted at the meeting. There are
three ways to revoke your proxy:
- You may send in another Proxy Card with a later date;
- You may notify the Secretary of the Company in writing
before the Annual Meeting that you have revoked your
proxy; or
- You may vote in person at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting in
person, please fill in and sign the enclosed Proxy Card and return it
promptly. If you do attend the Annual Meeting, you may vote your shares even
though you have sent in your Proxy Card. However, simply attending the
meeting will not revoke your proxy if you do not vote at the meeting.
QUORUM
A quorum of Stockholders is necessary to hold a valid
meeting. A majority of the outstanding shares of Common Stock on the Record
Date (except treasury shares), present in person or represented by proxy at
the beginning of the Annual Meeting, constitutes a quorum. If you have
returned a properly signed Proxy Card, you will be considered present at the
meeting and counted in determining the presence of a quorum. Shares
represented by proxies that withhold authority to vote for a nominee for
election as a director or that reflect abstentions or "broker non-votes"
(i.e., shares represented at the meeting held by brokers or nominees and to
which (i) instructions have not been received from the beneficial owners or
persons entitled to vote and (ii) the broker or nominee does not have the
discretionary voting power on a particular matter) will be treated as shares
that are
-2-
<PAGE>
present for purposes of determining the presence of a quorum. Abstentions and
broker non-votes will not otherwise affect the voting.
Votes at the Annual Meeting will be tabulated by the
inspector of election, who shall be appointed by the Chairman of the meeting.
The inspector of election's duties include determining the number of shares
represented at the meeting and entitled to vote, determining the
qualification of voters, conducting and accepting the votes, and, when the
voting is completed, ascertaining and reporting the number of shares voted,
or abstaining from voting, for the election of directors.
NO APPRAISAL RIGHTS
Under the Delaware General Corporation Law, you will not
have any appraisal rights in connection with the actions to be taken at the
Annual Meeting.
PROPOSAL I -- ELECTION OF DIRECTORS
The Company has a three-tiered, classified Board of
Directors with staggered terms of office for each class. Each class serves a
three-year term. The term for Class I directors expires at the Annual
Meeting, the term for Class II directors expires at the 2000 Annual Meeting
and the term for Class III directors expires at the 2001 Annual Meeting or as
soon after each such meeting as the successor directors for each class have
been elected and qualified.
The persons listed below have been designated by the Board
as candidates for election as Class I directors. Each is currently serving as
a Class I director. Unless otherwise specified in the Proxy Card, the proxies
solicited by the Board will be voted "FOR" the election of these candidates.
In case any of these candidates becomes unavailable to stand for election to
the Board, an event which is not anticipated, the Appointees, or their
substitutes, shall have full discretion and authority to vote or refrain from
voting for any substitute nominee in accordance with their judgment.
The terms of directors elected at the Annual Meeting expire
at the 2002 Annual Meeting or as soon thereafter as their successors are duly
elected and qualified. The Board has no reason to believe that any of the
nominees will be unable or unwilling to serve as a director if elected.
Directors are elected by a plurality vote of shares present
at the meeting, meaning that the nominee with the most affirmative votes for
a particular seat is elected for that seat. If you do not vote for a
particular nominee, or if you indicate "withhold authority to vote" for a
particular nominee on your Proxy Card, your vote will not count either "for"
or "against" the nominee.
-3-
<PAGE>
NOMINEES(1)
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE TITLE SINCE
- ---- --- -------------------------------------------- -----
<S> <C> <C> <C>
Lewis Halpert....................... 47 Director and Executive Managing Director, 1992
President of Kennedy-Wilson, Inc.
Residential and Notes Group
Kent Mouton......................... 46 Director and Chairman of the Compensation 1995
Committee
Thomas Barrack, Jr.................. 52 Director 1998
- -------------------
</TABLE>
(1) None of the nominees has a family relationship with the other nominees,
any existing director or any executive officer of the Company. Pursuant
to an Investor's Agreement dated as of July 16, 1998 between the
Company and Colony Investors III, L.P., the Company appointed Mr.
Barrack to the Board in July 1998 and agreed to use best efforts to
cause a person designated by Colony Investors III, L.P. to be included
as a nominee of the Board in this Proxy Statement. Colony Investors
III, L.P. has designated Mr. Barrack as its nominee.
RECOMMENDATION OF THE BOARD:
The Board recommends a vote `FOR" the election of each nominee listed above.
-4-
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers are listed below:
<TABLE>
<CAPTION>
BOARD TERM
NAME AGE TITLE EXPIRES
- ---- --- ---------------------------------------------- -------
<S> <C> <C> <C>
William McMorrow.................... 52 Chairman of the Board of Directors and Chief 2001
Executive Officer
Lewis Halpert....................... 47 Director and Executive Managing Director, 1999
President of Kennedy-Wilson, Inc.
Residential and Notes Group
Richard Mandel...................... 36 Director and Managing Director, President of 2000
Kennedy-Wilson, Inc. Commercial Group
Barry Schlesinger................... 58 Director and President of Kennedy-Wilson 2000
Properties Ltd.
Donald Prell........................ 75 Director and Chairman of the Audit Committee 2001
Kent Mouton......................... 46 Director and Chairman of the Compensation 1999
Committee
Thomas Barrack, Jr.................. 52 Director 1999
Freeman Lyle........................ 45 Executive Vice President, Chief Financial not applicable
Officer and Secretary
Terry Wachsner...................... 50 Senior Managing Director of Kennedy-Wilson not applicable
Properties Ltd.
</TABLE>
WILLIAM MCMORROW has been Chairman of the Board and Chief
Executive Officer since joining the Company's predecessor company in 1988.
From that time, he has been instrumental to the Company's growth into a
diversified real estate services and investment company.
Prior to 1988, Mr. McMorrow had more than 17 years of
finance experience specializing in problem real estate held by financial
institutions and insurance companies. For five years, he was the Executive
Vice President and Chairman of the Credit Policy Committee at Imperial Bank,
a subsidiary of a publicly traded company headquartered in Southern
California. During his tenure with the Bank, he was responsible for
restructuring a significant portion of the Bank's assets, as well as the
marketing and disposition of properties it owned. Additionally, Mr. McMorrow
has held senior positions with various other financial services firms
including Fidelity Bank in Pennsylvania, where he was Senior Vice President
for eight years.
Mr. McMorrow holds a Bachelor of Science Degree and Master
of Business Administration from the University of Southern California. He is
also a board member of the George L. Graziadio School of Business at
Pepperdine University in Malibu, California.
LEWIS HALPERT has been a member of the Board since joining
the Company's predecessor company at the same time as Mr. McMorrow in 1988,
and is Executive Managing Director and President of the
-5-
<PAGE>
Company's Residential and Notes Group. In these positions, he is actively
involved in developing new business opportunities and is currently overseeing
all residential and notes investments.
Mr. Halpert has over 20 years experience in all facets of
real estate, including investments and development, brokerage, management and
marketing. Prior to joining the Company, he operated his own independent
investment brokerage firm in Southern California.
