This INDEMNITY
AGREEMENT, dated as of February _,2006 (this “
Agreement ”), is made and entered into by General
Growth Properties, Inc., a Delaware corporation (“ GGP
”) and The Rouse Company, LP, a Delaware limited partnership
and the successor to The Rouse Company, Inc., a Maryland
corporation (“ Rouse ”) (collectively, the
“ Indemnifying Parties ”), in favor of and for
the benefit of the Holders.
WHEREAS, in 1996
Rouse acquired The Hughes Corporation (“ THC ”)
pursuant to the Agreement and Plan of Merger, dated as of
February 22, 1996 (the “ 1996 Merger Agreement
”), among Rouse, TRC Acquisition Company I and THC (the
“ 1996 Merger ”);
WHEREAS, in
satisfaction of a condition precedent set forth in the 1996 Merger
Agreement, Rouse entered into that certain Contingent Stock
Agreement, effective as of January 1, 1996 (the “
CSA ”), in favor of and for the benefit of the
Holders;
WHEREAS, pursuant
to Section 7.04(a) of the CSA, Rouse agreed to require any
successor to all or substantially all of the business and/or assets
of Rouse, by agreement in form and substance reasonably acceptable
to the Holders, to expressly assume and agree to perform the CSA in
the same manner and to the same extent that Rouse would be required
to perform it if no such succession took place;
WHEREAS, pursuant
to Section 7.04(b) of the CSA, Rouse expressly agreed that,
without the prior written consent of the Majority Holders, it would
not undertake or complete any transaction if such transaction could
reasonably be expected to have a prejudicial effect on the Holders
with respect to their non-taxable receipt of securities pursuant to
the 1996 Merger Agreement or the CSA;
WHEREAS, GGP,
Rouse, and Red Acquisition LLC (“ Merger Sub ”)
are parties to that certain Agreement and Plan of Merger dated as
of August 19, 2004 (the “2004 Merger Agreement
”), pursuant to which, as of the “Effective Time”
(as defined in the 2004 Merger Agreement), Merger Sub merged with
and into Rouse and GGP assumed the obligations of Rouse under the
CSA (collectively the “ 2004 Merger
”);
WHEREAS, in
connection with the 2004 Merger, GGP and Rouse entered into that
certain Assumption Agreement dated October 19, 2004, pursuant
to which GGP assumed the obligations of Rouse under the CSA (the
“ GGP Assumption ”);
WHEREAS, as a
result of the 2004 Merger and the GGP Assumption, future
distributions of Contingent Shares under the CSA will be made to
the Holders in shares of common stock of GGP rather than shares of
common stock of Rouse;
WHEREAS, the
Indemnifying Parties desire to indemnify the Holders, on the terms
and conditions set forth herein, for the possibility of certain
actual or deemed tax liabilities the Holders may incur as a result
of the 2004 Merger and/or the GGP Assumption; and
WHEREAS, the
Indemnifying Parties are entering into this Agreement (i) in
satisfaction of certain aspects of the Order, dated
November 8, 2005, of the Arbitration Panel, comprised of Judge
George Pratt, Mr. Gerald Aksen and Mr. Burt Lehman, that
heard certain disputes between the Indemnifying Parties and the
Representatives relating to the CSA; (ii) with the
understanding between the Indemnifying Parties that this Agreement
be in lieu of, and supersede and replace in its entirety, the
one-sentence indemnity contained in Paragraph 2 of the GGP
Assumption; and (iii) the Indemnifying Parties’ and the
Representatives’ respective positions on the foregoing
sentence are contained in a letter dated March
, 2006.
NOW, THEREFORE, in
consideration of the mutual covenants and agreements set forth in
this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Indemnifying Parties hereby agree as follows:
1.01 Defined
Terms . As used in this Agreement, the following defined terms
have the meanings indicated below:
(a)
“ Accounting Referee ” has the meaning specified
in Section 2.05 .
(b)
“ Agreement ” means this Indemnity
Agreement.
(c)
“ Applicable Federal Rate ” has the meaning
specified in the CSA.
(d)
“ Code ” means the Internal Revenue Code of
1986, as amended.
(e)
“ Contest ” has the meaning specified in
Section 2.06(a) .
(f)
“ Contestant ” has the meaning specified in
Section 2.06(a) .
(g)
“ Contingent Shares ” has the meaning specified
in the CSA.
(h)
“ CSA ” has the meaning specified in the
preamble of this Agreement.
(i)
“ GGP ” has the meaning specified in the
preamble of this Agreement.
(j)
“ GGP Assumption ” has the meaning specified in
the preamble of this Agreement.
(k)
“ GGP Shares ” means shares of the common stock
of GGP (or any successor thereto) to be issued or delivered to the
Holders pursuant to the CSA.
(l)
“ Gross-Up ” means any gross-up payment due to
any Holder or Contestant pursuant to Section 3.03
.
(m)
“ Holders ” means each of the Holders, as
defined in the CSA, and in the case of a Holder which is a Pass
Through Entity the term “Holders” includes the Pass
Through Entity and the Member or Members of such Pass Through
Entity.
(n)
“ Inclusion Issue ” has the meaning specified in
Section 2.04(a) .
