SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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)
Board of Directors of Kennedy-Wilson, Inc.
(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 BLVD.
SUITE 220
BEVERLY HILLS, CA 90210-5205
-----------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held on March 25, 1999
-----------------------
We will hold a special meeting of our stockholders in our Beverly Hills
Board Room, located at 9601 Wilshire Blvd., Suite 220, Beverly Hills, CA 90210
on March 25, 1999 at 9:00 a.m., Pacific Time for the following purposes:
1. To consider and act upon an amendment to our Certificate of
Incorporation to increase the number of authorized shares of common
stock from 10,000,000 to 50,000,000 and to increase the number of
authorized shares of preferred stock from 2,000,000 to 5,000,000.
2. To consider and act upon an amendment to our 1992 Incentive and
Nonstatutory Stock Option Plan to increase the number of shares of
common stock available under that plan from 1,080,000 to 1,700,000.
The Board of Directors has fixed the close of business on Friday, February
19, 1999 as the record date for determining stockholders of Kennedy-Wilson
entitled to notice of the meeting, as well as voting rights at the meeting.
AS A STOCKHOLDER, WE CORDIALLY INVITE YOU TO ATTEND THE MEETING TO INSURE
YOUR REPRESENTATION AT THE MEETING. PLEASE COMPLETE AND PROMPTLY MAIL YOUR PROXY
IN THE ENVELOPE PROVIDED. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON,
SHOULD YOU SO DESIRE.
By Order of the Board of Directors
FREEMAN A. LYLE
Executive Vice President
Chief Financial Officer
and Secretary
Beverly Hills, California
Wednesday, March 3, 1999
<PAGE>
Kennedy-Wilson, Inc.
9601 WILSHIRE BOULEVARD
SUITE 220
BEVERLY HILLS, CA 90210-5205
----------------------------
PROXY STATEMENT
Special Meeting of Stockholders
March 25, 1999
----------------------------
SOLICITATION OF PROXIES
The Board of Directors is soliciting proxies for use at the special meeting
of the stockholders to be held in our Beverly Hills Board Room, located at 9601
Wilshire Blvd., Suite 220, Beverly Hills, CA 90210 on March 25, 1999 at 9:00
a.m. Pacific Time. The Proxy Statement and the accompanying form of Proxy were
first mailed on or about March 3, 1999.
The purposes of the special meeting are to consider and act upon a proposal
to amend the Certificate of Incorporation of Kennedy-Wilson, Inc., a Delaware
corporation (the "Company"), to increase our authorized capital stock and a
proposal to amend the Company's 1992 Incentive and Nonstatutory Stock Option
Plan. The Board of Directors recommends that you vote and your fellow
stockholders vote for the approval of these proposals.
We will pay the cost of preparing, assembling and mailing the Notice of the
Special Meeting of Stockholders, Proxy Statement, form of Proxy, 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. We 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.
VOTING
The close of business on February 19, 1999 has been fixed as the cutoff
date for the determination of the stockholders entitled to notice of the meeting
and the right to vote at the meeting. On February 17, 1999 there were
outstanding 6,746,676 shares of Kennedy-Wilson common stock. Holders of common
stock (or their proxy) are entitled to one vote for each share owned for each
matter to be voted upon. A majority of the outstanding shares common stock,
present in person or represented by proxy will constitute a quorum at the
meeting. Abstentions and broker non-votes (which occur if a broker or other
nominee does not have the discretionary authority and has not received voting
instructions from the beneficial owners with respect to the particular item)
will be counted for the purposes of determining the presence or absence of a
quorum for the transaction of business.
Approval of Proposal 1, an amendment to the Company's Certificate of
Incorporation to increase the number of shares of our authorized capital stock
requires the affirmative vote of a majority of outstanding shares of common
stock. Approval of Proposal 2, an amendment to the Company's 1992 Incentive and
Nonstatutory Stock Option Plan requires the affirmative vote of a majority of
the outstanding shares, present in person or represented by proxy at the special
meeting. As to all matters that may come before the special meeting, abstentions
will have the effect of a negative vote. Broker non-votes are not taken into
account for determining whether a proposal has been approved by the requisite
stockholder vote.