Mr. Halpert holds a Bachelor of Arts Degree from California
State University at Sonoma.
RICHARD MANDEL has been a member of the Board since
December 1995. He is President of the Company's Commercial Group, responsible
for all commercial brokerage operations in the U.S. and Asia. Since joining
the Company in 1993, Mr. Mandel has established the Company's office in Tokyo
and has been instrumental in developing Japan-based relationships for the
Company. In 1996, Mr. Mandel opened the Company's New York office. During his
tenure, he has played a prominent role in brokering U.S., European and
Australian real estate assets to investors throughout Asia. In addition, he
has advised Japanese companies with the acquisition and disposition of
overseas assets.
Mr. Mandel was previously a director at Jones Lang Wootton,
a predecessor company of Jones Lang LaSalle, Inc., where he was involved with
real estate investment banking including the disposition, analysis,
marketing, negotiations and closings relating to real estate assets and with
creating stronger ties to the investment community in Hong Kong, Singapore,
Indonesia and Taiwan. In addition, he advised Asian investors on their U.S.
real estate holdings, created a conduit for Asian investments into the U.S.
and researched new Asian markets.
Mr. Mandel holds a Bachelor of Arts Degree from Washington
University in St. Louis, Missouri and a Master of Business Administration
from the JL Kellogg School of Management at Northwestern University.
BARRY SCHLESINGER has served since July 1998 as a member of
the Board and President of Kennedy-Wilson Properties Ltd., the Company's
wholly-owned property management and leasing subsidiary. Mr. Schlesinger
serves as President of Kennedy-Wilson Properties Ltd. through an Executive
Services Agreement dated July 17, 1998. From 1990 to July 1998, he served as
Chairman of the Board of Directors and Chief Executive Officer of Heitman
Properties, Ltd., which the Company purchased in July 1998 and renamed
Kennedy-Wilson Properties Ltd. Mr. Schlesinger was appointed to the Board in
accordance with the Executive Services Agreement. The Executive Services
Agreement is discussed in more detail in "Certain Transactions-Executive
Services Agreement."
Prior to joining Heitman Properties, Ltd. in 1971, Mr.
Schlesinger was responsible for project planning and scheduling for Tishman
Realty and Construction Company. He has 36 years of real estate experience.
Mr. Schlesinger holds a Bachelor of Science Degree from the
New York University College of Engineering.
DONALD PRELL has served as a member of the Board since
March 1992. For the past five years Mr. Prell has been a mediation consultant
and private investor. He also serves as a Trustee of the UCLA Foundation.
KENT MOUTON has served as a member of the Board since
December 1995. Mr. Mouton has been a partner in the law firm of Kulik,
Gottesman & Mouton, LLP in Los Angeles, California since 1991. He specializes
in the practice of real estate transactions.
Mr. Mouton holds a Bachelor of Arts Degree and Juris Doctor
Degree from UCLA.
-6-
<PAGE>
THOMAS BARRACK, JR. has served as a member of the Board
since July 1998. He is the Chairman and Chief Executive Officer of Colony
Capital, Inc., a company that manages in excess of $1.0 billion in domestic
and international real estate assets. Colony Capital, Inc. purchased a 10%
equity interest in the Company in July 1998. Mr. Barrack founded Colony
Capital, Inc. in 1991. Prior to forming Colony Capital, Inc., he was a
principal with Robert M. Bass Group, Inc., the principal investment vehicle
of the Fort Worth, Texas billionaire Robert M. Bass. Mr. Barrack also served
as Deputy Under Secretary at the Department of Interior in Washington, D.C.
for a period during the Reagan Administration. Mr. Barrack serves as a
member of the boards of directors of public companies Continental Airlines
Corporation, Public Storage, Inc., and Harveys Casino Resorts.
Mr. Barrack holds a Bachelor of Arts Degree form the
University of San Diego and a Juris Doctor Degree from the University of
Southern California. Mr. Barrack was appointed to the Board in accordance
with the Company's agreement with Colony Investors III, L.P., which is
discussed in the section headed "Certain Transactions-Colony Agreements."
FREEMAN LYLE has been the Company's Chief Financial
Officer, Executive Vice President and Secretary since joining the Company in
April of 1996. He is responsible for all of the Company's financial matters
including overseeing capital structure and arranging and maintaining credit
facilities.
Prior to joining the Company, Mr. Lyle was the President of
Lyle Realty Group, Inc., which provided investment, financing and consulting
services to real estate owners and lenders. He also served as Vice President
of Finance at R&B Realty Group, an international real estate firm. During his
tenure, he was responsible for the performance of a diversified real estate
and loan portfolio.
Mr. Lyle received his Bachelor of Science Degree at
California State University at Northridge and a Master of Business
Administration from the University of Southern California.
TERRY WACHSNER has been the Senior Managing Director of
Kennedy-Wilson Properties, Ltd. since July 1998 through the Executive
Services Agreement previously described in the discussion of Mr. Schlesinger
in this section. He joined Heitman Properties, Ltd., in 1980 and served as
President from 1988 until the Company purchased that company in July 1998. He
has 23 years experience in property management.
Mr. Wachsner holds a Bachelor of Arts Degree in Psychology
and a Master of Arts Degree in Architecture/Urban Planning from UCLA.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board currently has two committees: an Audit Committee
and a Compensation Committee.
The Company's Audit Committee is composed of Donald Prell
(Chairman) and Kent Mouton. This committee is responsible for reviewing the
Company's financial policies and objectives, and monitoring the Company's
financial condition and requirements for funds in conjunction with
management. In addition, the Company's Audit Committee meets with the
Company's independent auditors to review their audit report and consider any
recommendations. The Audit Committee held one meeting in 1998.
The Company's Compensation Committee is composed of Kent
Mouton (Chairman) and Donald Prell. This committee establishes the Company's
general compensation policies and determines the compensation levels for the
Chief Executive Officer and each employee that receives annual compensation
in excess of $100,000. The Compensation Committee also has oversight
responsibility for administering the Company's stock option plans (other than
Plan C for non-employee director stock options, pursuant to which options are
granted automatically upon the initial election of a non-employee director
and upon each subsequent re-election). The Compensation Committee held five
meetings in 1998.
