Exhibit 10.1
EXECUTION COPY
TAX MATTERS AGREEMENT
by and among
TEMPLE-INLAND INC.,
FORESTAR REAL ESTATE GROUP INC.,
and
GUARANTY FINANCIAL GROUP INC.
Dated as of
December 11, 2007

 

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TAX MATTERS AGREEMENT
     THIS TAX MATTERS AGREEMENT (this “Agreement”) is entered into as of
December 11, 2007 by and among Temple-Inland Inc., a Delaware corporation
(“Temple-Inland”), Forestar Real Estate Group Inc., a Delaware corporation
(“Forestar”), and Guaranty Financial Group Inc., a Delaware Corporation
(“Guaranty”); each a “Party” and collectively, the “Parties.”
R E C I T A L S:
     WHEREAS, Temple-Inland, acting through its direct and indirect
subsidiaries, currently conducts a number of businesses, including (i) the
Retained Business, (ii) the Real Estate Business, and (iii) the Financial
Services Business;
     WHEREAS, as of the date hereof, Temple-Inland and its direct and indirect
domestic subsidiaries are members of an Affiliated Group, of which Temple-Inland
is the common parent;
     WHEREAS, the Board of Directors of Temple-Inland has determined that it is
appropriate, desirable and in the best interests of Temple-Inland and its
stockholders to separate Temple-Inland (the “Separation”) into three separate,
independent and publicly traded companies: (i) one comprising the Real Estate
Business, which shall be owned and conducted, directly or indirectly, by
Forestar, (ii) one comprising the Financial Services Business, which shall be
owned and conducted, directly or indirectly, by Guaranty, and (iii) one
comprising the Retained Business, which shall continue to be owned and
conducted, directly or indirectly, by Temple-Inland;
     WHEREAS, in order to effect the Separation, the Board of Directors of
Temple-Inland has determined that it is appropriate, desirable and in the best
interests of Temple-Inland and its stockholders for Temple-Inland and certain of
its subsidiaries to enter into a series of transactions whereby, among other
things, (i) Forestar Real Estate Group LLC will convert to a corporation under
state law and TIN Inc. will contribute certain assets relating to the Real
Estate Business to Forestar (“Internal Contribution 1”) and distribute the stock
of Forestar to Temple-Inland (“Internal Distribution 1”); (ii) Temple-Inland
will distribute all of the issued and outstanding shares of common stock of
Forestar, on a pro rata basis to the holders of the outstanding common stock of
Temple-Inland (“External Distribution 1”); (iii) TIN Inc. will contribute
certain assets relating to the Financial Services Business to Guaranty
(“Internal Contribution 2”) and distribute the stock of Guaranty to
Temple-Inland (“Internal Distribution 2”); and (iv) Temple-Inland will
contribute certain assets relating to the Financial Services Business to
Guaranty (“Internal Contribution 3”) and distribute all of the issued and
outstanding shares of common stock of Guaranty, on a pro rata basis to the
holders of the outstanding common stock of Temple-Inland (“External Distribution
2”) (such transactions, the “Spin-Offs”);
     WHEREAS, Temple-Inland, Forestar and Guaranty have determined that it is
necessary and desirable, as part of the Separation, to (i) allocate, transfer,
retain or assign to the Forestar Group, the Real Estate Assets and Real Estate
Liabilities, (ii) allocate, transfer, retain or assign to the Guaranty Group the
Financial Services Assets and Financial Services Liabilities, and (iii)
allocate, transfer, retain or assign to the Temple-Inland Group, the Retained
Business Assets and Retained Business Liabilities;

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     WHEREAS, to effect the Separation, Temple-Inland, Forestar and Guaranty
entered into that certain Separation and Distribution Agreement dated as of even
date hereof (as amended or otherwise modified from time to time, the “Separation
Agreement”);
     WHEREAS, it is the intention of the Parties that Internal Contribution 1
and Internal Distribution 1 together qualify as a reorganization within the
meaning of sections 368(a)(1)(D) and 355 of the Code;
     WHEREAS, it is the intention of the Parties that External Distribution 1
qualify as a distribution within the meaning of section 355 of the Code;
     WHEREAS, it is the intention of the Parties that Internal Contribution 2
and Internal Distribution 2 together qualify as a reorganization within the
meaning of sections 368(a)(1)(D) and 355 of the Code;
     WHEREAS, it is the intention of the Parties that Internal Contribution 3
and External Distribution 2 together qualify as a reorganization within the
meaning of sections 368(a)(1)(D) and 355 of the Code;
     WHEREAS, in connection with the Separation, Forestar (USA) Real Estate
Group, Inc. shall, subject to the terms and provisions of the Separation and
Distribution Agreement (as defined herein), enter into a credit facility for
both revolving and term loan borrowings, all or a portion of the proceeds of
which shall be used to repay intercompany debt owed to Temple-Inland;
     WHEREAS, in contemplation of the Separation, pursuant to which the Forestar
Group and the Guaranty Group will cease to be members of the Affiliated Group of
which Temple-Inland is the parent, if (but only if) External Distribution 1 and
External Distribution 2 occur, the Parties have determined to enter into this
Agreement, setting forth their agreement with respect to certain tax matters;
and
     NOW, THEREFORE, in consideration of the foregoing premises, the mutual
promises and covenants hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties, intending to be legally bound, agree as follows:
Section 1. Definitions.
          Capitalized terms used in this Agreement and not otherwise defined in
this Section 1 shall have the meanings set forth in the Separation Agreement. As
used in this Agreement, the following capitalized terms shall have the following
meanings:

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     “Affiliated Group” means an affiliated group of corporations within the
meaning of section 1504(a)(1) of the Code that files a consolidated return for
United States federal Income Tax purposes.
     “After Tax Amount” means any additional amount necessary to reflect the
hypothetical Tax consequences of the receipt or accrual of any payment required
to be made under this Agreement (including payment of an additional amount or
amounts hereunder and the effect of the deductions available for interest paid
or accrued and for Taxes such as state and local Income Taxes), determined by
using the highest applicable statutory corporate Income Tax rate (or rates, in
the case of an item that affects more than one Tax) for the relevant taxable
period (or portion thereof).
     “Agreement” shall have the meaning set forth in the preamble hereto.
     “Allocated Credit Carryforwards” shall have the meaning set forth in
Section 4.04.
     “Audit” means any audit, assessment of Taxes, other examination by any
Taxing Authority, proceeding, or appeal of such a proceeding relating to Taxes,
whether administrative or judicial, including proceedings relating to competent
authority determinations.
     “Business Day” shall have the meaning set forth in the Separation
Agreement.
     “Carryback Period” shall have the meaning set forth in Section 4.02.
     “Code” means the Internal Revenue Code of 1986, as amended.
     “Combined Return” means any Tax Return, other than with respect to United
States federal Income Taxes, filed on a consolidated, combined (including nexus
combination, worldwide combination, domestic combination, line of business
combination or any other form of combination) or unitary basis wherein Forestar
(or one or more Forestar Affiliates) or Guaranty (or one or more Guaranty
Affiliates) join in the filing of such Tax Return (for any taxable period or
portion thereof) with Temple-Inland or one or more Temple-Inland Affiliates.
     “Consolidated Return” means any Tax Return with respect to United States
federal Income Taxes filed on a consolidated basis wherein Forestar (or one or
more Forestar Affiliates) or Guaranty (or one or more Guaranty Affiliates) join
in the filing of such Tax Return (for any taxable period or portion thereof)
with Temple-Inland or one or more Temple-Inland Affiliates.
     “Deferred Intercompany Item” shall mean any income, gain, deduction or loss
from transactions between members of the same Affiliated Group that is deferred
for U.S. federal income tax purposes under the principles in Treasury
Regulations section 1.1502-13, or any similar provision under state, local or
foreign law.
     “Distribution Date” shall mean the Forestar Distribution Date or the
Guaranty Distribution Date, as applicable.

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     “Distribution Taxes” means any Taxes imposed on, or increase in Taxes
incurred by, Temple-Inland or any Temple-Inland Affiliate, and any Taxes of a
Temple-Inland shareholder (or former Temple-Inland shareholder) that are
required to be paid or reimbursed by Temple-Inland or any Temple-Inland
Affiliate pursuant to a Final Determination, provided that Temple-Inland shall
have vigorously defended itself in any legal proceeding involving Taxes of a
Temple-Inland shareholder, (without regard to whether such Taxes are offset or
reduced by any Tax Asset, Tax Item, or otherwise) resulting from, or arising in
connection with, the failure of Internal Contribution 1, Internal Distribution
1, Internal Contribution 2, Internal Distribution 2, Internal Contribution 3,
External Distribution 1 or External Distribution 2 to qualify as a transaction
in which no income, gain or loss is recognized pursuant to sections 355 and
368(a)(1)(D) of the Code (including any Tax resulting from the application of
section 355(d) or section 355(e) of the Code to Internal Distribution 1,
Internal Distribution 2, External Distribution 1 or External Distribution 2) or
corresponding provisions of the laws of any other jurisdictions. Any Income Tax
referred to in the immediately preceding sentence shall be determined using the
highest applicable statutory corporate Income Tax rate (or rates, in the case of
an item that affects more than one Tax) for the relevant taxable period (or
portion thereof) taking into account deductions for interest paid or accrued and
other related Taxes, such as state and local Taxes.
     “Effective Time” shall have the meaning set forth in the Separation
Agreement.
     “Estimated Tax Installment Date” means, with respect to United States
federal Income Taxes, the estimated Tax installment due dates prescribed in
section 6655(c) of the Code and, in the case of any other Tax, means any other
date on which an installment payment of an estimated amount of such Tax is
required to be made.
     “External Distribution 1” shall have the meaning set forth in the recitals
hereto.
     “External Distribution 2” shall have the meaning set forth in the recitals
hereto.
     “Filing Party” shall have the meaning set forth in Section 7.01.
     “Final Determination” means the final resolution of liability for any Tax
for any taxable period, by or as a result of (i) a final and unappealable
decision, judgment, decree or other order by any court of competent
jurisdiction; (ii) a final settlement with the IRS, a closing agreement or
accepted offer in compromise under section 7121 or section 7122 of the Code, or
a comparable agreement under the laws of other jurisdictions, which resolves the
entire Tax liability for any taxable period; (iii) any allowance of a refund or
credit in respect of an overpayment of Tax, but only after the expiration of all
periods during which such refund may be recovered by the jurisdiction imposing
the Tax; or (iv) any other final disposition, including by reason of the
expiration of the applicable statute of limitations.
     “Financial Services Business” shall have the meaning set forth in the
Separation Agreement.
     “Force Majeure” shall have the meaning set forth in the Separation
Agreement.