Proxies will be voted in accordance with the instructions given by the
stockholder. In the absence of such instructions, proxies will be voted to
approve Proposals 1 and 2. As of the date this Proxy Statement was sent, the
Board was not aware of any matters which would be presented for action at the
meeting other than the proposed amendments, as identified in the Notice of
Special Meeting accompanying this Proxy Statement. Should any other matters
arise before the meeting or the adjournment of the meeting, however, proxies
will be voted in the discretion of the persons named as proxies by the
stockholder.
As stockholders, you have the power to revoke your proxy at any time before
it is voted at the meeting by submitting written notice of your revocation to
the Secretary of Kennedy-Wilson, or by filing a duly executed proxy bearing a
later date. Our mailing address is 9601 Wilshire Boulevard, Suite 220, Beverly
Hills, CA 90210-5205. Also, your proxy will not be voted if you are present at
the meeting and elect to vote the shares yourself.
<PAGE>
PROPOSAL 1: AMENDMENT TO CERTIFICATE
OF INCORPORATION TO INCREASE AUTHORIZED
SHARES OF CAPITAL STOCK
Proposed Amendment
At the special meeting, you and your fellow stockholders will consider and
take action upon our proposal to increase the authorized capital stock of the
Company. We propose to increase the amount of authorized common stock from
10,000,000 shares to 50,000,000 shares and to increase the amount of authorized
preferred stock from 2,000,000 shares to 5,000,000 shares. This increase in
authorized capital stock would be effected by an amendment to our Certificate of
Incorporation in the form set forth in Annex A to this Proxy Statement.
As of February 17, 1999, of the 10,000,000 shares of common stock currently
authorized, 6,746,676 shares were issued and outstanding. No shares of preferred
stock have been issued. Of the 3,253,324 unissued, authorized shares of common
stock, 1,453,120 shares were reserved for issuance upon the exercise of
outstanding options and warrants (other than the options granted subject to
stockholder approval at this meeting). Accordingly, on February 17, 1999 there
were only 1,800,204 shares of common stock available for issuance by the
Company. If Proposals 1 and 2 are approved by the stockholders, the Company will
have authorized and available for issuance or sale 41,497,804 shares of common
stock (taking into account shares reserved for issuance upon the exercise of
warrants and options) and 5,000,000 shares of preferred stock.
Purpose of Proposed Amendment
The Board of Directors believes that the proposed increase in the
authorized capital stock is in the best interest of both the Company and you.
The increase will provide the Board of Directors additional flexibility to raise
capital, to reserve additional shares for issuance under the Company's stock
option plans and to make acquisitions through the use of stock. The Board
believes that current market conditions make it appropriate for the Company to
issue equity in the near future in a private or public offering, but the Company
does not currently have enough authorized shares to do so. Approval of the
amendment is being sought at the special meeting rather than the scheduled
annual meeting because the Company anticipates that it may want to issue newly
authorized shares in an equity offering before the time fixed for the annual
meeting.
Effect of Proposed Amendment
The authorization of additional shares of common and preferred stock will
not affect the terms of the common stock or the rights of the holder of the
shares of common stock under the Company's Certificate of Incorporation. Should
additional shares be issued, Colony Investors III, L.P., a Delaware limited
partnership, which currently owns 10% of the outstanding issued shares of the
Company, has the right to purchase additional shares to maintain their 10%
shareholder status. No other stockholders, however, have preemptive rights with
respect to newly issued shares of common and preferred stock. Thus, should the
Board decide to issue additional shares of common stock or shares of preferred
stock, such issuance would have a dilutive effect on the shareholdings of such
stockholders.
Although the purpose of seeking an increase in the number of authorized
capital stock is not intended for anti-takeover purposes, the SEC rules require
disclosure of charter and bylaw provisions that could have an anti-takeover
effect. In our case, provisions that require disclosure under our Certificate of
Incorporation include: (i) a classified Board of Directors with staggered terms,
(ii) Board authority to issue one or more series of preferred stock up to a
maximum of 2 million shares or, if the amendment passes, a maximum of 5 million
shares, (iii) a special meeting of stockholders may only be called by the Board
of Directors, or a committee specially designated by the Board, (iv) certain
business combination transactions require a greater than majority of stockholder
approval, (v) members of the Board of Directors can only be removed for cause,
(vi) amendments to certain articles of the Certificate of Incorporation may
require, under certain circumstances, a greater than majority stockholder
approval and (vii) amendment of the bylaws may require, under certain
circumstances, greater than majority stockholder approval.