-7-
<PAGE>
The Board held nine meetings in 1998. Each director
attended 75% or more of the meetings of the Board and the Committees of the
Board on which the director served, if any. From time to time, the members of
the Board and the Committees of the Board act by unanimous written consent as
permitted by the laws of the State of Delaware.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid
or accrued by the Company during each of the last three fiscal years to the
Chief Executive Officer of the Company and the four most highly compensated
executive officers of the Company who served in either of those capacities
during fiscal 1998 (collectively, the "Named Executive Officers") for
services rendered:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS(2)
- ----------------- ---- ------ ----- --------------- ----------
<S> <C> <C> <C> <C> <C>
William McMorrow, 1998 $300,000 $2,219,222 $501,844 37,500
Chairman of the Board of Directors 1997 300,000 1,270,734 120,607 90,000
and CEO.............................. 1996 300,000 450,000 --- ---
Lewis Halpert, 1998 $150,000 $623,805 $101,133 ---
Executive Managing Director.......... 1997 150,000 396,800 31,083 45,000
1996 125,000 325,000 --- ---
Richard Mandrel, 1998 $250,000 $315,318 $116,064 37,500
Managing Director.................... 1997 225,000 284,267 35,917 243,000
1996 188,000 100,000 89,000 54,000
Barry Schlesinger,(3) 1998 $169,231 $270,000 --- 75,000
Chairman of the Board of Directors 1997 --- --- --- ---
of Kennedy-Wilson Properties Ltd..... 1996 --- --- --- ---
Freeman Lyle, 1998 $161,625 $140,000 $60,325 45,000
Executive Vice-President, Chief 1997 150,000 100,000 15,020 ---
Financial Officer and Secretary...... 1996 94,000 37,500 --- 54,000
- --------------------------------
</TABLE>
(1) "Other annual compensation" includes, among other things, deferred
compensation contributions and car allowance contributions. In 1996, this
included a foreign cost of living and housing allowance for Mr. Mandel
while he was based in Hong Kong and Tokyo. In 1996, "Other Annual
Compensation" excluded compensation in the form of other personal
benefits, for each of the Named Executive Officers other than Mr. Mandel,
that did not exceed the lesser of $50,000 or 10% of the annual salary and
bonus reported for each year.
(2) Adjusted for a 20% stock dividend paid October 27,1997, a 200% stock
dividend paid April 10, 1998, and a 50% stock dividend paid December 15,
1998.
(3) Mr. Schlesinger is employed by KW-A, LLC. An Executive Services Agreement
between the Company and KW-A, LLC requires the Company to pay to KW-A,
LLC all amounts due Mr. Schlesinger under his employment contract with
KW-A, LLC. The Executive Services Agreement is discussed in more detail
in "Certain Transactions-Executive Services Agreement."
-8-
<PAGE>
DEFERRED COMPENSATION PLAN
In 1997, the Company established a nonqualified deferred
compensation plan (the "Plan") to provide specific benefits to a select group
of management, highly compensated employees or directors who contribute
materially to the Company's continued growth, development and future business
success. Under the Plan, participants are able to defer up to 100% of their
annual total compensation including their bonuses. The Company is authorized
to make discretionary matching contributions in varying degrees based on the
Company's performance. In the fiscal year ended December 31, 1998, the
Company contributed approximately $1.1 million to the Plan. This amount
includes the amounts disclosed in the Summary Compensation Table, as
applicable, for the Named Executive Officers in the column labeled "Other
Annual Compensation."
EMPLOYEE PROFIT SHARING AND 401(k) PLANS
The Company maintains a profit sharing plan (the "Profit
Sharing Plan") covering all full-time employees meeting certain minimum age
and service requirements. Contributions to the Profit Sharing Plan are made
solely at the discretion of the Board. No contributions were made for the
years ended December 31,1996, 1997 and 1998.
The Company also has a qualified profit sharing plan under
the provisions of Section 401(k) of the Internal Revenue Code (the "401(k)
Plan"). Employees who are 21 or older who have completed six months of
service prior to January 1 or July 1 of each year are eligible to
participate. Under this plan, participants are able to reduce their current
compensation from 1% up to the lesser of 15% or the statutorily prescribed
annual limit allowable under Internal Revenue Service Regulations and have
that amount contributed to the 401(k) Plan. The 401(k) plan also includes
provisions which authorize the Company to make discretionary contributions.
During 1998 the Company made $27,000 in matching contributions to this plan.
During 1997 the Company made $24,000 in matching contributions. The 401(k)
plan has a graduated schedule of vesting over a six-year period of employment.
STOCK OPTION PLANS
Consistent with the Company's efforts to employ qualified
and experienced professionals, the Company has three stock option plans. the
Incentive Stock Option Plan ("Plan A") and the Non-statutory Stock Option
Plan ("Plan B") allow the Company to grant stock options to managers,
employees and consultants. The Company believes that both plans help to
attract and retain highly qualified individuals to fill high-level executive
and officer positions and to give key employees and consultants an additional
incentive to contribute to the Company's overall success. The administration
of these two plans is guided by the Company's overall compensation philosophy
of rewarding managers, employees and consultants based on their relative
contributions to the Company's overall accomplishments. The Compensation
Committee has sole discretion to decide which eligible managers, employees
and consultants are granted options, the number of options granted, and,
subject to the plans, the terms and conditions of each grant. The
Non-employee Director Stock Option Plan ("Plan C") allows the Company to
grant stock options to non-employee directors in order to further align their
interests with those of the Company's Stockholders.
The options granted under Plans A and B may be either
incentive stock options or options which are not intended to qualify as
incentive stock options. Only employees, however, are eligible for incentive
stock options. In order to encourage valued employees to stay with the
Company, the Compensation Committee typically grants options which vest over
a three-year period. The exercise price for shares of Common Stock underlying
an option is the fair market value of the stock on the date the option is
granted by the Compensation Committee unless the recipient of the option
grant already owns 10% or more of the Company's Common Stock. For those
recipients, the exercise price is 110% of the fair market value of the stock
on the date the option is granted. Under Plans A and B, as amended, an
aggregate of 1,700,000 shares of Common Stock are reserved for issuance. To
date, options for 1,466,620 shares have been issued. Of these options
1,244,620 remain unexercised and the balance have been exercised. All options
granted under Plan A must be exercised within five years of the grant
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<PAGE>
date. All options granted under Plan B must be exercised within ten years of
the grant date. No option under either Plan a or Plan B can be granted after
May 11, 2002.
The amount, price and terms of each grant under Plan C are
automatic. Upon election to the Board, non-employee directors receive an
option to purchase 13,500 shares of Common Stock at a price equal to fair
market value of the date preceding the grant. Thereafter, each non-employee
director receives an option to purchase 540 shares of Common Stock on the
same terms and conditions each time he or she is re-elected to the Board.
Several aspects of Plan C operate to encourage capable individuals to remain
on the Board. For example, an option does not vest under Plan C until one
year after the date of the grant and only vests if the holder served as a
director during that entire period. Also, unexercised options lapse the
earlier of 90 days after a non-employee director ceases to be one of the
Company's directors and the tenth anniversary of the date the option was
granted. No Plan C options may be granted after May 11, 2002. A total of
81,000 shares of Common Stock are reserved for issuance under Plan C. As of
May 12, 1999, the Company had options outstanding under Plan C for 28,620
shares, of which none have been exercised.
NAMED EXECUTIVE OFFICER STOCK OPTIONS
The following table provides information about stock option
grants made to each of the Named Executive Officers during 1998.
