Document:

Exhibit 10.1

EXECUTION VERSION

First Amendment to the

Amended and Restated Agreement

of Limited Partnership

of Rouse Properties, LP

 Establishing Series A Preferred Units of the Partnership

This Amendment is made as of November 12, 2015 by Rouse GP, LLC, a Delaware limited liability company, as general partner (the "General Partner") of Rouse Properties, LP, a Delaware limited partnership (the "Partnership"), and as attorney-in-fact for the Persons named on Exhibit A to the Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of January 8, 2015 (the "Partnership Agreement"), for the purpose of amending the Partnership Agreement.  Capitalized terms used herein and not defined shall have the meanings given to them in the Partnership Agreement.

WHEREAS, pursuant to that certain Contribution and Escrow Agreement (the "Contribution Agreement"), dated as of September 28, 2015, by and between Plaza Camino Real, a California limited partnership, as Transferor (the "Contributor"), and the Partnership, as Transferee, and First American Title Insurance Company, as Escrow Agent, the Contributor agreed to contribute certain assets to the Partnership in exchange for, among other things, preferred Partnership Units of the Partnership.

WHEREAS, the Contributor, Rouse Properties, Inc. (the "Company") and the Partnership have also entered into a Tax Protection Agreement (the "Tax Protection Agreement"), dated November 12, 2015, and the Contributor and the Company have entered into a Registration Rights Agreement, dated November 12, 2015, in connection with the transaction contemplated by the Contribution Agreement.

WHEREAS, Section 4.2.A of the Partnership Agreement grants the General Partner authority to cause the Partnership to issue Partnership Units (including without limitation, Common Units and preferred Partnership Units) or other Partnership Interests in the Partnership to any existing Partner or to any other Persons in one or more classes or one or more series of any such classes, with such designations, preferences, redemption and conversion rights and relative, participating, optional or other special rights, powers and duties as may be determined by the General Partner in its sole and absolute discretion, subject to applicable Delaware law.

WHEREAS, the General Partner has determined that, in connection with the issuance of the preferred Partnership Units contemplated by the Contribution Agreement, it is necessary and desirable to amend the Partnership Agreement to create and set forth the terms of the preferred Partnership Units having the designations, rights and preferences set forth herein.

WHEREAS, solely to the extent necessary to effect the establishment of the Series A Preferred Units (as defined herein) with the terms and conditions described herein, and to set forth certain tax matters, the following shall be deemed to amend the Partnership Agreement.

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the General Partner hereby amends the Partnership Agreement as follows:

1.            Article 1 of the Partnership Agreement is hereby amended by adding the following definitions:

"30 day VWAP" has the meaning set forth in Section 2.F.(v).

"As Exchanged REIT Shares" has the meaning set forth in Section 2.F.(vi).

 "Capital Proceeds" means the cash received by the Partnership or any Subsidiary from a sale, exchange, transfer, assignment, redemption, repayment of principal or other disposition of assets.

"Contribution Agreement" has the meaning set forth in the recitals to this Amendment.

"Contributor" has the meaning set forth in the recitals to this Amendment.

"Default Distribution Rate" has the meaning set forth in Section 2.C.(iii).

"Distribution Default" has the meaning set forth in Section 2.C.(iii).

"Distribution Period" has the meaning set forth in Section 2.C.(ii).

"Equity Base" means, (i) if the Company (or its successor by merger or otherwise) has a class of common equity securities listed on a National Securities Exchange, the sum of the value of all outstanding Common Units plus the liquidation preference of all outstanding preferred Partnership Units, and (ii) if the Company (or its successor by merger or otherwise) does not have a class of common equity securities listed on a national securities exchange, the Net Worth of the Partnership.  For purposes of clause (i) in the preceding sentence, the value of all outstanding Common Units shall be equal to the product of (i) the number of outstanding Common Units multiplied by (ii) the Conversion Factor, multiplied by (iii) the 30 day VWAP of the REIT Shares as of the date of the most recent quarterly financial statement.

"FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980.

"GAAP" means generally accepted accounting principles in the United States of America in effect from time to time.

"Majority-in-Interest" means more than 50% of the outstanding Series A Preferred Units at the relevant time.

"Minimum NW Amount" means, as of the applicable date of determination,  a Net Worth of $420,000,000.00; provided, however, that the Minimum NW Amount shall be reduced in connection with any partial redemption of the Series A Preferred Units by 

 

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an amount equal to the product of (i) 2.8125 and (ii) the $25.00 liquidation preference of the Series A Preferred Units so redeemed (e.g., if $50 million of Series A Preferred Units are redeemed, the Minimum NW Amount would be reduced by $140,625,000.00).

"National Securities Exchange" means an exchange registered as a national securities exchange under Section 6 of the U.S. Securities Exchange Act of 1934, as amended.

"Net Worth" means (i) the consolidated total assets of the Partnership and its Subsidiaries, plus (ii) the consolidated accumulated depreciation of the Partnership and its Subsidiaries, less (iii) the consolidated total liabilities of the Partnership and its Subsidiaries, in each case as those terms are defined for GAAP purposes.  Net Worth shall be determined based on a balance sheet (with a balance sheet date that is the date immediately following the date on which the Private Company Event occurred) audited or reviewed pursuant to PCAOB AU 722 by the Company's (or its successor's) independent accounting firm in accordance with GAAP.

 "Partnership Agreement" has the meaning set forth in the preamble to this Amendment.

"Permitted Senior Preferred Units" means preferred Partnership Units issued that by their terms expressly provide that such preferred Partnership Units rank senior to the Series A Preferred Units; provided, however, that the Partnership may not issue preferred Partnership Units that rank senior to the Series A Preferred Units without the consent of the holders of a majority of the outstanding Series A Preferred Units.

"Private Company Event" has the meaning set forth in Section 2.H.(i).

"Protected Property" means those certain assets contributed to the Partnership pursuant to the Contribution Agreement.

"Redemption Amount" has the meaning set forth in Section 2.F.(i).

"Redemption Notice" means a Series A Preferred Unit Holders Redemption Notice attached hereto as Exhibit A or Exhibit B.

"Regular Distribution Rate" has the meaning set forth in Section 2.C.(i).

"Safe Harbor Rate" has the meaning set forth in Section 2.C.(ix).

"Second Anniversary" has the meaning set forth in Section 2.C.(ix).

"Series A Liquidation Value" has the meaning set forth in Section 2.E.(i).

"Series A Preferred Units" means the series of Partnership Units established pursuant to this Amendment, representing units of Limited Partner Interest designated as the Series A Preferred Units, with, among other things, the preferences, rights, voting 

 

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powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion as described herein.

"Series A Preferred Unit Distribution Payment Date" has the meaning set forth in Section 2.C.(ii).

"Tax Protection Agreement" has the meaning set forth in the recitals to this Amendment.

2.            In accordance with Section 4.2.A of the Partnership Agreement, set forth below are the terms and conditions of the Series A Preferred Units hereby established:

A.            Designation and Number.  A series of Partnership Units, designated as Series A Preferred Units, is hereby established.  The maximum number of Series A Preferred Units shall be 5,600,000.  No Series A Preferred Units shall be issued to any person other than Contributor without the prior consent of Contributor.

B.            Rank.  The Series A Preferred Units, with respect to rights to the payment of regular and special periodic or other distributions and distribution of assets upon liquidation, dissolution or winding up of the Partnership, shall rank (i) junior to all existing and future indebtedness of the Partnership, (ii) senior to all existing and future Common Units and to preferred Partnership Units that by their terms expressly provide that such preferred Partnership Units rank junior to the Series A Preferred Units, (iii) on parity with preferred Partnership Units that by their terms expressly provide that such preferred Partnership Units rank on a parity with the Series A Preferred Units and (iv) junior to Permitted Senior Preferred Units; provided, however, that the Partnership may issue additional preferred Partnership Units that are on parity with the Series A Preferred Units only if, at the time of issuance the liquidation preference of such preferred Partnership Units, together with the liquidation preference of all outstanding preferred Partnership Units that are on a parity with or senior to the Series A Preferred Units and the liquidation preference of all outstanding Series A Preferred Units do not exceed 15% of the Equity Base.

C.            Distributions.

(i)            Pursuant to Section 5.1 of the Partnership Agreement but subject to the rights of holders of any Permitted Senior Preferred Units ranking senior to the Series A Preferred Units as to the payment of distributions, the holders of the then outstanding Series A Preferred Units shall be entitled to receive, when, as and if authorized by the General Partner, in its sole discretion out of Available Cash generated by the Partnership, cumulative quarterly preferential cash distributions in an amount per unit equal to 5% per annum of the $25.00 liquidation preference per Series A Preferred Unit (the "Regular Distribution Rate").

(ii)            Distributions on the Series A Preferred Units shall accrue and be fully cumulative from the date of original issuance and, subject to the authorization of the General Partner, shall be payable quarterly in equal amounts in arrears on the fifteenth day of each April, July, October and January or, if not a business day, the next succeeding business day (each, a "Series A Preferred Unit Distribution Payment

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Date").  Any distribution (including the initial distribution) payable on the Series A Preferred Units for any partial distribution period shall be prorated and computed on the basis of a 360-day year consisting of twelve 30-day months.  "Distribution Period" shall mean the period from and including the date of original issuance and ending on but excluding the next Series A Preferred Unit Distribution Payment Date, and each subsequent period from and including such Series A Preferred Unit Distribution Payment Date and ending on but excluding the next following Series A Preferred Unit Distribution Payment Date.

(iii)            If distributions on the Series A Preferred Units in the full amount described pursuant to this Section 2.C. are not made for two consecutive quarterly Distribution Periods (a "Distribution Default"), because the General Partner has not authorized such distributions, Available Cash is not sufficient or for any other reason, then the distribution rate shall be increased from the Regular Distribution Rate to a distribution rate of 8.5% per annum of the $25.00 liquidation preference per Series A Preferred Unit (the "Default Distribution Rate").  Any such increase in the distribution rate shall take effect from the first day of the Distribution Period immediately succeeding the occurrence of the Distribution Default and the Series A Preferred Units shall continue to accumulate distributions at the Default Distribution Rate until such time as the Partnership has paid in full all accumulated and unpaid distributions.  From and after the payment by the Partnership of all accumulated and unpaid distributions on the Series A Preferred Units, distributions will accumulate and be payable at the Regular Distribution Rate, commencing on the first day subsequent to the date on which all such accumulated and unpaid distributions are paid in full.