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     “Forestar” shall have the meaning set forth in the preamble hereto.
     “Forestar Affiliate” means any Person included in the Forestar Group.
     “Forestar Business Records” shall have the meaning set forth in
Section 8.01(b).
     “Forestar Common Stock” shall have the meaning set forth in the Separation
Agreement.
     “Forestar Distribution Date” shall have the meaning set forth in the
Separation Agreement.
     “Forestar Group” shall have the meaning set forth in the Separation
Agreement.
     “Forestar Tax Acts” shall have the meaning set forth in Section 4.01(b).
     “Guaranty” shall have the meaning set forth in the preamble hereto.
     “Guaranty Affiliate” means any Person included in the Guaranty Group.
     “Guaranty Business Records” shall have the meaning set forth in
Section 8.01(b).
     “Guaranty Common Stock” shall have the meaning set forth in the Separation
Agreement.
     “Guaranty Distribution Date” shall have the meaning set forth in the
Separation Agreement.
     “Guaranty Group” shall have the meaning set forth in the Separation
Agreement.
     “Guaranty Tax Acts” shall have the meaning set forth in Section 4.01(c).
     “Income Tax” means any federal, state, local or foreign Tax determined (in
whole or in part) by reference to net income, net worth, gross receipts or
capital, or any such Taxes imposed in lieu of such a Tax, including, without
limitation, any franchise Tax.
     “Income Tax Return” means any Tax Return relating to any Income Tax.
     “Internal Contribution 1” shall have the meaning set forth in the recitals
hereto.
     “Internal Contribution 2” shall have the meaning set forth in the recitals
hereto.
     “Internal Contribution 3” shall have the meaning set forth in the recitals
hereto.
     “Internal Distribution 1” shall have the meaning set forth in the recitals
hereto.
     “Internal Distribution 2” shall have the meaning set forth in the recitals
hereto.

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     “IRS” means the United States Internal Revenue Service or any successor
thereto, including its agents, representatives, and attorneys.
     “IRS Ruling” means the private letter ruling issued by the IRS in
connection with the Separation, which is a condition to the Spin-Offs under the
Separation Agreement.
     “IRS Ruling Documents” means the request for the IRS Ruling filed with the
IRS, together with all supplemental filings or other materials subsequently
submitted on behalf of Temple-Inland, the Temple-Inland Affiliates and
Temple-Inland’s shareholders to the IRS, the appendices and exhibits thereto,
and the IRS Ruling itself.
     “Joint Responsibility Item” means any Tax Item, including Distribution
Taxes, for which the non-Filing Party’s responsibility under this Agreement
could exceed one million dollars ($1,000,000), but not a Sole Responsibility
Item.
     “Officer’s Certificate” means a letter executed by an officer of
Temple-Inland, Forestar or Guaranty and provided to Spin-Off Tax Counsel or Tax
Counsel as a condition for the completion of the Spin-Off Tax Opinion, a
Supplemental Tax Spin-Off Opinion or Supplemental Tax Opinion.
     “Owed Party” shall have the meaning set forth in Section 6.05.
     “Owing Party” shall have the meaning set forth in Section 6.05.
     “Parties” shall have the meaning set forth in the preamble hereto.
     “Payment Period” shall have the meaning set forth in Section 6.05(e).
     “Person” shall have the meaning set forth in the Separation Agreement.
     “Post-Distribution Period” means any taxable period beginning after the
relevant Distribution Date.
     “Pre-Distribution Period” means any taxable period ending on or before the
relevant Distribution Date.
     “Prime Rate” shall have the meaning set forth in the Separation Agreement.
     “Real Estate Assets” shall have the meaning set forth in the Separation
Agreement.
     “Real Estate Business” shall have the meaning set forth in the Separation
Agreement.
     “Real Estate Liabilities” shall have the meaning set forth in the
Separation Agreement.
     “Retained Business Assets” shall have the meaning set forth in the
Separation Agreement.

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     “Retained Business” shall have the meaning set forth in the Separation
Agreement.
     “Retained Business Liabilities” shall have the meaning set forth in the
Separation Agreement.
     “Separation” shall have the meaning set forth in the preamble hereto.
     “Separation Agreement” shall have the meaning set forth in the recitals
hereto.
     “Sole Responsibility Item” means any Tax Item for which the non-Filing
Party has the entire economic liability under this Agreement.
     “Spin-Offs” shall have the meaning set forth in the recitals hereto.
     “Spin-Off Tax Counsel” means Skadden, Arps, Slate, Meagher & Flom LLP.
     “Spin-Off Tax Opinion” means the opinion to be issued by Spin-Off Tax
Counsel, as one of the conditions to completing the Spin-Offs, addressing
certain United States federal Income Tax consequences of the Spin-Offs under
section 355 of the Code.
     “Supplemental Ruling” means any ruling (other than the IRS Ruling) issued
by any Taxing Authority in connection with the Spin-Offs.
     “Supplemental Ruling Documents” means any request for a Supplemental
Ruling, together with any supplemental filings or other materials subsequently
submitted, the appendices and exhibits thereto, and any Supplemental Rulings
issued.
     “Supplemental Spin-Off Tax Opinion” means any opinion (other than the
Spin-Off Tax Opinion) issued by any tax counsel in connection with the
Spin-Offs.
     “Supplemental Tax Opinion” shall have the meaning set forth in
Section 4.03(c).
     “Tax Asset” means any Tax Item that has been recognized for Tax purposes,
but has not been realized during the taxable period, and that could reduce a Tax
in another taxable period, including a net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or credit
related to alternative minimum tax or any other Tax credit.
     “Tax Benefit” means a reduction in the Tax liability (or increase in refund
or credit or any item of deduction or expense) of a taxpayer (or of the
Affiliated Group, or similar group of entities as defined under corresponding
provisions of the laws of any other jurisdiction, of which it is a member) for
any taxable period. Except as otherwise provided in this Agreement, a Tax
Benefit shall be deemed to have been realized or received from a Tax Item in a
taxable period only if and to the extent that the Tax liability of the taxpayer
(or of the Affiliated Group, or similar group of entities as defined under
corresponding provisions of the laws of any other jurisdiction, of which it is a
member) for such period, after taking into account the effect of the

