As filed with the Securities and Exchange Commission on August 13, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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KENNEDY-WILSON, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-4364537
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
9601 Wilshire Boulevard
Suite 220
Beverly Hills, California 90210-5205
(310) 887-6400
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Freeman A. Lyle With copy to:
Chief Financial Officer Richard K. Smith, Jr., Esq.
9601 Wilshire Boulevard, Suite 220 White & Case LLP
Beverly Hills, California 90210-5205 633 West Fifth Street, Suite 1900
(310) 887-6400 Los Angeles California 90071-2007
(Name, Address, Including Zip Code, (213) 620-7700
and Telephone Number, Including Area
Code, of Agent for Service)
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] Registration
No. _______.
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] Registration No. _______.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Title Of Shares Amount To Be Proposed Maximum Proposed Maximum Amount Of
To Be Registered Registered Aggregate Price Per Aggregate Offering Registration Fee
Unit Price(1)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share 750,000 $8.531 $6,398,250 $1,778.71
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
(1) Estimated solely for calculating the amount of the registration fee
pursuant to Rule 457(c). The price and fee are based upon the average of
the high and low sales prices of shares of common stock on August 11, 1999
as reported on The Nasdaq National Market.
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
Subject to Completion, Dated , 1999
PROSPECTUS
750,000 SHARES
KENNEDY-WILSON,
INCORPORATED
COMMON STOCK
Offering by the Selling Security Holders
o The selling security holders are offering for resale up to 750,000 shares
of our common stock which they may acquire upon conversion of subordinated
convertible debentures which we previously issued in the aggregate
principal amount of $7,500,000.
o We expect that the selling security holders using this prospectus will sell
the shares in ordinary brokers' transactions, transactions directly with
market makers, privately negotiated sales or otherwise.
o We will not receive any of the proceeds from the offering of the shares
with this prospectus, and the registration of the shares pursuant to this
prospectus does not necessarily mean that any shares will be offered or
sold.
- --------------------------------------------------------------------------------
Investing in our common stock involves risks. You
should carefully consider the risk factors
beginning on page 2 before purchasing our
common stock.
- --------------------------------------------------------------------------------
Offering Price
o The sale price of the shares offered with this prospectus will be
determined by the selling security holders at the time of sale and may be
based upon the market price of the shares, negotiated prices or by formula.
Our Common Shares
o The shares offered with this prospectus will be listed for trading under
the trading symbol "KWIC" on The Nasdaq National Market.
o On August 12, 1999, the closing price of our common shares on the Nasdaq
National Market was $8.531 per share.
Our Business
o We are an integrated, international real estate services and investment
company.
o We offer a complementary array of real estate services including property
management, asset management, leasing, brokerage and auctioning services.
o We also invest as a principal in real estate and distressed note pools.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. The
selling security holders may not sell any shares until the registration
statement of which this prospectus forms a part filed with the SEC is effective.
This prospectus is neither an offer to sell securities nor a solicitation of an
offer to buy securities in any state where the offer or sale is not permitted.
The date of this prospectus is , 1999
<PAGE>
[Begin Inside Cover]
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the SEC using a "shelf" registration process. Under this shelf registration
process, the selling security holders may, from time to time, sell their shares
of our common stock, par value $0.01 per share, in one or more offerings. This
prospectus provides you with a general description of our common stock. Please
carefully read both this prospectus and any applicable prospectus supplement
together with additional information described under the heading "Where You Can
Find More Information and Incorporation by Reference."
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information that is different from what is contained in this prospectus. This
prospectus does not constitute any offer to sell or a solicitation of an offer
to buy any securities in any jurisdiction where it is unlawful to do so. You
should not assume that the information contained in this prospectus is accurate
as of any date other than its date, and neither the delivery of this prospectus
nor the sale of securities hereunder shall create any implication to the
contrary.
In this prospectus, the "Company," "Kennedy-Wilson," "we," "us" and "our"
refer to Kennedy-Wilson, Inc., a Delaware corporation, and its subsidiaries.
Our principal executive offices are located at 9601 Wilshire Boulevard,
Suite 220, Beverly Hills, California, 90210, and our telephone number is (310)
887-6400. You can reach our web site at http://www.kennedywilson.com.
[End Inside Cover]
RISK FACTORS
An investment in our common stock involves a number of risks. Before making
an investment decision, you should carefully consider all of the risks described
in this prospectus. If any of the risks discussed in this prospectus actually
occur, our business, financial condition and results of operations could be
materially adversely affected. If this were to occur, the trading price of our
common stock could decline significantly and you may lose all or part of your
investment.
The risk factors described below are not the only ones we face. Additional
risks and uncertainties not presently known to us may also impair our business
operations.
We May Be Adversely Affected By A Downturn In Economic Conditions
Our business is closely tied to real estate. Our economic performance, the
value of our real estate and real estate secured notes, and our ability to
implement our business strategies may be affected by changes in national and
local economic conditions. The condition of the real estate markets in which we
operate tends to be cyclical and related to the condition of the economy in the
U.S. and Japan as a whole and to the perceptions of investors of the overall
economic outlook. Rising interest rates, declining demand for real estate or
periods of general economic slowdown or recession have had a direct negative
impact on the real estate market in the past and a recurrence of these
conditions in the U.S. or a deeper recession in Japan could result in a
reduction in our revenues. In addition, the economic condition of each local
market where we operate may be dependent on one or more industries. Our ability
to vary our portfolio promptly in response to economic or other conditions is
limited. Certain significant expenditures, such as debt service costs, real
estate taxes, and operating and maintenance costs are generally not reduced when
market conditions are poor. These factors would impede us from responding
quickly to changes in the performance of our investments and could adversely
impact our business, financial condition and results of operations. An economic
recession could lead to:
o a general decline in rents due to defaulting tenants or less favorable
terms for renewed or new leases;
o fewer purchases and sales of properties by clients, resulting in a
decrease in property management fees, brokerage commissions and
auction revenues;
o a decline in actual and projected sale prices of our properties
meaning lower returns on the properties in which we have invested;
o higher interest rates, higher loan costs, less desirable loan terms
and a reduction in the availability of mortgage loans and mezzanine
financing which could limit our ability to acquire additional real
estate assets; and
o a decrease in the availability of lines of credit and other sources of
capital used to purchase real estate investments and distressed notes.
Our Real Estate Investments Involve Risk Of Losses And Fluctuations In Operating
Results
We participate as a principal in real estate investments, and the timing of
our purchases and sales of those investments could result in significant
fluctuations in our net operating results and cash flow. We may experience one
or more quarters without acquiring or disposing of real estate, which could have
a material adverse effect on our business, financial condition and results of
operations.
There is the inherent possibility in all of our real estate investments
that we will lose all or part of our investment. Moreover, in our joint ventures
that invest in real estate, we may not be able to unilaterally decide the timing
of the disposition of an investment, and as a result, may not control when and
whether any gain will be realized or loss avoided. Our investments can also be
diminished by:
o civil unrest, acts of war and acts of God, including earthquakes,
hurricanes and other natural disasters (which may result in uninsured
or under insured losses);
o the impact of present or future legislation here in the U.S. or in
Japan (including environmental regulation, changes in laws concerning
foreign ownership of property, changes in real estate tax rates,
changes in zoning laws and laws requiring upgrades for disabled
persons) and the cost of compliance with these types of legislation;
and
o liabilities relating to claims to the extent insurance is not
available or is inadequate.