(iv)            No distribution on the Series A Preferred Units shall be authorized by the General Partner or declared or paid or set apart for payment by the Partnership at such time as the terms and provisions of any agreement of the Partnership, including any agreement relating to the indebtedness of the Partnership or its Subsidiaries, prohibits such authorization, declaration, payment or setting apart for payment or provides that such authorization, declaration, payment or setting apart for payment would constitute a breach thereof, or a default thereunder, or if such authorization, declaration, payment or setting apart for payment shall be restricted or prohibited by law.  No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Series A Preferred Units which may be in arrears.

(v)            Notwithstanding the foregoing, distributions with respect to the Series A Preferred Units shall accumulate (including at the Default Distribution Rate as set forth in clause (iii) above) whether or not any of the foregoing restrictions exist, whether or not there is sufficient Available Cash for the payment thereof and whether or not such distributions are authorized. Accumulated but unpaid distributions on Series A Preferred Units shall not bear interest and holders of the Series A Preferred Units shall not be entitled to any distributions in excess of full cumulative distributions.  Any distribution payment made on the Series A Preferred Units shall first be credited against the earliest accumulated but unpaid distribution due with respect to such units which remains payable.

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(vi)            Except as provided in Section 2.C.(ix) herein, unless full cumulative distributions have been or contemporaneously are paid on the Series A Preferred Units for all past distribution periods, no distributions shall be authorized, declared or paid or set apart for payment nor shall any other distribution be authorized, declared or made upon any other Partnership Interests ranking, as to the payment of distributions or the distribution of assets upon any liquidation, dissolution or winding up of the Partnership, junior to or on a parity with the Series A Preferred Units for any period, nor shall any other Partnership Interests ranking junior to or on a parity with the Series A Preferred Units as to the payment of distributions or the distribution of assets upon any liquidation, dissolution or winding up of the Partnership, be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such Partnership Interests) by the Partnership (except by conversion into or exchange for Partnership Interests ranking junior to the Series A Preferred Units as to the payment of distributions and the distribution of assets upon any liquidation, dissolution or winding up of the affairs of the Partnership).

(vii)            When distributions are not paid in full upon the Series A Preferred Units and any other Partnership Interests ranking on a parity as to the payment of distributions with the Series A Preferred Units, all distributions authorized and declared upon the Series A Preferred Units and any other Partnership Interests ranking on a parity as to the payment of distributions with the Series A Preferred Units shall be declared pro rata so that the amount of distributions authorized and declared per Series A Preferred Unit and such other Partnership Interests shall in all cases bear to each other the same ratio that accumulated distributions per each Series A Preferred Unit and such other Partnership Interests (which shall not include any accumulation in respect of unpaid distributions for prior distribution periods if such other Partnership Interests do not have a cumulative distribution) bear to each other.

(viii)            Holders of Series A Preferred Units shall not be entitled to any distribution, whether payable in cash, property or Partnership Interests, in excess of full cumulative distributions on the Series A Preferred Units as described above.  Accrued but unpaid distributions on the Series A Preferred Units will accumulate as of the Series A Preferred Units Distribution Payment Date on which they first become payable.

(ix)            No distribution on the Series A Preferred Units shall be declared or paid or set apart for payment by the Partnership on or prior to the second anniversary of the date on which such Series A Preferred Units were issued (the "Second Anniversary") if the payment of such distribution with respect to the Series A Preferred Units would, if made, result in any holder of such Series A Preferred Unit receiving distributions in excess of an annual return on such holder's "unreturned capital" (as defined for purposes of Treasury Regulations Section 1.707-4(a)) for a Partnership Year (treating the Partnership Year in which such Second Anniversary occurs as ending on such Second Anniversary solely for purposes of this Section 2.C.(ix)) equal to the Safe Harbor Rate (as defined below).  The payment of such distribution to such holder in excess of such amount will instead be deferred, will continue to cumulate (without interest) and will be payable on the earliest to occur of (a) the disposition of the Series A

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Preferred Units to which such deferred distribution relates in a transaction in which the disposing holder recognizes taxable gain thereon, (b) the first Series A Preferred Unit Distribution Payment Date with respect to the Series A Preferred Units following the Second Anniversary or (c) to the extent such deferred distribution does not exceed such holder's share of "net cash flow of the partnership from operations" (as defined for purposes of Treasury Regulations Section 1.707-4(b)) for the calendar year in which such distribution would have been made but for this Section 2.C.(ix), the second Series A Preferred Unit Distribution Payment Date of the next succeeding calendar year. For purposes of the foregoing, the "Safe Harbor Rate" shall equal 150% of the highest applicable federal rate, based on quarterly compounding, in effect for purposes of Section 1274(d) of the Code at any time between the date on which such Series A Preferred Units were issued and the date on which the relevant distribution or redemption price payment is to be made. Such Safe Harbor Rate shall be provided to the Partnership by holders of the Series A Preferred Units at least fourteen (14) days prior to the relevant Series A Preferred Unit Distribution Payment Date, and the Partnership shall be permitted to rely on the rate most recently provided by such holders for the purposes of paying the applicable distribution or redemption price hereunder. Payments of distributions with respect to the Series A Preferred Units are intended to qualify as preferred returns that are not treated as part of a disguised sale within the meaning of Treasury Regulations Sections 1.707-3 and 1.707-4.

 

D.            Certain Capital Account and Related Tax Matters.

(i)            Notwithstanding any other provision of the Partnership Agreement to the contrary, in the event that the Partnership issues additional Partnership Units (including the Series A Preferred Units), the General Partner shall make such revisions to Section 6.1 of the Partnership Agreement as it determines are necessary to reflect the terms of the issuance of such additional Partnership Units, including preferential allocations to certain classes of Units, subject to the terms of such classes of Units and subject to the terms and conditions hereof.

(ii)            Section 6.1A and Section 6.1B of the Partnership Agreement shall be superseded in their entirety by the following:

For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership's items of income, gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be allocated among the Partners in each Partnership Year (or portion thereof) as provided herein below. Except as otherwise provided in this Section 6.1, Net Income and Net Loss shall be allocated to each of the Partners holding the same class of Partnership Units in accordance with their respective Percentage Interests in such class of Partnership Units.

A.            After giving effect to the special allocations set forth in Section 1 of Exhibit C attached to the Partnership Agreement, Net Income for any Partnership Year shall be allocated in the following manner and order of priority:

 

 

 

(a)            First, 100% to the General Partner in an amount equal to the remainder, if any, of the cumulative Net Losses allocated to the General Partner pursuant to Section 6.1B(d) for all prior Partnership Years minus the cumulative Net Income allocated to the General Partner pursuant to this Section 6.1A(a) for all prior Partnership Years;

(b)            Second, 100% to each Partner holding Partnership Units in an amount equal to the remainder, if any, of the cumulative Net Losses allocated to each such Partner pursuant to Section 6.1B(c) for all prior Partnership Years minus the cumulative Net Income allocated to such Partner pursuant to this Section 6.1A(b) for all prior Partnership Years;

(c)            Third, 100% to the Partners holding Preferred Units in an amount equal to the remainder, if any of the cumulative Net Losses allocated to each such Partner pursuant to Section 6.1B(b) for all prior Partnership Years minus the cumulative Net Income allocated to such Partner pursuant to this Section 6.1A(c) for all prior Partnership Years;

(d)            Fourth, 100% to the Partners holding Common Units in an amount equal to the remainder, if any, of the cumulative Net Losses allocated to each such Partner pursuant to Section 6.1B(a) for all prior Partnership Years, minus the cumulative Net Income allocated to each such Partner pursuant to this Section 6.1A(d) for all prior Partnership Years;

(e)            Fifth, 100% to the Partners holding Preferred Units, with respect to each series of Preferred Units, in an amount equal to the excess of (i) the cumulative priority return (as defined in the applicable terms and conditions of any such class of Preferred Units) to the last day of the current Partnership Year or the date of redemption of such Preferred Units, to the extent such Preferred Units are redeemed during such Partnership Year, over (ii) the cumulative Net Income allocated to the Partners holding such Preferred Units pursuant to this Section 6.1A(e) for all Partnership Years; and

(f)            Sixth, 100% to the Partners holding Common Units.

For purposes of allocating the tranches of Net Income and items of income and gain pursuant to this Section 6.1A, there shall, to the extent permitted by the Code, be no allocation of FIRPTA gain items to the Partners holding Series A Preferred Units, except to the extent attributable to the Protected Property.

B.            Net Losses for any Partnership Year shall be allocated in the following manner and order of priority:

(a)            First, 100% to the Partners holding Common Units until the Adjusted Capital Account of each such Partner is zero (not taking into account any amounts a Partner is obligated to contribute to the capital of the Partnership or is deemed obligated to contribute pursuant to Treas. Reg. 1.704-1(b)(2)(ii)(c)(2));

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(b)            Second, 100% to the Partners holding Preferred Units, pro rata to each such Partner's Adjusted Capital Account (ignoring for this purpose any amounts a Partner is obligated to contribute to the capital of the Partnership or is deemed obligated to contribute pursuant to Treas. Reg. 1.704-1(b)(2)(ii)(c)(2)) until the Adjusted Capital Account of each such Partner is zero;

(c)            Third, 100% to the Partners holding Partnership Units to the extent of, and in proportion to, the positive balance, if any, in their Adjusted Capital Accounts; and

(d)            Fourth, 100% to the General Partner.

(iii)            Notwithstanding any other provision of the Partnership Agreement to the contrary, the General Partner shall elect to (a) use the "traditional" method of allocation under Section 704(c) and Regulations Section 1.704-3(b) in respect of the Protected Property contributed to the Partnership pursuant to the Contribution Agreement and (b) allocate excess nonrecourse liabilities (as defined in Treasury Regulation Section 1.752-3(a)(3)) up to the amount of built-in gain with respect to the Property under Code Section 704(c) to the extent such built-in gain exceeds the gain described in Treasury Regulation Section 1.752-3(a)(2) with respect to such property.