Certificate of Incorporation
The amendment would take effect on the date of filing of a certificate of
amendment to our Certificate of Incorporation with the Delaware Secretary of
State. The Board of Directors has authorized and approved the amendment and the
proposed change to the Company's Certificate of Incorporation. If approved by
the holders of a majority of the outstanding common stock, the amendment to the
Company's Certificate of Incorporation would be filed immediately following the
meeting, unless we subsequently determine that the amendment is not in the best
interests of you and the Company.
Recommendation of the Board
The Board of Directors recommends a vote FOR approval of the proposed
amendment. The approval of the amendment requires the affirmative vote of a
majority of the outstanding shares of the Company's common stock. Management
stockholders of the Company own more than 50% of the outstanding common stock
and have indicated that they intend to vote in favor of the amendment, thereby
assuring stockholder approval. Nonetheless, stockholder participation at the
special meeting, in person or by representation, is encouraged.
<PAGE>
PROPOSAL 2: AMENDMENT TO THE COMPANY'S
1992 INCENTIVE AND NONSTATUTORY
STOCK OPTION PLAN
Proposed Amendment
At the special meeting, you and your fellow shareholders will consider and
act upon an amendment to the Company's 1992 Incentive and Nonstatutory Stock
Option Plan (the "Plan"). Approval of the proposed amendment would amend Section
4 of the Plan to increase the number of shares of common stock that the Company
may issue under the Plan from 1,080,000 to 1,700,000.
On February 19, 1999 the Board of Directors, acting on the unanimous
recommendation of the Compensation Committee, approved, subject to shareholder
approval, the amendment and directed that it be submitted to the Company's
stockholders for their approval. The Plan became effective when it was approved
by the Company's stockholders at the annual meeting on March 29, 1992.
If this proposal is approved by the stockholders, the Company intends to
register under the Securities Act the additional shares that it may issue under
the Plan.
Purpose of the Amendment
The Board of Directors believes that the Plan has been helpful in
attracting and retaining the best available people for positions of substantial
responsibility, and providing key employees and consultants with an additional
incentive to contribute to the success of the Company and its affiliates.
Therefore, the Board of Directors desires to continue the Plan. As of February
17, 1999, options to purchase 1,382,400 of the Company's common stock were
outstanding or approved to be granted under the Plan at exercise prices of $.95
to $8.33 per share. Of these, options to purchase 302,400 shares are in excess
of the number of shares now authorized under the Plan, and the Company has
conditioned the grant of such options on shareholder approval of this Proposal
2. The Board of Directors believes that shareholder approval of this Proposal
will enable the Company to continue to grant options under the Plan to key
employees and consultants at levels that the Company has determined appropriate.
The market value of the underlying securities was valued at $10.00 per share, as
of February 28, 1999.
Summary of the Plan
The following summarizes the material features of the Plan, as proposed to
be amended. A copy of the Plan, as so amended, will be made available to any
stockholder of the Company requesting a copy in writing. You should read the
Plan for a full statement of its legal terms and conditions.
General
- -------
The Plan is administered by the Compensation Committee. All key employees,
including officers and other key employees who are also directors of, or
consultants to, the Company are eligible to participate in the Plan. The
Compensation Committee determines which persons shall be granted options, the
extent of such grants and their terms and conditions. All employees and
consultants are eligible to receive options grants under the plan.
The Company has the option of granting either incentive stock options
("ISOs") or options which are not intended to qualify as incentive stock options
("NQOs"), except that ISOs may only be granted to employees of the Company. No
options may be granted under the Plan after May 11, 2002.
The exercise price for shares under options granted under the Plan must be
at least equal to the fair market value per share of common stock at the time
they are granted. The exercise price under options granted to a stockholder who
owns greater than 10% of the Company must be at least 110% of the fair market
value per share of the common stock at the time they are granted. The exercise
price for options granted must be paid at the time of exercise in cash or by
certified bank check or, in certain circumstances, with previously acquired
shares of common stock.