Part of our investment strategy is to locate and acquire real estate assets
that we believe are undervalued and to improve them to increase their resale
value. We face risks arising from the acquisition of properties not yet fully
developed or in need of substantial renovation or redevelopment, particularly
the risk that we overestimate the value of the property and the risk that the
cost or time to complete the renovation or redevelopment will exceed the
budgeted amount. Such delays or cost overruns may arise from:
o shortages of materials or skilled labor;
o a change in the scope of the original project;
o the difficulty in obtaining necessary zoning, land-use, environmental,
building, occupancy and other governmental permits and authorizations;
o the discovery of structural or other latent defects in the property
once construction has commenced; and
o delays in obtaining tenants.
Any failure to complete a redevelopment project in a timely manner and
within budget or to sell or lease the project after completion could have a
material adverse effect upon our business, results of operation and financial
condition.
We also have made and expect to continue to make or acquire mezzanine
loans, which are loans that are secured by real property, but are subject to the
interests of lenders who are senior to us. These mezzanine loans are considered
to involve a high degree of risk compared to other types of loans secured by
real property. This is due to a variety of factors, including that a foreclosure
by the holder of the senior loan could result in our mezzanine loan becoming
uncollectible. Accordingly, we may not recover the full amount, or any, of our
investment in mezzanine loans. In addition, mezzanine loans may have higher loan
to value ratios than conventional term loans.
We Will Be Subject To New Risks Resulting From Increased Japanese Operations
One of our strategies for the future is to increase our operations and
investments in Asia, particularly, in Japan. In furtherance of this strategy, we
expect to commit additional resources to expand our sales and marketing
activities in Japan and expand our service offerings and products in selected
markets throughout Asia. If we are successful in implementing this strategy, the
increased scope of our international operations may lead to more volatile
financial results and difficulties in managing our businesses. This volatility
and difficulty could be caused by, among other things, the following:
o currency fluctuations, restrictions and problems relating to the
repatriation of profits;
o our relative inexperience in investing in Japanese real estate and
loan pools;
o difficulties and costs of staffing and managing international
operations;
o the burden of complying with multiple and potentially conflicting
laws;
o laws restricting foreign companies from conducting business and
unexpected changes in regulatory requirements;
o the impact of different business cycles and economic instability;
o political instability and civil unrest;
o greater difficulty in perfecting our security interests, collecting
accounts receivable, foreclosing on security and protecting our
interests as creditors in bankruptcies in certain geographic regions;
o potentially adverse tax consequences;
o share ownership restrictions on foreign operations;
o Japanese property and income taxes, tax withholdings and tariffs; and
o geographic, time zone, language and cultural differences between
personnel in different areas of the world.
During 1997 and 1998, Japan and other parts of Asia were impacted by
financial turmoil which was initially reflected in rapidly falling exchange
rates relative to the U.S. Dollar. This led to falling stock prices and asset
values in Asia and reduced economic growth prospects in Asia. Several property
markets in Asia were affected by real estate developments that resulted in an
oversupply of completed or partially completed space. Property prices fell along
with prices of other investments and asset values.
These events reduced Asian economic growth in 1998 and, as economic growth
is generally a significant factor affecting property markets, demand for
property in Asia is generally weaker than in prior years. Also important to a
recovery in Asian property markets will be the adjustment to the current
significant oversupply of space in many markets which is likely to take time to
correct. The short-term outlook for real estate in Asia includes depressed rents
and capital values. The length and severity of the downturn is likely to vary in
different markets within the region. Our ability to realize profits from
acquisitions of distressed notes and the subsequent sale of any real estate
securing those notes may be materially adversely affected by a prolonged
depression in the value of real estate in the region. Conversely, a strong Asian
economy could reduce the availability of undervalued real estate and distressed
note pools in Asia. This could adversely effect our operations in Japan. We
cannot be sure that we will be successful with our Asian investments.
Our Revenues And Earnings May Be Affected By Foreign Currency Fluctuations
Our revenues from non-U.S. operations have been primarily denominated in
the local currency where the associated revenues were earned. Thus, we may
experience significant fluctuations in revenues and earnings because of
corresponding fluctuations in foreign currency exchange rates. To date, our
foreign currency exposure has been limited to the Japanese Yen. As we increase
our foreign operations, fluctuations in the value of the U.S. Dollar relative to
the other currencies in which we may generate earnings could materially
adversely affect our business, operating results and financial condition.
Fluctuations in currencies relative to the U.S. Dollar may adversely impact
period-to-period comparisons of our reported results of operations. Due to the
constantly changing currency exposures to which we will be subject and the
volatility of currency exchange rates, there can be no assurance that we will
not experience currency losses in the future, nor can we predict the effect of
exchange rate fluctuations upon future operating results. Our management may
decide to use currency hedging instruments including foreign currency forward
contracts, purchased currency options where applicable and borrowings in foreign
currency. Economic risks associated with these hedging instruments include
unexpected fluctuations in inflation rates impacting cash flow relative to
paying down debt, and unexpected changes in the underlying net asset position.
There can be no assurance that any hedging will be effective.
Our Joint Venture Activities Involve Unique Risks
We have utilized joint ventures for large commercial investments and real
estate developments. We plan to continue to acquire interests in additional
limited and general partnerships, joint ventures and other enterprises
(collectively, "Joint Ventures") formed to own or develop real property or
interests in real property or note pools. It is our strategy in Japan to invest
primarily through Joint Ventures. We have acquired and may acquire minority
interests in Joint Ventures and we may also acquire interests as a passive
investor without rights to actively participate in management of the Joint
Ventures. Investments in Joint Ventures involve additional risks, including the
possibility that the other participants may become bankrupt or have economic or
other business interests or goals which are inconsistent with our own, that we
will not have the right or power to direct the management and policies of the
Joint Ventures and that other participants may take action contrary to our
instructions or requests and against our policies and objectives. Should a
participant in a material Joint Venture act contrary to our interest, it could
have a material adverse effect upon our business, results of operations and
financial condition. Moreover, we cannot be certain that we will continue these
investments, or that we can identify suitable Joint Venture partners and form
new Joint Ventures in the future.
We May Incur Losses On Our Note Investments
We purchase notes that are unsecured or secured by real or personal
property. These notes are generally non-performing or sub-performing, and often
are in default at the time of purchase. In general, the distressed notes we
acquire are highly speculative investments and have a greater than normal risk
of future defaults and delinquencies as compared to newly originated loans.
Returns on loan investments depend on the borrower's ability to make required
payments or, in the event of default, our security interests, if any, and our
ability to foreclose and liquidate whatever property may be securing the note.
We cannot be sure that we will be able to collect on a defaulted loan or
foreclose on security successfully or in a timely fashion. There may also be
instances when we are able to acquire title to an underlying property and sell
it, but not make a profit on our investment.