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Tax Item on the Tax liability of such taxpayer (or of the Affiliated Group, or
similar group of entities as defined under corresponding provisions of the laws
of any other jurisdiction, of which it is a member) in the current period and
all prior periods, is less than it would have been had such Tax liability been
determined without regard to such Tax Item.
     “Tax Counsel” means a nationally recognized law firm mutually agreed upon
by Temple-Inland and Forestar or Temple-Inland and Guaranty, as applicable, to
provide a Supplemental Tax Opinion.
     “Tax Detriment” means an increase in the Tax liability (or reduction in
refund or credit or any item of deduction or expense) of a taxpayer (or of the
Affiliated Group, or similar group of entities as defined under corresponding
provisions of the laws of any other jurisdiction, of which it is a member) for
any taxable period. Except as otherwise provided in this Agreement, a Tax
Detriment shall be deemed to have been realized or incurred from a Tax Item in a
taxable period only if and to the extent that the Tax liability of the taxpayer
(or of the Affiliated Group, or similar group of entities as defined under
corresponding provisions of the laws of any other jurisdiction, of which it is a
member) for such period, after taking into account the effect of the Tax Item on
the Tax liability of such taxpayer (or of the Affiliated Group, or similar group
of entities as defined under corresponding provisions of the laws of any other
jurisdiction, of which it is a member) in the current period and all prior
periods, is more than it would have been had such Tax liability been determined
without regard to such Tax Item.
     “Tax Item” means any item of income, gain, loss, deduction, expense or
credit, or other attribute that may have the effect of increasing or decreasing
any Tax.
     “Tax Return” means any return, report, certificate, form or similar
statement or document (including any related or supporting information or
schedule attached thereto and any information return, amended tax return, claim
for refund or declaration of estimated Tax) required to be supplied to, or filed
with, a Taxing Authority in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
     “Tax Material” shall have the meaning set forth in Section 8.01(a).
     “Taxes” means all federal, state, local or foreign taxes, charges, fees,
duties, levies, imposts, rates or other assessments, including income, gross
receipts, excise, property, sales, use, license, capital stock, transfer,
franchise, value added or other taxes, (including any interest, penalties or
additions attributable thereto) and a “Tax” shall mean any one of such Taxes.
     “Taxing Authority” means any governmental authority or any subdivision,
agency, commission or authority thereof or any quasi-governmental or private
body having jurisdiction over the assessment, determination, collection or
imposition of any Tax (including the IRS).
     “Temple-Inland” shall have the meaning set forth in the preamble hereto.
     “Temple-Inland Affiliate” means any Person included in the Temple-Inland
Group.

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     “Temple-Inland Business Records” shall have the meaning set forth in
Section 8.01(b).
     “Temple-Inland Group” shall have the meaning set forth in the Separation
Agreement.
     “Temple-Inland Tax Acts” shall have the meaning set forth in
Section 4.01(a).
     “Temple-Inland Inc. Tax Allocation Policy” means the Temple-Inland Inc. Tax
Allocation Policy by and between Temple-Inland Inc. and members of the
Temple-Inland Group effective January 1, 2003.
     “Unallocated Liabilities” shall have the meaning set forth in the
Separation Agreement.
Section 2. Preparation and Filing of Tax Returns.
     2.01. Temple-Inland’s Responsibility. Subject to the other applicable
provisions of this Agreement and consistent with past practices, Temple-Inland
shall have sole and exclusive responsibility for the preparation and filing of:
          (a) all Consolidated Returns and all Combined Returns for any taxable
period;
          (b) all Tax Returns (other than Consolidated Returns and Combined
Returns) with respect to any Temple-Inland Affiliate for any taxable period;
          (c) all Tax Returns with respect to Forestar, any Forestar Affiliate,
or the Real Estate Business or any part thereof, that are required to be filed
(taking into account any extension of time which has been requested or received)
on or prior to the Forestar Distribution Date and which have been, under past
practices, prepared and filed by Temple-Inland.
          (d) all Tax Returns with respect to Guaranty, any Guaranty Affiliate,
or the Financial Services Business or any part thereof, that are required to be
filed (taking into account any extension of time which has been requested or
received) on or prior to the Guaranty Distribution Date and which have been,
under past practices, prepared and filed by Temple-Inland.
     2.02. Forestar’s Responsibility. Forestar shall have sole and exclusive
responsibility for the preparation and filing of all Tax Returns (other than
Consolidated Returns and Combined Returns) with respect to Forestar and/or any
Forestar Affiliate due after the Forestar Distribution Date.
     2.03. Guaranty’s Responsibility. Guaranty shall have sole and exclusive
responsibility for the preparation and filing of all Tax Returns (other than
Consolidated Returns and Combined Returns) with respect to Guaranty and/or any
Guaranty Affiliate due after the Guaranty Distribution Date.