 

E.            Liquidation Preference.

 

(i)            In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, the holders of the Series A Preferred Units shall be entitled to receive out of the assets of the Partnership available for distribution to the Partners pursuant to Section 13.2 of the Partnership Agreement a liquidation preference of $25.00 per Series A Preferred Unit, plus an amount equal to any accumulated and unpaid distributions (whether or not authorized) to the date of payment (the "Series A Liquidation Value"), before any distribution of assets is made to holders of any other Partnership Interests that rank junior to the Series A Preferred Units as to the distribution of assets upon the liquidation, dissolution or winding up of the Partnership, but subject to the preferential rights of the holders of Permitted Senior Preferred Units ranking senior to the Series A Preferred Units as to the distribution of assets upon the liquidation, dissolution or winding up of the Partnership.

(ii)            If upon any such voluntary or involuntary liquidation, dissolution or winding up of the Partnership, the assets of the Partnership legally available for distribution to its Partners are insufficient to make such full payment to the holders of the Series A Preferred Units, and the corresponding amounts payable on all other Partnership Interests ranking on a parity with the Series A Preferred Units as to the distribution of assets upon the liquidation, dissolution or winding up of the Partnership, then the holders of the Series A Preferred Units, and all other holders of such Partnership Interests on a parity with the Series A Preferred Units shall share ratably in any such distribution of assets in proportion to the full liquidating distributions (including, if applicable, accumulated and unpaid distributions) to which they would otherwise be respectively entitled.

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(iii)            After payment of the full amount of the Series A Liquidation Value, the holders of the Series A Preferred Units, shall have no right or claim to any of the remaining assets of the Partnership.

(iv)            None of a consolidation or merger of the Partnership with or into another entity, a merger of another entity with or into the Partnership, a statutory unit exchange by the Partnership or a sale, lease or conveyance of all or substantially all of the Partnership's property or business shall be considered a liquidation, dissolution or winding up of the affairs of the Partnership.

F.            Redemptions.

(i)            Optional Redemption by the Partnership.  Notwithstanding any other provision of the Partnership Agreement to the contrary and subject to the obligations under the Tax Protection Agreement, at any time from and after the third anniversary of the date of the original issuance of the Series A Preferred Units (i.e., from and after November 12, 2018), the Partnership shall have the right to redeem the Series A Preferred Units in whole or in part at the option of the Partnership for consideration equal to the $25.00 liquidation preference for such Series A Preferred Units plus an amount equal to any accumulated and unpaid distributions to the date of the redemption (the "Redemption Amount"), in the form elected by the Partnership of either cash or Common Units (valued as provided in Section 2.F.(v) below), or a combination thereof.  Any such redemption will be made pro rata among the holders of Series A Preferred Units.

(ii)            Redemption by Election of the Majority-in-Interest on or after the 10th Anniversary.    A holder of the Majority-in-Interest of the Series A Preferred Units shall have the right, at any time on or after the date that is the tenth anniversary of the date of the original issuance of the Series A Preferred Units (i.e., November 12, 2025), to require the Partnership to redeem all of the Series A Preferred Units that remain outstanding for consideration equal to the Redemption Amount.  Upon any such election to be redeemed made by the holder of a Majority-in-Interest of the Series A Preferred Units, the Partnership shall redeem the Series A Preferred Units in the form elected by the Partnership of either cash or Common Units (valued as provided below), or a combination thereof.

(iii)            Optional Redemption by a Holder.  If, at any time after January 1, 2022, the aggregate liquidation preference of the Series A Preferred Units exceeds 15% of the Equity Base as of the end of a calendar quarter, then a holder of Series A Preferred Units shall have the right, but not the obligation, to require the Partnership to redeem up to the amount of the Series A Preferred Units necessary for the outstanding Series A Preferred Units to represent 15% of the Equity Base at a redemption price equal to the Redemption Amount of such Series A Preferred Units, in the form elected by the Partnership of either cash or Common Units (valued as provided below), or a combination thereof.  The Partnership shall honor optional redemption requests in priority of the order in which such requests are received, provided that the optional redemption requests of holders of the Series A Preferred Units shall be honored before

 

 

 

 

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any redemption requests of holders of any other Partnership Interests that rank junior to the Series A Preferred Units.

(iv)            Rights Cease upon a Redemption.  From and after the applicable redemption date, the Series A Preferred Units so redeemed shall no longer be outstanding and all rights hereunder, to distributions or otherwise, with respect to such Series A Preferred Units shall cease (except for rights with respect to books, records, accounting, reports and tax matters set forth in Article 9 and Article 10 of the Partnership Agreement, to the extent necessary for the redeeming holder of Series A Preferred Units to comply with any required tax or financial filings or reporting requirements).

(v)            Valuation of Common Units upon a Redemption.  The value of each Common Unit to be issued in connection with a redemption of Series A Preferred Units pursuant to this Section 2.F. shall be equal to the product of (a) 96% of the Volume-Weighted Average Price (VWAP) of the REIT Shares over the 30 trading days (the "30 day VWAP") prior to (but excluding) the date of redemption multiplied by (b) the Conversion Factor.  No fractional Common Units may be issued by the Partnership and, instead of any fractional interest in a Common Unit that would otherwise be deliverable upon a redemption, the Partnership shall pay to the holder of the Series A Preferred Units an amount in cash equal to the product of (x) such fractional interest and (y) the value of a Common Unit.

(vi)            Limitation on Equity Issuances upon Redemptions.  If, as a result of a redemption under Section 2.F.(i) or Section 2.F.(ii), a holder of Series A Preferred Units being redeemed for Common Units would own more than 15% of the outstanding REIT Shares (assuming all of the Common Units issued upon redemption of the Series A Preferred Units were immediately exchanged for REIT Shares in accordance with Section 8.6 of the Partnership Agreement ("As Exchanged REIT Shares")), then, in lieu of redeeming Series A Preferred Units for Common Units, the Partnership shall redeem for cash such number of Series A Preferred Units necessary to reduce the number of Common Units to be issued upon such redemption such that the holder does not own more than 15% of the As Exchanged REIT Shares as a result of such redemption.

(vii)            Redemption.  If the Partnership redeems any of the Series A Preferred Units for Common Units, then any such Common Units shall be immediately redeemable by the Contributor pursuant to Section 8.6 of the Partnership Agreement; provided, however, that with respect to any Series A Preferred Units that are redeemed by the Partnership for Common Units, (a) the Specified Redemption Date for any redemption pursuant to Section 8.6 of the Partnership Agreement shall mean the date on which the Partnership receives a Redemption Notice with respect to such Common Units and (b) Section 8.6.C of the Partnership Agreement shall not apply to any redemption of such Common Units.

(viii)            Registration Rights.  Notwithstanding Section 8.6 of the Partnership Agreement and the redemption rights set forth in Sections 2.F.(i), 2.F.(ii) and 2.F.(iii) hereof, (A) the Partnership may only issue Common Units, and the Company may only issue REIT Shares, as applicable, in connection with a redemption if (1) a 

 

 

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registration statement relating to the REIT Shares for which such Common Units may be redeemed has been filed with the Securities and Exchange Commission in accordance with the Registration Rights Agreement, (2) such registration statement is effective at the time of issuance of such Common Units and (3) a Suspension Event (as defined in the Registration Rights Agreement) is not occurring and not reasonably likely to occur within 45 days of such redemption, otherwise the Partnership must redeem in the form of cash, and (B) if (1) a Black-out Period (as defined in the Registration Rights Agreement) is occurring and (2) the Partnership elects to redeem in the form of Common Units, then the issuance of Common Units shall be delayed until the expiration of the Black-out Period (and the value of the issued Common Units shall be based on the 30 day VWAP as of the date prior to (but excluding) the date of issuance).

(ix)            Notices.

 

(a)            Redemption Notice by the Partnership.  Notice of a redemption pursuant to Section 2.F.(i) will be mailed by the Partnership, postage prepaid, not less than 10 nor more than 15 days prior to the redemption date, addressed to the respective holders of the Series A Preferred Units to be redeemed at their respective addresses as they appear on the books of the Partnership. Each notice shall state: (i) the redemption date; (ii) the number of Series A Preferred Units to be redeemed; (iii) the form of redemption consideration per Series A Preferred Unit; (iv) the place or places where certificates representing such Series A Preferred Units are to be surrendered for payment of the redemption consideration; (v) the current Conversion Factor; and (vi) that distributions on the Series A Preferred Units to be redeemed will cease to accumulate on such redemption date.  If fewer than all the Series A Preferred Units are to be redeemed, the notice mailed to each such holder thereof shall also specify the number of Series A Preferred Units to be redeemed from each such holder.  No failure to give such notice or any defect thereto or in the mailing thereof shall affect the validity of the proceedings for the redemption of any of the Series A Preferred Units except as to a holder to whom notice was defective or not given.

(b)            Notice of Redemption by Election of the Majority-in-Interest on or after the 10th Anniversary.  Notice of a redemption pursuant to Section 2.F.(ii) by a holder of the Majority-in-Interest of the Series A Preferred Units shall be provided to the Partnership (with a copy to the General Partner) in the form of Redemption Notice attached hereto as Exhibit A via facsimile, hand delivery or other mail or messenger service and shall be completed within 30 business days of delivery to the Partnership of a Redemption Notice.

(c)            Notice of Holders of Exercise of Optional Redemption.  Notice of a redemption pursuant to Section 2.F.(iii) shall be provided to the Partnership (with a copy to the General Partner) in the form of Redemption Notice attached hereto as Exhibit B via facsimile, hand delivery or other mail or messenger service and shall be completed within 30 business days of delivery to the Partnership of a Redemption Notice.

 

 

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G.            Voting Rights.  Except as provided in Section 2.B. and as required by applicable law, the Series A Preferred Units shall have no voting rights, except that no amendment of the Partnership Agreement shall be made that adversely affects the rights of the holders of Series A Preferred Units without the consent of a majority of such holders.

