Document:

Exhibit
10.12

 

AMENDMENT NO. 7 TO CREDIT AGREEMENT

 

This Amendment No. 7 to
Credit Agreement (this “Amendment”)
dated as of November 23, 2010, is made by and among WALTER
ENERGY, INC., a Delaware corporation formerly known as Walter
Industries, Inc. (the “Borrower”),
BANK OF AMERICA, N.A., a national
banking association organized and existing under the laws of the United States
(“Bank of America”),
in its capacity as administrative agent for the Lenders (as defined in the
Credit Agreement (as defined below)) (in such capacity, the “Administrative Agent”),
and each of the Lenders signatory hereto.

 

W I T N E S S E T H:

 

WHEREAS, the Borrower,
the Administrative Agent and the Lenders have entered into that certain Credit
Agreement dated as of October 3, 2005 (as amended by Amendment No. 1 to Credit
Agreement and Waiver dated as of January 24, 2006, as further amended by
Amendment No. 2 to Credit Agreement and Waiver dated as of February 14, 2006,
as further amended by Amendment No. 3 to Credit Agreement dated as of September
14, 2006, as further amended by Amendment No. 4 to Credit Agreement dated as of
October 9, 2007, as further amended by Amendment No. 5 to Credit Agreement
dated as of April 30, 2008, as further amended by Amendment No. 6 to Credit
Agreement dated as of September 3, 2009, as hereby amended and as from time to
time hereafter further amended, modified, supplemented, restated, or amended
and restated, the “Credit
Agreement”; the capitalized terms used in this Amendment not
otherwise defined herein shall have the respective meanings given thereto in
the Credit Agreement), pursuant to which the Lenders have made available to the
Borrower a term loan facility and a revolving credit facility, including a
letter of credit facility and a swing line facility; and

 

WHEREAS, the Borrower
has requested that the Administrative Agent and the Lenders agree to amend
certain terms of the Credit Agreement, which the Administrative Agent and the
Lenders party hereto are willing to do on the terms and conditions contained in
this Amendment;

 

NOW,
THEREFORE, in consideration of the premises and further
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

 

1.             Amendment to Credit
Agreement.  Subject to
the terms and conditions set forth herein, Section 8.02(n) of the Credit
Agreement is hereby amended by deleting such subsection in its entirety and
replacing it with the following in lieu thereof:

 

“(n)         (i) other Investments within
the meaning of clause (a) and (b) of the definition of “Investment”
(and otherwise excluding Homebuilding Assets) not exceeding $25,000,000 in any
fiscal year of the Borrower, provided that (A) the aggregate of all
Investments made under this clause (n) at any time outstanding shall not
exceed $75,000,000 and (B) the aggregate amount of all Investments in New
Holdco or any of its Subsidiaries made under this clause (n) at any time
outstanding shall not exceed $15,000,000 (without increasing the aggregate
limit in the preceding clause (n)(ii)); provided  further
that (x) the 

 

 

aggregate amount of
Investments at any time outstanding under clause (i) of the immediately
preceding proviso shall be increased on any date of measurement thereof by an
amount equal to the sum of fifty percent (50%) of the portion of Excess
Cash Flow each year not required to be paid to reduce the Term Loan pursuant to
Section 2.06(d)(iv)  plus fifty percent (50%) of the portion of
the Net Cash Proceeds from the public or private issuance of Equity Interests
of the Borrower or any Restricted Subsidiary not required to be paid to reduce
the Term Loan pursuant to Section 2.06(d)(iii)  plus fifty percent
(50%) of the portion of the Net Cash Proceeds from a Permitted Securities
Transaction actually received by the Borrower and paid to reduce the Term Loan
pursuant to Section 2.06(d)(vi), in each case net of any such amounts
utilized in Section 8.06(c) and/or in Section 8.13 on or prior to
such date, and (y) the annual limit of $25,000,000 provided in this Section
8.02(n) shall be increased on any date of measurement thereof by an amount
equal to 1/3 of the amount by which the $75,000,000 limit is increased pursuant
to the immediately preceding proviso (A) as of such date; and (ii) Investments pursuant to the Borrower’s
agreement to purchase 25,274,745 shares
of common stock of Western Coal Corp. from affiliates of Audley Capital for CAD
$11.50 per share;”

 

2.             Effectiveness; Conditions
Precedent.  The
effectiveness of this Amendment and the amendment to the Credit Agreement
provided in Section 1 hereof are subject to the satisfaction of each the
following conditions precedent:

 

(a)           The Administrative Agent
shall have received each of the following fees, documents or instruments in
form and substance reasonably acceptable to the Administrative Agent:

 

(i)                                     counterparts of
this Amendment, duly executed by the Borrower, the Administrative Agent and the
Required Lenders, which counterparts may be delivered by telefacsimile or other
electronic means (including .pdf), but such delivery will be promptly followed
by the delivery of four (4) original signature pages by each Person party
hereto unless waived by the Administrative Agent; and

 

(ii)                                  such other
assurances, certificates, documents, consents or opinions as the Administrative
Agent reasonably may require.