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     2.04. Agent. Subject to the other applicable provisions of this Agreement,
(i) Forestar hereby irrevocably designates, and agrees to cause each Forestar
Affiliate to so designate, Temple-Inland as its sole and exclusive agent and
attorney-in-fact to take such action (including execution of documents) as
Temple-Inland, acting in good faith, may deem appropriate in any and all matters
(including Audits) relating to any Tax Return described in Section 2.01 and
(ii) Guaranty hereby irrevocably designates, and agrees to cause each Guaranty
Affiliate to so designate, Temple-Inland as its sole and exclusive agent and
attorney-in-fact to take such action (including execution of documents) as
Temple-Inland, acting in good faith, may deem appropriate in any and all matters
(including Audits) relating to any Tax Return described in Section 2.01.
     2.05. Manner of Tax Return Preparation.
          (a) Unless otherwise required by a Taxing Authority, the Parties
hereby agree to prepare and file all Tax Returns, and to take all other actions,
in a manner consistent with (1) this Agreement, (2) the Temple-Inland Inc. Tax
Allocation Policy, (3) the Spin-Off Tax Opinion, (4) any Supplemental Spin-Off
Tax Opinion, (5) any Supplemental Tax Opinion, (6) the IRS Ruling Documents, and
(7) any Supplemental Ruling Documents. All Tax Returns shall be filed on a
timely basis (taking into account applicable extensions) by the Party
responsible for filing such returns under this Agreement.
          (b) With respect to any Consolidated Return or Combined Return:
(1) Forestar and Guaranty shall each provide Temple-Inland with a pro forma
draft of the portion of such Tax Return that reflects Forestar and/or any
Forestar Affiliate, and Guaranty and/or any Guaranty Affiliate, as applicable,
at least sixty (60) days prior to the due date (with applicable extensions) for
the filing of such Tax Return; (2) Within twenty (20) days after receiving the
pro forma draft Tax Returns, Temple-Inland shall review the drafts and provide
comments and questions to Forestar and Guaranty (in writing if requested by
Forestar and/or Guaranty); (3) Forestar and Guaranty shall cooperate with
Temple-Inland by responding (in writing if requested) and resolving the comments
and questions from Temple-Inland within ten (10) days of receiving comments and
questions from Temple-Inland.
Nothing in this Section 2.05(b) shall alter the sole and exclusive
responsibility for the preparation and filing of Tax Returns under
Sections 2.01, 2.02 and 2.03. If Forestar or Guaranty, as applicable, has not
responded to the Temple-Inland comments and questions in a timely manner
pursuant to Section 2.05(b) above, or in the case of a dispute regarding the
reporting of any Tax Item, such dispute has not been resolved by the due date
(with applicable extensions) for the filing of any Tax Return, Temple-Inland
shall file such Tax Return reporting all Tax Items in the manner as it deems
appropriate, provided, however, that Temple-Inland agrees that it will
thereafter file an amended Tax Return, if necessary, reporting any disputed Tax
Item in the manner determined under Section 8.02, and any other Tax Item as
agreed upon by Temple-Inland and Forestar or Temple-Inland and Guaranty.

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Section 3. Liability for Taxes.
     3.01. Liability for Pre-Distribution Period Taxes. Liability for all Taxes
related to Pre-Distribution Periods or portions thereof, other than Taxes
described in Section 4, shall be allocated in a manner consistent with the
Temple-Inland Inc. Tax Allocation Policy and past practices.
     3.02 Liability for Post-Distribution Period Taxes. With respect to
Post-Distribution Periods or portions thereof, Temple-Inland and any
Temple-Inland affiliate, Forestar and any Forestar affiliate, and Guaranty and
any Guaranty affiliate, shall be liable for their respective Taxes.
     3.03. Joint Liability for Certain Unallocated Taxes. Any Taxes not
otherwise allocated by Section 3.01, Section 3.02 or Section 4 shall be
allocated in the manner consistent with the allocation of Unallocated
Liabilities described in Article VI of the Separation Agreement.
     3.04. Payment of Tax Liability. If one Party is liable or responsible for
Taxes, under Sections 3.01 through 3.03, with respect to Tax Returns for which
another party is responsible for preparing and/or filing, or with respect to
Taxes that are paid by another Party, then the liable or responsible Party shall
pay the Taxes (or a reimbursement of such Taxes) to the other Party pursuant to
Section 6.05.
     3.05. Computation. Consistent with the past application of the
Temple-Inland Inc. Tax Allocation Policy, Temple-Inland shall provide Forestar
and Guaranty, as applicable, with a written calculation in reasonable detail
(including copies of all work sheets and other materials used in preparation
thereof) setting forth the amount of any Tax liability of Forestar or Guaranty,
as applicable, for which Forestar or Guaranty is liable under Section 3.01.
Forestar and Guaranty, as applicable, shall have the right to review and comment
on such calculation. Any dispute with respect to such calculation shall be
resolved pursuant to Section 8.02; provided, however, that, notwithstanding any
dispute with respect to any such calculation, in no event shall any payment
attributable to the amount of any Tax liability of Forestar or Guaranty be paid
later than the date provided in Section 6.
Section 4. Distribution Taxes and Deconsolidation.
     4.01. Distribution Taxes.
          (a) Temple-Inland’s Liability for Distribution Taxes. Notwithstanding
Sections 3.01 through 3.05, Temple-Inland shall be liable for any Distribution
Taxes, to the extent that such Distribution Taxes are attributable to, caused
by, or result from, one or more of the following (collectively, “Temple-Inland
Tax Acts”):
               (i) any action or omission by Temple-Inland or any Temple-Inland
Affiliate, at any time, that is inconsistent with any information, covenant or
representation in an Officer’s Certificate, Spin-Off Tax Opinion, Supplemental
Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling Documents or
Supplemental Ruling Documents (disclosure by Temple-Inland (or any Temple-Inland
Affiliate) to Forestar (or any Forestar Affiliate) or