STOCK OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
Potential Realizable
Value of Assumed
Number of Percentage of Annual Rates of Stock
Securities Total Options Price Appreciation of
Underlying Granted to Exercise Option Terms(1)
Options Employees in Price per Expiration ---------------------
Name of Executive Officer Granted 1998 Share Date 5% 10%
- ------------------------- ---------- ------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
William McMorrow.............. 37,500 9.52% $7.00 4/27/03 $72,524 $160,259
Lewis Halpert................. 0 n/a n/a n/a n/a n/a
Richard Mandel................ 37,500 9.52% $7.00 4/27/03 $72,524 $160,259
Barry Schlesinger............. 75,000 19.04% $8.33 12/15/03 $172,607 $381,416
Freeman Lyle.................. 45,000 11.42% $3.67 1/20/03 $45,628 $100,826
- -----------------
</TABLE>
(1) The potential realized value figures assume that the stock price at the
time each option is granted will appreciate at an annual rate of 5% or 10%.
-10-
<PAGE>
The following table provides information about stock
options held by the Named Executive Officers as of December 31, 1998.
AGGREGATED OPTION EXERCISES IN 1998
AND OPTION VALUES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Number of Options on In-The-Money Options
Shares December 31, 1998 on December 31, 1998
Acquired on Value ----------------- --------------------
Name of Executive Officer Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William McMorrow.............. 0 n/a 30,000 97,500 $98,340 $196,680
Lewis Halpert................. 0 n/a 15,000 30,000 $49,170 $98,340
Richard Mandel................ 18,500 $138,834 153,000 217,500 $830,142 $908,694
Barry Schlesinger............. 0 n/a n/a n/a n/a n/a
Freeman Lyle.................. 27,000 $155,610 9,000 63,000 $46,746 $251,190
</TABLE>
EMPLOYMENT CONTRACTS
The employment agreements of the Named Executive Officers
are described below:
- MR. McMORROW's contract provides for a term expiring on
December 31, 1999, a base salary of $300,000 per annum and
an advance of $100,000, payable against a bonus of up to
20% of 1999 "profits" between $3,000,000 and $35,000,000.
"Profits" is defined as pre-tax, pre-reserves and prior to
payment of bonuses to other employees and the Company's
contributions to the Company's deferred compensation plan.
The bonus is paid at 6 months based on 1st and 2nd quarter
profits and at year end based on 3rd and 4th quarter
profits.
- MR. HALPERT's contract provides for a term expiring on
December 31, 1999, a base salary of $150,000 per annum
plus a non-repayable advance of $150,000, payable against
an annual incentive bonus of 15% to 25% of the net profit
allocated to the Residential Properties Group.
- MR. MANDEL's contract provides for a term expiring on
December 31, 1999, a base salary of $250,000 plus an
incentive bonus of 12.5% to 20% of the profits allocated
to the Company's Commercial Group.
- MR. SCHLESINGER'S employment contract is with KW-A, LLC
and provides for a term expiring on December 31, 2000.
KW-A, LLC is a limited liability company, of which Mr.
Schlesinger is a member, that provides executive
management services to the Company. Mr. Schlesinger's
employment contract provides for an annual base salary of
$400,000 plus (i) an annual incentive bonus of 7.06% of
the first $1,700,000 of net profits of Kennedy-Wilson
Properties, Ltd. in excess of $3,333,000, and a
discretionary bonus in respect of the net profits of
Kennedy-Wilson Properties in excess of $5,033,000 and (ii)
an "add-on bonus" in 1999 of $270,000. Under the
Executive Services Agreement dated as of July 17, 1998
with KW-A, LLC the Company has agreed to pay KW-A, LLC an
amount equal to all sums payable to Mr. Schlesinger under
the terms of his employment agreement. In return, KW-A,
LLC is obligated to furnish the Company with executive
management services. The Executive
-11-
<PAGE>
Services Agreement is discussed in more detail in "Certain
Transactions-Executive Services Agreement."
- MR. LYLE's contract, which expired on March 31, 1999, had
a base salary of $180,000 plus a discretionary performance
bonus of 0% to 100% of base salary. The Compensation
Committee is in the process of extending Mr. Lyle's
contract on substantially similar terms.
In addition to compensation as noted above, each contract
sets forth the services the Named Executive Officer is to provide to the
Company, his benefits and expenses reimbursement rights and obligations, if
any, a non-competition covenant, a confidentiality agreement and terms for
termination. Other than the employment contract for Mr. McMorrow, none of
these employment contracts provide for any severance, change-in-control or
related payments to be paid to the Named Executive Officer upon termination
of the employment contract. Mr. McMorrow's employment contract provides for a
severance payment equal to two times his annual compensation as determined by
the arithmetic average of his salary and bonus for the prior three years in
the event his employment contract is not renewed other than for cause or
there is a change in control of the Company.
DIRECTOR COMPENSATION
Each director who is not also an employee of the Company
receives a quarterly retainer of $4,000 plus a fee of $1,000 for each board
meeting attended and $500 for each Board Committee meeting attended. In
addition, the Company maintains Plan C described above under the heading
"Stock Option Plans" as further compensation for non-employee directors of
the Company. Employees of the Company who also are directors receive no
additional compensation for their service on the Board or on any Board
Committee.
-12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 26, 1999 the total
number of shares of Common Stock beneficially owned and the percentage of the
outstanding shares so owned by (i) each director, (ii) each Named Executive
Officer, (iii) all executive officers and directors as a group and (iv) each
beneficial owner of more than five percent (5%) of the outstanding shares of
Common Stock known to the Company. Except as otherwise indicated in the notes
following the table, the Stockholders listed in the table are the beneficial
owners of the shares listed with sole voting and investment power over those
shares. Shares subject to options exercisable within 60 days are treated as
outstanding when determining the amount and percentage beneficially owned by
a person or entity.
<TABLE>
<CAPTION>
Number of shares
Name beneficially owned Percent of class
- ---- ------------------ ----------------
<S> <C> <C>
William McMorrow(1)............................... 1,521,821 16.7
Lewis Halpert(2).................................. 1,384,047 15.2
Richard Mandel(3)................................. 282,500 3.0
Barry Schlesinger(4).............................. 42,499 *
Donald Prell(5)................................... 14,580 *
Kent Mouton(5).................................... 14,040 *
Thomas Barrack, Jr.(6)............................ 858,166 9.5
Freeman Lyle(7)................................... 131,493 1.4
All Executive Officers and Directors as a Group... 4,258,147 44.0
Colony Investors, III, L.P.(6).................... 858,166 9.5
Kenneth Stevens................................... 766,200 8.4
Cahill, Warnock Strategic Partners Fund, L.P.(8).. 750,000 8.3
Stephen F. Mandel, Jr.(9)......................... 545,000 6.0
- ----------------------------
</TABLE>
* Less than 1.0%.
Except as otherwise indicated in the following notes, the address for
each individual, company, or named group is in care of Kennedy-Wilson,
Inc., 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California
90210.
(1) Includes approximately 4,190 shares held for Mr. McMorrow's account as
well as approximately 275 shares held for the account of Mr. McMorrow's
spouse in the Company's 401(k) Profit Sharing Plan and Trust of which Mr.
McMorrow expressly disclaims beneficial ownership, and 42,500 shares
which may be acquired pursuant to exercise of outstanding stock options
that are presently exercisable or exercisable within 60 days.