H.            Private Company Event Rights and Limitations.

(i)            In the event the Company engages in a going private or other transaction, the result of which is that the REIT Shares (or the common equity shares of any successor to the Company by merger or otherwise) are no longer traded on a National Securities Exchange (a "Private Company Event"), from and after the effective date of such Private Company Event (a) the Series A Preferred Units shall continue to be redeemable as provided for in Section 2.F., but solely for consideration in the form of cash, (b) the Partnership (or its successor) shall not issue any additional preferred Partnership Units that are on a parity with the Series A Preferred Units and (c) the Partnership (or its successor) shall not make any distributions of Capital Proceeds if its Net Worth immediately following such distribution would be less than the Minimum NW Amount.  Notwithstanding the foregoing, the Partnership at all times shall be permitted to make distributions necessary for the Company (or its successor, if applicable) to maintain its REIT status or avoid Federal excise tax.

(ii)            If, at the effective date of a Private Company Event, the Partnership (or its successor) does not meet the Minimum NW Amount then the Partnership (or its successor) shall redeem for cash consideration at least an amount of Series A Preferred Units as necessary to satisfy the Minimum NW Amount following such redemption at a redemption price equal to the Redemption Amount of such Series A Preferred Units.  Any such redemption will be made pro rata among the holders of Series A Preferred Units.

(iii)            The General Partner shall deliver to all holders of Series A Preferred Units notice of the anticipated effective date of a Private Company Event by the later of (A) 10 Business Days in advance of the effective date of the Private Company Event and (B) the date of first public disclosure by the Company of the Private Company Event, which notice shall include a reasonable summary of the terms of such Private Company Event.

(iv)            From and after a Private Company Event, the General Partner shall be required to deliver to the holder of the Series A Preferred Units, upon request, not more frequently than semi-annually, such reports, records and other evidence as may be necessary to prove that any reimbursement of the General Partner and/or its Affiliates pursuant to Section 7.4 of the Partnership Agreement is (a) consistent with what is customarily afforded in similar companies with similar investment structures and (b) limited to reasonable expenditures and only to the extent directly attributable to the Partnership.

I.            Transfer.  In addition to the restrictions set forth in Section 11.3 of the Partnership Agreement, a holder of the Series A Preferred Units may not transfer any of the 

 

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Series A Preferred Units without the consent of the General Partner, which consent may be withheld in the General Partner's sole discretion; provided, however, that a holder of the Series A Preferred Units shall have the right to transfer any of its Series A Preferred Units to its Affiliates without the consent of the General Partner.  Except at set forth herein, any attempt to effect a transfer of the Series A Preferred Units without the General Partner's consent shall be void ab initio.

J.            Preservation of Liquidity.  In the event that the Company (i) merges or otherwise consolidates with another public company or (ii) sells all or substantially all of its interests in the Partnership directly or indirectly to another public company, then the redemption rights available to the Series A Preferred Units to receive Common Units, convertible into REIT Shares and, ultimately, cash through the sale of REIT Shares, shall apply to the shares of such successor to the Company, and substantially the same registration rights set forth in the Registration Rights Agreement shall be provided with respect to the shares of such successor to the Company, and substantially all other rights available to the Series A Preferred Units, as set forth in this Amendment and the Partnership Agreement, shall otherwise be made available to the Series A Preferred Units by any such successor to the Company. Notwithstanding Section 2.G. above, holders of Series A Preferred Units shall not have the right to vote upon or approve any transaction that complies with this Section 2.J.

3.            Contracts with Affiliates.  Section 7.6.A. of the Partnership Agreement shall be superseded in its entirety by the following:

The Partnership may lend or contribute funds or other assets to its or the Company's Subsidiaries or other Persons in which it or the Company has an equity investment and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner; provided, however, that, except as may be required to enable to the Company to qualify as a REIT under the Code or avoid any excise tax, the Partnership may not lend or contribute such funds or other assets to the Company unless full cumulative distributions have been or contemporaneously are declared and paid or authorized, declared and a sum sufficient for the payment thereof set apart for such payment on the Series A Preferred Units for all past distribution periods and the then current distribution period in accordance with Section 2.C of this Amendment.  The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person.

4.            Except as modified herein, all terms and conditions of the Partnership Agreement shall remain in full force and effect, which terms and conditions the General Partner hereby ratifies and confirms.  In the event of any inconsistency between the terms of this Amendment and the terms of the Partnership Agreement, the terms of this Amendment shall prevail.

5.            No sinking fund shall be established for the redemption of Series A Preferred Units.

6.            This Amendment shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to conflicts of law.

 

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7.            This Amendment shall be binding upon and shall inure to the benefit of the parties hereto, their respective legal representatives, successors and assigns.

8.            This Amendment may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart.  Reproductions (photographic, facsimile or otherwise) of this Amendment may be made and relied upon to the same extent as though such reproduction was an original.

9.            If any provision of this Amendment is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

10.            The admission of the Contributor as an Additional Limited Partner of the Partnership shall become effective as of the date of this Amendment, which shall also be the date upon which the name of the Contributor is recorded on the books and records of the Partnership and Exhibit A to the Partnership Agreement is amended to reflect such admission.

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IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the date first set forth above.

GENERAL PARTNER:

Rouse GP, LLC, a Delaware limited liability company,

 as General Partner of Rouse Properties, LP

By:            /s/ Andrew Silberfein______________

       Name:  Andrew Silberfein

       Title:  CEO and President

 EXISTING LIMITED PARTNERS:

By: Rouse GP, LLC, a Delaware limited liability company,

 as Attorney-in-Fact for the Limited Partners

By:            /s/ Andrew Silberfein______________

       Name:  Andrew Silberfein

       Title:  CEO and President

[Signatures Continue on the Following Page]

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 SERIES A PREFERRED UNIT HOLDER:

Plaza Camino Real, a California limited partnership

By: PCRGP, L.P., a Delaware limited partnership,

 its general partner

By:  Plaza Camino Real LLC, a Delaware limited liability company,

 its general partner

By:  Westfield America Limited Partnership, a Delaware limited partnership, its sole member

By:  Westfield U.S. Holdings, LLC, a Delaware limited liability company, its general partner

By:              /s/ Peter R. Schwartz

        Name: Peter R. Schwartz

         Title: Senior Executive Vice President

                  and Secretary

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Exhibit A

Notice of Redemption by Election of the

 Majority-in-Interest on or after the 10th Anniversary

The undersigned holder of a Majority-in-Interest of the Series A Preferred Units hereby irrevocably requests Rouse Properties, LP, a Delaware limited partnership (the "Partnership"), to redeem all of the Series A Preferred Units outstanding on the date hereof in accordance with the terms of Section 2.F. (ii) of the First Amendment to the Amended and Restated Agreement of Limited Partnership of the Partnership, as amended from time to time in accordance with its terms (the "Amendment"); and the undersigned irrevocably (i) surrenders all of its Series A Preferred Units and all right, title and interest therein, (ii) pursuant to the term of the Amendment, causes the surrender of all of the other Series A Preferred Units outstanding on the date of this notice, and (iii) directs that the consideration redemption proceeds be delivered in accordance with this Notice be delivered in the name(s) and at the address(es) specified below.  Capitalized terms used herein and not defined shall have the meanings given to them in the Amendment.

The undersigned hereby represents, warrants, and certifies that the undersigned (a) has good and unencumbered title to the Series A Preferred Units its is surrendering pursuant to this Notice, free and clear of the rights or interests of any other person or entity, (b) has the full right, power, and authority to surrender the Series A Preferred Units that are the subject of this Notice, (c) owns a Majority-in-Interest of the Series A Preferred Units outstanding on the date of this notice, and (d) has obtained the consent or approval of all persons or entities, if any, having the right to consent or approve such surrender.

Name:

Address:

Number of Series A Preferred Units tendered:   ____________________

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Exhibit B

Series A Preferred Unit Holders

 Redemption Notice

The undersigned holder of Series A Preferred Units hereby irrevocably requests Rouse Properties, LP, a Delaware limited partnership (the "Partnership"), to redeem the Series A Preferred Units listed below in accordance with the terms of Section 2.F. (iii) of the First Amendment to the Amended and Restated Agreement of Limited Partnership of the Partnership, as amended from time to time in accordance with its terms; and the undersigned irrevocably (i) surrenders such Series A Preferred Units and all right, title and interest therein and (ii) directs that the consideration redemption proceeds be delivered in accordance with this Notice be delivered in the name(s) and at the address(es) specified below.  Capitalized terms used herein and not defined shall have the meanings given to them in the Amendment.

The undersigned hereby represents, warrants, and certifies that the undersigned (a) has good and unencumbered title to the Series A Preferred Units that are the subject of this Notice, free and clear of the rights or interests of any other person or entity, (b) has the full right, power, and authority to surrender the Series A Preferred Units that are the subject of this Notice and (c) has obtained the consent or approval of all persons or entities, if any, having the right to consent or approve such surrender.

Name:

Address:

Number of Series A Preferred Units tendered:   ____________________

	
 

	
 

19Exhibit 10.2

 

EXECUTION VERSION

TAX PROTECTION AGREEMENT

This TAX PROTECTION AGREEMENT (this "Agreement") is dated as of November 12, 2015 by and among Rouse Properties LP, a Delaware limited partnership ("OP"), Rouse Properties, Inc., a Delaware corporation ("Rouse," and together with OP, "Indemnitors"), and Plaza Camino Real, a California limited partnership ("PCR").

WITNESSETH

WHEREAS, PCR is an entity that is taxed as a partnership under the Code;

WHEREAS, Westfield America Limited Partnership, a Delaware limited partnership ("WALP") owns, directly and indirectly, an equity interest in PCR;

WHEREAS, WALP is an entity that is taxed as a partnership under the Code;

WHEREAS, Westfield America, Inc. ("WEA") is a Missouri corporation that has elected to be taxed as a real estate investment trust (a "REIT") within the meaning of Sections 856 through and including 860 of the Code (as defined below);

WHEREAS, WEA owns substantially all of its assets through WALP and owns an equity interest in WALP;

WHEREAS, PCR has agreed to contribute the Property to OP in exchange for interests in OP, as set forth in the Contribution Agreement and Partnership Agreement;

WHEREAS, as an inducement for PCR to contribute the Property and enter into the Transaction Documents, the Indemnitors shall provide certain tax indemnities to PCR;

WHEREAS, in order to set forth the Indemnification Events that shall trigger such tax indemnities to PCR and to specify the damages payable by the Indemnitors to PCR as a result of an Indemnification Event, the parties have entered into this Agreement;

NOW, THEREFORE in consideration of the promises and mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1.                          Definitions.  For purposes of this Agreement, the following terms shall apply:

(a)            "Affiliated REIT" shall mean each of (i) WEA and (ii) any other Person that is a direct or indirect owner of a PCR for so long as such Person has elected to maintain its status as a REIT and PCR has provided written notice identifying such Person to OP.

