Exhibit 10.2

 

Execution Copy

 

THE HOWARD HUGHES CORPORATION
WARRANT PURCHASE AGREEMENT

 

Purchaser: Grant Herlitz

 

Date of Purchase: November 22, 2010

 

Purchase Price: $2,000,000

 

Number of Shares Underlying Warrant: 315,731

 

Exercise Price Per Share: $42.23

 

THE HOWARD HUGHES CORPORATION, a Delaware corporation (the “Corporation”), is
pleased to give you the opportunity to purchase a Warrant (the “Warrant”) to
purchase shares of the Corporation’s authorized common stock, par value $0.01
per share, subject to the terms and conditions set forth in this Warrant
Purchase Agreement (this “Agreement”).  The purchase of the Warrant is
specifically conditioned upon the execution by you of this Agreement.  The Date
of Purchase of the Warrant, the number of shares issuable upon exercise of the
Warrant (the “Warrant Shares”), and the Exercise Price per share are stated
above.  The Purchase Price shall be paid to the Corporation no later than 5
Business Days following the Date of Purchase and if not so paid this Agreement
shall terminate without further action.  This Agreement was entered into prior
to your election as President of the Corporation and is not governed by The
Howard Hughes Corporation 2010 Equity Incentive Plan.

 

This Agreement sets forth the terms of the agreement between you and the
Corporation with respect to the Warrant.  By accepting this Agreement, you agree
to be bound by all of the terms hereof.

 

1.     Definitions.  As used in this Agreement, the following terms have the
meanings set forth below:

 

(a)   “Board of Directors” means the board of directors of the Corporation.

 

(b)   “Business Day” means any day other than a Saturday, a Sunday or a day on
which banking institutions in the State of Delaware are authorized or obligated
by law or executive order to close.

 

(c)   “Cause” shall mean, as determined in good faith by a unanimous vote
(excluding you if you are a member of the Board of Directors) of the Board of
Directors at a meeting of the Board of Directors held for such purpose, and
where you and your counsel had an opportunity (on at least 15 days prior notice)
to be heard before the Board of Directors, your:

 

(i)            conviction, plea of guilty or no contest to any felony;

 

(ii)           gross negligence or willful misconduct in the performance of your
duties;

 

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(iii)          drug addiction or habitual intoxication;

 

(iv)          commission of fraud, embezzlement, misappropriation of funds,
breach of fiduciary duty, violation of law, or a material act of dishonesty
against the Corporation, in each case that the Board of Directors determines was
willful;

 

(v)           material and continued breach of the Employment Agreement, after
notice for substantial performance is delivered by the Corporation in writing
that identifies in reasonable detail the manner in which the Corporation
believes you are in breach of this Employment Agreement;

 

(vi)          willful material breach of Corporation policy or code of conduct;
or

 

(vii)         willful and continued failure to substantially perform your duties
under the Employment Agreement (other than such failure resulting from your
incapacity due to physical or mental illness);

 

unless, in each case, the event constituting Cause is curable and has been cured
by you within 30 days of your receipt of notice from the Corporation that an
event constituting Cause has occurred and specifying the details of such event. 
If you cure an event during such period that would otherwise constitute Cause,
then the Corporation will have no right to terminate your employment for Cause. 
For purposes of this provision, no act or omission on your part shall be
considered “willful” unless it is done or omitted not in good faith or without
reasonable belief that the act or omission was in the best interests of the
Corporation.  Any act or omission based upon a resolution duly adopted by the
Board of Directors or advice of counsel for the Corporation shall be
conclusively presumed to have been done or omitted in good faith and in the best
interests of the Corporation.