Our Operating Results May Vary From Quarter To Quarter
We have experienced a fluctuation in our financial performance from quarter
to quarter due in part to the significance of revenues from the sales of our
real estate to our overall performance. The timing of purchases and sales of our
real estate investments has varied, and will continue to vary, widely from
quarter to quarter, due to variability in market opportunities, changes in
interest rates, and the overall demand for residential and commercial real
estate, among other things. While these factors have contributed to our
experiencing increased operating income and earnings in the fourth quarter in
past years, there can be no assurance that we will continue to perform better in
the fourth quarter.
In addition, the timing and magnitude of brokerage commissions paid to us
may vary widely from quarter to quarter depending upon overall activity in the
general real estate market and the nature of our brokerage assignments, among
other things.
The Real Estate Services And Investment Businesses Are Highly Competitive
Real estate services and investment businesses are highly competitive. Our
principal competitors include both large multinational companies and national
and regional firms, such as Jones Lang LaSalle, Inc., Trammell Crow Company, CB
Richard Ellis Services, Inc. and Insignia Financial Group. Most of these
competitors have greater financial resources and a broader global presence than
Kennedy-Wilson. We compete with these companies and others in the U.S. and to a
limited extent, in Japan:
o selling commercial and residential properties on behalf of customers
through brokerage and auction services;
o leasing and property management, including construction and
engineering services;
o purchasing commercial and residential properties, as well as
undeveloped land for our own account; and
o acquiring secured and unsecured distressed loans.
Our property management operations must compete with a growing number of
national firms seeking to expand market share. There can be no assurance that we
will be able to continue to compete effectively, maintain current fee levels or
arrangements, continue to purchase investment property profitably or not
encounter increased competition.
We May Lose Property Management Agreements Or Client Relationships
We are highly dependent on long-term client relationships and on revenues
received for services under various property management and leasing agreements
with third party owners of properties. A considerable amount of our revenues are
derived from fees related to these agreements. A significant portion of our
revenues earned for the management and leasing of properties relates to
properties owned or asset managed by Heitman Capital Management Corporation.
Prior to our acquisition of Heitman Properties, Ltd. in July 1998, now known as
Kennedy-Wilson Properties Ltd., Heitman Properties, Ltd. and Heitman Capital
Management Corporation were owned by the same company.
Heitman Capital Management Corporation has sold certain of the properties
that we, and our predecessor, Heitman Properties, Ltd., managed for Heitman
Capital. We expect Heitman Capital to sell more of its properties in the future.
Accordingly, the number of properties that we manage for Heitman Capital will
probably decrease. Further, during the years prior to our acquisition of Heitman
Properties, Heitman Properties experienced a decline in the total square footage
of property under management, property management fees and leasing commissions.
You should review the Heitman Properties' consolidated balance sheets and
statement of operations contained in our prospectus dated May 12, 1999 for more
information about Heitman Properties' financial condition and results of
operations prior to our acquisition of that company.
The majority of our property management agreements are cancelable prior to
their expiration by the client for any reason on as little as 30 to 60 days'
notice. These contracts also may not be renewed when their respective terms
expire. We believe many of our clients will continue to use our services for
their current holdings and will engage us for newly acquired properties. If,
however, we fail to maintain existing relationships, fail to develop and
maintain new client relationships or otherwise lose a substantial number of
management agreements, we could experience a material adverse change in our
business, financial condition and results of operations.
Our property management fees are generally structured as a percentage of
the revenues generated by the properties that we manage. Similarly, our leasing
commissions typically are based on the value of the lease revenues commitments.
As a result, our revenues are adversely affected by decreases in the performance
of the properties we manage and declines in rental value. Property performance
will depend upon our ability to attract and retain creditworthy tenants, our
ability to control operating expenses (some of which are beyond our control),
financial conditions generally and in the specific areas where properties are
located and the condition of the real estate market generally.
The Growth Of Our Business Depends On Our Ability To Renew Leases Or Secure New
Tenants
A significant portion of our property management business involves
facilitating the leasing of commercial space. In certain areas of operation,
there may be inadequate commercial space to meet demand and there is a potential
for a decline in the number of our overall lease and brokerage transactions. In
areas where the supply of commercial space exceeds demand, we may not be able to
renew leases or obtain new tenants for our owned and managed rental properties
as leases expire. Moreover, the terms of new leases and renewals (including
renovation costs or costs of concessions to tenants) may be less favorable than
current leases. Our revenues may be adversely affected by the failure to
promptly find tenants for substantial amounts of vacant space, if rental rates
on new or renewal leases are significantly lower than expected, or if reserves
for costs of re-leasing prove inadequate. We cannot be sure that we can continue
to lease properties for our clients and for our own account in a profitable
manner.
Our ability to lease properties also depends on:
o the attractiveness of the properties to tenants;
o competition from other available space;
o our ability to provide for adequate maintenance and insurance and to
pay increased operating expenses which may not be passed through to
tenants;
o the availability of capital to periodically renovate, repair and
maintain the properties, as well as for other operating expenses; and
o the existence of potential tenants desiring to lease the properties.
The Growth Of Our Business Depends On Our Ability To Integrate Acquisitions Into
Our Existing Operations
Acquisitions and expansion have been, and will continue to be, a
significant component of our growth strategy for the future. In July, 1998, we
acquired Heitman Properties, Ltd., a nationwide property management and leasing
operation. In the first two quarters of 1999, we acquired Coastal Commercial
Real Estate Services, Inc. and Jones Lang Wootton California, Inc., two
California-based property management firms. While maintaining our existing
business lines, we intend to continue to pursue a sustained growth strategy by
increasing revenues from existing clients, expanding the breadth of our service
offerings, seeking selective co-investment opportunities and pursuing strategic
acquisitions.
Our ability to manage our growth will require us to effectively integrate
new acquisitions into our existing operations while managing development of
principal properties. We expect that significant growth in several business
lines occurring simultaneously will place substantial demands on our managerial,
administrative, operational and financial resources. Our future success and
profitability will depend, in part, on our ability to attract, retain and
motivate qualified managers and other personnel, and successfully implement
enhancements to management and operating systems. In addition, expansion will
likely require increased financing from third party lenders. We cannot be sure
that we will be able to successfully manage all factors necessary for a
successful expansion of our business. Moreover, our strategy of growth depends
on the existence of and our ability to identify attractive and synergistic
acquisition targets. The unavailability of suitable acquisition targets, or our
inability to find them, may result in a decline in our business, financial
condition and results of operations.
We Depend On Key Personnel Whose Continued Service Is Not Guaranteed
Our continued success is dependent to a significant degree upon the efforts
of certain senior executives. William McMorrow, our Chairman and Chief Executive
Officer; Freeman Lyle, our Executive Vice President, Chief Financial Officer and
Secretary; Lewis Halpert, our Executive Managing Director and the President of
our Residential and Notes Groups; and Barry Schlesinger, the Chairman and Chief
Executive Officer of Kennedy-Wilson Properties, Ltd., have each been essential
to our business. In addition, Richard Mandel, the Managing Director and
President of our Commercial Brokerage Division, has been key to real estate
brokerage and investment activities in markets outside Los Angeles, including in
Japan. Ryosuke Homma, President and Representative Director of our Japanese
subsidiary, Kennedy-Wilson Japan, has been vital to our business in Japan. These
executives have employment contracts with us that are renewable annually. The
departure of all or any of these executives for whatever reason or the inability
of all or any of them to continue to serve in their present capacities or our
inability to attract and retain qualified personnel could have a material
adverse effect upon our business, financial condition and results of operations.