 

(b)           an amendment fee payable to
each Lender that executes this Amendment by 5:00 p.m. Eastern Time on Tuesday,
November 23, 2010, such amendment fee for each Lender’s own account, in an
amount equal to (a) for each such Revolving Lender, seven and one-half basis
points (7.5 “bps”) multiplied  by such Revolving Lender’s
Revolving Credit Commitment immediately prior to the effective date of this
Amendment and (b) for each Term Loan Lender, seven and one-half basis points (7.5
“bps”) multiplied  by such Term Loan Lender’s Outstanding Amount
with respect to the Term Loan immediately prior to the effective date of this
Amendment; and

 

(c)           in addition to the amendment
fee,  all other fees and expenses payable to

 

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the
Administrative Agent and the Lenders (including the reasonable fees and
expenses of counsel to the Administrative Agent) shall have been paid in full
(without prejudice to final settling of accounts for such fees and expenses).

 

3.             Representations and
Warranties.  In order to
induce the Administrative Agent and the Lenders to enter into this Amendment,
the Borrower represents and warrants to the Administrative Agent and the
Lenders as follows:

 

(a)           The representations and
warranties made by the Borrower  in
Article VI of the Credit Agreement and in each of the other Loan
Documents to which it is a party are true and correct in all material respects
on and as of the date hereof, except to the extent that such representations
and warranties expressly relate to an earlier date;

 

(b)           This Amendment has been duly
authorized, executed and delivered by the Borrower and constitutes a legal,
valid and binding obligation of such parties; and

 

(c)           After giving effect to this
Amendment, no Default or Event of Default has occurred and is continuing.

 

4.             Entire Agreement.  This Amendment, together with all the Loan
Documents (collectively, the “Relevant Documents”), sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relating to such subject matter. 
No promise, condition, representation or warranty, express or implied,
not set forth in the Relevant Documents shall bind any party hereto, and no
such party has relied on any such promise, condition, representation or
warranty.  Each of the parties hereto
acknowledges that, except as otherwise expressly stated in the Relevant
Documents, no representations, warranties or commitments, express or implied,
have been made by any party to the other in relation to the subject matter
hereof or thereof.  None of the terms or
conditions of this Amendment may be changed, modified, waived or canceled
orally or otherwise, except in writing and in accordance with Section 11.01
of the Credit Agreement.

 

5.             Full Force and Effect of
Agreement.  Except as
hereby specifically amended, modified or supplemented, the Credit Agreement and
all other Loan Documents are hereby confirmed and ratified in all respects and
shall be and remain in full force and effect according to their respective
terms.

 

6.             Counterparts.  This Amendment may be executed in any number
of counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument.  Delivery of an
executed counterpart of a signature page of this Amendment by telecopy or other
electronic means (including .pdf) shall be effective as delivery of a manually
executed counterpart of this Amendment.

 

7.             Governing Law.  This Amendment shall in all respects be
governed by, and construed in accordance with, the laws of the State of New
York applicable to contracts executed and to be performed entirely within such
State, and shall be further subject to the provisions of 

 

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Sections 11.14 and 11.15
of the Credit Agreement.

 

8.             Enforceability.  Should any one or more of the provisions of
this Amendment be determined to be illegal or unenforceable as to one or more
of the parties hereto, all other provisions nevertheless shall remain effective
and binding on the parties hereto.

 

9.             References.  All references in any of the Loan Documents
to the “Credit Agreement” shall mean the Credit Agreement, as amended hereby.

 

10.           Successors and Assigns.  This Amendment shall be binding upon and
inure to the benefit of the Borrower, the Administrative Agent and each of the
Guarantors and Lenders, and their respective successors, legal representatives,
and assignees to the extent such assignees are permitted assignees as provided
in Section 11.06 of the Credit Agreement.

 

[Signature pages intentionally ommitted.]

 

4Exhibit 10.1

 

Execution Copy

 

THE HOWARD HUGHES CORPORATION

WARRANT PURCHASE AGREEMENT

 

Purchaser: David
R.Weinreb

 

Date
of Purchase: November 22, 2010

 

Purchase
Price: $15,000,000

 

Number
of Shares Underlying Warrant: 2,367,985

 

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 Chief Executive Officer 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;

 

(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, 

 

2

 

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 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 

 

3

 

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.

 

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 David R. Weinreb 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 

 

4

 

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 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 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.

 

5

 

(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)
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 

 

6

 

transaction shall be the gross number of shares
(subject to the transaction, e.g., 2,367,985 in the case of a full exercise),
multiplied by the Exercise Price, and divided by the SA (as defined 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.

 

7

 

(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 

 

8

 

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

 

9

 

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.

 

10

 

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

  

 

11

 

	
   

  	
   

  	
  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]

 

12

 

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/
  David R. Weinreb

  	
   

  
	
   

  	
   

  
	
  David
  R. Weinreb

  	
   

  

 

13

 

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:               David R. Weinreb

 

Address:

 

Social
Security No.:

 

2.                                       The property with respect to which the election is made is a warrant
(the “Warrant”) to purchase 2,367,985 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 $15,000,000.

 

7.                                       The amount paid for such property is $15,000,000.

 

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.

 

14

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