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Guaranty (or any Guaranty Affiliate) of any action or fact that is inconsistent
with any information, covenant or representation submitted to Spin-Off Tax
Counsel, Tax Counsel, the IRS, or other Taxing Authority, as applicable, in
connection with an Officer’s Certificate, Spin-Off Tax Opinion, Supplemental
Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling Documents or
Supplemental Ruling Documents, shall not relieve Temple-Inland (or any
Temple-Inland Affiliate) of liability under this Agreement);
               (ii) any action or omission by Temple-Inland or any Temple-Inland
Affiliate, after the Spin-Offs (including any act or omission that is in
furtherance of, connected to, or part of a plan or series of related
transactions (within the meaning of section 355(e) of the Code) occurring on or
prior to the Spin-Offs), including a cessation, transfer to affiliates, or
disposition of the active trades or businesses, stock buyback or payment of an
extraordinary dividend;
               (iii) any acquisition of any stock or assets of Temple-Inland or
any Temple-Inland Affiliate, by one or more other Persons prior to or following
the Spin-Offs;
               (iv) any issuance of stock by Temple-Inland or any Temple-Inland
Affiliate, after the Spin-Offs, including any issuance pursuant to the exercise
of employee stock options or other employment related arrangements, or the
exercise of warrants; or
               (v) any change in ownership of stock in Temple-Inland or any
Temple-Inland Affiliate after the Spin-Offs.
          (b) Forestar’s Liability for Distribution Taxes. Notwithstanding
Sections 3.01 through 3.05, Forestar, and each Forestar Affiliate shall be
jointly and severally liable for any Distribution Taxes, to the extent that such
Distribution Taxes are attributable to, caused by, or result from, one or more
of the following (collectively, “Forestar Tax Acts”):
               (i) any action or omission by Forestar or any Forestar Affiliate,
at any time, that is inconsistent with any information, covenant or
representation in an Officer’s Certificate, Spin-Off Tax Opinion, Supplemental
Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling Documents or
Supplemental Ruling Documents, (disclosure by Forestar (or any Forestar
Affiliate) to Temple-Inland (or any Temple-Inland Affiliate) of any action or
fact that is inconsistent with any information, covenant or representation
submitted to Spin-Off Tax Counsel, Tax Counsel, the IRS, or other Taxing
Authority, as applicable, in connection with an Officer’s Certificate, Spin-Off
Tax Opinion, Supplemental Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS
Ruling Documents, Supplemental Ruling Documents, shall not relieve Forestar (or
any Forestar Affiliate) of liability under this Agreement);
               (ii) any action or omission by Forestar or any Forestar
Affiliate, after the Spin-Off (including any act or omission that is in
furtherance of, connected to, or part of a plan or series of related
transactions (within the meaning of section 355(e) of the Code) occurring on or
prior to the Distribution), including a cessation, transfer to affiliates, or
disposition of the active trades or businesses, stock buyback or payment of an
extraordinary dividend;

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               (iii) any acquisition of any stock or assets of Forestar or any
Forestar Affiliate, by one or more other Persons (other than Temple-Inland or
any Temple-Inland Affiliate) prior to or following the Spin-Off;
               (iv) any issuance of stock by Forestar or any Forestar Affiliate,
after the Spin-Off, including any issuance pursuant to the exercise of employee
stock options or other employment related arrangements, or the exercise of
warrants; or
               (v) any change in ownership of stock in Forestar or any Forestar
Affiliate after the Spin-Off.
          (c) Guaranty’s Liability for Distribution Taxes. Notwithstanding
Sections 3.01 through 3.05, Guaranty, and each Guaranty Affiliate shall be
jointly and severally liable for any Distribution Taxes, to the extent that such
Distribution Taxes are attributable to, caused by, or result from, one or more
of the following (collectively, “Guaranty Tax Acts”):
               (i) any action or omission by Guaranty or any Guaranty Affiliate,
at any time, that is inconsistent with any information, covenant or
representation in an Officer’s Certificate, Spin-Off Tax Opinion, Supplemental
Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling Documents or
Supplemental Ruling Documents, (disclosure by Guaranty (or any Guaranty
Affiliate) to Temple-Inland (or any Temple-Inland Affiliate) of any action or
fact that is inconsistent with any information, covenant or representation
submitted to Spin-Off Tax Counsel, Tax Counsel, the IRS, or other Taxing
Authority, as applicable, in connection with an Officer’s Certificate, Spin-Off
Tax Opinion, Supplemental Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS
Ruling Documents, Supplemental Ruling Documents, shall not relieve Guaranty (or
any Guaranty Affiliate) of liability under this Agreement);
               (ii) any action or omission by Guaranty or any Guaranty
Affiliate, after the Spin-Off (including any act or omission that is in
furtherance of, connected to, or part of a plan or series of related
transactions (within the meaning of section 355(e) of the Code) occurring on or
prior to the Distribution), including a cessation, transfer to affiliates, or
disposition of the active trades or businesses, stock buyback or payment of an
extraordinary dividend;
               (iii) any acquisition of any stock or assets of Guaranty or any
Guaranty Affiliate, by one or more other Persons (other than Temple-Inland or
any Temple-Inland Affiliate) prior to or following the Spin-Off;
               (iv) any issuance of stock by Guaranty or any Guaranty Affiliate,
after the Spin-Off, including any issuance pursuant to the exercise of employee
stock options or other employment related arrangements, or the exercise of
warrants; or
               (v) any change in ownership of stock in Guaranty or any Guaranty
Affiliate after the Spin-Off.

