Exhibit
10.12


 


THE HOWARD HUGHES CORPORATION


 


[Effective Date],
2010


 


Fairholme
Capital Management, LLC


4400
Biscayne Boulevard, 9th Floor


Miami,
Florida  33137


Attention:  Charles M. Fernandez


 


Ladies
and Gentlemen:


 


Reference is made to the
Amended and Restated Stock Purchase Agreement (the “Stock Purchase Agreement”),
effective as of March 31, 2010, as amended, between General Growth
Properties, Inc. and The Fairholme Fund and Fairholme Focused Income Fund
(each, together with its permitted nominees and assigns, a “Purchaser”).  Capitalized terms used but not otherwise
defined in this letter agreement (this “Agreement”) shall have the
meanings attributed to such terms in the Stock Purchase Agreement as in effect
on the date hereof.


 


Pursuant to the terms of the
Stock Purchase Agreement and the Plan, The Howard Hughes Corporation (“THHC”)
and each Purchasers hereb agree as follows:


 


1.             Subscription Right.


 


(i)            Sale of
New Equity Securities.  If
THHC or any Subsidiary of THHC at any time or from time to time makes any
public or non-public offering of any shares of GGO Common Stock (or securities
that are convertible into or exchangeable or exercisable for, or linked to the
performance of, GGO Common Stock) (other than (1) pursuant to the granting
or exercise of employee stock options or other stock incentives pursuant to
THHC’s stock incentive plans and employment arrangements as in effect from time
to time or the issuance of stock pursuant to THHC’s employee stock purchase
plan as in effect from time to time, (2) pursuant to or in consideration
for the acquisition of another Person, business or assets by THHC or any of its
Subsidiaries, whether by purchase of stock, merger, consolidation, purchase of
all or substantially all of the assets of such Person or otherwise or (3) to
strategic partners or joint venturers in connection with a commercial
relationship with THHC or its Subsidiaries or to parties in connection with
them providing THHC or its Subsidiaries with loans, credit lines, cash price
reductions or similar transactions, under arm’s-length arrangements) (the “Proposed
Securities”), each Purchaser shall have the right to acquire from THHC (the
“Subscription Right”) for the same price (net of any underwriting
discounts or sales commissions or any other discounts or fees if not purchasing
from or through an underwriter, placement agent or broker) and on the same
terms as such Proposed Securities are proposed to be offered to others, up to
the amount of such Proposed Securities in the aggregate required to enable it
to maintain its aggregate proportionate GGO Common Stock-equivalent interest in
THHC on a Fully Diluted Basis determined in accordance with the following
sentence, in each case, subject to such limitations as


 

















 


may be imposed by applicable
Law or stock exchange rules.  The amount
of such Proposed Securities that each Purchaser shall be entitled to purchase
in the aggregate in any offering pursuant to the above shall (subject to such
limitations as may be imposed by applicable Law or stock exchange rules) be
determined by multiplying (x) the total number of such offered shares of
Proposed Securities by (y) a fraction, the numerator of which is the
number of shares of GGO Common Stock held by such Purchaser on a Fully Diluted
Basis as of the date of THHC’s notice pursuant to Section 1(ii) in
respect of the issuance of such Proposed Securities, and the denominator of
which is the number of shares of GGO Common Stock then outstanding on a Fully
Diluted Basis.  For the avoidance of
doubt, the actual amount of securities to be sold or offered to each Purchaser
pursuant to its exercise of the Subscription Right hereunder shall be
proportionally reduced if the aggregate amount of Proposed Securities sold or
offered is reduced.  Any offers and sales
pursuant to this Section 1 in the context of a registered public
offering shall be conditioned upon reasonably acceptable representations and
warranties of the applicable Purchaser regarding its status as the type of
offeree to whom a private sale can be made concurrently with a registered
public offering in compliance with applicable securities Laws.