(2) Includes approximately 1,368 shares held for Mr. Halpert's account in the
Company's 401(k) Profit Sharing Plan and Trust, and 15,000 shares which
may be acquired pursuant to exercise of outstanding stock options that
are presently exercisable or exercisable within 60 days.
(3) Includes beneficial ownership of 264,500 shares which may be acquired
pursuant to exercise of outstanding stock options that are presently
exercisable or exercisable within 60 days.
-13-
<PAGE>
(4) Includes beneficial ownership of 25,000 shares which may be acquired
pursuant to exercise of outstanding stock options that are presently
exercisable or exercisable within 60 days.
(5) Includes beneficial ownership of 14,040 shares which may be acquired
pursuant to exercise of outstanding stock options that are presently
exercisable.
(6) As reported in a Schedule 13D dated July 24, 1998 filed with the
Securities and Exchange Commission (the "SEC"), Colony Investors III,
L.P., a Delaware limited partnership, holds of record 660,127 shares of
Common Stock and a warrant to acquire 198,039 shares of Common Stock that
is now exercisable. The sole general partner of Colony Investors III,
L.P. is Colony GP III, Inc., a Delaware corporation. Mr. Barrack holds a
60% interest in Colony GP III, Inc. Mr. Barrack and Colony Investors III,
L.P. have shared voting and investment power with respect to those
shares. The mailing address of Colony Investors III, L.P. and Thomas
Barrack, Jr., as indicated in the Schedule 13D, is 1999 Avenue of the
Stars, Suite 1200, Los Angeles, California 90067.
(7) Includes beneficial ownership of 33,000 shares which may be acquired
pursuant to exercise of outstanding stock options that are presently
exercisable or exercisable within 60 days.
(8) As reported in a Schedule 13G dated April 26, 1999 filed with the SEC,
Edward Cahill; David Warnock; Cahill, Warnock Strategic Partners, L.P.;
Cahill Warnock Strategic Partners Fund, L.P.; Cahill, Warnock & Company,
LLC and Strategic Associates, L.P. beneficially own 750,000 shares which
may be acquired pursuant to conversion of debentures in the aggregate
principal amount of $7,500,000 at the current exercise price of $10.00
per share. The debentures are convertible at any time by the holders.
According to the Schedule 13G, the principal business address of the
beneficial owners is One South Street, Suite 2150, Baltimore, MD 21202.
(9) As reported in a Schedule 13G dated May 12, 1999 filed with the SEC. The
mailing address of Stephen F. Mandel, Jr., as indicated in the
Schedule 13G, is Two Greenwhich Plaza, Greenwhich, Connecticut 06830.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
The following are brief descriptions of transactions
between the Company or one or more of its subsidiaries and any of the
Company's directors, executive officers or Stockholders known to the Company
to own beneficially more than 5% of Common Stock, or any member of the
immediate family of any of those persons during the fiscal year ended
December 31, 1998 where the amount involved exceeded $60,000.
PROPERTY MANAGEMENT CONTRACTS
Barry Schlesinger, a member of the Company's Board and
Chairman of Kennedy-Wilson Properties Ltd., holds a 7.1% interest in two
buildings for which the Company provides property management services. During
the period of January 1, 1998 to July 16, 1998 Heitman Properties, Ltd.
earned $81,000 in management fees for these buildings. The Company acquired
Heitman Properties, Ltd. on July 17, 1998 and renamed it Kennedy-Wilson
Properties Ltd. During the period of July 17, 1998 to December 31, 1998 the
Company earned $23,000 in management fees for these buildings. Presently, the
management fees are $25,000 per year per building. The Company expects
revenues related to these buildings to be approximately $50,000 for 1999. The
Company may terminate the management contracts on 30 days notice.
PIONEER JOINT VENTURES
In November, 1996 the Company entered into a joint venture
with parties who are affiliated with Goodwin Gaw, a former member of the
Board. In particular, the Company paid $440,000 for a 25% interest in a joint
venture that purchased a ski resort in Colorado for $7.0 million. In
September, 1997 the Company acquired a
-14-
<PAGE>
50% interest in a joint venture that purchased for $14.6 million an office
building in downtown Los Angeles with approximately 28,000 square feet. The
Company acquired an interest in this joint venture for approximately $1.4
million. In the first calendar quarter of 1998, the Company entered into two
further joint ventures with parties who are affiliated with Mr. Gaw. In
January 1998, the Company acquired for $4.2 million a 15% interest in a joint
venture that purchased for $62.0 million a commercial building in New York
with more than 1.0 million square feet. In March 1998, the Company acquired
for about $300,000 a 40% interest in a joint venture that acquired a note
collateralized by a hotel in Beverly Hills, California. The Company
subsequently sold its interest in that note for $612,717. Mr. Gaw resigned
from his position as a member of the Board on November 5, 1998.
LEGAL FEES
In 1998, the Company paid the law firm of Kulik, Gottesman
& Mouton a total of approximately $496,191 in legal fees. Kent Mouton is a
partner in that firm and a member of the Board.
COLONY AGREEMENTS
Thomas Barrack, Jr., a member of the Board and a beneficial
owner of more than 5% of Common Stock, holds a 60% interest in Colony GP III,
Inc. Colony GP III, Inc. is the sole general partner of Colony Investors III,
L.P. Colony Investors III, L.P. is the sole member of Colony K-W, LLC.
In July 1998, the Company acquired Heitman Properties, Ltd.
The purchase price and a portion of the expenses associated with that
acquisition were financed from the proceeds of a $21.0 million subordinated
loan made by Colony K-W LLC, pursuant to a Bridge Loan Agreement dated as of
July 16, 1998 among Colony K-W LLC, the Company and certain subsidiaries of
the Company. The loan bears interest at a rate of 14% per annum and matures
on January 15, 2000. The loan is guaranteed by certain of the Company's
subsidiaries on a subordinated basis and, pursuant to a Pledge Agreement
dated as of July 16, 1998 made by the Company in favor of Colony K-W LLC, is
secured by a pledge of all of the outstanding shares of Heitman Properties,
Ltd., now known as Kennedy-Wilson Properties Ltd. The terms of the loan
agreement restrict, among other things, certain borrowings, distributions and
mergers involving the Company and the guarantors and is subject to additional
customary restrictive covenants.
On July 16, 1998, Colony Investors III, L.P. entered into a
Stock Purchase Agreement and a Warrant Agreement with the Company, pursuant
to which Colony Investors III, L. P. purchased (i) 440,085 shares of Common
Stock (660,127 shares as adjusted for the December 15, 1998 50% stock
dividend) and (ii) a warrant, exercisable for seven years from July 16, 1998,
to purchase an additional 132,026 shares of Common Stock (198,039 shares as
adjusted for such stock dividend) at an initial exercise price of $15.00 per
share ($10.00 per share as adjusted for such stock dividend) subject to
adjustment as provided in the Warrant Agreement, for a total aggregate
purchase price of $5,232,610.