Each of these individuals has built a highly regarded reputation in the
real estate industry. Each attracts business opportunities and assists us both
in negotiations with lenders and potential joint venture partners and in the
representation of large and institutional clients. If we lost their services,
our relationships with lenders, joint venturers and clients would diminish
significantly.
In addition, our other officers have strong regional reputations and they
aid us in attracting and identifying opportunities and negotiating for us and on
behalf of our clients. In particular, we view the establishment and maintenance
of strong relationships through these individuals as critical to our success in
the Japanese market.
As we continue to grow, our success will be largely dependent upon our
ability to attract and retain qualified personnel in all areas of business. We
cannot be sure that we will be able to continue to hire and retain a sufficient
number of qualified personnel to support or keep pace with our planned growth.
Ownership Of Our Common Stock Is Concentrated In The Hands Of Directors And
Officers
Our directors and executive officers own a significant portion of our
issued and outstanding shares of common stock. Accordingly, our directors and
officers will have the power to influence substantially the election of all of
the members of our Board of Directors and the outcome of most corporate actions
requiring stockholder approval. Such voting control may prevent the approval of
certain types of transactions, including a proposal by third parties to acquire
us.
We Are Highly Dependent Upon California Operations
We have a high concentration of our business activities in California.
Consequently, our business, results of operations and financial condition are
dependent upon general trends in the California economy and its real estate
market. Although it is currently in a period of recovery, the California economy
experienced a recession in the early 1990s that was accompanied by a sustained
decline in the value of California real estate. Real estate market declines may
become so severe that the market value of the properties securing loans may be
significantly less than the outstanding balances of those loans, and real estate
market declines may negatively affect our ability to sell our property at a
profit. In addition, California historically has been vulnerable to certain
natural disaster risks, such as earthquakes, floods, wild fires and
erosion-caused mudslides. The existence of adverse economic conditions or the
occurrence of natural disasters in California could have a material adverse
effect on our business, financial condition and results of operations.
Our Use Of Debt To Finance Acquisitions Could Adversely Impact Our Results
We have historically financed new acquisitions and property purchases with
cash derived from secured and unsecured loans and lines of credit. For instance,
we typically purchase real property with loans secured by a mortgage on the
property acquired. We have also pledged shares of our property management
subsidiary as collateral for the loan we used to finance the acquisition of that
subsidiary. We anticipate continuing this trend. We do not have a policy
limiting the amount of debt that we may incur. Accordingly, our management and
Board of Directors have discretion to increase the amount of our outstanding
debt at any time. We could become more highly leveraged, resulting in an
increase in debt service costs that could adversely affect our results of
operations and increase the risk of default on our debt.
Much of our debt bears interest at variable rates. As a result, we are
subject to fluctuating interest rates that may impact, adversely or otherwise,
our results of operations and cash flows.
We may be subject to risks normally associated with debt financing,
including the risk that our cash flow will be insufficient to make required
payments of principal and interest, and the risk that existing indebtedness on
our properties will not be able to be refinanced or that the terms of available
financing will not be as favorable as the terms of existing indebtedness. If we
were unable to satisfy the obligations owed to any lender with a lien on one of
our properties, the lender could foreclose on the real property or other assets
securing the loan and we would lose that property or asset. The loss of any
property or asset to foreclosure could have a material adverse effect on our
business, financial condition and results of operations.
Our Operations May Be Adversely Affected By Year 2000 Issues
Many computer systems and software products are coded to accept only two
digit entries in the date code field. As a result, those computer programs and
systems may recognize a date using "00" as the year 1900 rather than the year
2000. Significant uncertainty exists concerning the potential effects associated
with these year 2000 issues.
We rely upon our computer systems to conduct operations. Without the use of
our computer systems, we would have difficulty processing transactions, paying
invoices or engaging in similar normal business activities. We have implemented
plans to review, test, remediate and upgrade or replace our existing computer
systems to ensure that they are year 2000 compliant. If, however, we are unable
to attract and retain qualified personnel who are able to detect and remediate
any year 2000 problems, or to do so in a timely manner, or if the year 2000
problems are more costly than anticipated to remediate, there could be a
material adverse effect on our business, financial condition and results of
operations.
There is also "embedded technology" in our core property systems. Embedded
technology consists of micro-processing chips which are embedded in the workings
of mechanical devices, for example, elevators, fire safety systems, air
conditioning and heating, and keyless entry systems in the buildings we manage.
If non-compliant embedded technology fails, it may cause our core property
systems to fail. As a result, the building's tenants may be able to cancel
leases, the owner may be subject to fines or penalties under terms of the leases
and owners may be unable to compensate us for our services. These events could
have a material adverse effect on our business, results of operations and
financial condition. Additionally, although we are not aware of any threatened
claims related to year 2000 issues, we may be subject to litigation from year
2000 claims. Adverse outcomes of any year 2000 litigation could have a material
adverse effect on our business, financial condition and results of operations.
Furthermore, if our suppliers have not successfully become year 2000
compliant, they may not be able to provide the services or deliver the products
to us as currently provided and delivered. If our suppliers fail to become year
2000 compliant, there could be a material adverse effect on our business,
operating results and financial condition. We would then have to try to contract
with other suppliers with sufficient capacity to accommodate our needs. There
can be no assurance that we would be able to contract with any new suppliers on
acceptable terms, if at all.
We May Have Liabilities In Connection With Real Estate Brokerage And Property
Management Activities
As a licensed real estate broker, we, and our licensed employees, are
subject to certain statutory due diligence, disclosure and standard-of-care
obligations. Failure to fulfill these obligations could subject us or our
employees to litigation from parties who purchased, sold or leased properties
they brokered or managed. In addition, we may become subject to claims by
participants in real estate sales claiming that we did not fulfill our statutory
obligations as a broker.
In our property management capacity, we hire and supervise third party
contractors to provide construction and engineering services for our properties.
While our role is limited to that of a supervisor, we cannot be sure that we
will not be subjected to claims for construction defects or other similar
actions. Adverse outcomes of property management litigation could have a
material adverse effect on our business, financial condition and results of
operations.
Our Properties May Subject Us To Potential Environmental Liability
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real estate may be liable for the clean
up of hazardous or toxic substances and may be liable to a governmental entity
or to third parties for property damage and for investigation and clean-up costs
incurred by governmental entities or third parties in connection with the
contamination. Such laws typically impose liability without regard to whether
the owner or operator knew of, or was responsible for, the presence of the
hazardous or toxic substances, even when the contaminants were associated with
previous owners or operators. The costs of investigation, remediation or removal
of hazardous or toxic substances may be substantial, and the presence of those
substances, or the failure to properly remediate those substances, may adversely
affect the owner's or operator's ability to sell or rent the affected property
or to borrow using the property as collateral. The presence of contamination at
a property can impair the value of the property even if the contamination is
migrating onto the property from an adjoining property. Additionally, the owner
of a site may be subject to claims by parties who have no relation to the
property based on damages and costs resulting from environmental contamination
emanating from the site.