 


(ii)           Notice.  In the event THHC proposes to offer Proposed
Securities, it shall give each Purchaser written notice of its intention,
describing the estimated price (or range of prices), anticipated amount of
securities, timing and other terms upon which THHC proposes to offer the same
(including, in the case of a registered public offering and to the extent
possible, a copy of the prospectus included in the registration statement filed
with respect to such offering), no later than ten (10) Business Days after
the commencement of marketing with respect to such offering or after THHC takes
substantial steps to pursue any other offering. 
Each Purchaser shall have three (3) Business Days from the date of
receipt of such a notice to notify THHC in writing that it intends to exercise
its Subscription Right and as to the amount of Proposed Securities such
Purchaser desires to purchase, up to the maximum amount calculated pursuant to Section 1(i).  In connection with an underwritten public
offering, such notice shall constitute a non-binding indication of interest to
purchase Proposed Securities at such a range of prices as such Purchaser may
specify and, with respect to other offerings, such notice shall constitute a
binding commitment of such Purchaser to purchase the amount of Proposed
Securities so specified at the price and other terms set forth in THHC’s notice
to such Purchaser.  The failure of such
Purchaser to so respond within such three (3) Business Day period shall be
deemed to be a waiver of the applicable Subscription Right under this Section 1
only with respect to the offering described in the applicable notice.  In connection with an underwritten public
offering or a private placement, each Purchaser shall further enter into an
agreement (in form and substance customary for transactions of this type) to
purchase the Proposed Securities to be acquired by it contemporaneously with
the execution of any underwriting agreement or purchase agreement entered into
with THHC, the underwriters or initial purchasers of such underwritten public
offering or private placement, and the failure of such Purchaser to enter into
such an agreement at or prior to such time shall constitute a waiver of the
Subscription Right in respect of such offering.


 


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(iii)          Purchase
Mechanism.  If a
Purchaser exercises its Subscription Right provided in this Section 1,
the closing of the purchase of the Proposed Securities with respect to which
such right has been exercised shall take place concurrently with the sale to
the other investors in the applicable offering, which period of time for the
closing of the purchase of the Proposed Securities with respect to which such
right has been exercised shall be extended for a maximum of one hundred eighty
(180) days in order to comply with applicable Laws (including receipt of any
applicable regulatory or stockholder approvals).  Each of THHC and each Purchaser shall use its
reasonable best efforts to secure any regulatory or stockholder approvals or
other consents, and to comply with any Law necessary in connection with the
offer, sale and purchase of, such Proposed Securities.


 


(iv)          Failure of
Purchase.  In the
event (A) a Purchaser fails to exercise its Subscription Right provided in
this Section 1 within said three (3) Business Day period, or (B) if
so exercised, a Purchaser fails or is unable to consummate such purchase within
the one hundred eighty (180) day period specified in Section 1(iii),
without prejudice to other remedies, THHC shall thereafter be entitled during
the Additional Sale Period to sell the Proposed Securities not elected to be
purchased pursuant to this Section 1 or which such Purchaser fails
to, or is unable to, purchase, at a price and upon terms no more favorable in
any material respect to the purchasers of such securities than were specified
in THHC’s notice to such Purchaser.  In
the event THHC has not sold the Proposed Securities within the Additional Sale
Period, THHC shall not thereafter offer, issue or sell such Proposed Securities
without first offering such securities to the applicable Purchaser in the
manner provided above.


 


(v)           Non-Cash
Consideration.  In the case
of the offering of securities for a consideration in whole or in part other
than cash, including securities acquired in exchange therefor (other than
securities by their terms so exchangeable), the consideration other than cash
shall be deemed to be the fair value thereof as determined by the Board of
Directors of THHC (the “Board”); provided, however, that
such fair value as determined by the Board shall not exceed the aggregate
market price of the securities being offered as of the date the Board
authorizes the offering of such securities.


 


(vi)          Cooperation.  THHC and each Purchaser shall cooperate in
good faith to facilitate the exercise of such Purchaser’s Subscription Right
hereunder, including using reasonable efforts to secure any required approvals
or consents.