 

(d)   “Change in Control” means the occurrence of any of the following events:

 

(i)            A “change in the ownership of the Corporation” which shall occur
on the date that any one person, or more than one person acting as a group,
excluding Pershing Square Management, L.P. and its Affiliates (as defined under
the Securities Act of 1933), acquires ownership of stock in the Corporation
that, together with stock held by such person or group, constitutes more than
50% of the total fair market value or total voting power of the stock of the
Corporation; however, if any one person or more than one person acting as a
group, is considered to own more than 50% of the total fair market value or
total voting power of the stock of the Corporation, the acquisition of
additional stock by the same person or persons will not be considered a “change
in the ownership of the Corporation” (or to cause a “change in the effective
control of the Corporation” within the meaning of Section 1(d)(ii) below) and an
increase of the effective percentage of stock owned by any one person, or
persons acting as a group, as a result of a transaction in which the Corporation
acquires its stock in exchange for property will be treated as an acquisition of
stock for purposes of this paragraph; provided further, however, that for
purposes of this Section 1(d)(i), the following acquisitions shall not
constitute a Change in Control:  (A) any acquisition by any employee benefit
plan (or

 

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related trust) sponsored or maintained by the Corporation or any entity
controlled by the Corporation, or (B) any acquisition by investors (immediately
prior to such acquisition) in the Corporation for financing purposes, as
determined by the Board of Directors in its sole discretion.  This
Section 1(d)(i) applies only when there is a transfer of the stock of the
Corporation (or issuance of stock) and stock in the Corporation remains
outstanding after the transaction.

 

(ii)           A “change in the effective control of the Corporation” which
shall occur on the date that either (A) any one person, or more than one person
acting as a group, excluding Pershing Square Management, L.P. and its
Affiliates, acquires (or has acquired during the twelve month period ending on
the date of the most recent acquisition by such person or persons) ownership of
stock of the Corporation possessing 35% or more of the total voting power of the
stock of the Corporation, except for (1) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Corporation or any entity
controlled by the Corporation, or (2) any acquisition by investors (immediately
prior to such acquisition) in the Corporation for financing purposes, as
determined by the Board of Directors in its sole discretion; or (B) a majority
of the members of the Board of Directors are replaced during any twelve-month
period by directors whose appointment or election is not endorsed by a majority
of the members of the Board of Directors prior to the date of the appointment or
election.  For purposes of a “change in the effective control of the
Corporation,” if any one person, or more than one person acting as a group, is
considered to effectively control the Corporation within the meaning of this
Section 1(d)(ii), the acquisition of additional control of the Corporation by
the same person or persons is not considered a “change in the effective control
of the Corporation,” or to cause a “change in the ownership of the Corporation”
within the meaning of Section 1(d)(i) above.

 

(iii)          The occurrence of any of the transactions contemplated by
Section 1(d)(i) or 1(d)(ii) above (including any acquisition by Pershing Square
Management, L.P. or its Affiliates), in connection with which the stock of the
Corporation ceases to be publicly traded on a national securities exchange.

 

(iv)          A “change in the ownership of a substantial portion of the
Corporation’s assets” which shall occur on the date that any one person, or more
than one person acting as a group, excluding Pershing Square Management, L.P.
and its Affiliates, acquires (or has acquired during the twelve month period
ending on the date of the most recent acquisition by such person or persons)
assets of the Corporation that have a total gross fair market value equal to or
more than 60% of the total gross fair market value of all the assets of the
Corporation immediately prior to such acquisition or acquisitions; provided that
the proceeds of such acquisition or acquisitions are distributed to the
shareholders of the Corporation in connection with such acquisition or
acquisitions.  For this purpose, gross fair market value means the value of the
assets of the Corporation, or the value of the assets being disposed of,
determined without regard to any liabilities associated with such assets.  Any
transfer of assets to an entity that is controlled by the shareholders of the
Corporation immediately after the transfer, as provided in guidance issued
pursuant to Section 409A of the Code, shall not constitute a Change in Control.