The aggregate fair market value, as determined as of the date of the grant,
of the shares of common stock for which ISOs are granted to any optionee under
the Plan which are exercisable for the first time by the optionee during any
calendar year may not exceed $100,000.
Options granted under the Plan become exercisable on the dates the
Compensation Committee determines for each individual option. Options become
immediately exercisable in full in the event of a disposition of all or
substantially all of the assets or capital stock of the Company by means of a
sale, merger, consolidation, reorganization, liquidation or otherwise (a "Change
in Control"), unless the Compensation Committee arranges for the optionee to
receive new options covering shares of the Company purchasing or acquiring the
assets or stock of the Company, in substitution of the options granted under the
Plan. The Plan and any unexercised options shall terminate and cease to be
effective upon any such Change in Control. The Compensation Committee in any
event may, on such terms and conditions as it deems appropriate, accelerate the
exerciseability of options granted under the Plan. ISOs expire no later than
five years from the date of the grant. NQOs expire no later than ten years from
the date of grant.
Options granted under the Plan are not transferable other than by will or
the laws of descent and distribution. Unexercised options generally lapse upon
the earlier of the option expiration date or 90 days after termination of
employment other than by reason of disability or death, and in the case of death
or disability, upon the earlier of the option expiration date or one year after
the date of death.
The Plan provides for antidilution adjustments which are applicable in the
event of a reorganization, recapitalization, reclassification, stock dividend,
stock split or reverse stock split; however, no such adjustment need be made if
the Committee determines, on the advice of counsel to the Company, that the
adjustment may result in the receipt of federally taxable income due optionees
or the holders of common stock or other classes of the Company's securities. The
Company did make antidilution adjustments in connection with the 20% stock
dividend effectuated October 27, 1997, the 200% stock dividend effectuated April
10, 1998, and the 50% stock dividend effectuated December 15, 1998.
The Plan provides that the Board may amend the Plan in such respects as
deemed advisable; provided, however, that no amendment can operate to affect
adversely an optionee's rights under the Plan with respect to any option granted
prior to the adoption of such amendment, except with the written consent of the
optionee or as may be necessary to comply with any applicable law.
Notwithstanding the preceding, any amendment which would increase the maximum
number of shares issuable, such as this proposed amendment, change the classes
of eligible persons or require shareholder approval under any applicable law,
rule or regulation, is subject to shareholder approval.
Federal Income Tax Consequences
The following is a brief summary of certain significant United States
Federal income tax consequences under the Internal Revenue Code of 1986, as
amended (the "Code"), as in effect on the date of this summary, applicable to
the Company and optionees, in connection with the grant and exercise of options
under the Plan. This summary is not intended to be exhaustive, and, among other
things, does not describe state, local or foreign tax consequences, or the
effect of gift, estate or inheritance taxes. References to the "Company" in this
summary of tax consequences shall mean the Company or the affiliate of the
Company that employs the optionee, as the case may be.
The grant of options under the Plan will not result in taxable income to
optionees or an income tax deduction for the Company. However, the transfer of
common stock to optionees upon exercise of their options may or may not give
rise to taxable income to such optionees and tax deductions for the Company,
depending upon whether the options are ISOs or NQOs.
The exercise of a NQO generally results in immediate recognition of taxable
ordinary income by the NQO holder and a corresponding tax deduction for the
Company in the amount by which the fair market value of the shares of common
stock received upon exercise of an option, on the date of such exercise, exceeds
the aggregate option price. Any appreciation or depreciation in the fair market
value of such shares after the date of such exercise will generally result in a
capital gain or loss to the NQO holder at the time a taxable disposition of such
shares occurs.