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          (d) Joint Liability for Remaining Distribution Taxes. In the event
that Distribution Taxes are not otherwise allocated by Sections 4.01(a), (b) or
(c), then the liability for such Distribution Taxes shall be allocated in the
manner consistent with the allocation of Unallocated Liabilities described in
Article VI of the Separation Agreement. In the event that one or more
Temple-Inland Tax Acts occur simultaneously with one or more Forestar Tax Acts
or Guaranty Tax Acts and these result in Distribution Taxes, then the allocation
of the liability for such Distribution Taxes shall be allocated in the manner
consistent with the allocation of Unallocated Liabilities described in
Article VI of the Separation Agreement, and, Sections 4.01(a), (b) or (c) shall
not control the allocation of such Distribution Taxes.
          (e) Representation. Each of Temple-Inland, Forestar and Guaranty
represents that, as of the date of this Agreement, neither it nor its Affiliates
know of any fact that it reasonably believes or should believe may cause
Internal Contribution 1, Internal Distribution 1, External Distribution 1,
Internal Contribution 2, Internal Distribution 2, Internal Contribution 3, or
External Distribution 2 to fail to qualify for U.S. federal income tax purposes
as transactions in which no income, gain, or loss is recognized pursuant to
section 355 of the Code.
     4.02. Carrybacks.
          (a) In General. Temple-Inland agrees to pay to Forestar or Guaranty,
as applicable, the Tax Benefits from the use, in accordance with applicable law,
in any Pre-Distribution Period (the “Carryback Period”) of a carryback of any
Tax Asset of the Forestar Group or Guaranty Group from a Post-Distribution
Period (other than a carryback of any Tax Asset attributable to Distribution
Taxes for which the liability is borne by Temple-Inland or any Temple-Inland
Affiliate). In the absence of controlling legal authority, if the Temple-Inland
Group and either the Forestar Group or Guaranty Group or both, as applicable,
can carryback Tax Assets from the same Post-Distribution Period to a Carryback
Period, the Tax Assets of the Temple-Inland Group shall be carried back and
absorbed by the Temple-Inland Group first. If subsequent to the payment by
Temple-Inland to Forestar or Guaranty of the Tax Benefit of a carryback of a Tax
Asset of the Forestar Group or the Guaranty Group, there shall be a Final
Determination which results in a (1) change to the amount of the Tax Asset so
carried back or (2) change to the amount of such Tax Benefit, Forestar or
Guaranty, as applicable, shall repay to Temple-Inland, or Temple-Inland shall
repay to Forestar or Guaranty, as the case may be, any amount which would not
have been payable to such other Party pursuant to this Section 4.02(a) had the
amount of the Tax Benefit been determined in light of these events. Nothing in
this Section 4.02(a) shall require Temple-Inland to file an amended Tax Return
or claim for refund of United States federal Income Taxes; provided, however,
that Temple-Inland shall use its reasonable efforts to carryback a Tax Asset of
the Forestar Group or the Guaranty Group.
          (b) Net Operating Losses. Notwithstanding any other provision of this
Agreement, Forestar and Guaranty each hereby expressly agree to elect (under
section 172(b)(3) of the Code and, to the extent feasible, any similar provision
of any state, local or foreign Tax law) to relinquish any right to carryback net
operating losses to any Pre-Distribution Periods of Temple-Inland (in which
event no payment shall be due from Temple-Inland to Forestar in respect of such
net operating losses).

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          (c) Computation. Consistent with the past application of the
Temple-Inland Inc. Tax Allocation Policy, Temple-Inland shall provide Forestar
and Guaranty, as applicable, with a written calculation in reasonable detail
(including copies of all work sheets and other materials used in preparation
thereof) setting forth the amount of any Tax Benefit relating to such carryback
of any Tax Asset of the Forestar Group or Guaranty Group from a
Post-Distribution Period (other than a carryback of any Tax Asset attributable
to Distribution Taxes for which the liability is borne by Temple-Inland or any
Temple-Inland Affiliate). Forestar and Guaranty, as applicable, shall have the
right to review and comment on such calculation. Any dispute with respect to
such calculation shall be resolved pursuant to Section 8.02.
     4.03. Continuing Covenants.
          (a) In General. Each of Temple-Inland, Forestar and Guaranty agrees
(1) not to take any action (or cause its Affiliates to take any action)
reasonably expected to result in an increased Tax liability to the other, a
reduction in a Tax Asset of the other or an increased liability to the other
under this Agreement, and (2) to take any action (and cause its Affiliates to
take any action) reasonably requested by the other that would reasonably be
expected to result in a Tax Benefit or avoid a Tax Detriment to the other,
provided, in either such case, that the taking or refraining to take such action
does not result in any additional cost not fully compensated for by the other
Party or any other adverse effect to such Party. The Parties hereby acknowledge
that the preceding sentence is not intended to limit, and therefore shall not
apply to, the rights of the Parties with respect to matters otherwise covered by
this Agreement.
          (b) Restrictions. Temple-Inland, Forestar, and Guaranty, respectively,
agree that they will not knowingly take or fail to take, or permit any
Temple-Inland Affiliate, any Forestar Affiliate, or any Guaranty Affiliate, as
applicable, to knowingly take or fail to take, any action where such action or
failure to act would be inconsistent with any information, covenant or
representation that relates to facts or matters related to Temple-Inland (or any
Temple-Inland Affiliate), Forestar (or any Forestar Affiliate), or Guaranty (or
any Guaranty Affiliate), or within the control of Temple-Inland, Forestar, or
Guaranty and is contained in an Officer’s Certificate, Spin-Off Tax Opinion,
Supplemental Tax Opinion, Supplemental Spin-Off Tax Opinion, IRS Ruling
Documents or Supplemental Ruling Documents, (except where such information,
covenant or representation was not previously disclosed to Temple-Inland,
Forestar, or Guaranty) other than as permitted by this Section 4.03. For this
purpose an action is considered inconsistent with a representation if the
representation states that there is no plan or intention to take such action.
Temple-Inland, Forestar, and Guaranty, respectively, agree that they will not
take (and it will cause the Temple-Inland Affiliates, Forestar Affiliates, and
Guaranty Affiliates to refrain from taking) any position on a Tax Return that is
inconsistent with the treatment of Internal Contribution 1, Internal
Distribution 1, External Distribution 1, Internal Contribution 2, Internal
Distribution 2, Internal Contribution 3, and External Distribution 2 as
transactions in which no income, gain, or loss is recognized pursuant to section
355 of the Code.
          (c) Certain Forestar Actions Following the Spin-Off. Forestar agrees
that, during the two (2) year period following the Spin-Off, Forestar shall not
(i) sell or otherwise transfer in a single transaction or series of transactions
50% or more of the gross or net assets of the active trade or business (for
purposes of section 355(b) of the Code) or 50% or more of its consolidated