 

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(b)  "Amendment" shall mean the First Amendment to the Amended and Restated Agreement of Limited Partnership of Rouse Properties, LP dated November 12, 2015.

(c)  "California Courts" shall have the meaning set forth in Section 8(d)(vi).

(d)  "Closing Date" shall have the meaning set forth in the Contribution Agreement.

(e)  "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.

(f)  "Common Units" shall have the meaning set forth in the Partnership Agreement.

(g)  "Contribution Agreement" shall mean the Contribution and Escrow Agreement by and among PCR, OP, and First American Title Insurance Company, dated as of September 28, 2015.

(h)  "Dispute" shall have the meaning set forth in Section 8(d).

(i)  "Escrow Account" shall have the meaning set forth in Section 6.

(j)  "Exchange" shall have the meaning set forth in Section 2(g).

(k)  "Expense Amount" shall have the meaning set forth in Section 6.

(l)  "Expense Amount Accountant's Letter" shall have the meaning set forth in Section 6.

(m)  "Expense Amount Tax Opinion" shall have the meaning set forth in Section 6.

(n)  "Final Determination" shall mean (i) a decision, judgment, decree, or other order by any court of competent jurisdiction, which decision, judgment, decree, or other order has become final after all allowable appeals by either party to the action have been exhausted or the time for filing such appeal has expired, (ii) a closing agreement entered into under Section 7121 of the Code, or any final settlement agreement entered into in connection with any administrative or judicial proceeding, or (iii) the expiration of time for instituting a claim for refund, or if such claim was filed, the expiration of time for instituting a suit with respect thereto.

(o)  "Fiscal Year" shall mean the calendar year, except as otherwise required by law.

(p)  "Gross-Up Amount" shall mean, with respect to an Indemnification Event, an amount equal to the Tax Amount attributable to such Indemnification Event times the 

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excess of (i) a fraction, the numerator of which is one and the denominator of which is the excess of one minus the Tax Rate over (ii) one.

 

(q)  "Indemnification Event" shall have the meaning set forth in Section 2(a).

(r)  "Indemnification Notice" shall have the meaning set forth in Section 2(d).

(s)  "Indemnification Payment" shall have the meaning set forth in Section 2(a)(vi).

(t)  "Indemnitors' Acknowledgment" shall have the meaning set forth in Section 4(b)(ii).

(u)  "Indemnity Loan" shall have the meaning set forth in Section 6.

(v)  "Indemnity Loan Agreement" shall have the meaning set forth in Section 6.

(w)  "Nonqualifying Income" means any amount that is treated as gross income for purposes of Section 856 of the Code and which is not Qualifying Income.

(x)  "Partnership Agreement" shall mean the Amended and Restated Agreement of Limited Partnership of Rouse Properties, LP dated as of October 30, 2014, as amended by the Amendment.

(y)  "PCR Third Party Agreement" shall mean the Contribution Agreement, dated as of September 7, 2006, by and among WALP and the parties listed on Exhibit A thereto.

(z)  "Prime" shall mean for any day the fluctuating interest per annum equal to the rate of interest in effect for such date as publicly reported from time to time by The Wall Street Journal or any successor thereto as the consensus "prime rate."

(aa)  "Property" shall have the meaning set forth in the Contribution Agreement.

(bb)  "Protected Property" shall mean the Property and any Replacement Property.

(cc)  "Qualifying Income" means gross income that is described in Section 856(c)(2) or 856(c)(3) of the Code.

(dd)  "REIT Qualification Ruling" shall have the meaning set forth in Section 6.

(ee)  "REIT Requirements" shall mean the requirements imposed on REITs pursuant to Sections 856 through and including 860 of the Code.

 

 

 

 

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(ff)            "REIT Shares" shall have the meaning set forth in the Partnership Agreement.

(gg)            "Regulations" shall mean the temporary and final regulations issued by the U.S. Treasury Department under the Code.

(hh)            "Release Document" shall have the meaning set forth in Section 6.

(ii)            "Replacement Property" shall have the meaning set forth in the Partnership Agreement.

(jj)            "Rules" shall have the meaning set forth in Section 8(d).

(kk)            "Series A Preferred Units" shall have the meaning set forth in the Partnership Agreement.

(ll)            "Tax Amount" shall have the meaning set forth in Section 2(a).

(mm)            "Tax Claim" shall have the meaning set forth in Section 4(a).

(nn)            "Tax Proceeding" shall have the meaning set forth in Section 4(a).

(oo)            "Tax Protection Period" shall mean the period of time beginning on the Closing Date through and including December 31, 2021.

(pp)            "Tax Protection Provisions" shall mean only the provisions of this Agreement, the Contribution Agreement, the Amendment and the Partnership Agreement that are, in each case, set forth on Schedule 1.

(qq)            "Tax Rate" shall mean the maximum combined federal and, if applicable, California rate of tax applicable to an association taxable as a corporation for federal income tax purposes that has not elected to be taxed for federal income tax purposes as a real estate investment trust and which is domiciled exclusively in California; provided, however, that for purposes of computing the applicable federal rate of taxation, any amounts payable with respect to state and local income taxes shall be assumed to be deductible for federal income tax purposes.

(rr)            "Taxes" shall mean any and all federal, state, and local taxes, charges, fees, duties (including customs duties), levies or other assessments that are taxes, including without limitation, income, gross receipts, net proceeds, ad valorem, turnover, real and personal property (tangible and intangible), sales, use, franchise, excise, value added, stamp, user, transfer, fuel, excess profits, occupational, interest equalization, windfall profits, severance, license, payroll, environmental, capital stock, disability, employee's income withholding, other withholding, and unemployment taxes, which are imposed by any governmental authority, and such term shall include any interest, penalties or additions to tax attributable thereto; provided, however, that the foregoing definition of "Taxes" shall be limited to "Taxes" imposed by the United States or any State or political subdivision thereof.

 

(ff)            "REIT Shares" shall have the meaning set forth in the Partnership Agreement.

(gg)            "Regulations" shall mean the temporary and final regulations issued by the U.S. Treasury Department under the Code.

(hh)            "Release Document" shall have the meaning set forth in Section 6.

(ii)            "Replacement Property" shall have the meaning set forth in the Partnership Agreement.

(jj)            "Rules" shall have the meaning set forth in Section 8(d).

(kk)            "Series A Preferred Units" shall have the meaning set forth in the Partnership Agreement.

(ll)            "Tax Amount" shall have the meaning set forth in Section 2(a).

(mm)            "Tax Claim" shall have the meaning set forth in Section 4(a).

(nn)            "Tax Proceeding" shall have the meaning set forth in Section 4(a).

(oo)            "Tax Protection Period" shall mean the period of time beginning on the Closing Date through and including December 31, 2021.

(pp)            "Tax Protection Provisions" shall mean only the provisions of this Agreement, the Contribution Agreement, the Amendment and the Partnership Agreement that are, in each case, set forth on Schedule 1.

(qq)            "Tax Rate" shall mean the maximum combined federal and, if applicable, California rate of tax applicable to an association taxable as a corporation for federal income tax purposes that has not elected to be taxed for federal income tax purposes as a real estate investment trust and which is domiciled exclusively in California; provided, however, that for purposes of computing the applicable federal rate of taxation, any amounts payable with respect to state and local income taxes shall be assumed to be deductible for federal income tax purposes.

(rr)            "Taxes" shall mean any and all federal, state, and local taxes, charges, fees, duties (including customs duties), levies or other assessments that are taxes, including without limitation, income, gross receipts, net proceeds, ad valorem, turnover, real and personal property (tangible and intangible), sales, use, franchise, excise, value added, stamp, user, transfer, fuel, excess profits, occupational, interest equalization, windfall profits, severance, license, payroll, environmental, capital stock, disability, employee's income withholding, other withholding, and unemployment taxes, which are imposed by any governmental authority, and such term shall include any interest, penalties or additions to tax attributable thereto; provided, however, that the foregoing definition of "Taxes" shall be limited to "Taxes" imposed by the United States or any State or political subdivision thereof.

 

 

4

 

(ss)            "Third Party Indemnity Payment" shall mean any liability or cost that is imposed on or incurred by PCR, WALP, WEA or any affiliate of PCR, WALP, or WEA pursuant to the PCR Third Party Agreement as a result of any Indemnification Event.

(tt)            "Transaction Documents" shall mean this Agreement, the Contribution Agreement, the Partnership Agreement, the Amendment and all exhibits, schedules, and appendices to any of the foregoing.

(uu)            "Transfer" shall have the meaning set forth in Section 2(g).

Any terms not defined herein shall have the meanings assigned to them in the Transaction Documents.

 

		Section 2.	 Amount and Scope of Indemnification.