In general, the exercise of an ISO is exempt from income tax (although not
from the alternative minimum tax) and does not result in a tax deduction for the
Company at any time unless the ISO holder disposes of the common stock purchased
thereby within two years of the date such ISO was granted or within one year of
the date of such exercise (a "Disqualifying Disposition"). If these holding
period requirements are satisfied, and if the ISO holder has been an employee of
the Company at all times from the date of grant of the ISO to the day three
months before such exercise (or twelve months in the case of termination of
employment due to disability), then such ISO holder will recognize any gain or
loss upon disposition of such shares as capital gain or loss. However, if the
ISO holder makes a Disqualifying Disposition of any such shares, he or she will
generally be obligated to report as taxable ordinary income for the year in
which such disposition occurred the excess, with certain adjustments, of the
fair market value of the underlying common stock on the date the ISO was
exercised over the option price paid. The Company would be entitled to a tax
deduction in the same amount so reported by the ISO holder. Any additional gain
realized by such ISO holder on such a Disqualifying Disposition of such shares
would be capital gain. If the total amount realized in a Disqualifying
Disposition is less than the exercise price of the ISO, the difference would be
a capital loss for the ISO holder.
Upon surrender of a NQO or ISO for cash, in the event of a Change in
Control, the amount of cash that the optionee receives is immediately taxable to
him or her as ordinary income and deductible by the Company.
Under Section 162(m) of the Code, the Company may be limited as to Federal
income tax deductions to the extent that total annual compensation in excess of
$1 million is paid to the Chief Executive Officer of the Company or any one of
the other four highest paid executive officers who are employed by the Company
on the last day of the Company's taxable year.
Under certain circumstances, accelerated vesting or exercise of options
granted to an optionee under the Plan in connection with a Change in Control
might be deemed an "excess parachute payment" for purposes of the golden
parachute payment provisions of Section 280G of the Code. To the extent it is so
considered, the optionee would be subject to an excise tax equal to 20% of the
amount of the excess parachute payment, and the Company would be denied a tax
deduction for the excess parachute payment.
Future Plan Awards
As described above, the amendment increases the number of shares of common
stock available for grant under the Plan. Reference is made to the Benefits
Subject to Approval Table, Summary Compensation Table and Stock Option Tables on
pages 9, 10, and 12 to assess the level of awards made under the Plan.
Plan Benefits
The following table illustrates the options to purchase shares of the
Company's common stock that have been granted subject to stockholder approval of
the increase in the number of shares reserved under the Plan provided in this
proxy statement. These options become exercisable over a three year period after
the date of their grant, one-third each year, or over a five year period,
one-fifth each year, and expire on the fifth anniversary of their grant subject
to earlier termination as provided in the Plan. The exercise price is the market
value of the common stock on the date of the grant, which in the case of these
options ranges from $7.38 to $8.33.
Benefits Subject to Approval Table
----------------------------------
Number of Shares
Underlying Options
Name Granted
---- -------
Barry Schlesinger 169,900
Chairman, Kennedy-Wilson
Properties, Ltd.
Non Executive 132,500
Officer Employees
as a Group
Required Vote
The Board of Directors recommends a vote FOR approval of the proposed
amendment. The approval of the amendment requires the affirmative vote of a
majority of the outstanding common shares, present in person or represented by
proxy at the special meeting. Management stockholders of the Company own more
than 50% of the outstanding common stock and have indicated that they intend to
vote in favor of the amendment, thereby assuring stockholder approval.
Nonetheless, stockholder participation at the meeting, in person or by
representation, is encouraged.
<PAGE>
EXECUTIVE COMPENSATION
Summary of Executive Compensation
The following table sets forth the total compensation paid or accrued by
the Company to the Chief Executive Officer and the four most highly compensated
executive officers of the Company who served in such capacities during fiscal
1998 (the "Named Executive Officers") for services rendered during each of the
last three fiscal years.
Summary of Compensation Table
Number of
Other Securities
Annual Underlying
Name and Position Year Salary Bonus Compensation(1) Options(2)
- ----------------- ---- ------ ----- -------------- ----------
William J. McMorrow 1998 $300,000 $2,219,222 $501,844 37,500
Chairman of the 1997 1,270,754 120,607 90,000
Board 300,000
CEO 1996 450,000 0 0
300,000
Lewis A. Halpert 1998 150,000 623,805 101,133 0
Executive Managing 1997 150,000 396,800 31,083 45,000
Director 1996 125,000 325,000 0 0
Richard Mandel 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
B. Schlesinger(3) 1998 169,231 270,000 0 75,000
Chairman 1997
Kennedy-Wilson 1996
Properties, Ltd
Freeman A. Lyle 1998 161,625 140,000 60,325 45,000
Executive V.P., 1997 150,000 100,000 15,020 0
Chief Financial
Officer 1996 94,000 37,500 0 54,000
and Secretary
(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
based in Hong Kong and Tokyo. For the years 1996 and 1997 Other annual
Compensation excluded compensation in the form of other personal benefits, for
each of the named officers other than R. 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 200% stock dividend effectuated April 10, 1998, and a 50% stock
dividend effectuated December 15, 1998.