 

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For purposes of this Section 1(d), the provisions of Section 318(a) of the Code
regarding the constructive ownership of stock will apply to determine stock
ownership; provided, that stock underlying unvested options (including options
exercisable for stock that is not substantially vested) will not be treated as
owned by the individual who holds the option.  In addition, for purposes of this
Section 1(d), “Corporation” includes (A) the Corporation and (B) an entity that
is a stockholder owning more than 50% of the total fair market value and total
voting power (a “Majority Shareholder”) of the Corporation, or any entity in a
chain of entities in which each entity is a Majority Shareholder of another
entity in the chain, ending in the Corporation

 

(e)   “Code” means the Internal Revenue Code of 1986, as amended.

 

(f)    “Common Stock” means the authorized common stock, par value $0.01 per
share, as described in the Corporation’s Certificate of Incorporation.

 

(g)   “Date of Purchase” means the date designated as such in the first
paragraph of this Agreement.

 

(h)   “Disability” means the good faith determination by the Board of Directors
that you are permanently disabled.

 

(i)    “Employment Agreement” means the employment agreement entered into
between the Corporation and Grant Herlitz on November 22, 2010.

 

(j)    “Exchange Act” means the Securities Exchange Act of 1934.

 

(k)   “Exercise Notice” means the written exercise notice in the form provided
by the Board of Directors.

 

(l)    “Exercise Price” means the exercise price per share designated as such in
the first paragraph of this Agreement.

 

(m)  “Expiration Date” means November 21, 2017.

 

(n)   “Fair Market Value” per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:

 

(i)            If the Common Stock is at the time traded on NYSE, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question, as the price is reported by the National Association of
Securities Dealers on NYSE.  If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.

 

(ii)           If the Common Stock is at the time listed on any stock exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the stock exchange determined by the
Board of Directors to be the primary market for the Common Stock, as such price
is officially quoted in the composite tape of transactions on such exchange.  If
there is no closing selling price for the Common Stock on the

 

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date in question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.

 

(iii)          If the Common Stock is at the time neither listed on any stock
exchange nor traded on NYSE, then the Fair Market Value shall be determined in
good faith by the Board of Directors after taking into account such factors as
the Board of Directors shall deem appropriate.

 

(o)   “Good Reason” shall mean the occurrence of any of the following events
without your written consent:

 

(i)            a material diminution in your base compensation;

 

(ii)           a material diminution in your authority, duties or
responsibilities;

 

(iii)          you no longer report directly to the Chief Executive Officer or
the Board of Directors; or

 

(iv)          any other action or inaction that constitutes a material breach by
the Corporation of the Employment Agreement;

 

provided that, in each case, you must provide a notice of termination to the
Corporation within 60 days of the initial occurrence of the event constituting
Good Reason, and the Corporation shall have the opportunity to cure such event
within 30 days of receiving such notice.  If the Corporation cures an event
during such period that would otherwise constitute Good Reason, then you will
have no right to terminate your employment for Good Reason.  Following the
occurrence of a Change in Control, any claim by you that Good Reason exists
shall be presumed to be correct unless a court of competent jurisdiction
determines that the Corporation has established by clear and convincing evidence
that Good Reason does not exist.

 

(p)   “Immediate Family” means your child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law, including adoptive relationships.

 

(q)   “NYSE” means The New York Stock Exchange.

 

2.     Vesting and Exercisability.  This Warrant will be fully vested at the
time of purchase.  Except as provided in Section 3, you may only exercise your
Warrant after the sixth year anniversary of the Purchase Date (November 22,
2016) and before the Expiration Date.  To the extent it has not already been
exercised, the Warrant shall terminate on the Expiration Date.

 

3.     Special Lifting of Restrictions and Change in Control.

 

(a)          Immediately prior to the effective date of a Change in Control or
upon the date of a termination of your employment by the Company without Cause
or by you for Good Reason, the Warrant shall be immediately exercisable and
transferable, notwithstanding the restrictions enumerated in Section 2.