(a)            Indemnitors shall indemnify PCR, without duplication, from and against any and all Taxes (the amount of such Taxes, the "Tax Amount") of PCR (or, as applicable, an Affiliated REIT), computed as provided in this Section 2 and attributable to:

 

(i)            a Transfer in violation of Section 2(g) hereof;

(ii)            an optional redemption by OP, in whole or in part, of Preferred Units pursuant to Section 2.F(i) of the Amendment for cash prior to the expiration of the Tax Protection Period;

(iii)            a redemption by OP, in whole or in part, of Common Units (previously exchanged by PCR for Preferred Units in a non-recognition transaction pursuant to Section 2.F.(i) of the Amendment) for cash or REIT shares prior to the expiration of the Tax Protection Period;

(iv)            a purchase pursuant to Section 8.6B of the Partnership Agreement by Rouse, in whole or in part, of Common Units (previously exchanged by PCR in a non-recognition transaction pursuant to an optional redemption of Preferred Units pursuant to Section 2.F.(i) of the Amendment) for cash or REIT shares prior to the expiration of the Tax Protection Period;

(v)            a sale by PCR of any REIT shares to the extent such REIT shares are received by PCR pursuant to a redemption of any Common Units (previously exchanged by PCR for Preferred Units prior to the expiration of the Tax Protection Period in a non-recognition transaction pursuant to Section 2.F.(i) of the Amendment), but only if such REIT shares were received in a non-recognition transaction, and only to the extent of the amount of built-in gain in such REIT shares at the time of the redemption of such Common Units; and

(vi)            a breach of a Tax Protection Provision by an Indemnitor, or any entity (x) in which an Indemnitor owns a direct or indirect majority equity interest, managing member interest or general partner interest (including OP) and

 

 

 

 

 

 

 

5

(y)            that owns any portion of the Protected Property (directly or indirectly) (each such breach and any event described in subparagraphs (A) through (E) above, an "Indemnification Event"); it being understood and agreed that any breach of a Tax Protection Provision shall be determined, in each case, without regard to any consent or waiver by PCR unless any such consent or waiver by PCR expressly references this Agreement.

(b)            Any indemnification payments (each, an "Indemnification Payment") tendered to PCR with respect to an Indemnification Event pursuant to this Section 2 shall equal the sum, without duplication, of (i) with respect to that portion of any income or gain that is allocable to a Qualified Transferor (as defined in the PCR Third Party Agreement), the Third Party Indemnity Payment, (ii) with respect to any remaining income or gain, the Tax Amount, and (iii) the Gross-Up Amount.  The Indemnification Payment amount shall be calculated using the assumptions listed in Section 2(c).

(c)            The computation of an Indemnification Payment shall be based upon the following assumptions:

(i)            Solely for purposes of the portion of any income or gain described in clauses (ii) and (iii) of paragraph (b) above: (x) PCR is deemed to be taxable as a C corporation for federal income tax purposes taxable at the Tax Rate, (y) other than income or gain attributable to an Indemnification Event, PCR is deemed to have no items of income, gain, loss, deduction, or credit and (z) calculations shall not include the benefits of any tax attribute (including any net operating loss or capital loss carry forward) generated independently of any Indemnification Event.

(ii)            The Indemnification Payment shall be made solely to PCR and not to WALP or WEA.

(iii)            Upon a transfer of the Protected Property in violation of Section 2(g) hereof, PCR shall be deemed to recognize gain with respect to the Protected Property equal to the Code Section 704(c) built-in gain amount with respect to the Protected Property on the Closing Date, which is set forth on Schedule 2, reduced pursuant to the Regulations as a result of the use of the "traditional method" as set forth in Section 2.D.(iii) of the Amendment (and less any amount of Code Section 704(c) gain previously recognized as a result of a direct or indirect transfer (including any redemption) of some or all of PCR's interests in OP).

(iv)            With respect to any Indemnification Event described in Section 2(a)(ii), (iii), (iv) or (v) hereof, PCR shall be deemed to recognize gain equal to the gain it recognizes under Code Sections 731, 752, and/or 1001, as applicable (and the amount of such gain shall be determined as though PCR had received cash in consideration for such units or REIT shares, as applicable, on the date on which PCR provides a Notice of Redemption (as defined in the Partnership Agreement) to OP, determined in accordance with Section 8.6 of the Partnership Agreement).

 

 

 

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(v)            With respect to an Indemnification Event due to a breach of Section 2(h) hereof, the Tax Amount shall be deemed to be the amount of any Taxes, penalties or fines payable by an Affiliated REIT as a result of such Indemnification Event.

(vi)            The Tax Amount shall exclude all Taxes imposed on OP and any of its subsidiaries.

(d)            In the event PCR makes a claim for indemnification hereunder, PCR shall provide OP with a written statement setting forth in reasonable detail the Indemnification Event, the computation of the Indemnification Payments and supporting analysis (such statement, an "Indemnification Notice").

(e)            Any payment that is due to PCR pursuant to this Agreement shall be paid within the later of (i) thirty (30) business days after PCR provides an Indemnification Notice to OP, or (ii) thirty (30) business days prior to the due date (without extensions) of the earliest of (A) any return on which PCR would reflect such income or gain, (B) any estimated payment of tax with respect to the Indemnification Event that gave rise to such payment, or (C) any payment of withholding tax due with respect to the Indemnification Event that gave rise to such payment.  Any payment required under this Section 2 and not made when due shall bear interest at Prime plus 4 %, compounded quarterly.

(f)            Upon written request of OP, the accuracy of PCR's calculation of any Indemnification Payment pursuant to this Section 2 shall be verified by a nationally recognized accounting firm, which shall not have previously conducted any work for OP or PCR, selected by PCR and reasonably acceptable to OP.  In order to enable such accountants to verify such adjustments and as required by Section 5 hereof, PCR shall provide to such accountants all information reasonably necessary for such verification, including any computer analyses used by PCR or OP to calculate such amount or amounts.  In conducting its verification, the accounting firm shall consult with, and consider in good faith the opinions and positions of, PCR and OP as to the proper resolution of any matters at issue.  The review and determination of such calculations by such accounting firm pursuant to this Section 2(f) shall be final.  The parties hereto agree that, if the accounting firm is required to resolve any matters relating to the computations, the accounting firm (i) shall provide PCR and OP with a written notification that describes in reasonable detail the matter or matters at issue, and (ii) prior to its resolution of the matter or matters at issue, shall provide PCR and OP with an opportunity to set forth their positions concerning the proper resolution of the matter or matters at issue in accordance with a procedure reasonably acceptable to both PCR and OP.  The cost of such verification shall be borne by OP, unless it is the determination of such verification that the actual amount or amounts payable deviates, in a manner favorable to OP, by more than 20% from the amount originally determined by PCR, in which case such cost shall be borne 100% by PCR.

(g)            During the Tax Protection Period, OP shall not cause or permit (i) any direct or indirect sale, exchange, transfer or other disposition, whether voluntary or involuntary (collectively, a "Transfer"), of all or any portion of the Protected Property

 

 

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(including any interest therein or in the entity owning the Protected Property) in a transaction that would result in the recognition of taxable income or gain to PCR under Section 704(c) of the Code.  Notwithstanding anything to the contrary in this Agreement, OP may Transfer all or any portion of the Protected Property in a transaction in which no gain is required to be realized and recognized by PCR (an "Exchange"), including a non-taxable transaction qualifying under Section 1031 of the Code (or any successor statute); provided, however, that any property so acquired by OP in an Exchange (the "Replacement Property") shall remain subject to the provisions of this Section 2(g) in place of the exchanged Protected Property for the remainder of the Tax Protection Period; provided, further, that if the Protected Property (including any interest therein or in the entity owning the Protected Property) is transferred in one or more Exchanges that qualifies under Section 721 of the Code and is then disposed of by a transferee in a transaction occurring during the Tax Protection Period that would result in the recognition of taxable income or gain to PCR, then such transfer shall be treated for purposes of this Agreement as a Transfer of such Protected Property during the Tax Protection Period, and any property acquired by such transferee in exchange for all or a portion of the Protected Property or Replacement Property in a transaction in which no gain is required to be recognized by PCR, including a non-taxable transaction qualifying under Section 1031 of the Code (or any successor statute) shall remain subject to the provisions of this Agreement in the same manner as a Replacement Property for the remainder of the Tax Protection Period.

(h)            Each Affiliated REIT is a REIT and is subject to the provisions of Sections 856 through and including 860 of the Code.  So long as an Affiliated REIT owns, directly or indirectly, any interest in OP, then notwithstanding any other provision of the Transaction Documents, OP shall use commercially reasonable efforts, with the cooperation of each such Affiliated REIT, to ensure that:

(i)            At least ninety-five percent (95%) of the gross income of OP for each taxable year (or portion thereof, if applicable) will be derived from the items described in Section 856(c)(2) of the Code;

(ii)            At least seventy-five percent (75%) of the gross income of OP for each taxable year (or portion thereof, if applicable) will be derived from the items described in Section 856(c)(3) of the Code;

(iii)            As of the end of each quarter of each taxable year, except for securities of a taxable REIT subsidiary ("TRS") of each applicable Affiliated REIT, OP shall not own, directly or indirectly, securities that would cause such Affiliated REIT to be treated, for purposes of Section 856(c) of the Code, as holding securities (x) possessing more than ten percent (10%) of the total voting power of the outstanding securities of one issuer, (y) having a value of more than ten percent (10%) of the total value of the outstanding securities of any one issuer, or (z) issued by one issuer and having a value of more than five percent (5%) of the gross value of such Affiliated REIT;

 

 

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(iv)            As of the end of each quarter of each taxable year, OP shall not, directly or indirectly, hold securities of a TRS of an Affiliated REIT such that such Affiliated REIT is treated for purposes of Section 856(c) of the Code as having more than twenty-five percent (25%) of the value of its assets represented by securities of one of more TRSs of such Affiliated REIT;

(v)            As of the end of each quarter of each taxable year, at least seventy-five percent (75%) of the value of OP's assets shall be represented by the items described in Section 856(c)(4)(A) of the Code (that is, real estate assets, cash and cash items (including receivables) and government securities (each as defined in Section 856 of the Code));

(vi)            OP shall not engage in any prohibited transaction within the meaning of Section 857(b)(6) of the Code;

(vii)            Any services that would otherwise cause any rents from a lease to be excluded from treatment as rents from real property pursuant to Section 856(d)(2)(C) of the Code with respect to an Affiliated REIT shall be provided by either (1) an independent contractor (as described in Section 856(d)(3) of the Code and in accordance with Treasury Regulation Section 1.856-4(b)(5)) with respect to such Affiliated REIT and from whom neither OP nor such Affiliated REIT derives or receives any income, or (2) a TRS of such Affiliated REIT as described in Section 856(l) of the Code, except as otherwise consented to in writing by the applicable Affiliated REIT; and

 

(viii)            As of the end of each quarter of each taxable year, except for securities of a TRS of an Affiliated REIT, OP shall not own, directly or indirectly or by attribution (in accordance with attribution rules referred to in Section 856(d)(5) of the Code), in the aggregate more than 10% of the total value of all classes of stock or more than 10% of the total voting power (or, with respect to any such Person which is not a corporation, an interest of 10% or more in the assets or net profits of such Person) of a lessee or sublessee of all or any part of the Protected Property or of any other assets of OP except in each case with the specific written approval of the applicable Affiliated REIT for whom such ownership would cause a related party rent issue under Section 856(d)(2).