 


(vii)         General.  Notwithstanding anything herein to the
contrary, (A) if (1) a Purchaser
exercises its Subscription Right pursuant to this Section 1
and is unable to complete the purchase of the Proposed Securities concurrently
with the sales to the other investors in the applicable offering as
contemplated by Section 1(iii) due to applicable regulatory or
stockholder approvals and (2) THHC or the Board determines in good faith
that any delay in completion of an offering in respect of which such Purchaser is entitled to Subscription Rights would
materially impair the financing objective of such offering, THHC may proceed
with such offering without the participation of such
Purchaser in such offering, in which event THHC and such Purchaser shall promptly thereafter agree on a process
otherwise consistent with this Section 1 as would allow such Purchaser to 


 


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purchase, at the same price
(net of any underwriting discounts or sales commissions or any other discounts
or fees if not purchasing from or through an underwriter, placement agent or
broker) as in such offering, up to the amount of shares of GGO Common Stock (or
securities that are convertible into or exchangeable or exercisable for, or
linked to the performance of, GGO Common Stock) as shall be necessary to enable
such Purchaser to maintain its aggregate proportionate GGO Common
Stock-equivalent interest in THHC on a Fully Diluted Basis, (B) if THHC or
the Board determines in good faith that compliance with the notice provisions
in Section 1(ii) would materially impair the financing
objective of an offering in respect of which a
Purchaser is entitled to Subscription Rights, THHC shall be
permitted by notice to such Purchaser to reduce the notice period required
under Section 1(ii) (but not to less than one (1) Business
Day) to the minimum extent required to meet the financing objective of such
offering, and such Purchaser shall have the
right to either (x) exercise it Subscription Rights during the shortened
notice periods specified in such notice or (y) require THHC to promptly
thereafter agree on a process otherwise consistent with this Section 1
as would allow such Purchaser to purchase, at
the same price (net of any underwriting discounts or sales commissions or any
other discounts or fees if not purchasing from or through an underwriter,
placement agent or broker) as in such offering, up to the amount of shares of
GGO Common Stock (or securities that are convertible into or exchangeable or
exercisable for, or linked to the performance of, GGO Common Stock) as shall be
necessary to enable such Purchaser to maintain its aggregate proportionate GGO
Common Stock-equivalent interest in THHC on a Fully Diluted Basis and (C) in
the event THHC is unable to issue shares of GGO Common Stock (or securities
that are convertible into or exchangeable or exercisable for, or linked to the
performance of, GGO Common Stock) to a
Purchaser as a result of a failure to receive regulatory or stockholder approval
therefor, THHC shall take such action or cause to be taken such other action in
order to place such Purchaser, in so far as reasonably practicable (subject to
any limitations that may be imposed by applicable Law or stock exchange rules),
in the same position in all material respects as if such Purchaser was able to effectively exercise its Subscription
Rights hereunder, including, without limitation, at the option of such
Purchaser, issuing to such Purchaser another class
of securities of THHC having terms to be agreed by THHC and such member having
a value at least equal to the value per share of GGO Common Stock, in each
case, as shall be necessary to enable such Purchaser to maintain its
proportionate GGO Common Stock-equivalent interest in THHC on a Fully Diluted Basis.


 


(viii)        Termination.  This Section 1 shall terminate at
such time as the Purchaser Group collectively beneficially own less than 5% of
the outstanding shares of GGO Common Stock on a Fully Diluted Basis.


 


2.             Stockholder
Vote With Respect to Subscription Right.  THHC shall, for the benefit of each
Purchaser, to the extent required by any U.S. national securities exchange upon
which shares of GGO Common Stock are listed, for so long as any Purchaser has
subscription rights as contemplated by Section 1, put up for a
stockholder vote at the annual meeting of its stockholders, and include in its
proxy statement distributed to such stockholders in connection with such annual
meeting, approval of such Purchaser’s subscription rights for the maximum
period permitted by the rules of such U.S. national securities exchange.