In connection with the purchase of the stock and warrant,
Colony Investors III, L.P. entered into an Investor's Agreement with the
Company, dated as of July 16, 1998, pursuant to which the Company has agreed,
during the term and subject to the provisions thereof, including the
continued ownership of a specified minimum number of shares of Common Stock,
among other things, to take all action necessary so that the Board will
include one class I director designated by Colony Investors III, L.P., and
thereafter, to use its best efforts to cause a person designated by Colony
Investors III, L.P. to be included in each slate of proposed class I
directors put forth by the Company and its Stockholders and recommended for
election in any proxy solicitation materials disseminated by the Company.
Colony Investors III, L.P.'s initial director nominee was its affiliate,
Thomas Barrack, Jr., who is now a member of the Board. With certain
exceptions as described in the Investor's Agreement, Colony Investors III,
L.P. has preemptive purchase rights to maintain its beneficial ownership
percentage for so long as its investment continues to represent at least 5%
of the outstanding Common Stock.
The Company and Colony Investors III, L.P. also executed a
Registration Rights Agreement on July 16, 1998 with respect to the warrant
and any Common Stock issuable under that warrant. Pursuant to the
-15-
<PAGE>
Registration Rights Agreement, and subject to the terms and conditions
thereof, the warrant beneficially owned by Colony Investors III, L.P. is
subject to demand and piggyback registration rights.
Colony Investors III, L.P. is also the general partner of
Colony-K-W Genpar Ltd. and Colony K-W Genpar Ltd. is the general partner of
Colony K-W Partners, L.P. Colony K-W, L.P., K-W Japan Investments, Inc. and
EBISU Investors I, LLC are limited partners in Colony K-W Partners, L.P. K-W
Japan Investments, Inc. is a wholly-owned subsidiary of the Company. EBISU
Investors I, LLC is owned in part by William McMorrow (26.32%), Richard
Mandel (26.32%) and Lewis Halpert (10.52%), current directors and executive
officers of the Company, and Ryosuke Homma (15.79%), President of
Kennedy-Wilson Japan K.K. The remainder is owned by some of the employees in
the Tokyo office of Kennedy-Wilson Japan K.K. Colony-K-W Genpar Ltd. and
Colony K-W together have a 97.5% interest in Colony-K-W Partners, L.P., K-W
Japan Investments has a 2.0% interest and EBISU Investors I, LLC has a 0.5%
interest. The Colony K-W Partners, L.P. partnership acquired a pool of
distressed notes from Sanwa Bank and its affiliates in September 1998 for
approximately $24.0 million and a building in Kawasaki, Japan in February
1999 for about $93.4 million.
MUROMACHI BUILDING MANAGEMENT K.K.
In March 1999, the Company entered into a Japanese
partnership agreement with Meguro Investors, LLC. Meguro Investors, LLC is
owned in part by William McMorrow (25%), Richard Mandel (25%) and Ryosuke
Homma (25%). The remainder is owned by some of the employees in the Tokyo
office of Kennedy-Wilson Japan K.K. The K-W/Meguro partnership purchased an
insolvent Japanese real estate holding company called Muromachi Building
Management K.K. The purchase price was $83,000. Under the terms of the
partnership agreement, Meguro Investors LLC is the beneficial owner of the
holding company acquired and the Company is the legal owner.
ARROWHEAD BROKERAGE
William McMorrow and Lewis Halpert each own 20% of real
property located in Lake Arrowhead, California. They have retained the
Company as the exclusive broker for selling that property. The Company will
earn a fee of 4% of the sale price at the close of escrow. The property's
value is estimated at approximately $12.5 million.
EXECUTIVE SERVICES AGREEMENT
On July 17, 1998, the Company entered into an agreement
with KW-A, LLC to purchase executive management services. Barry Schlesinger,
a member of the Board and Chairman of Kennedy-Wilson Properties, Ltd., Terry
Wachsner, Senior Managing Director of Kennedy-Wilson Properties, Ltd., Larry
Beasley and Jerome Powalish are equal members in KW-A, LLC. The Company pays
KW-A, LLC an amount equal to all sums payable by KW-A, LLC to its members
under their respective employment agreements whose services the Company uses.
The amount received in 1998 by Mr. Schlesinger under this arrangement is
described in the "Employment Contract" section. Mr. Wachsner received
$430,000 in 1998. The terms of the Company's agreement with KW-A, LLC expire
the earlier of the termination of employment by KW-A, LLC of the last member
or December 31, 2000.
-16-
<PAGE>
GOODWIN GAW SHARES
On November 5, 1998, Goodwin Gaw resigned from his position
as a member of the Board. On November 10, 1998, the Company purchased from
Mr. Gaw 135,000 shares of Common Stock for $6.716 per share for a total of
$906,750. The closing price for Common Stock on the NASDAQ National Market on
that date was $7.281 per share. All 135,000 shares were subsequently retired.
BROKERAGE ENGAGEMENTS
In the past the Company has been retained, and the Company
anticipates that from time to time in the future it will be retained, to
perform auction or brokerage services for entities controlled by certain of
the Company's executive officers and/or directors. The Company believes that
the terms of these brokerage transactions in the past have been substantially
comparable to those that would have been obtainable in similar transactions
with unaffiliated parties, and that they will have no material effect on the
Company.
INDEBTEDNESS OF MANAGEMENT
In December 1997, the Company loaned an aggregate of
$1,319,652 to 18 key employees. The Company made the loans to enable those
employees to acquire in a private, unsolicited transaction approximately
73,314 shares of Common Stock from an institutional investor. The terms of
each of the loans, other than the principal balances, are identical. Each
loan is unsecured, bears interest at an annual rate equal to the commercial
prime rate of Bank of America in effect from time to time plus 1%. Interest
is payable semiannually on August 31 and January 31. The principal is due on
the earlier of three years following the making of the loan or six months
following the employee/borrower's termination of employment. The following
table provides details of the loans that were made to the Company's directors
and executive officers:
-17-
<PAGE>
DECEMBER 1997 LOANS TO DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
MAXIMUM AMOUNT AMOUNT OWED AS OF
BORROWER OWED IN 1998 MAY 26, 1999
- -------- --------------------- ------------
<S> <C> <C>
William McMorrow,
Chairman of the Board of Directors and Chief Executive
Officer............................................ $226,008 $ 0
Lewis Halpert,
Director........................................... $225,972 $ 0
Richard Mandel,
Managing Director.................................. $162,000 $ 0
Freeman Lyle,
Executive Vice President, Chief Financial Officer and
Secretary.......................................... $225,972 $110,000
</TABLE>
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act"), as amended, requires the Company's directors and certain of
its officers, as well as persons who own ten percent or more of the Company's
outstanding Common Stock ("Insiders"), to file an initial report of
beneficial ownership of stock of the Company and reports of changes in
beneficial ownership thereafter with the SEC. Section 16(a) requires Insiders
to deliver copies of all reports filed under Section 16(a) to the Company.
Based solely on a review of these copies received, the Company believes that
Insiders have complied with all applicable Section 16(a) filing requirements
for fiscal 1998, with the exception of Goodwin Gaw, a former director who
resigned on November 5, 1998, who reported two transactions one day late.