Section 3.                          Exclusions.  Notwithstanding any other provision of this Agreement, the Indemnitors shall not have any liability for indemnification under this Agreement for any Taxes  attributable, in whole or in part, to:

(a)            any fraud or willful misconduct of PCR or any officer, director, employee or agent thereof; or

(b)            the breach by PCR of a covenant set forth in Sections 4 and 5 below; or

(c)            any income or gain recognized by PCR solely as a result of consummating the transactions set forth in the Transaction Documents to occur on the Closing Date (it

 

 

 

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being understood that any gain recognized pursuant to Section 707 of the Code with respect to such transactions to the extent attributable to a subsequent Indemnification Event shall not be considered to have been recognized "solely" as a result of consummating such transactions).

Section 4.                          Contests Pertaining to Tax Claims and Tax Proceedings.

(a)            If any claim, demand, assessment (including a written, proposed or final revenue agent's report, a 30-day letter or a notice of deficiency (as described in Section 6212 of the Code)) or other assertion is made with respect to Taxes against PCR or OP the calculation of which involves a matter covered in this Agreement that could result in Tax liability of PCR that could be the subject of an indemnification claim hereunder (a "Tax Claim") or if OP or PCR receives any notice with respect to any current or future audit, examination, investigation or other proceeding involving PCR or OP or that otherwise could involve a matter covered in this Agreement and could directly or indirectly affect PCR adversely (any such proceeding, a "Tax Proceeding"), then OP or PCR, as applicable, shall promptly (but in no event later than twenty (20) business days after receipt of such notice) notify in writing the other party of such Tax Claim or Tax Proceeding; provided, however, that in no event shall a party's failure or delay to comply with this Section 4(a) in any way affect the other's obligations pursuant to this Agreement except to the extent that the others are materially prejudiced by such failure or delay.

(b)

(i)            Rouse, as the general partner of OP, shall have the right to control the defense, settlement or compromise of any Tax Proceeding or Tax Claim addressed to OP; provided, however, that Rouse shall not consent to the entry of any judgment or enter into any settlement with respect to such Tax Claim or Tax Proceeding that could result in Tax liability to PCR without the prior written consent of PCR (unless, and only to the extent, that any Taxes required to be paid by PCR as a result thereof would be required to be reimbursed by OP under Section 2 and OP agrees in connection with such settlement or consent, to make such required payments); provided, further, that OP shall keep PCR duly informed of the progress thereof to the extent that such Tax Proceeding or Tax Claim could, directly or indirectly, adversely affect PCR and that PCR and its counsel shall have the right to review and comment on any and all submissions made to the Internal Revenue Service or a court with respect to such Tax Claim or Tax Proceeding (after making appropriate redactions to preserve confidentiality of all matters not directly related to the substantive issues which could potentially give rise to a Tax liability to PCR), and that OP shall consider such comments in good faith.  PCR shall have the right to participate in any such Tax Proceeding or Tax Claim at its own expense, and shall not proceed independently of OP in any Tax Proceeding or Tax Claim that includes the OP pursuant to Chapter 63, subchapter C of the Code; and

(ii)            OP will be entitled to require PCR to contest (acting through counsel selected by PCR and reasonably satisfactory to OP) any Tax Proceeding

 

 

 

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or Tax Claim addressed to PCR and shall have the right to participate, at its own expense, in the defense of such Tax Claim or Tax Proceeding; provided, however, that this Section 4(b)(ii) shall apply solely with respect to the portion of such Tax Claim or Tax Proceeding that could, directly or indirectly, give rise to an Indemnification Payment hereunder; provided, further, that Indemnitors shall be required to pay all third party costs and expenses as well as all reasonable internal costs of PCR incurred as a result of such portion of such contest; provided, further, that, to the extent OP does not participate in the defense of such Tax Claim or Tax Proceeding, PCR shall keep OP duly informed of the progress thereof and OP and its counsel shall have the right to review and comment on any and all submissions made to the Internal Revenue Service or a court with respect to such Tax Claim or Tax Proceeding (after making appropriate redactions to preserve the confidentiality of all matters not directly related to the substantive issues which could potentially give rise to and Indemnification Payment hereunder), and that PCR shall consider such comments in good faith; provided, further, that PCR shall not settle or otherwise resolve such portion of any such Tax Claim or Tax Proceeding without the consent of  OP (which shall not be unreasonably withheld, delayed or conditioned).  OP shall not be entitled to require PCR to contest a Tax Claim unless it has delivered on a timely basis a written notice (an "Indemnitors' Acknowledgment") in which OP acknowledges (x) that such Tax Claim, if sustained in a Final Determination, is subject to the obligation hereunder to indemnify PCR, and (ii) that Indemnitors are liable to pay all third party costs and expenses as well as all reasonable internal costs and expenses incurred by PCR in connection with any contest, including, without limitation, all reasonable legal and other documented out-of-pocket expenses, and shall have provided PCR with adequate assurances for the payment thereof.  Failure of OP to deliver an Indemnitors' Acknowledgement to PCR within thirty (30) days after Indemnitors' receipt of written notice of a Tax Claim shall result in Indemnitors' waiver of any right of such Indemnitors to require PCR to contest a Tax Claim, and PCR shall be entitled to concede or settle such Tax Claim in its sole and absolute discretion.

(c)            PCR shall not make payment of any Tax Claim for at least thirty (30) business days after giving written notice of such claim to Indemnitors if such forbearance does not materially prejudice the rights of PCR.  If the conduct of any Tax Claim or Tax Proceeding requires PCR to pay the Taxes claimed and file or sue for a refund, Indemnitors shall advance to PCR, on an interest-free basis with no additional net after-tax cost to PCR, sufficient funds to pay the Taxes and any interest, penalties and additions to the Taxes payable with respect thereto (to the extent such amount is subject to Indemnitors' indemnity obligations hereunder). PCR shall promptly use such funds to pay such Taxes, interest, penalties or additions to such Taxes, as the case may be.

(d)            Notwithstanding anything to the contrary in this Agreement, Indemnitors' liability for indemnification shall, at the Indemnitors' election, be deferred until a Final Determination of the Tax liability of PCR in respect of the relevant Indemnification Event (as determined using the assumptions in Section 2(c)).  At such time, Indemnitors

 

 

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shall, subject to the provisions of Section 6, become obligated for the payment of any indemnification hereunder resulting from the outcome of such contest, and PCR shall become obligated to refund to Indemnitors any amount received as a refund by PCR or credited to PCR attributable to advances by Indemnitors hereunder. Within thirty (30) days following such Final Determination, any amounts due hereunder shall be paid first by set off against each other and either (i) Indemnitors shall pay to PCR any excess of the full amount due hereunder over the amount of any advances previously made by Indemnitors and applied against Indemnitors' indemnity obligation as aforesaid or (ii) PCR shall repay to Indemnitors any excess of such advances over such full amount due hereunder, together with any interest received by PCR that is properly attributable to such excess amount of such advances during the period such advances were outstanding.

Section 5.                          Cooperation.

(a)            Each of OP and PCR shall provide, or cause to be provided, such assistance as may reasonably be requested by the other party with respect to any accountants' work described in Section 2(e) hereof or during the contest of a Tax Claim or handling of a Tax Proceeding pursuant to Section 4 hereof.

(b)            PCR agrees to take any action (including filing claims for refund and amended tax returns) which it is reasonably requested to take by OP that would minimize the net amount of any Indemnification Payment due from Indemnitors hereunder; provided, however, that PCR shall not be required to take any action that it believes in its reasonable discretion would place PCR in a materially worse tax or economic position than PCR would have been in if such action were not taken.

Section 6.                          REIT Status of WEA; Indemnity Payments.  Notwithstanding the foregoing, in the event that counsel or independent accountants for WEA determine that there exists a material risk that any portion of any Indemnity Payments to PCR hereunder would be treated as Nonqualifying Income upon the allocation, distribution, or payment of such amounts to WEA (based on the allocation, distribution or payment of such amounts from PCR to WALP and from WALP to WEA), the amount paid by Indemnitors to PCR pursuant to this Agreement in any tax year shall not exceed the maximum amount that can be paid by Indemnitors to PCR in such year without causing WEA to fail to meet the REIT Requirements for such year, determined as if the payment of such amount were Nonqualifying Income as determined by such counsel or independent accountants to WEA.  If the amount payable for any taxable year under the preceding sentence is less than the amount that Indemnitors would otherwise be obligated to pay to PCR pursuant to this Agreement (the "Expense Amount"), then:  (1) Indemnitors shall place the Expense Amount in escrow with an escrow agent (the "Escrow Agent") mutually acceptable to Indemnitors and PCR (the "Escrow Account") and shall not cause the Escrow Agent to release any portion thereof to PCR, and PCR shall not be entitled to any such amount, unless and until PCR delivers to the Indemnitors, at the sole option of WEA, (i) an opinion (an "Expense Amount Tax Opinion") of WEA's tax counsel to the effect that such amount, if and to the extent paid, would not constitute Nonqualifying Income, (ii) a letter (an "Expense Amount Accountant's Letter") from WEA's independent accountants indicating the maximum amount that can be paid at that time to PCR without causing WEA to fail to meet the REIT Requirements for any relevant taxable year, together with an opinion of WEA's tax counsel to the effect that such payment

 

 

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would either (A) be treated as Qualifying Income or (B) not be treated as Nonqualifying Income, or (iii) a private letter ruling issued by the IRS to WEA indicating that the receipt of any Expense Amount hereunder will not cause WEA to fail to satisfy the REIT Requirements (a "REIT Qualification Ruling" and, collectively with an Expense Amount Tax Opinion and an Expense Amount Accountant's Letter, a "Release Document"); and (2) pending the delivery of a Release Document by PCR to the Indemnitors, PCR shall have the right, but not the obligation, to borrow the Expense Amount from the Escrow Account pursuant to a loan agreement among PCR, the Indemnitors and the Escrow Agent (an "Indemnity Loan Agreement") in form and substance acceptable to PCR that (i) requires the Indemnitors to cause the Escrow Agent to lend PCR immediately available cash proceeds from the Escrow Account in an amount up to the Expense Amount (an "Indemnity Loan"), and (ii) provides for (A) a commercially reasonable interest rate and commercially reasonable covenants, taking into account the credit standing and profile of PCR at the time of such loan, and (B) a 15 year maturity with no periodic amortization.  To the extent an Indemnity Loan is made from the Escrow Account pursuant to this Section 6, the Indemnitors' obligation to pay any remaining Expense Amount with respect to the portion of the Expense Amount loaned PCR shall be limited to the aggregate amount of any payments of interest and principal made by PCR to Indemnitors under the Indemnity Loan Agreement.  The obligation to pay any portion of the Expense Amount that is not paid as a result of this Section 6 shall terminate five years from the original date such Expense Amount would have been payable without regard to this provision, and PCR shall have no further right to receive any such amount.  Notwithstanding the foregoing, nothing in this Section 6 shall increase the liability of Indemnitors pursuant to this Agreement determined without regard to the provisions of this Section 6, and PCR shall reimburse Indemnitors for all reasonable fees of external counsel and the Escrow Agent, if any, incurred by the Indemnitors solely as a result of the inclusion of Section 6 in this Agreement and the implementation of the Indemnity Loan and the Escrow Account.