(3) Mr. Schlesinger is employed by KW-A, LLC. A Services Agreement between the
Company and KW-A, LLC requires the Company to pay to KW-A, LLC amounts due Mr.
Schlesinger under his employment contract with KW-A , LLC. Mr. Schlesinger
joined the Company when the Company acquired Heitman Properties in July, 1998.
Employment Agreements
Mr. McMorrow's employment agreement with the Company provides for a base
salary of 300,000 per annum, plus an advance of $100,000, payable against a
bonus of up to 20% of "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 Company contributions to the Deferred Compensation Plan. Mr.
Halpert's employment contract provides for a base salary of $150,000 per annum,
plus a non-repayable advance of $150,000 payable against his annual incentive
bonus of 15% to 25% of net profits allocated to the residential property and
notes divisions in 1999. Under the terms of Mr. Mandel's agreement with the
Company, he receives a base salary of $250,000 plus an incentive bonus of 12 1/2
% to 20% of the net profits allocated to the commercial brokerage division in
1999. Mr. Lyle's employment agreement provides for a base salary of $180,000
plus a bonus, determined by the Company at its sole and absolute discretion, of
up to 100% of his base salary. Unless terminated earlier, all employment
agreements discussed in this paragraph terminate on December 31, 1999 with the
exception of Mr. Lyle's, which terminates on March 31, 1999.
Mr. Schlesinger has an employment agreement with KW-A, LLC through December
31, 2000. KW-A, LLC is a limited liability company whose members are Mr.
Schlesinger, and Terry Wachsner, Larry Beasley and Jerome Powalish, each of whom
are employees of KW-A, LLC and provide 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,
Ltd. in excess of $5,033,000 and (ii) an "add-on bonus" in 1999 of $270,000.
Pursuant to the terms of a Services Agreement, the Company and Kennedy-Wilson
Properties, Ltd. have 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 management executive
services.
In addition to compensation as noted above, each contract sets forth the
employee services provided to the Company; benefits and expense reimbursements,
if applicable, provided to the employee; a non-competition covenant and
confidentiality agreement; and grounds for termination. None of the contracts
provide for any severance, change-in-control or related payments upon
termination of the agreement, except for Mr. McMorrow's. Mr. McMorrow's
employment agreement 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 agreement is not renewed or
terminated due to a change in control of the Company.
Deferred Compensation Plan
In 1997, the Company established a nonqualified deferred compensation plan
to provide specific benefits to a select group of management or highly
compensated employees who contribute materially to the continued growth,
development and future business success of the Company. Under such plan,
participants are able to defer up to 100% of their annual total compensation,
consisting of salary and bonus. The Company is authorized to make discretionary
matching contributions under certain circumstances pursuant to the terms of the
plan. In 1998, the Company contributed $1,078,963, including the amounts
disclosed in the Summary of Compensation Table, as applicable, for the named
executive officers in the column labeled Other Annual Compensation.
Stock Options
The following table provides information with respect to stock option
grants made to each of the Named Executive Officers in the Summary of
Compensation Table for fiscal 1998.
<TABLE>
<CAPTION>
Stock Option Grants in Last Fiscal Year
Percentage of
Number of Total options
Securities Granted to Potential Realizable Value
Underlying Employees in Exercise Price Expiration of Assumed Annual Rates of Stock Price
Name Options Granted 1998 Per Share Date Appreciation of Option Terms
- ---- --------------- ---- --------- ---- ----------------------------
5% 10%
<S> <C> <C> <C> <C> <C> <C>
W. McMorrow 37,500 9.52% $7.00 4/27/03 $72,524 $160,259
F. Lyle 45,000 11.42 3.67 1/20/03 45,628 100,826
R. Mandel 37,500 9.52 7.00 4/27/03 72,524 160,259
B. Schlesinger 75,000 19.04 8.33 12/15/03 172,607 381,416
L. Halpert 0 0 0 N/A 0 0
</TABLE>
The following table furnishes information with respect to stock options held by
the same group of Named Executive Officers.