 


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3.             Transfer
Restrictions.  Each
Purchaser covenants and agrees that the GGO Shares (and shares issuable upon
exercise of GGO Warrants) shall be disposed of only pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities Laws.  Each Purchaser agrees to the imprinting, so
long as is required by this Section 3, of the following legend on
any certificate evidencing the GGO Shares (and shares issuable upon exercise of
GGO Warrants):


 


THE SHARES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED (THE “ACT”) OR UNDER ANY STATE
SECURITIES LAWS (“BLUE SKY”) OR THE SECURITIES LAWS OF ANY OTHER
RELEVANT JURISDICTION.  THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE.  THE SHARES MAY NOT BE SOLD,
ASSIGNED, MORTGAGED, PLEDGED, ENCUMBERED, HYPOTHECATED, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS EITHER (I) A REGISTRATION STATEMENT WITH
RESPECT TO THE SHARES IS EFFECTIVE UNDER THE ACT AND APPLICABLE BLUE SKY LAWS
AND THE SECURITIES LAWS OF ANY OTHER RELEVANT JURISDICTION ARE COMPLIED WITH OR
(II) UNLESS WAIVED BY THE ISSUER, THE ISSUER RECEIVES AN OPINION OF LEGAL
COUNSEL SATISFACTORY TO THE ISSUER THAT NO VIOLATION OF THE ACT OR OTHER
APPLICABLE LAWS WILL BE INVOLVED IN SUCH TRANSACTION.


 


Certificates evidencing the GGO Shares (and shares
issuable upon exercise of GGO Warrants) shall not be required to contain such
legend (A) while a registration statement covering the resale of the GGO
Shares is effective under the Securities Act, or (B) following any sale of
any such GGO Shares pursuant to Rule 144 of the Exchange Act (“Rule 144”),
or (C) following receipt of a legal opinion of counsel to the applicable
Purchaser that the remaining GGO Shares held by such Purchaser are eligible for
resale without volume limitations or other limitations under Rule 144.  In addition, THHC will agree to the removal
of all legends with respect to shares of GGO Common Stock deposited with DTC
from time to time in anticipation of sale in accordance with the volume limitations
and other limitations under Rule 144, subject to THHC’s approval of
appropriate procedures, such approval not to be unreasonably withheld,
conditioned or delayed.


 


Following the time at which such legend is no longer
required (as provided above) for certain GGO Shares, THHC shall promptly,
following the delivery by the applicable Purchaser to THHC of a legended
certificate representing such GGO Shares, deliver or cause to be delivered to
such Purchaser a certificate representing such GGO Shares that is free from
such legend.  In the event the above
legend is removed from any of the GGO Shares, and thereafter the effectiveness
of a registration statement covering such GGO Shares is suspended or THHC
determines that a supplement or amendment thereto is required by applicable
securities Laws, then THHC may require that the above legend be placed on any
such GGO Shares that cannot then be sold pursuant to an effective registration
statement or under Rule 144 and such Purchaser shall cooperate in the replacement
of such legend.  Such legend shall
thereafter be removed when 


 


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such
GGO Shares may again be sold pursuant to an effective registration statement or
under Rule 144.


 


For the avoidance of doubt, each Purchaser’s
Subscription Rights pursuant to Section 1 may not be sold,
transferred or disposed of to a Person that is not a member of the Purchaser
Group.