 

(b)   Notwithstanding the provisions of Section 6, in the event of a termination
of your employment by reason of your death or Disability, you or your estate (as
the case may be)

 

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may sell the Warrant to a third party; provided, however, that all terms and
restrictions applicable to the Warrant prior to the sale shall continue to apply
to the Warrant after the sale to a third party purchaser.

 

(c)   In the event of a Change in Control, you shall elect that either:

 

(i)            this Warrant be assumed by the successor entity in connection
with a Change in Control, in which case this Warrant shall be appropriately
adjusted, immediately after such Change in Control, to apply to the number and
class of securities which would have been issuable to you upon the consummation
of such Change in Control had the Warrant been exercised immediately prior to
such Change in Control, and appropriate adjustments shall also be made to the
Exercise Price, provided the aggregate Exercise Price shall remain the same, or

 

(ii)           this Warrant terminate and cease to be outstanding, in which case
the successor entity shall pay to you upon the Change in Control an amount equal
to the product of (A) the per share consideration paid to the shareholders of
the Corporation by the successor entity in conjunction with the Change in
Control, and (B) the number of Shares underlying the unexercised portion of this
Warrant on the date of the Change in Control, minus the cumulative Exercise
Price for those Warrant Shares.

 

(d)   Subject to Section 5, this Agreement shall not in any way affect the right
of the Corporation to adjust, reclassify, reorganize, otherwise change its
capital or business structure, to merge, consolidate, dissolve, liquidate, or
sell or transfer all or any part of its business or assets, and in any such
transaction involving only cash consideration you shall be deemed to have
elected to receive cash pursuant to Section 3(c)(ii) if so provided in the
agreement providing for such transaction.

 

4.     Exercise of Warrant.

 

(a)          In order to exercise this Warrant with respect to all or any part
of the Warrant Shares for which this Warrant is exercisable, you (or any other
person or persons exercising the Warrant in accordance with the terms hereof)
must take the following actions:

 

(i)            Execute and deliver to the Corporation an Exercise Notice for the
Warrant Shares for which the Warrant is exercised (the “Purchased Shares”) which
Exercise Notice (1) states the number of Purchased Shares (which must be a whole
number of shares) and (2) is signed or otherwise given by you (or any other
authorized person exercising the Warrant).

 

(ii)           Pay the aggregate Exercise Price for the Purchased Shares, at the
time of delivery of the Exercise Notice, (1) in cash or an equivalent means
acceptable to the Corporation, or (2) with shares of Common Stock owned by you
(including shares received upon exercise of the Warrant or restricted shares, if
any, already held by you) and having a Fair Market Value at least equal to the
aggregate Exercise Price for the shares of Common Stock to which the Warrant is
being exercised, or (3) by any combination of clauses (1) and (2), or (4) by net
issue exercise, pursuant to which the Corporation will issue to you a number of
shares of Common Stock as to which the Warrant is exercised, less a number of
shares with a Fair Market Value as of the date of exercise equal to the Exercise
Price.  The number of shares to settle the transaction shall be the gross number
of shares (subject to the transaction, e.g., 315,731 in the case of a full
exercise), multiplied by the Exercise Price, and divided by the SA (as defined

 

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below).  If shares of Common Stock are used for payment of all or any portion of
the Exercise Price, then (for purposes of payment of the Exercise Price) those
shares of Common Stock shall be deemed to have a cash value equal to their
aggregate Fair Market Value determined as of the date of the delivery of the
Exercise Notice, giving effect to all purchases of Warrant Shares.

 

(iii)          Certify in a writing reasonably acceptable to the Corporation
that you have complied with the provisions of Section 6 hereof at all times
since the Date of Purchase and, if the Warrant is exercised in respect of fewer
than the total Warrant Shares to which this Warrant then relates, that you will
continue to comply with such covenants in respect of the Warrant Shares which
remain subject to this Warrant.

 

(b)   Notwithstanding any other provision hereof, the number of shares of Common
Stock that you shall receive upon a full or partial exercise of the Warrant
shall be adjusted upward or downward, as the case may be, based upon the
following formula:

 

QA = (SA — K) x Q / ST

 

Where:

 

·      QA is the adjusted number of shares of Common Stock to be received,
rounded to the nearest whole number.