Aggregated Option Exercises In 1998
and 1998 Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options on
on December 31, 1998 December 31, 1998
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. McMorrow 0 $0 30,000 97,500 $98,340 $196,680
F. Lyle 27,000 155,610 9,000 63,000 46,746 251,190
R. Mandel 18,000 138,834 153,000 217,500 830,142 908,694
B. Schlesinger 0 0 0 0 0 0
L. Halpert 0 0 15,000 30,000 49,170 98,340
</TABLE>
Long Term Incentive and Pension Plans
The Company does not currently have, nor has it ever had, long term
incentive or pension plans.
Director Compensation
Each of our directors who is not an employee 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, we maintain a Non-Employee
Director Stock Option Plan, which is designed to provide non-employee directors
with the opportunity to obtain equity ownership interest in the Company through
the exercise of stock options. Our executive officers who also are directors
receive no additional compensation for services as members of the Board of
Directors or any Board Committee.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors during the last fiscal
year was comprised of Kent Mouton and Donald Prell. No member of the
Compensation Committee of the Board of Directors was, or currently is, an
officer or employee of the Company or any of its subsidiaries.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 17, 1999 the total number of
shares of the Company's common stock beneficially owned and the percentage of
the outstanding shares so owned by each beneficial owner known to the Company of
more than five percent (5%) of the outstanding shares of common stock, (ii) each
director, (iii) each Named Executive Officer, and (iv) all directors and
officers as a group. Except as otherwise indicated in the notes following the
table, the stockholders listed in the table are the beneficial owners of such
shares with sole voting and investment power over such 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.
Number
of Shares Percent
Name Beneficially Owned of Class
---- ------------------ --------
William J. McMorrow(1) 1,521,821 20.80%
Lewis A. Halpert(2) 1,384,047 18.92
Richard A. Mandel(3) 219,500 2.75
Freeman A. Lyle(4) 131,493 1.80
Donald B. Prell(5) 14,580 *
Kent Y. Mouton(5) 14,040 *
Barry Schlesinger 17,499 *
Thomas Barrack(6) 864,166 11.73
Executive Officers 4,143,146 56.63
and Directors
Kenneth V. Stevens 766,200 11.56
Colony Investors III, L.P(6) 864,166 9.99
Fidelity Management 400,000 5.47
& Research Company(7)
* Less than one percent.
** 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 Blvd., Suite 220, Beverly Hills, CA 90210-5205.
(1) Includes approximately 4190 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 1368 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 201,500 shares which may be acquired
pursuant to exercise of outstanding stock options that are presently exercisable
or exercisable within 60 days.
(4) 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.
(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 Schedule 13D, dated July 24, 1998, filed with the Securities
and Exchange Commission, Colony Investors III, L.P., a Delaware limited
partnership ("Colony Investors"), holds of record 666,127 shares of common stock
and warrant to acquire 198,039 shares of common stock that is now exercisable.
The sole general partner of Colony Investors is Colony GP III, Inc., a Delaware
Corporation ("GP"). Mr. Barrack holds a 60% interest in GP. Mr. Barrack and
Colony Investors have shared voting and investment power with respect to such
shares. The mailing address of Colony Investors and Thomas Barrack, as indicated
in Schedule 13D, is 1999 Avenue of the Stars, Suite 1200, Los Angeles, CA 90067.
(7) As reported in Schedule 13G, dated February 12, 1999, filed with the
Securities and Exchange Commission. The mailing address of Fidelity Management &
Research Company, as indicated in schedule 13G, is 82 Devonshire Street, Boston,
Massachusetts 02109-3614.
