THIS PAYMENT GUARANTY (as amended, modified, restated or supplemented from time to time, this “Guaranty”) is made as of the day of June, 2009, by KENNEDY- WILSON, INC. a Delaware corporation, having an address at 9601 Wilshire Boulevard, Suite 220, Beverly Hills, California 90210 (“Guarantor”), in favor of THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, a New York corporation, having an address at 7 Hanover Square, New York, New York 10004 (“Lender”).

RECITALS

A.                                    Lender is simultaneously herewith making the loan to Borrower (as defined in the Security Instrument, which term is defined below) in the original principal amount of $28,000,000.00 (the “Loan”), which Loan is evidenced by two promissory notes, one in the original principal amount of $20,000,000 and the second in the original principal amount of $8,000,000, each dated the date hereof, made by Borrower and payable to Lender in the principal amount of the Loan (as amended, modified, extended, renewed, restated or supplemented from time to time, collectively, the “Note”).

B.                                      The Loan is secured by, among other things, that certain DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FINANCING STATEMENT dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Security Instrument”), which also secures the payment and performance of all other Obligations, as defined in the Security Instrument.

C.                                      For purposes of this Guaranty, the capitalized terms used herein without definition shall have the respective meanings set forth for such terms in Annex A to the Security Instrument, and the rules of interpretation set forth in such Annex A of the Security Instrument shall govern the interpretation of this Guaranty.

D.                                     As a material inducement for, and as a condition precedent to Lender’s making the Loan, Guarantor is required to execute and deliver to Lender this Guaranty.

ARTICLE I- GUARANTY

Section 1.01                             The Guaranty . In consideration of the loans, advances, extensions of credit and financial accommodations heretofore or hereinafter at any time made or afforded by Lender to Borrower in connection with the Loan and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby unconditionally and irrevocably guarantees, without limit, the full and prompt payment when due of all payment Obligations of Borrower to Lender set forth in the Security Instrument, and payment of any monetary obligations arising as a result of Borrower’s failure to perform any nonmonetary obligations set forth in the Security Instrument (such guaranteed obligations being hereinafter referred to as the “Liabilities”).

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Section 1.02                             Liabilities Guaranteed.

(a)                                   In the event Borrower fails at any time to pay any part or all of the Liabilities guaranteed when due, whether by acceleration or otherwise, Guarantor, upon demand of Lender, shall pay the Liabilities in the same manner as if they constituted the direct and primary obligation of Guarantor, and such obligation of Guarantor shall be due with costs of collection, Reasonable Attorneys Fees and without relief from valuation or appraisement laws.

(b)                                  The obligations of Guarantor hereunder shall in no way be affected or impaired by any provision in any instrument evidencing or securing the Loan whereby Lender agrees not to seek or enforce any personal liability against Borrower, or any provision of like effect, or whereby Lender agrees to look solely to any collateral for the enforcement or satisfaction of the Loan or the obligations arising under the instruments evidencing or securing the Loan, or any provision of like effect.

ARTICLE II- WAIVERS AND CONSENTS

Section 2.01                             General Waivers of Guarantor. Guarantor hereby waives each of the following:

(i)                                      notice of acceptance of this Guaranty, notice of the existence or creation of all or any of the Liabilities, notice of any extension of credit, advances, loan or similar accommodation by Lender to Borrower, and notice of the amount of the Liabilities which may exist from time to time;

(ii)                                   presentment, demand, protest, notice of protest, notice of dishonor, notice of nonpayment or of other default with respect to any of the Liabilities, and all other notices whatsoever;

(iii)                                any requirement that Lender institute suit, or otherwise exhaust its rights or remedies against Borrower or against any other person, guarantor, or under the Security Instrument or other collateral guaranteeing or securing all or any part of the Liabilities (the obligations of such guarantors or other persons and such Security Instrument or other collateral security being hereinafter referred to as the “Collateral”), prior to enforcing any rights it has under this Guaranty or otherwise against Guarantor, or to pursue any other remedy it may now or hereafter have against Borrower, or (if Borrower is a partnership) any general partner of Borrower, including any and all benefits under California Civil Code Sections 2845, 2849 and 2850;

(iv)                               all diligence in collection, protection of, or realization upon the Collateral or any other security for any of the Liabilities;

(v)                                  any right of subrogation with respect to the Liabilities or the Collateral, any right to enforce any remedy which Lender now has or hereafter may have against Borrower, and any right to participate in any security now or hereafter held by Lender, until Lender shall have received payment in full of the Liabilities;

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(vi)                               any defense or right of setoff based on the deterioration in market or other value, waste, loss by fire, theft, loss or substitution of any property which is a part of the Collateral;

(vii)                            any defenses arising out of the absence, impairment or loss of any right of reimbursement or subrogation or other right or remedy of Guarantor against Borrower or against any security resulting from the exercise or election of any remedy or remedies by Lender, including without limitation the exercise of the power of sale under the Security Instrument, and any defense arising by reason of any disability or other defense of Borrower or by reason of the cessation, from any cause, of the liability of Borrower;