·      SA is the average reported closing sales price for the Common Stock over
the 22 most recent days of trading on a stock exchange, if so traded, ending on
the last trading day prior to the date of the Corporation’s receipt of a Notice
of Exercise (the “Exercise Date”). If the Warrant Shares are not traded on a
national securities exchange on the Exercise Date, then the value of such
Warrant Shares for the purposes of this Section 4(b) shall be deemed to be the
Fair Market Value.

·      K is the Exercise Price.

·      Q is the unadjusted number of shares of Common Stock.

·      ST is the Fair Market Value of the Warrant Shares on the last trading day
prior to the Exercise Date.

 

For purposes of clarity, if QA calculated as above results in a negative number,
it shall be set to zero.

 

For example, if you held a warrant to purchase 100 Warrant Shares with an
exercise price of $5, the Fair Market Value of the Warrant Shares on the
Exercise Date was $10, and the average trading price over the last 22 trading
days was $11, then you would receive $600 worth of Common Stock or 60 shares of
Common Stock; conversely, if the average trading price over the last 22 trading
days was $9, you would receive $400 worth of Common Stock or 40 shares of Common
Stock.

 

(c)   As soon as practicable after the Exercise Date, the Corporation shall
issue to or on behalf of the Warrant holder (or any other person or persons
exercising this Warrant in accordance with the terms hereof) a certificate for
the purchased Warrant Shares, with the appropriate legends affixed thereto.

 

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(d)   In no event may this Warrant be exercised for any fractional shares. 
Fractional shares shall be satisfied in cash.

 

The Warrant shall not be deemed to have been exercised unless all of these
requirements are satisfied.

 

5.     Adjustment Provisions.  The number of shares of Common Stock that may be
acquired under the Warrant, shall be subject to adjustment, from time to time,
in accordance with the following provisions:

 

(a)   If at any time or from time to time, the Corporation shall subdivide as a
whole (by reclassification, by a stock split, by the issuance of a distribution
on stock payable in stock or otherwise, including a dividend designated as such
by the Board of Directors) the number of shares of Common Stock then outstanding
into a greater number of shares of Common Stock, then (a) the number of shares
of Common Stock that may be acquired under the Warrant shall be increased
proportionately and (b) the Exercise Price for each share of Common Stock
subject to the Warrant shall be reduced proportionately, without changing the
aggregate purchase price as to which the Warrant remains exercisable.

 

(b)   If at any time or from time to time, the Corporation shall consolidate as
a whole (by reclassification, reverse stock split, or otherwise) the number of
shares of Common Stock then outstanding into a lesser number of shares of Common
Stock, then (a) the number of shares of Common Stock that may be acquired under
the Warrant shall be decreased proportionately, and (b) the Exercise Price for
each share of Common Stock subject to the Warrant shall be increased
proportionately, without changing the aggregate purchase price or value as to
which the Warrant remains exercisable.

 

(c)   Should any other change be made to the Common Stock by reason of any
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation’s receipt of consideration, appropriate
adjustments shall be made to the class of securities subject to this Warrant in
such manner and to the extent deemed appropriate by the Board of Directors.

 

(d)   Whenever the number of shares of Common Stock subject to the Warrant is
required to be adjusted as provided in this Section 5, the Corporation shall,
within 30 days following such adjustment, prepare and give to you a written
notice setting forth, in reasonable detail, the event requiring adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
and the change in price and the number of shares of Common Stock, other
securities, cash or property purchasable subject to the Warrant after giving
effect to the adjustment.

 

(e)   Adjustments under Section 5(a), (b) and (c) shall be made by the Board of
Directors, and its determination as to what adjustments shall be made and the
extent thereof shall be final, binding and conclusive.  No fractional interest
shall be issued on account of any such adjustments.