SHAREHOLDER PROPOSALS
Any eligible stockholder of Kennedy-Wilson wishing to have a proposal
considered for inclusion in Kennedy-Wilson's 1999 proxy solicitation materials
for the 1999 annual meeting must have provided such proposal in writing to the
Secretary of Kennedy-Wilson on or before December 11, 1998. The Board of
Directors of Kennedy-Wilson would have then reviewed such proposals and
determined whether they would have been included in its 1999 proxy solicitation
material. Generally, a stockholder is eligible to submit a proposal for
consideration at a meeting of stockholders if, at the time of the submission of
the proposal, he or she has been for at least one year the record or beneficial
owner of at least 1% or $2,000.00 in market value of securities entitled to be
voted on the proposal at the meeting, and he or she retains such securities
through the date on which the next meeting is held.
APPRAISAL RIGHTS
Under the Certificate of Incorporation and relevant section of the Delaware
State Corporations Code, holders of the Company's common stock are not entitled
to appraisal rights in connection with the proposed amendments.
<PAGE>
ANNEX A
FORM OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
Section 1 of Article V of the Certificate of Incorporation of Kennedy-Wilson,
Inc. presently reads as follows:
SECTION 1. Number of Authorized Shares. The Corporation shall be
authorized to issue two classes of shares of stock to be designated,
respectively, "Common Stock" and "Preferred Stock;" the total number
of shares of all classes of stock that the Corporation shall have
authority to issue is Twelve Million (12,000,000) shares consisting of
Ten Million (10,000,000) shares of Common Stock, par value $.01 per
share, and Two Million (2,000,000) shares of Preferred Stock, par
value $.01 per share.
Following approval of the proposed amendment to increase the authorized
Common Stock, $.01 par value, Section 1 of Article V of the Certificate of
Incorporation will be amended to read as follows:
SECTION 1. Number of Authorized Shares. The Corporation shall be
authorized to issue two classes of shares of stock to be designated,
respectively, "Common Stock" and "Preferred Stock;" the total number of
shares of all classes of stock that the Corporation shall have
authority to issue is Fifty-Five Million (55,000,000) shares consisting
of Fifty Million (50,000,000) shares of Common Stock, par value $.01
per share, and Five Million (5,000,000) shares of Preferred Stock, par
value $.01 per share.
<PAGE>
PROXY
KENNEDY-WILSON, INC.
9601 WILSHIRE BLVD.
SUITE 220
BEVERLY HILLS, CA 90210-5205
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MARCH 25, 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, all
the shares of common stock of Kennedy-Wilson, Inc. held of record by the
undersigned on the close of business February 19, 1999, at the Special Meeting
of Shareholders to be held on March 25, 1999 in our Beverly Hills Board Room,
located at 9601 Wilshire Blvd., Suite 220, Beverly Hills, CA 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 PROPOSALS 1 AND 2, AND, IN THEIR DISCRETION, OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE SPECIAL MEETING.
(continued on reverse side)
<PAGE>
PLEASE FOLD AND DETACH HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2. PLEASE MARK,
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
1. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK FROM
10,000,000 SHARES TO 50,000,000 SHARES AND TO INCREASE THE PREFERRED
STOCK FROM 2,000,000 SHARES TO 5,000,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. PROPOSAL TO AMEND THE COMPANY'S 1992 INCENTIVE AND NONSTATUTORY STOCK
OPTION PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE
FROM 1,080,000 SHARES TO 1,700,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR Proposals 1 and 2. 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 President or other authorized officer. If a partnership or
limited liability company, please sign in partnership or applicable entity name
by authorized person.
___________________________________ Dated: ________________, 1999
___________________________________ Dated: ________________, 1999
Signature(s) in Box
(If there are co-owners, both must sign)
THE SIGNATURE(S) SHOULD BE EXACTLY AS THE NAME(S) APPEAR PRINTED TO THE LEFT. IF
A CORPORATION, PLEASE SIGN THE CORPORATION NAME IN FULL BY A DULY AUTHORIZED
OFFICER AND INDICATE THE OFFICE OF THE SIGNOR. WHEN SIGNING AS EXECUTOR,
ADMINISTRATOR, FIDUCIARY, ATTORNEY, TRUSTEE OR GUARDIAN, OR AS CUSTODIAN FOR A
MINOR, PLEASE GIVE FULL TITLE AS SUCH. IF A PARTNERSHIP, SIGN IN THE PARTNERSHIP
NAME.