In connection with the direct or indirect ownership, operation, management
and development of real properties, we may be considered an owner or operator of
those properties or as having arranged for the disposal or treatment of
hazardous or toxic substances. Therefore, we may be potentially liable for
removal or remediation costs.
Certain federal, state and local laws, regulations and ordinances also
govern the removal, encapsulation or disturbance of asbestos-containing
materials during construction, remodeling, renovation or demolition of a
building. Such laws may impose liability for release of asbestos-containing
materials, and third parties may seek recovery from owners or operators of real
properties for personal injuries associated with asbestos-containing materials.
We may be potentially liable for those costs for properties that we own. In the
past, we have been required to remove asbestos from certain buildings that we
own. There can be no assurance that in the future we will not be required to
remove asbestos from our buildings or incur other substantial costs of
environmental remediation.
Before consummating the acquisition of a particular piece of property, it
is our policy to retain independent environmental consultants to conduct a
thorough environmental review of the property to check for contaminants,
including performing a Phase I environmental review. These assessments have
included, among other things, a visual inspection of the properties and the
surrounding area and a review of relevant federal, state and historical
documents. To date, the assessments we have had done have not revealed any
environmental liability that we believe would have a material adverse effect on
our business, assets or results of operations as a whole, nor are we aware of
any material environmental liability of the types described. Nevertheless, it is
possible that the assessments we commissioned do not reveal all environmental
liabilities or that there are material environmental liabilities of which we are
currently unaware. There can be no assurance that future laws, ordinances or
regulations will not impose any material environmental liability or that the
current environmental condition of our properties will not be affected by
tenants, by the condition of land or operations in the vicinity of those
properties, or by third parties unrelated to us. We believe that our properties
are in substantial compliance in all material respects with all federal, state
and local laws, ordinances and regulations regarding hazardous or toxic
substances. We have not been notified by any governmental authority, and are not
otherwise aware of any material noncompliance, liability or claim relating to
hazardous or toxic substances in connection with any of our properties. There
can be no assurance that federal, state and local agencies or private plaintiffs
will not bring these types of actions in the future, or that those actions, if
adversely resolved would not have a material adverse effect on our business,
financial condition and results of operations.
We May Incur Unanticipated Expenses Relating To Laws Benefiting Disabled Persons
The Americans with Disabilities Act (the "ADA") generally requires that
public accommodations such as hotels and office buildings be accessible to
disabled people. We believe that our properties are in substantial compliance
with the ADA and that we will not be required to make substantial capital
expenditures to address the requirements of the ADA. If, however, our properties
were not in compliance with the ADA, the U.S. federal government could fine us
or private litigants could be awarded money damages against us. If we are
required to make substantial alterations to one or more of our properties, our
results of operations could be materially adversely affected.
We Have Insurance Coverage Limitations
We carry comprehensive general liability coverage and umbrella coverage on
all of our properties of which we own more than 50% with limits of liability
which we deem adequate and appropriate under the circumstances (subject to
deductibles) to insure against liability claims and provide for the cost of
legal defense. There are, however, certain types of extraordinary losses that
may be either uninsurable, or that are not generally insured because it is not
economically feasible to insure against those losses. Should any uninsured loss
occur, we could lose our investment in, and anticipated revenues from, a
property, which loss or losses could have a material adverse effect on our
operations. Currently, we also insure some of our properties for loss caused by
earthquake in levels we deem appropriate and, where we believe necessary, for
loss caused by flood. We cannot be sure that the occurrence of an earthquake,
flood or other natural disaster will not have a materially adverse effect on our
business, financial condition and results of operations.
We Are Subject To Certain Anti-Takeover Effects Under Delaware Law
Because we are a Delaware corporation, management and board of directors
could utilize certain provisions of the Delaware code to make it more difficult
for a third party to acquire control of our company, even if the change of
control would be beneficial to our stockholders. These provisions include a
classified, staggered Board of Directors, the inability of stockholders to take
action by written consent without a meeting, the inability of the stockholders
to call for a special meeting of stockholders, the inability to remove directors
without cause and a requirement that certain business combinations be approved
by the holders of 66 2/3% of the common stock. This could discourage potential
takeover attempts which may adversely affect the market price of our common
stock.
Our Stock Price May Be Volatile
Since the beginning of 1997 the market price of our common stock has
fluctuated from a low of $1.77 to a high of $13.37 and may be subject to
fluctuations in the future. Factors contributing to these fluctuations may
include:
o the announcement of new acquisitions or renovation projects by use or
our competitors;
o quarterly variations in our operating results or the operating results
of our competitors; and
o changes in earnings (losses) or other estimates by analysts or
reported results that vary from those estimates.
Furthermore, stock markets have experienced significant price and volume
fluctuations which could affect the market price of our common stock which may
be unrelated to our operating performance. Investors may be unable to resell
their shares of our common stock at or above the offering price. in the past,
companies that have experienced volatility in the market price of their stock
have been the object of securities class action litigation. If anyone brings a
lawsuit of this type against us, it could result in substantial costs and a
diversion of management's attention and our resources.
THE COMPANY
We are an integrated, international real estate services and investment
company. Through our seven principal U.S. offices and our office in Tokyo, we
deliver a range of professional real estate services to a well-established
institutional client base. These services include property management and
leasing services and traditional brokerage and auction marketing services. In
addition, we invest for our own account in, and manage on behalf of other
investors, real estate and note pool investments.
SELLING SECURITY HOLDERS
On April 26, 1999, we issued and sold 6% subordinated convertible
debentures in the original aggregate principal amount of $7,500,000 to Cahill,
Warnock Strategic Partners Fund, L.P. and Strategic Associates, L.P. pursuant to
a Convertible Debenture Purchase Agreement dated as of April 15, 1999. The
debentures mature on April 15, 2006. The holders of the debentures may convert
their debentures at any time prior to maturity into common stock at a conversion
price of $10.00 per share, subject to adjustment after the date of this
prospectus as provided in the Purchase Agreement. If the selling security
holders choose to exercise their conversion rights in full with respect to all
the debentures, they may acquire, and resell with this prospectus, up to 750,000
shares of common stock. As used in this prospectus, the term "selling security
holders" includes assignees, transferees and distributees of selling security
holders permitted by the Registration Rights Agreement referred to in the
section titled "PLAN OF DISTRIBUTION."
Because the debentures may be transferred by the current holders, we are
unable to provide information with respect to the identity of the selling
security holders or their relationship with us at this time. In addition, since
a selling security holder may sell all or part of the common stock offered with
this prospectus, we cannot estimate the number or percentage of common stock
each such selling security holder will hold upon completion of any offering made
hereby. We will include such information in supplements to this prospectus.