 

6.     Transferability.  This Warrant may be assigned in whole or in part during
your lifetime either as (a) a gift to one or more members of your Immediate
Family or to a trust in

 

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which you and/or one or more such family members hold more than 50% of the
beneficial interest or (b) pursuant to a domestic relations order.  The assigned
portion shall be exercisable only by the person or persons who acquire a
proprietary interest in the Warrant pursuant to such assignment.  The terms
applicable to the assigned portion shall be the same as those in effect for this
Warrant immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Board of Directors may deem appropriate.
Except for assignments to a person or an entity expressly permitted pursuant to
the first sentence of Section 6(a) above (a “Permitted Transferee”), the Warrant
may not be assigned, transferred, pledged, or otherwise hypothecated by you or
any Permitted Transferee.  Additionally, you or any Permitted Transferee may not
hedge or enter into any derivative or other transaction in respect of the
Warrant Shares (the intention of the parties being that you, together with any
Permitted Transferee, shall maintain a net long position in respect of the
Warrant Shares).  You shall (i) cause any Permitted Transferee to comply with
the covenants herein and (ii) upon the written request of the Corporation
certify as to your compliance with the covenants herein from time to time.
Notwithstanding anything to the contrary herein, the covenants and limits on
transferability in this Section 6 shall terminate on the earliest of
(x) November 22, 2016, (y) your termination of employment by the Corporation
without Cause, or a termination by you for Good Reason, or (z) a Change in
Control.

 

7.     Delivery of Certificates of Stock.  After the exercise of the Warrant the
Corporation shall promptly issue and deliver a certificate representing the
number of shares of Common Stock as to which the Warrant has been exercised
after the Corporation receives (a) the Exercise Notice, (b) payment of the
Exercise Price, and (c) any tax withholding as may be requested.  The value of
the shares of Common Stock shall not bear any interest owing to the passage of
time.

 

8.     Rights as a Stockholder.  You shall have no right as a stockholder with
respect to any shares covered by this Agreement unless and until a certificate
representing those shares is issued in your name.

 

9.     Rights Offerings.

 

If at any time the Corporation shall distribute rights or warrants to all or
substantially all holders of its Common Stock entitling them, for a period of
not more than 45 days, to subscribe for or purchase shares of Common Stock at a
price per share less than the Fair Market Value of the Common Stock on the last
trading day preceding the date on which the Board of Directors declares such
distribution of rights or warrants, the Exercise Price in effect immediately
prior to the close of business on the record date for such distribution shall be
reduced immediately thereafter to the price determined by multiplying such
Exercise Price by the quotient of (x) the number of shares of Common Stock
outstanding at the close of business on such record date plus the number of
shares of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or purchase would
purchase at such Fair Market Value divided by (y) the number of shares of Common
Stock outstanding at the close of business on such record date plus the number
of shares of Common Stock so offered for subscription or purchase.  In such
event, the number of shares of Common Stock issuable upon the exercise of the
Warrant as in effect immediately prior to the close of business on such record
date shall be increased immediately thereafter to the amount determined by
multiplying such number by the quotient of (x) the Exercise Price in effect
immediately prior to the adjustment contemplated by the immediately preceding
sentence divided by (y) the new Exercise Price determined in accordance with the
immediately preceding sentence.  In case any rights or

 

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warrants referred to in this Section 9 in respect of which an adjustment shall
have been made shall expire unexercised and any shares that would have been
underlying such rights or warrants shall not have been allocated pursuant to any
backstop commitment or any similar arrangement, the Exercise Price and the
number of shares of Common Stock issuable upon exercise of the Warrant then in
effect shall be readjusted at the time of such expiration to the Exercise Price
that would then be in effect and the number of Shares that would then be
issuable upon exercise of the Warrant if no adjustment had been made on account
of such expired rights or warrants.