PURSUANT TO ITEM 402(a)(9) OF REGULATION S-K, PROMULGATED
BY THE SEC UNDER THE EXCHANGE ACT, THE FOLLOWING PERFORMANCE GRAPH AND REPORT
OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY
PREVIOUS FILING BY THE COMPANY UNDER EITHER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") OR THE EXCHANGE ACT THAT INCORPORATES FUTURE SECURITIES ACT
OR EXCHANGE ACT FILINGS IN WHOLE OR IN PART BY REFERENCE.
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<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing yearly change in
the cumulative total Stockholder return on the Company's Common Stock to the
cumulative total Stockholder return on The Nasdaq National Market Index
("Nasdaq Market Index") and an index of publicly traded companies with one or
more business lines similar to those of the Company ("Peer Group Index").
[GRAPH]
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
------------------------------------------------------------------------------
COMPANY INDEX/MARKET 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Kennedy-Wilson, Inc. 100.00 40.74 14.81 28.89 56.91 112.10
Peer Group Index(1) 100.00 64.00 64.00 144.00 244.48 207.34
NASDAQ Market Index 100.00 104.99 136.18 169.23 207.00 291.96
- ---------------------------------------
</TABLE>
(1) The Peer Group Index is made up of the following securities:
CB Richard Ellis Services, Inc.
Grubb & Ellis Co.
Insignia Financial Group
Jones Lang Lasalle Inc.
Trammell Crow Co.
-19-
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation Committee of the Board (the "Committee")
establishes the general compensation policies of the Company, determines the
compensation levels for the Chief Executive Officer and other senior officers
of the Company and administers and/or provides oversight on all incentive
plans, including the Kennedy-Wilson, Inc. 1992 Incentive and Non-Statutory
Stock Option Plan and the approval of any grants of stock options thereunder.
The Company applies a consistent philosophy to compensation
for all employees, including officers. This philosophy is based upon the
premise that the achievements of the Company result from the coordinated
efforts of all individuals working toward common, defined objectives. The
Company strives to attain these objectives through team work that is focused
upon meeting the expectations of customers and Stockholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the Committee was comprised of Kent Mouton and
Donald Prell, both of whom are non-employee directors. Neither Mr. Mouton nor
Mr. Prell was an officer or employee of the Company during the fiscal year
ended December 31, 1998, nor have either of them been an officer of the
Company at any time. Mr. Mouton is a partner in the law firm of Kulik,
Gottesman & Mouton. During fiscal year 1998, the Company paid Kulik,
Gottesman & Mouton a total of approximately $496,191 in legal fees.
COMPENSATION POLICY
The Committee believes that the Company is engaged in
highly competitive businesses and must attract and retain qualified
executives in order to be successful. Accordingly, the compensation policy
for executive officers is designed to (i) provide a total compensation
package for officers that is competitive and enables the Company to attract
and retain key executive and employee talent needed to accomplish its
business objectives and (ii) to directly link compensation to improvements in
performance and increase in Stockholder value. As a result, executive
compensation generally includes base salary, cash incentive bonus, and the
discretionary award of stock options by the Committee.
The Company's executive compensation policy is to ensure
that a substantial portion of potential aggregate annual compensation be
contingent upon the performance of the Company. The Company is committed to
providing sales commission and/or incentive opportunities that, together with
base salaries (where appropriate), provide for competitive and equitable
total cash compensation opportunities. Aggregate base salaries, where
appropriate, are set relative to average market pay practices, while target
incentives opportunities are set somewhat above average market pay practices.
Additionally, future base salary increases and commission or incentive pay
opportunities are directly linked to the achievement of key financial
objectives.
The variable compensation plans focus respective executive
officers on the immediate objectives of the business and their job, encourage
executives to work together as a team to achieve Company success, and
recognize and reward the sustained contribution of outstanding performers
within the Company.
COMPONENTS OF COMPENSATION
The Company has compensation programs that include both
cash and equity components. The Committee has established base salary, as
well as short and long-term incentive compensation targets for certain
officers of the Company. The compensation targets define the percentage for
each component of total compensation.
-20-
<PAGE>
With respect to cash compensation for officers, the Company
sets base salaries and target incentive bonus opportunities for each officer
by reviewing the cash compensation provided to comparable positions and
assessing the internal equity of cash compensation opportunities based on
position responsibilities, the performance of each officer, and overall
levels of contribution to the Company. When considering competitive pay
practices, the Committee reviews compensation levels in both the real estate
industry and general industry at firms comparable in size and revenue to the
Company. Target incentive compensation opportunities are typically funded as
stipulated levels of net profit are achieved. Some officers with defined
divisional business development responsibilities also receive a salary draw,
with additional opportunity to earn a proportionate share of the net profits
or revenue of the relevant division.
The Company provides for long-term equity compensation
through stock options as a means to compensate and provide long-term
incentives for its executive officers. Option exercise prices for officers
are set at the stock's fair market value on the date of grant, unless the
optionee holds 10% or more of Common Stock, in which case the exercise price
is set at 110% of fair market value on the date of the grant. Thus, the value
of the Stockholders' investment in the Company must generally appreciate
before an optionee receives any financial benefit from the option. Options
granted to executive officers generally provide that they are exercisable
over a period of three to five years after the date of grant. In determining
the size of the stock option grants, the Committee considers various
subjective factors primarily relating to the responsibilities of the
individual officers, and also to their respective expected future
contributions.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
William J. McMorrow has been Chairman of the Board and
Chief Executive Officer of the Company since joining its predecessor company
in 1988. The Committee believes that Mr. McMorrow's base salary is within a
competitive range of pay, as compared with companies of similar size and
scope as the Company. Incentive compensation has been linked to the Company's
overall performance. In determining Mr. McMorrow's incentive compensation for
1998, the Committee considered various factors, including, but not limited
to, Mr. McMorrow's guidance in the Company's financing, acquisition and
disposition of real estate assets, the July 1998 acquisition of the Company's
property management and leasing operations and the integration of that
business line into the Company's operations. For 1999, the Committee has
determined Mr. McMorrow's compensation will be based upon a potential target
compensation mix whereby the majority of his total compensation will be in
the form of incentives, based upon attainment of gross profits and other
business factors.
By the Compensation Committee of the Board
of Directors
Kent Y. Mouton, Chairman
Donald B. Prell
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<PAGE>
GENERAL INFORMATION
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The firm of Deloitte & Touche LLP has been selected by the
Board, upon the recommendation of the Audit Committee of the Board, as
independent accountants to audit the books and accounts of the Company and
its subsidiaries for the fiscal year ending December 31, 1999. This firm has
served as independent accountants for the Company since 1991. A
representative of Deloitte & Touche LLP will be present at the Annual Meeting
and will have an opportunity to make any desired statement and to answer any
appropriate questions by Stockholders.
STOCKHOLDER PROPOSAL
In order for a proposal by a Stockholder be included in the
proxy statement and proxy card for the 2000 Annual Meeting, such proposal
must be received by the Company no later than February 2, 2000, assuming that
the date of the 2000 Annual Meeting is not changed by more than 30 calendar
days from the date of the Annual Meeting. In such event, the Company will
provide notice of the date by which such proposals must be received in order
to be included.