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time to
time by the selling security holders. The selling security holders may sell the
shares of common stock in one or more transactions in the over-the-counter
market, on The Nasdaq National Market or other exchange on which the shares may
be listed, including block trades or ordinary broker's transactions, or in
privately negotiated transactions, through the writing of options on the shares
or a combination of such methods of sale, at fixed prices that may be changed,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Alternatively, the shares may
be offered to or through underwriters, brokers or dealers who may act solely as
agents, or who may acquire shares as principals. The distribution of the shares
through such persons may be effected in one or more transactions that may take
place in the over-the-counter market, on The Nasdaq National Market or other
exchange on which the shares may be listed, including block trades or ordinary
broker's transactions, or through privately negotiated transactions or sales to
one or more brokers or dealers for resale of such securities as principals, or
otherwise at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The selling security
holders may pay usual and customary or specifically negotiated brokerage fees or
commissions in connection with such sales. In connection with such sales, the
selling security holders and any participating brokers or dealers may be deemed
"underwriters" as such term is defined in the Securities Act of 1933 and the
commissions paid or discounts allowed to any of such underwriters, brokers,
dealers or agents, in addition to any profits received on resale of the shares
if any such underwriters, brokers, dealers or agents should purchase any shares
as a principal, may be deemed to be underwriting discounts or commissions under
the Securities Act of 1933.
In order to comply with the securities laws of certain states, if
applicable, the shares may only be sold in such jurisdictions through registered
or licensed brokers or dealers. In addition, in certain states the shares may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The selling security holders may be subject to the anti-manipulation rules
of Regulation M under the Securities Exchange Act of 1934 which apply to sales
of shares in the market and to the activities of the selling security holders
and their affiliates. We will make copies of this prospectus, with any
supplements or amendments, available to the selling security holders for
delivery to purchasers at or prior to the time of any sale of the shares offered
herewith. The selling security holders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against
liabilities resulting therefrom. Among these liabilities for which
indemnification may be provided are those arising under the Securities Act of
1933.
In connection with distributions of the shares or otherwise, the selling
security holders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with a hedging transaction,
broker-dealers or other financial institutions may engage in short sales of the
shares in the course of hedging the positions they assume with selling security
holders. The selling security holders may also sell the shares short and deliver
the shares offered hereby to close out such short positions. The selling
security holders may also enter into option or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealer or other financial institution of shares offered hereby,
which shares such broker-dealer or other financial institution may resell
pursuant to this prospectus, as supplemented or amended to reflect such
transaction. The selling security holders may also loan or pledge shares to a
broker-dealer or other financial institution, and, upon a default, such
broker-dealer or other financial institution may effect sales of the pledged
shares pursuant to this prospectus, as supplemented or amended to reflect such
transaction. In addition, any shares that qualify for sale pursuant to Rule 144
may, at the option of the holder thereof, be sold under Rule 144 rather than
pursuant to this prospectus.
Pursuant to a Registration Rights Agreement dated as of April 15, 1999
among us, Cahill Warnock Strategic Partners Fund, L.P. and Strategic Associates,
L.P., we have agreed to indemnify the selling security holders against certain
liabilities, including certain liabilities under the Securities Act of 1933. We
have also agreed to pay the expenses of registering all of the shares of common
stock offered hereby under the Securities Act of 1933, including all
registration, filing and exchange listing fees, blue sky expenses, fees of
counsel and accountants, fees of the NASD, transfer taxes, if any, transfer
agent fees and underwriters' fees customarily paid by issuers (excluding
underwriting discounts and commissions). The Registration Rights Agreement
requires us to maintain the effectiveness of the registration statement, as
amended or supplemented from time to time, relating to this prospectus until the
earlier of:
o The date on which all of the shares offered by this prospectus are
resold by the selling security holders; and
o April 26, 2001.
We intend to de-register the shares covered by this prospectus which are
not sold by the selling security holders within the above time frame.
USE OF PROCEEDS
The selling security holders will receive all of the proceeds from the sale
of the common stock offered with this prospectus. We will not receive any of the
proceeds from the sale of common stock with this prospectus.
LEGAL MATTERS
The validity of the common stock offered with this prospectus will be
passed upon for the Company by White & Case LLP, Los Angeles, California.
EXPERTS
The consolidated financial statements of Kennedy-Wilson, Inc. and related
financial statement schedules incorporated in this prospectus by reference to
the Company's Annual Report on Form 10-K for the year ended December 31, 1998
and the Company's filing on Form 8-K/A dated September 30, 1998, which includes
the financial statements of Heitman Properties Ltd., also incorporated by
reference, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports which are incorporated herein by this reference, and
have been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in auditing and accounting.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
AND INCORPORATION BY REFERENCE
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy,
upon payment of a fee set by the SEC, any document that we file with the SEC at
any of its public reference rooms in Washington, D.C. (450 Fifth Street, N.W.
Washington, D.C. 20549), New York, New York (Seven World Trade Center,13th
Floor, Suite 1300, New York, New York 10048) or Chicago, Illinois (Citicorp
Center, 500 West Madison Street, 14th Floor, Suite 1400, Chicago, Illinois
60661). You may call the SEC at 1-800-432-0330 for more information on the
public reference rooms. Our filings are also available to the public on the
Internet through the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" into this prospectus
information from the documents filed with the SEC. This means that we can
disclose important information to you by referring you to those documents. The
information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information in this prospectus, and
information that we file later with the SEC which automatically updates and/or
supersedes such information. This prospectus incorporates by reference the
documents set forth below that we have previously filed with the SEC. These
documents contain important information about our company, including information
concerning its financial performance.
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
o Our Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1999.
o Our Current Report on Form 8-K/A dated September 30, 1998.
o Our prospectus filed pursuant to Rule 424(b)(4) under the Securities
Act of 1933 dated May 12, 1999.
o The description of our common stock contained in our Registration
Statement on Form 8-A, filed July 17, 1992, which registers the shares
under Section 12(b) of the Securities Exchange Act of 1934, including
any subsequent amendment or any report filed for the purpose of
updating such description.
o Any additional documents that we file with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act between the
date of this prospectus and the earlier of the following dates:
o The date on which all of the shares offered by this prospectus
are resold by the selling security holders; and
o April 26, 2001.
This prospectus is part of a registration statement on Form S-3 which we
have filed with the SEC. As permitted by SEC rules, this prospectus does not
contain all of the information contained in the registration statement and
accompanying exhibits and schedules filed with the SEC. You may refer to the
registration statement, the exhibits and schedules for more information about us
and our shares. The registration statement, exhibits and schedules are also
available at the SEC's public reference rooms or through its web site on the
Internet. This prospectus is qualified in its entirety by such other
information.
You may obtain a copy of these filings at no cost upon oral or written request
to Kennedy-Wilson, Inc., 9601 Wilshire Boulevard, Beverly Hills, California
90210-5205, (310) 887-6400, Attention: Freeman A. Lyle.
<PAGE>
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus may constitute
"forward-looking statements" within the meaning of the federal securities laws.
Forward-looking statements are statements containing a projection of revenues,
income (loss), earnings (loss), capital expenditures, dividends, capital
structure or other financial terms or our plans and objectives for future
operations.
The forward-looking statements in this prospectus are based on our
management's beliefs, assumptions, and expectations of our future economic
performance, taking into account the information currently available to them.