 

10.   Tender or Exchange Offers.

 

If the Corporation or any subsidiary of the Corporation shall consummate a
tender or exchange offer for all or any portion of the Common Stock for a
consideration per share with a Fair Market Value greater than the Fair Market
Value of the Common Stock on the date such tender or exchange offer is first
publicly announced (the “Announcement Date”), the Exercise Price in effect
immediately prior to the expiration date for such tender or exchange offer shall
be reduced immediately thereafter to the price determined by multiplying such
Exercise Price by the quotient of (x) the Fair Market Value of the Common Stock
on the Announcement Date minus the Premium Per Post-Tender Share divided by
(y) the Fair Market Value of the Common Stock on the Announcement Date.  In such
event, the number of shares of Common Stock issuable upon the exercise of the
Warrant as in effect immediately prior to such expiration date shall be
increased immediately thereafter to the amount determined by multiplying such
number by the quotient of (x) the Exercise Price in effect immediately prior to
the adjustment contemplated by the immediately preceding sentence divided by
(y) the new Exercise Price determined in accordance with the immediately
preceding sentence.  As used in this Section 10 with respect to any tender or
exchange offer, “Premium Per Post-Tender Share” means the quotient of (x) the
amount by which the aggregate Fair Market Value of the consideration paid in
such tender or exchange offer exceeds the aggregate Fair Market Value on the
Announcement Date of the shares of Common Stock purchased therein divided by
(y) the number of shares of Common Stock outstanding at the close of business on
the expiration date for such tender or exchange offer (after giving pro forma
effect to the purchase of shares being purchased in the tender or exchange
offer).

 

11.   Furnish Information.  You shall furnish to the Corporation all information
requested by the Corporation to enable it to comply with any reporting or other
requirement imposed upon the Corporation by or under any applicable statute or
regulation.

 

12.   Registration and Listing of Warrant Shares.  The Corporation shall file a
registration statement with the Securities and Exchange Commission to register
the sale of Warrant Shares as soon as reasonably practicable, but no later than
20 Business Days after the date that the Corporation files its first Form 10-K. 
The Corporation will file a listing application for listing on NYSE with respect
to the Warrant Shares as soon as practicable after the date hereof, but no later
than 20 Business Days after the date that the Corporation files its first
Form 10-K.

 

13.   Obligation to Exercise.  The purchase of the Warrant through this
Agreement shall impose no obligation upon you to exercise the same or any part
thereof.

 

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14.   Remedies.  You shall be entitled to recover from the Corporation
reasonable fees incurred in connection with the enforcement of the terms and
provisions of this Agreement, whether by an action to enforce specific
performance or for damages for its breach or otherwise.

 

15.   Right of the Corporation and Subsidiaries to Terminate Employment. 
Nothing contained in this Agreement shall confer upon you the right to continue
in the employ of the Corporation or any subsidiary, or interfere in any way with
the rights of the Corporation or any subsidiary to terminate your employment at
any time.

 

16.   Exchange Act Compliance.  The Board of Directors shall take all steps
necessary to ensure that the purchase and exercise of the Warrant are exempt
from Section 16(b) of the Exchange Act.

 

17.   No Guarantee of Interests.  The Board of Directors and the Corporation do
not guarantee the Common Stock of the Corporation from loss or depreciation.

 

18.   Corporation Action.  Any action required of the Corporation shall be by
resolution of its Board of Directors or by a person or committee authorized to
act by resolution of the Board of Directors.

 

19.   Severability.  If any provision of this Agreement is for any reason held
to be illegal, invalid, or to violate any law or listing requirement applicable
to the Corporation, the illegality, invalidity, or violation shall not affect
the remaining provisions hereof, but such provision shall be fully severable and
this Agreement shall be construed and enforced as if the illegal or invalid
provision had never been included herein and you and the Corporation shall amend
this Agreement, preserving, to the maximum extent reasonably possible, the
intended economic effects of this Agreement as executed by the parties hereto.