(o)
“ Indemnifiable Liability ” means any Taxes
resulting to or payable by a Holder, from time to time, as a result
of any Tax Assumption being determined to be incorrect solely
because of the consummation of the 2004 Merger and/or the GGP
Assumption, reduced (but not below zero) by any applicable
Indemnity Credit; provided , however , that
notwithstanding anything herein to the contrary, the term
Indemnifiable Liability does not include, with respect to any
Holder, any tax liability attributable to (i) any interest
income realized for tax purposes by reason of the issuance or
delivery to such Holder, or to the Pass Through Entity of which
such Holder is, or was, a member, of shares under the CSA, whether
prior or subsequent to the consummation of the 2004 Merger;
(ii) the 1996 Merger failing to qualify as a
“reorganization” within the meaning of Section 368(a)
of the Code for any reason other than solely because of the
consummation of the 2004 Merger and/or the GGP Assumption;
(iii) the execution and delivery of the CSA incident to the
1996 Merger or the receipt of shares thereunder being treated as
one or more taxable events for any reason other than solely because
of the consummation of the 2004 Merger and/or the GGP Assumption;
(iv) the issuance or delivery of shares of stock pursuant to
the CSA prior to the consummation of the 2004 Merger other than
solely because of the consummation of the 2004 Merger and/or the
GGP Assumption; or (iv) consummation of the 2004 Merger on
Rouse shareholders as such, generally.
(p)
“ Indemnifiable Shares ” means (i) shares
of common stock of Rouse issued or delivered to the Holders or the
Pass Through Entities pursuant to the 1996 Merger; (ii) shares
of common stock of Rouse issued or delivered pursuant to the CSA;
or (iii) GGP Shares issued or delivered pursuant to the CSA,
the bases of which, for income tax purposes, are affected by an
Indemnifiable Liability.
(q)
“Indemnifying Parties” has the meaning specified
in the preamble of this Agreement.
(r)
“ Indemnity Credit ” means, with respect to any
Holder, the amount of reduction of Tax of such Holder solely
resulting from an event giving rise to an Indemnifiable Liability,
which reduction is realized by such Holder upon the disposition of
an Indemnifiable Share in a transaction in which gain or loss is
recognized for federal income tax purposes prior to the Indemnity
Payment Date with respect to such share.
(s)
“ Indemnity Payment Date ” means the date on
which the Indemnifying Parties are obligated to pay the amount of
any Indemnifiable Liability as provided in Sections 2.04
through 2.06 .
(t)
“ Majority Holders ” has the meaning specified
in the CSA.
(u)
“ Member ” means each partner, member,
stockholder or other beneficial owner of a Pass Through Entity.
Where a Member is a Pass Through Entity, then the term
“Member” shall also include the Member or Members of
such Pass Through Entity.
(v)
“ Merger Sub ” has the meaning specified in the
preamble of this Agreement.
(w)
“ Notice of Issue ” has the meaning specified in
Section 2.04(a) .
(x)
“ Pass Through Entity ” means any entity taxable
as a partnership, “S corporation” or other entity the
income of which is not taxed to the entity but to its Members and
any entity whose existence separate from its Member or Members is
disregarded for tax purposes.
(y)
“ Rouse ” has the meaning specified in the
preamble of this Agreement.
(z)
“ Section ” means, unless otherwise indicated,
the relevant Section of this Agreement.
(aa)
“ Taxes ” means, with respect to any Holder, an
amount determined by multiplying the highest combined marginal
federal and applicable state, foreign or local tax rate on income
or gain on the character of income recognized (including in the
case of any state, foreign or local taxes, taxes denominated as
franchise taxes) times the income or gain asserted or finally
determined, as the case may be, to be recognized by such Holder as
a result of an Indemnifiable Liability. For purposes of determining
such amount, any calculation will be made without regard to any
deductions, losses or credits of the Holders or Pass Through
Entity, as the case may be, which are not directly related to the
1996 Merger or the CSA.
(bb)
“ Tax Assumptions ” mean the following regarding
the tax treatment of the 1996 Merger, the 2004 Merger and the GGP
Assumption to the Holders:
(i)
the 1996 Merger constituted a “reorganization” within
the meaning of Code Section 368(a);
(ii)
no taxable income or gain was recognized by the Holders as a result
of the exchange of stock of THC for that of Rouse in connection
with the 1996 Merger or by their acquisition of rights pursuant to
the CSA;
(iii)
no taxable income or gain was, or will be, recognized by the
Holders by reason of the issuance or delivery of shares of stock
pursuant to the CSA prior to the consummation of the 2004 Merger,
except to the extent that a portion of each share of stock so
issued or delivered was treated as interest for income tax
purposes;
(iv)
for United States federal income tax purposes and for the income
tax purposes of any state or any political subdivision thereof, no
taxable income or gain was recognized by the Holders by reason of
the execution and delivery of this Agreement;
(v)
for United States federal income tax purposes and for the income
tax purposes of any state or any political subdivision thereof, the
GGP Assumption will not result in the recognition of income, gain
or loss for tax purposes by the Holders; and
(vi)
for United States federal income tax purposes and for the income
tax purposes of any state or any political subdivision thereof, the
issuance or delivery to the Holders or a Pass Through Entity of GGP
Shares (or those of a successor) pursuant to the CSA will not
result in taxable income or gain to the Holders, except to the
extent that any portion of each GGP Share so issued or delivered is
treated as interest income for tax purposes.
(cc)
“ Taxing Authority ” means the United States
Secretary of Treasury and any delegate thereof, the United States
Internal Revenue Service and any comparable state or local agency
or authority.
(dd)
“ Tax Notice ” has the meaning specified in
Section 2.04 .
(ee)
“ THC ” has the meaning specified in the
preamble of this Agreement.
(ff)
“ 1996 Merger ” has the meaning specified in the
preamble of this Agreement.
(gg)
“ 1996 Merger Agreement ” has the meaning
specified in the preamble of this Agreement.
(hh)
“ 2004 Merger ” has the meaning spe
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