(viii)                         any defense based upon Lender’s failure to disclose to Guarantor any information concerning Borrower’s financial condition or any other circumstances bearing on Borrower’s ability to pay all sums payable under the Note or any of the other Loan Documents;

(ix)                                 any defense based upon any legal disability or other defense of Borrower, any other guarantor of other person, or by reason of the cessation or limitation of the liability of Borrower from any cause other than full payment of all sums payable under the Note or any of the other Loan Documents;

(x)                                    any defense based upon any lack of authority of the officers, directors, partners or agents acting or purporting to act on behalf of Borrower or any principal of Borrower or any defect in the formation of Borrower or any principal of Borrower;

(xi)                                 any defense based upon the application by Borrower of the proceeds of the Loan for purposes other than the purposes represented by Borrower to Lender or intended or understood by Lender or Guarantor;

(xii)                              any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal;

(xiii)                           any defense based upon Lender’s election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code or any successor statute;

(xiv)                          any defense based upon any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy Code;

(xv)                             the failure to take any action permitted hereunder, or the waiver of any conditions hereinabove set forth by Lender or any person acting on behalf of Lender shall in no way affect, diminish or release the obligations of Guarantor hereunder; and

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(xvi)                          the rights, benefits and defenses arising from alteration, impairment or suspension in any respect or by any means of any of Borrower’s obligations under the Loan Documents or any of Lender’s rights or remedies under the Loan Documents without Guarantor’s prior consent.

(xvii)                       The rights, benefits and defenses arising out of or under California Civil Code Section 2819 resulting from alteration, impairment or suspension in any respect or by any means of any of Borrower’s obligations under the Loan Documents or any of lender’s rights or remedies under the Loan Documents without Guarantor’s prior consent.

(xviii)                    In accordance with Section 2856 of the California Civil Code, Guarantor waives any and all other rights of subrogation, reimbursement, indemnification, contribution, and any other rights and defenses available to Guarantor by reason of Sections 2787 through 2855, inclusive, of the California Civil Code, including any and all rights or defenses Guarantor may have by reason of protection afforded to Borrower with respect to any of the obligations of Guarantor under this Guaranty pursuant to the antideficiency or other laws of the State of California limiting or discharging Borrower’s Indebtedness, including Sections 580a, 580b, 580d, and 726 of the California Code of Civil Procedure. Likewise, Guarantor waives any and all rights and defenses available to Guarantor under California Civil Code Sections 2899 and 3433. Without limiting the generality of the foregoing, Guarantor hereby expressly waives any and all benefits under (i) California Code of Civil Procedure Section 580a (which Section, if Guarantor had not given this waiver, would otherwise limit Guarantor’s liability after a nonjudicial foreclosure sale to the difference between the obligations of Guarantor under this Guaranty and the fair market value of the property or interests sold at such nonjudicial foreclosure sale), (ii) California Code of Civil Procedure Sections 580b and 580d (which Sections, if Guarantor had not given this waiver, would otherwise limit Lender’s right to recover a deficiency judgment with respect to purchase money obligations and after a nonjudicial foreclosure sale, respectively), and (iii) California Code of Civil Procedure Section 726 (which Section, if Guarantor had not given this waiver, among other things, would otherwise require Lender to exhaust all of its security before a personal judgment could be obtained for a deficiency). Notwithstanding any foreclosure of the lien of the Instrument, whether by the exercise of the power of sale contained in the Instrument, by an action for judicial foreclosure or by Lender’s acceptance of a deed in lieu of foreclosure, Guarantor shall remain bound under this Guaranty.

(xix)                            Guarantor shall have no right of and hereby waives any claim for, subrogation, reimbursement, indemnification, and contribution against Borrower and against any general partner, member or other constituent of Borrower, and against any other person or any collateral or security for the Indebtedness (including without limitation any such rights pursuant to Sections 2847 and 2848 of the California Civil Code), until the Indebtedness has been indefeasibly paid and satisfied in full, all obligations owed to Lender under the Loan Documents have been fully performed, and Lender has released, transferred or disposed of all of its right, title and interest in such collateral or security, and there has expired the maximum possible period thereafter

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during which any payment made by Borrower or others to Lender with respect to the Indebtedness could be deemed a preference under the United States Bankruptcy Code.

Section 2.02                             Specific Waivers Related to Real Estate. Without limiting any other provisions of this Guaranty:

(i)                                      Guarantor unconditionally and irrevocably waives all rights and defenses that Guarantor may have because the Debt is secured by real property. This means, among other things, that Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower. If Lender forecloses on any real property collateral pledged by Borrower:

(A)                               the amount of the Debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price;

(B)                                 Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower; (This waiver being acknowledged by Guarantor to be an unconditional and irrevocable wavier of any rights and defenses Guarantor may have because the Debt is secured by real property); and

This is an unconditional and irrevocable waver of any rights and defenses Guarantor may have because Borrower’s debt is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code