Pursuant to the rules and regulations promulgated by the
SEC, any Stockholder who intends to present a proposal at the 2000 Annual
Meeting of the Company without requesting the Company to include such
proposal in the Company's proxy statement should be aware that he must notify
the Company not later than April 18, 1999 of his intention to present the
proposal. Otherwise, the Company may exercise discretionary voting with
respect to such shareholder proposal pursuant to authority conferred on the
Company by proxies to be solicited by the Board and delivered to the Company
in connection with the meeting.
Under Section 2.9 of the Company's By-Laws, Stockholder (i)
proposals submitted for inclusion at any special meeting of Stockholders and
(ii) nominations for election of directors must comply with additional
procedures. With respect to any Stockholder proposal to be made at a special
meeting, the Stockholder must have given notice of such proposal in writing
to the Secretary of the Company not less than 90 days in advance of such
meeting or, if later, the seventh day following the first public announcement
of the date of such meeting. A Stockholder's notice to the Secretary shall
set forth as to each matter the Stockholder proposes to bring before the
meeting (1) a brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the meeting, (2)
the name and address, as they appear on the Company's books, of the
Stockholder proposing such business, (3) the class and number of shares of
the Company that are beneficially owned by the Stockholder, and (4) any
material interest of the Stockholder in such business. In addition, the
Stockholder making such proposal shall promptly provide any other information
reasonably requested by the Company.
With respect to Stockholder nominations for the election of
directors, any Stockholder entitled to vote in the election of directors may
nominate a person for election as a director at a meeting of Stockholders
only if written notice of such Stockholder's intent to make such nomination
has been given to the Secretary of the Company not later than 90 days in
advance of such meeting or, if later, the seventh day following the first
public announcement of the date of such meeting. Each such notice shall set
forth (i) the name and address of the Stockholder who intends to make the
nomination and of the person or persons to be nominated, (ii) a
representation that the Stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting and nominate the person or persons specified in the
notice, (iii) a description of all arrangements or understandings between the
Stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the Stockholder, (iv) such other information regarding each nominee
proposed by such Stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the SEC had the nominee been
nominated, or intended to be nominated, by the Board and (v) the consent of
each nominee to serve as a director of the Company if so elected. In
addition, the Stockholder making such nomination shall promptly provide any
other information reasonably requested by the Company.
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ANNUAL REPORT
All Stockholders of record as of the Record Date have been
sent, or are concurrently herewith being sent, a copy of the Company's Annual
Report for the fiscal year ended December 31, 1998. Such report contains
certified consolidated financial statements of the Company and its
subsidiaries for the fiscal year ended December 31, 1998.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of the date of this Proxy Statement, the Board is not
aware of any matters to come before the Annual Meeting other than those set
forth on the Notice accompanying this Proxy Statement. If any other matters
come before the Annual Meeting, the Proxy Card, if executed and returned,
gives discretionary authority to the Appointees with respect to such matters.
ADDITIONAL INFORMATION
The Company will pay the cost of preparing, assembling and
mailing the Notice of the Annual Meeting, this Proxy Statement, the enclosed
Proxy Card, and the solicitation of the proxies. Directors, officers and
other regular employees of the Company may solicit proxies. None of them will
receive any additional compensation for such solicitation. People soliciting
proxies may contact you in person, by telephone or by telegraph. The Company
will pay brokers or other persons holding stock in their names or the names
of their nominees for the expenses of forwarding solicited material to their
principals.
THE COMPANY WILL, UPON THE WRITTEN REQUEST OF ANY PERSON
WHO IS A BENEFICIAL OWNER OF ITS SHARES ON THE RECORD DATE FOR THE ANNUAL
MEETING, FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT TO THE SEC ON
FORM 10-K FOR THE YEAR 1998 AND WILL FURNISH, AT A CHARGE OF $10, A COPY OF
THE EXHIBITS THERETO. SUCH REQUEST SHOULD CONTAIN A REPRESENTATION THAT THE
PERSON REQUESTING THIS MATERIAL WAS A BENEFICIAL OWNER OF THE COMMON STOCK ON
THE RECORD DATE AND BE SENT TO THE SECRETARY OF THE COMPANY AT THE ADDRESS
INDICATED ON THE FIRST PAGE OF THIS PROXY STATEMENT.
By Order of the Board of Directors
/s/ Freeman A. Lyle
Executive Vice President, Chief
Financial Officer, and Secretary
Beverly Hills, California
June 2, 1999
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KENNEDY-WILSON, INC.
9601 WILSHIRE BOULEVARD
SUITE 220
BEVERLY HILLS, CALIFORNIA 90210-5205
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 23, 1999
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF KENNEDY-WILSON, INC.
The undersigned hereby appoints William J. McMorrow and Freeman A. Lyle,
and each of them, as Proxies, each with the power to appoint his substitute,
and hereby authorizes each of them to represent and to vote as designated
below, and with discretionary authority as to any other matters that may come
before the meeting, all the shares of common stock of Kennedy-Wilson, Inc.
held of record by the undersigned on the close of business May 26, 1999, at
the 1999 Annual Meeting of Stockholders to be held on June 23, 1999 at the
Regent Beverly Wilshire Hotel, located at 9500 Wilshire Boulevard, Beverly
Hills, California 90210, and any postponements or adjournments thereof.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN IN THE ACCOMPANYING
ENVELOPE. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS
INDICATED. HOWEVER, IF NO INSTRUCTIONS ARE GIVEN, THE PROXIES WILL VOTE THE
SHARES "FOR" THE NOMINEES FOR DIRECTOR PROPOSED BY THE BOARD OF DIRECTORS OF
KENNEDY-WILSON, INC. AND AT THEIR DISCRETION ON OTHER MATTERS THAT MAY COME
BEFORE THE MEETING. AS OF JUNE 2, 1999, THE PROXIES HAVE NO KNOWLEDGE OF ANY
MATTERS TO BE PRESENTED AT THE MEETING OTHER THAN THOSE CONTAINED IN THIS
PROXY.
FOLD AND DETACH HERE
<PAGE>
Please mark your votes
as indicated in this
example /X/
FOR all WITHHOLD AUTHORITY
nominees listed to vote for all nominees
Election of Directors.
The Board of Directors / / / /
recommends a vote "FOR"
the nominees listed below.
LEWIS HALPERT
KENT MOUTON
THOMAS BARRACK JR.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
_______________________________________________________________________
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
This proxy, when properly dated and executed, will be voted in the manner
directed herein by the undersigned Stockholder. If no direction is made, the
shares represented by this proxy will be voted FOR all of the nominees for
director named above. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give the full title as such. If a corporation, please sign
in full corporate name by the President or other authorized officer. If a
partnership or limited liability company, please sign in partnership or
applicable entity name by the authorized person.
Signature(s) _____________________________________ Dated: _________, 1999
(If there are co-owners, both must sign)
FOLD AND DETACH HERE