Section 7.                          Notices.  All notices, demands, declarations, consents, directions, approvals, instructions, requests and other communications required or permitted by the terms of this Agreement shall be given in the same manner as in the Contribution Agreement.

Section 8.                          Miscellaneous.

(a)            Rouse irrevocably and unconditionally appoints OP as its agent in connection with the matters described in this Agreement, and grants OP an irrevocable and durable power of attorney, with the express authority to take any and all action on its behalf in connection with this Agreement.  PCR may rely on any action taken or not taken, and any document or instrument executed and delivered, by OP on behalf of Indemnitors in connection with the matters described herein.

(b)            Except as otherwise provided herein, the terms and conditions of this Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their respective successors and assigns, and nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights or remedies of any nature whatsoever under or by reason of this Agreement.

 

 

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(c)            This Agreement and the documents and instruments referred to herein, (i) constitute the entire agreement and supersede all other prior or contemporaneous oral or written agreements and understandings among the parties, or any of them, with respect to the subject matter hereof, other than the Contribution Agreement and the Partnership Agreement and (ii) shall be governed by and construed in accordance with the laws of the State of New York, including Sections 5-1401 and 5-1402 of the New York General Obligations Law and New York Civil Practice Laws and Rules 327(b), but without reference to any New York conflict of laws provision that could compel the application of the laws of another jurisdiction.

d)            Except as provided in Section 2(f), which shall govern certain disputes concerning the calculation of certain amounts payable hereunder, any controversy, dispute or claim under, arising out of, in connection with or in relation to this Agreement including without limitation the negotiation, execution, interpretation, construction, coverage, scope, performance, non-performance, breach, termination, validity or enforceability of this Agreement (each, a "Dispute") will be finally settled, at the request of any party, by binding arbitration conducted in accordance with this Section 8(d).   The arbitration shall be administered by JAMS pursuant to its  Comprehensive Arbitration Rules then in effect (the "Rules").   The arbitration shall be held in the County of Los Angeles, California before a panel of three neutral and impartial arbitrators, who shall be neutrals associated with JAMS, residing in the Los Angeles, California area, who are either (i) agreed to by the Indemnitors and PCR within thirty (30) days of receipt by respondent(s) of the demand for arbitration, or (ii) failing such agreement, are appointed pursuant to the procedures set forth in the Rules. The arbitrator, who will chair the arbitral tribunal, will be selected by the arbitrators within thirty (30) days of the appointment of the arbitrators. If the parties fail to timely agree on the selection of the arbitrators, the three arbitrators shall be appointed by JAMS in accordance with the e Rules.  Decisions of the tribunal will be made by not less than a majority of the arbitrators comprising such tribunal.  The arbitration will be governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.).  The award shall be final and binding upon the parties to the maximum extent permitted by law and shall be the sole and exclusive remedy between the parties regarding any claims, counter-claims, issues or accounting submitted to the arbitral tribunal. Arbitration under this Section 8(d) will be conducted in accordance with the following provisions:

(i)            The arbitration will be conducted in accordance with the Rules and any other reasonable rules of procedure adopted by the arbitrators to allow the parties to a Dispute to present evidence and argument to the arbitrators;

(ii)            Except as may be otherwise provided in this Agreement, the statutes of limitations of the State of New York applicable to the commencement of a lawsuit will apply to the commencement of an arbitration hereunder;

(iii)            In accordance with the Rules and/or upon the request of the parties, the arbitrators may order such discovery (including third-party

 

 

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discovery) as the arbitrators determine to be reasonable under the circumstances. The arbitrators may impose reasonable schedules deadlines, and restrictions, including respecting the number of depositions and discovery requests, to ensure that discovery is conducted and concluded in  an efficient and timely basis, and the arbitrators may impose sanctions on any party for abuse or delay of discovery;

(iv)            The arbitrators will, in all cases, as promptly as possible hold hearings and reach a final determination with regard to a Dispute.  A determination and award of damages (if any) of the majority of the arbitrators, will be conclusive and binding upon the parties to the maximum extent permitted by law. Such award shall be in writing, and shall state the findings of fact and conclusions of law on which it is based. Judgment upon any award rendered by the arbitrators shall be final and binding on the parties and may be enforced by any court having jurisdiction thereof; and

(v)            By agreeing to arbitration, the parties do not intend to deprive any court of its jurisdiction to issue a pre-arbitral injunction, pre-arbitral attachment or other order in aid of arbitration proceedings and the enforcement of any award. Without prejudice to such provisional remedies as may be available under the jurisdiction of a court, the arbitral tribunal shall have full authority to grant provisional remedies or order the parties to request that a court modify or vacate any temporary or preliminary relief issued by a such court, and to award damages for the failure of any party to respect the arbitral tribunal's orders to that effect;

(vi)            Each party unconditionally and irrevocably agrees to submit to the exclusive jurisdiction of the state and federal courts located in the State of California, County of Los Angeles (the "California Courts"), for the purpose of any proceedings in aid of arbitration and for pre-arbitral attachment or injunction, and to the non-exclusive jurisdiction of the California Courts for proceedings arising out of or relating to the enforcement of any award or decision of the arbitrators duly appointed under this Agreement.  Each party unconditionally and irrevocably waives any objections which they may have now or in the future to such jurisdiction including without limitation objections by reason of lack of personal jurisdiction, improper venue, or inconvenient forum. Each party further agrees that any service of process or summons in connection with any such dispute, litigation, action or proceeding may be served on it by mailing a copy of such process or summons to it by registered mail return receipt requested or by receipted courier service at its address set forth and in the manner provided in Section 7 above, with such service deemed effective on proof of receipt. Each party to this Agreement irrevocably waives the right to a trial by jury in any proceeding in relation to any Dispute, and agrees to take any and all action necessary or appropriate to effect such waiver; and

(vii)            During the pendency of any proceedings respecting a dispute in connection with this Agreement, and before the entry of any decision or judgment therein, the parties shall each bear equal shares of the fees charged and

 

 

 

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costs incurred by the Arbitrator.  Upon conclusion of the arbitration, the arbitrator shall award attorneys' fees and costs, including all fees and costs of the arbitration, to the prevailing party.

(e)            This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement.

(f)            When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement, unless otherwise indicated.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words "include," "includes," or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation."

(g)            Except as described in Section 4 and Section 2(f), each party shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement.  If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

(h)            Any term of this Agreement may be amended, and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of each of the Indemnitors and PCR.

(i)            If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

(j)            In the event that Rouse or OP, as applicable, or any of its successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, Rouse or OP, as applicable, shall cause proper provision to be made so that the successors and assigns of Rouse or OP, as applicable, assume the obligations of Rouse or OP, as applicable, set forth in this Agreement and the Tax Protection Provisions.  No transaction described in this Section 8(j) shall relieve Rouse, OP or any other party of any of their respective obligations under this Agreement.

(k)            Neither this Agreement nor any of the Tax Protection Provisions may be amended, modified or supplemented at any time except by an instrument in writing that is executed by all of the parties hereto.

 

 

 

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Section 9.                          Term.  With respect to indemnification for Taxes, the term of this Agreement shall extend from the date hereof until such time as the applicable statute of limitations bars a claim by the Internal Revenue Service or relevant state or local tax authority for Taxes otherwise indemnifiable under this Agreement.

[SIGNATURE PAGES FOLLOW]

 

 

 

 

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

Plaza Camino Real, a California limited partnership

By: PCRGP, L.P., a Delaware limited partnership,

 its general partner

By:  Plaza Camino Real LLC, a Delaware limited liability company,

 its general partner

By:  Westfield America Limited Partnership, a Delaware limited partnership, its sole member

By:  Westfield U.S. Holdings, LLC, a Delaware limited liability company, its general partner

By:            /s/ Peter R. Schwartz                              

Name: Peter R. Schwartz

 Title:  Senior Executive Vice President and Secretary

 

Rouse Properties LP,

 a Delaware limited partnership

By:  Rouse GP, LLC, a Delaware limited liability company,

 its general partner

By:            /s/ Andrew Silberfein________

      Name: Andrew Silberfein

       Title:  CEO and President

Rouse Properties, Inc.,

a Delaware corporation

By:            /s/ Andrew Silberfein________

      Name: Andrew Silberfein

       Title:  CEO and President

 

Schedule 1

 Tax Protection Provisions

Only the following listed provisions are Tax Protection Provisions within the meaning of the Tax Protection Agreement:

Contribution Agreement

Section 2.7 (Intended Tax Treatment)

Amendment

Section 2(C)(ix) (Safe Harbor For Current Distributions During the First Two Years)

Section 2(D)(iii) (Allocation of Liabilities for Tax Purposes; Traditional Method)

Tax Protection Agreement

Section 2(g)

Section 2(h)

 

Schedule 2

Section 704(c) Built-In Gain

$64,952,146

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