These statements are not statements of historical fact. Forward-looking
statements involve risks and uncertainties that may cause our actual results,
performance or financial condition to be materially different from the
expectations of future results, performance or financial condition we express or
imply in any forward-looking statements. Some of the important factors that
could cause our actual results, performance or financial condition to differ
materially from our expectations are:
o general volatility of the capital markets and the market price of our
common shares;
o changes in the real estate market, interest rates or the general
economy of the markets in which we operate;
o our ability to identify and complete acquisitions and successfully
integrate businesses we acquire;
o our ability to employ and retain qualified employees;
o our ability, and the ability of our significant vendors, suppliers and
customers, to achieve Year 2000 compliance;
o changes in government regulations that are applicable to our regulated
brokerage and property management businesses;
o changes in the demand for our services;
o degree and nature of our competition; and
o the other factors referenced in this prospectus, including, without
limitation, under the caption "Risk Factors".
When used in our documents or oral presentations, the words "plan,"
"believe," "anticipate," "estimate," "expect," "objective," "projection,"
"forecast," "goal," or similar words are intended to identify forward-looking
statements. We qualify any and all of our forward-looking statements entirely by
these cautionary factors.
<PAGE>
==================================== ====================================
-------------------------
o We have not authorized anyone
to give you any information
that differs from the
information in this 750,000 COMMON SHARES
prospectus. If you receive
any different information,
you should not rely on it.
o The delivery of this
prospectus shall not, under
any circumstances, create an
implication that KENNEDY-WILSON,
INC. is operating under the same
conditions that it was
operating under when this
prospectus was written. Do KENNEDY-WILSON
not assume that the
information contained in this INCORPORATED
prospectus is correct at any
time past the date indicated.
o This prospectus does not
constitute an offer to sell,
or the solicitation of an offer
to buy, any securities other
than the securities to which it
relates.
o This prospectus does not
constitute an offer to sell, ----------------------
or the solicitation of an PROSPECTUS
offer to buy, the securities ----------------------
to which it relates in any
circumstances in which such
offer or solicitation is
unlawful.
-------------------------
Table of Contents
Page
About This Prospectus......
The Company.....................
Risk Factors.................... DATED August __, 1999
Plan Of Distribution............
Selling Security Holders........
Use Of Proceeds.................
Legal Matters...................
Experts.........................
Where You Can Find More
Information
And Incorporation By Reference.
Cautionary Note About
Forward-Looking
Statements.....................
===================================== ====================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth those expenses to be incurred by
Kennedy-Wilson, Inc. (the "Registrant") in connection with the issuance and
distribution of the common stock being registered. All amounts shown except the
SEC filing fee are estimates.
Item Amount
---- ------
SEC filing fee............................... $ 1,779
Accountants' fees and expenses............... 4,000
Legal fees and expenses...................... 15,000
Miscellaneous expenses....................... 500
Total................................... $ 21,279
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article XII of the Registrant's Certificate of Incorporation provides that
the Registrant shall, to the fullest extent permitted by the Delaware General
Corporation Law (as amended from time to time, the "Delaware Law"), indemnify
each director and officer, present or former, of the Registrant whom it may
indemnify pursuant to the Delaware Law, including certain liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). Section 145 of the
Delaware Law authorizes a corporation to indemnify its directors and officers in
terms sufficiently broad to permit such indemnification (including reimbursement
of expenses incurred) under certain circumstances for liabilities under the
Securities Act.
Section 145 of the Delaware Law provides that in the case of any action
other than one by or in the right of the corporation, a corporation may
indemnify any person who was or is a party, or is threatened to be made a party
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation in such capacity on behalf of another corporation or
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interest of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
Section 145 of the Delaware Law further provides that in the case of an
action by or in the right of a corporation to procure a judgment in its favor, a
corporation may indemnify any person who was or is a party, or is threatened to
be made a party to any action or suit by reason of the fact that such person is
or was a director, officer, employee or agent of the corporation, or is was
serving at the request of the corporation in such capacity on behalf of another
corporation or enterprise, against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted under standards similar to those set forth in
the preceding paragraph, except that no indemnification may be made in respect
of any action or claim as to which such person shall have been adjudged to be
liable to the corporation, unless a court determines that such person is fairly
and reasonably entitled to indemnification.
In addition, Article XII of the Registrant's Certificate of Incorporation
provides that a director of the Registrant shall not be liable to the Registrant
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(iii) in respect of certain unlawful dividend payments or stock redemptions or
repurchases, and (iv) for any transaction from which the director derives an
improper personal benefit. The effect of the provision of the Registrant's
Certificate of Incorporation is to eliminate the rights of the Registrant and
its stockholders (through stockholders' derivative suits on behalf of the
Registrant) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in
clauses (i) through (iv) above. This provision does not limit or eliminate the
rights of the Registrant or any stockholder to seek nonmonetary relief such as
an injunction or rescission in the event of a breach of a director's duty of
care. Furthermore, Section 7.01 of Article VII of the Registrant's Bylaws
provides that the Registrant may indemnify, in addition to its directors and
officers, employees and agents against losses incurred by any such person by
reason of the fact that such person was acting in such capacity to the fullest
extent authorized by the Delaware Law.
The Registrant currently maintains directors' and officers' liability
insurance. The policy insures directors and officers for liabilities incurred in
connection with or on behalf of the Registrant, except for losses incurred on
account of certain specified liabilities, including losses from matters which
may be deemed uninsurable under the law pursuant to which the policy shall be
construed.
Prior to incorporating in Delaware in 1992, the predecessor company of the
Registrant operated as a California S corporation. At the time of the
termination of such predecessor company's S corporation status in 1992, the
Registrant agreed to indemnify its former shareholders for certain federal and
state tax liabilities incurred by them as a result of a final determination of
an adjustment to the tax returns of the predecessor company or former
shareholders for the 1992 tax year.
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement or
incorporated by reference into this Registration Statement by reference:
Exhibit Description
4.1 Description of the Registrant's common stock in Article V of the
Registrant's Certificate of Incorporation (Filed as Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ending December 31,
1998 and incorporated herein by this reference).
4.2 Description of rights of holders of the Registrant's common stock in
Article II of the Registrant's By-Laws (Filed as Exhibit 3.2 to the
Registrant's 1992 Registration Statement on Form S-1 (Registration No.
33-46978) and incorporated herein by this reference).
4.3 Form of common stock Certificate (Filed as Exhibit 4.1 to the Registrant's
1992 Registration Statement on Form S-1 (Registration No. 33-46978) and
incorporated herein by this reference).
5* Opinion of White & Case LLP regarding legality.
10.1 Convertible Debenture Purchase Agreement dated as of April 15, 1999 among
the Registrant, William McMorrow, Lewis Halpert, Cahill, Warnock Strategic
Partners Fund, L.P. and Strategic Associates, L.P. (Filed as Exhibit
10.31.1 to the Registrant's 1999 Registration Statement on Form S-1
(Registration No. 333-74391) and incorporated herein by this reference).
10.2 Registration Rights Agreement dated as of April 15, 1999 among the
Registrant, Cahill, Warnock Strategic Partners Fund, L.P. and Strategic
Associates, L.P. (Filed as Exhibit 10.31.2 to the Registrant's 1999
Registration Statement on Form S-1 (Registration No. 333-74391) and
incorporated herein by this reference).