 


4.             Rights Agreement.  In the event THHC adopts a rights plan
analogous to the Rights Agreement (the “GGO Rights Agreement”), (i) the
GGO Rights Agreement shall be inapplicable to the Stock Purchase Agreement,
this Agreement and the transactions contemplated thereby and hereby, (ii) no
Purchaser, nor any other member of its Purchaser Group, shall be deemed to be
an Acquiring Person (as defined in the Rights Agreement) whether in connection
with the acquisition of shares of GGO Common Stock or GGO Warrants or the
shares issuable upon exercise of the GGO Warrants, (iii) neither a Shares
Acquisition Date (as defined in the Rights Agreement) nor a Distribution Date
(as defined in the Rights Agreement) shall be deemed to occur and (iv) the
Rights (as defined in the Rights Agreement) will not separate from the GGO
Common Stock, in each case under (ii), (iii) and (iv), as a result of the
execution, delivery or performance of the Stock Purchase Agreement or this
Agreement or the consummation of the transactions contemplated thereby and
hereby including the acquisition of shares of GGO Common Stock by any Purchaser
or other member of the Purchaser Group after the date hereof as otherwise
permitted by the Stock Purchase Agreement and this Agreement, or the GGO
Warrants.


 


5.             Assignment; Third Party
Beneficiaries.  Neither
this Agreement nor any of the rights, interests or obligations under this
Agreement may be assigned by any party without the prior written consent of the
other party.  Notwithstanding the
previous sentence, this Agreement, or a Purchaser’s rights, interests or
obligations hereunder, may be assigned or transferred, in whole or in part, by
such Purchaser to one or more members of its Purchaser Group.  Notwithstanding the foregoing or any other
provisions herein, no such assignment shall relieve Purchaser of its obligations
hereunder if such assignee fails to perform such obligations.


 


6.             Prior Negotiations; Entire
Agreement.  This
Agreement constitutes the entire agreement of the parties and supersedes all
prior agreements, arrangements or understandings, whether written or oral,
between the parties with respect to the subject matter of this Agreement.


 


7.             Governing Law; Venue.  THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.  EACH OF THE PARTIES HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF, AND VENUE IN, ANY STATE OR FEDERAL COURT
LOCATED IN NEW YORK, NEW YORK AND WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS.


 


8.             Counterparts.  This Agreement may be executed in any number
of counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each of the
parties; and delivered to the other 


 


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party (including via facsimile or other electronic
transmission), it being understood that each party need not sign the same
counterpart.


 


9.             Waivers and Amendments.  This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions of
this Agreement may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance.  No delay on the part of any party in
exercising any right, power or privilege pursuant to this Agreement shall operate
as a waiver thereof, nor shall any waiver on the part of any party of any
right, power or privilege pursuant to this Agreement, nor shall any single or
partial exercise of any right, power or privilege pursuant to this Agreement,
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege pursuant to this Agreement.  The rights and remedies provided pursuant to
this Agreement are cumulative and are not exclusive of any rights or remedies
which any party otherwise may have at law or in equity.


 


10.           Certain Remedies.  The parties agree that irreparable damage
would occur in the event that any provisions of this Agreement were not
performed in accordance with their specific terms.  It is accordingly agreed that each of the
parties shall be entitled to an injunction or injunctions (without necessity of
proving damages or posting a bond or other security) to prevent breaches of
this Agreement, and to enforce specifically the terms and provisions of this
Agreement, in addition to any other applicable remedies at law or equity


 


[Signature Page Follows]


 


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Please evidence your acceptance of, and agreement
to, the terms and conditions of this Agreement by executing and returning an
executed copy of this Agreement to the address first written above as soon as
practicable.


 


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  THE HOWARD HUGHES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


Accepted and agreed as of the date of this
Agreement:


 


FAIRHOLME FUNDS, INC., 

on behalf of its series The Fairholme Fund


 


 


	
  By:

  	
   

  	
   

  
	
  Name:  Bruce R. Berkowitz

  	
   

  
	
  Title:  President

  	
   

  



 


 


FAIRHOLME FUNDS, INC.,


on behalf of its series Fairholme Focused Income Fund


 


 


	
  By:

  	
   

  	
   

  
	
  Name:  Bruce R. Berkowitz

  	
   

  
	
  Title:  President

  	
   

  



 


[SIGNATURE
PAGE TO LETTER AGREEMENT]