 

20.   Notices.  Whenever any notice is required or permitted hereunder, such
notice must be in writing and personally delivered or sent by electronic
facsimile transmission.  Any such notice required or permitted to be delivered
hereunder shall be deemed to be delivered on the next Business Day after which
it is personally delivered or transmitted by electronic facsimile to the person
who is to receive it at the address which such person has theretofore specified
by written notice delivered in accordance herewith.

 

The Corporation and you agree that any notices shall be given to the Corporation
or to you at the following addresses; provided that the Corporation or you may
change, at any time and from time to time, by written notice to the other, the
address which it or he had previously specified for receiving notices.

 

Corporation:

The Howard Hughes Corporation

 

One Galleria Tower

 

13355 Noel Road, Suite 950

 

Dallas, Texas  75240

 

Attn: Office of the General Counsel

 

 

with a copy to:

William A. Ackman, Chairman of the Board

 

888 Seventh Avenue, 42nd Floor

 

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New York, NY 10019

 

 

Holder:

At your current address as shown in the Corporation’s records.

 

21.   Waiver of Notice.  Any person entitled to notice hereunder may waive such
notice.

 

22.   Successors.  This Agreement shall be binding upon you, your legal
representatives, heirs, legatees and distributees, and upon the Corporation, its
successors and assigns.

 

23.   Headings.  The titles and headings of Sections are included for
convenience of reference only and are not to be considered in construction of
the provisions hereof.

 

24.   Governing Law.  All questions arising with respect to the provisions of
this Agreement shall be determined by application of the laws of the State of
Delaware except to the extent Delaware law is preempted by federal law.

 

25.   Word Usage.  Words used in the masculine shall apply to the feminine where
applicable, and wherever the context of this Agreement dictates, the plural
shall be read as the singular and the singular as the plural.

 

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]

 

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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by
its duly authorized officer as of the Date of Purchase first above written.

 

 

THE HOWARD HUGHES CORPORATION

 

 

 

 

 

By:

/s/ Gary Krow

 

 

Gary Krow,

 

 

Chairman of the Compensation Committee

 

 

ACKNOWLEDGED AND AGREED:

 

 

/s/ Grant Herlitz

 

 

Grant Herlitz

 

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APPENDIX A

 

SECTION 83(b) ELECTION

 

This statement is made under Section 83(b) of the Internal Revenue Code of 1986,
as amended, pursuant to Treasury Regulations Section 1.83-2.

 

1.             The taxpayer who purchased the property is:

 

Name:  Grant Herlitz

 

Address:                                                            

 

                                                                           

 

Social Security No.:                                          

 

2.             The property with respect to which the election is made is a
warrant (the “Warrant”) to purchase 315,731 shares of the common stock, par
value $0.01 per share, (the “Shares”) of The Howard Hughes Corporation (the
“Corporation”).

 

3.             The property was purchased on November 22, 2010 (the “Date of
Purchase”).

 

4.             The taxable year for which the election is made is the calendar
year 2010.

 

5.             Pursuant to the terms of the Warrant Purchase Agreement (the
“Agreement”) the Warrant will be fully vested and nonforfeitable on date of
purchase.

 

6.             The fair market value of such property at the time of transfer
(determined without regard to any restriction other than a restriction which by
its terms will never lapse) is $2,000,000.

 

7.             The amount paid for such property is $2,000,000.

 

8.             A copy of this statement was furnished to the Corporation, from
whom the taxpayer purchased such property.

 

9.             This statement is executed on [                     ,
            ]

 

 

 

 

Signature of Spouse (if any)

 

Signature of Taxpayer

 

 

This election must be filed with the Internal Revenue Service Center with which
the taxpayer files his or her federal income tax returns and must be filed
within 30 days after the Date of Purchase.  This filing should be made by
registered or certified mail, return receipt requested.  The taxpayer must
retain two copies of the completed form for filing with his or her federal and
state tax returns for the current tax year and an additional copy for his or her
records.

 

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