10.3 Form of Convertible Subordinated Notes issued by the Registrant to Cahill,
Warnock Strategic Partners Fund, L.P. and Strategic Associates, L.P. on
April 26, 1999 (Filed as Exhibit 10.31.3 to the Registrant's 1999
Registration Statement on Form S-1 (Registration No. 333-74391) and
incorporated herein by this reference).
23.1* Consent of Deloitte & Touche, LLP, independent accountants.
23.2 Consent of White & Case LLP, counsel (included in Exhibit 5).
24 Power of Attorney (included on the signature page to this Registration
Statement).
- ----------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during the period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Securities Act shall have been deemed to be part of this
Registration Statement as of the time it was declared effective.
(6) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Beverly Hills, State of California on this 13th day
of August, 1999.
KENNEDY-WILSON, INC.
By: /s/ William J. McMorrow
--------------------------------
William J. McMorrow
Chairman of the Board of Directors and
Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints William J. McMorrow and Freeman A. Lyle,
and each or any of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
SEC, granting unto each said attorney-in-fact and agent full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or
either of them, or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof. This Power of Attorney may be executed in one
or more counterparts.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ William J. McMorrow
- ------------------------------------ Chairman of the Board of August 13, 1999
William J. McMorrow Directors and Chief Executive
Officer
(Principal Executive Officer)
/s/ Freeman A. Lyle
- ------------------------------------- Executive Vice President, Chief August 13, 1999
Freeman A. Lyle Financial Officer and Secretary
(Principal Financial
and Accounting Officer)
/s/ Lewis A. Halpert
- ------------------------------------- Executive Managing Director August 13, 1999
Lewis A. Halpert and Director
- ------------------------------------- Managing Director and Director August __, 1999
Richard A. Mandel
/s/ Barry S. Schlesinger
- ------------------------------------- Director and President of August 13, 1999
Barry S. Schlesinger Kennedy-Wilson Properties Ltd.
/s/ Donald B. Prell
- ------------------------------------- Director August 13, 1999
Donald B. Prell
- ------------------------------------- Director August __, 1999
Kent Y. Mouton
- ------------------------------------- Director August __, 1999
Thomas J. Barrack, Jr.
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
4.1 Description of the Registrant's common stock in Article V of the
Registrant's Certificate of Incorporation (Filed as Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ending December 31,
1998 and incorporated herein by this reference).
4.2 Description of rights of holders of the Registrant's common stock in
Article II of the Registrant's By-Laws (Filed as Exhibit 3.2 to the
Registrant's 1992 Registration Statement on Form S-1 (Registration No.
33-46978) and incorporated herein by this reference).
4.3 Form of common stock Certificate (Filed as Exhibit 4.1 to the Registrant's
1992 Registration Statement on Form S-1 (Registration No. 33-46978) and
incorporated herein by this reference).
5* Opinion of White & Case LLP regarding legality.
10.1 Convertible Debenture Purchase Agreement dated as of April 15, 1999 among
the Registrant, William McMorrow, Lewis Halpert, Cahill, Warnock Strategic
Partners Fund, L.P. and Strategic Associates, L.P. (Filed as Exhibit
10.31.1 to the Registrant's 1999 Registration Statement on Form S-1
(Registration No. 333-74391) and incorporated herein by this reference).
10.2 Registration Rights Agreement dated as of April 15, 1999 among the
Registrant, Cahill, Warnock Strategic Partners Fund, L.P. and Strategic
Associates, L.P. (Filed as Exhibit 10.31.2 to the Registrant's 1999
Registration Statement on Form S-1 (Registration No. 333-74391) and
incorporated herein by this reference).
10.3 Form of Convertible Subordinated Notes issued by the Registrant to Cahill,
Warnock Strategic Partners Fund, L.P. and Strategic Associates, L.P. on
April 26, 1999 (Filed as Exhibit 10.31.3 to the Registrant's 1999
Registration Statement on Form S-1 (Registration No. 333-74391) and
incorporated herein by this reference).
23.1* Consent of Deloitte & Touche, LLP, independent accountants.
23.2 Consent of White & Case LLP, counsel (included in Exhibit 5).
24 Power of Attorney (included on the signature page to this Registration
Statement).
- ----------------
* Filed herewith.
[LETTERHEAD OF WHITE & CASE LLP]
August 13, 1999
Kennedy-Wilson, Inc.
9601 Wilshire Boulevard
Suite 220
Beverly Hills, California 90210
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special counsel to Kennedy-Wilson, Inc., a Delaware
corporation (the "Company"), and are familiar with the proceedings and documents
relating to the proposed registration by the Company, through a Registration
Statement on Form S-3 (the "Registration Statement"), to be filed by the Company
with the Securities and Exchange Commission, of up to 750,000 Common shares,
$.01 par value, of the Company (the "Shares").
For the purposes of rendering this opinion, we have examined originals or
photostatic copies of:
(1) The Convertible Debenture Purchase Agreement dated as of April 15, 1999
(the "Purchase Agreement") among the Company, William McMorrow, Lewis Halpert,
Cahill, Warnock Strategic Partners Fund, L.P. and Strategic Associates, L.P.;
(2) Forms of the Convertible Subordinated Notes issued by the Company to
Cahill, Warnock Strategic Partners Fund, L.P. and Strategic Associates, L.P. on
April 26, 1999 (the "Debentures" and collectively with the Purchase Agreement,
the "Debenture Documents"); and
(3) Copies of such corporate records, agreements and other documents of the
Company as we have deemed relevant and necessary as a basis for the opinion
hereinafter set forth.
In connection with our examination of such documents, we have assumed the
genuineness of all signatures on, and the authenticity of, all documents
submitted to us as originals and the conformity to the original documents of all
documents submitted to us as copies. With respect to instruments executed by
natural persons, we have assumed the legal competency and authority of such
persons. As to facts material to the opinions expressed herein which were not
independently established or verified, we have relied upon oral or written
statements and representations of the Company. We express no opinion herein as
to any laws other than the General Corporation Law of the State of Delaware.
Based on the foregoing, in reliance thereon and subject to (i) compliance
with applicable state securities laws, (ii) receipt from the SEC of an order
declaring the Registration Statement effective and (iii) the assumptions and
qualifications set forth herein, we are of the opinion that the Shares, when
issued and delivered in accordance with the terms and conditions set forth in
the Debenture Documents, will be validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and we further consent to the use of our name under the heading
"Legal Matters" in the Prospectus which is a part of the Registration Statement.
Very truly yours,
/s/ White & Case LLP
RKS:JD
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Kennedy Wilson, Inc. on Form S-3 of the report of Deloitte & Touche LLP dated
February 26, 1999, appearing in the Annual Report on Form 10-K of Kennedy
Wilson, Inc. for the year ended December 31, 1998.
We also consent to the incorporation by reference in this Registration Statement
of Kennedy Wilson, Inc. on Form S-3 of the report of Deloitte & Touche LLP dated
July 10, 1998, on the financial statements of Heitman Properties Ltd. as of
December 31, 1997 and 1996 and for the three year period ended December 31,
1997, appearing in the Report on Form 8-K/A dated September 30, 1998 and to the
reference to Deloitte & Touche LLP under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
August 10, 1999