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gross or net assets (such percentages to be measured based on fair market values
as of the date of the applicable Spin-Off); (ii) merge or consolidate Forestar
or any Forestar Affiliate with any other entity, without regard to which party
is the surviving entity except for intragroup mergers involving Forestar
affiliates that are wholly-owned within the group; (iii) transfer any assets in
a transaction described in section 351 (other than a transfer to a corporation
which files a United States federal consolidated Income Tax Return with Forestar
and which is wholly-owned, directly or indirectly, by Forestar), section 721
(other than transfers in the ordinary course of business) or subparagraph (C) or
(D) of section 368(a)(1) of the Code (other than a 368(a)(1)(C) or (D)
reorganization between Forestar affiliates that are wholly-owned within the
group); (iv) issue stock of Forestar or any Forestar Affiliate (or any
instrument that is convertible or exchangeable into any such stock) in an
acquisition or public or private offering (excluding any issuance pursuant to
the exercise of employee stock options or other employment related arrangements
having customary terms and conditions and that satisfy the requirements of
Treasury Regulations section 1.355-7(d)(8), or any successor provision thereto),
or (v) facilitate or otherwise participate in any acquisition (whether solicited
or unsolicited) of stock in Forestar that would result in any shareholder owning
five percent (5%) or more of the outstanding stock of Forestar; provided
however, Forestar shall be permitted to take such action or one or more actions
set forth in the foregoing clauses (i) through (v) if, prior to taking such
action, Forestar obtains, at its own expense, (A) a supplemental opinion, in
form and substance reasonably acceptable to Temple-Inland, from Tax Counsel that
such action will not result in Distribution Taxes (a “Supplemental Tax
Opinion”), (B) a Supplemental Ruling that such action will not result in
Distribution Taxes, or (C) a written statement from Temple-Inland waiving the
requirement to obtain a Supplemental Tax Opinion or Supplemental Ruling.
Temple-Inland and Forestar hereby agree that they will act in good faith to take
all reasonable steps necessary to amend this Section 4.03(c), from time to time,
by mutual agreement, to (i) add certain actions to the list contained herein, or
(ii) remove certain actions from the list contained herein, in either case, in
order to reflect any relevant change in law, regulation or administrative
interpretation occurring after the date of this Agreement.
          (d) Certain Guaranty Actions Following the Spin-Off. Guaranty agrees
that, during the two (2) year period following the Spin-Off, Guaranty shall not
(i) sell or otherwise transfer in a single transaction or series of transactions
50% or more of the gross or net assets of the active trade or business (for
purposes of section 355(b) of the Code) or 50% or more of its consolidated gross
or net assets (such percentages to be measured based on fair market values as of
the date of the applicable Spin-Off); (ii) merge or consolidate Guaranty or any
Guaranty Affiliate with any other entity, without regard to which party is the
surviving entity except for intragroup mergers involving Guaranty affiliates
that are wholly-owned within the group; (iii) transfer any assets in a
transaction described in section 351 (other than a transfer to a corporation
which files a United States federal consolidated Income Tax Return with Guaranty
and which is wholly-owned, directly or indirectly, by Guaranty), section 721
(other than transfers in the ordinary course of business) or subparagraph (C) or
(D) of section 368(a)(1) of the Code (other than a 368(a)(1)(C) or
(D) reorganization between Guaranty affiliates that are wholly-owned within the
group); (iv) issue stock of Guaranty or any Guaranty Affiliate (or any
instrument that is convertible or exchangeable into any such stock) in an
acquisition or public or private offering (excluding any issuance pursuant to
the exercise of employee stock options or other employment related arrangements
having customary terms and conditions and that satisfy the requirements of

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Treasury Regulations section 1.355-7(d)(8), or any successor provision thereto),
or (v) facilitate or otherwise participate in any acquisition (whether solicited
or unsolicited) of stock in Guaranty that would result in any shareholder owning
five percent (5%) or more of the outstanding stock of Guaranty; provided
however, Guaranty shall be permitted to take such action or one or more actions
set forth in the foregoing clauses (i) through (v) if, prior to taking such
action, Guaranty obtains, at its own expense, (A) a Supplemental Tax Opinion,
(B) a Supplemental Ruling that such action will not result in Distribution
Taxes, or (C) a written statement from Temple-Inland waiving the requirement to
obtain a Supplemental Tax Opinion or Supplemental Ruling. Temple-Inland and
Guaranty hereby agree that they will act in good faith to take all reasonable
steps necessary to amend this Section 4.03(d), from time to time, by mutual
agreement, to (i) add certain actions to the list contained herein, or
(ii) remove certain actions from the list contained herein, in either case, in
order to reflect any relevant change in law, regulation or administrative
interpretation occurring after the date of this Agreement.
          (e) Cooperation. The Parties agree that, at the request of the other
Party, the Parties shall cooperate fully to seek to obtain, as expeditiously as
possible, the Spin-Off Tax Opinion, any Supplemental Spin-Off Tax Opinion, any
Supplemental Tax Opinion, the IRS Ruling, and/or any Supplemental Ruling. Such
cooperation shall include the execution of any documents that may be necessary
or reasonably helpful in connection with obtaining the Spin-Off Tax Opinion,
Supplemental Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling, and/or
Supplemental Ruling (including any power of attorney, Officer’s Certificate, IRS
Ruling Documents, Supplemental Rulings Documents, and/or reasonably requested
written representations confirming that (i) Temple-Inland, Forestar or Guaranty,
as the case may be, has read the Officer’s Certificate, IRS Ruling Documents,
and/or Supplemental Ruling Documents, and (ii) all information and
representations, if any, relating to Temple-Inland (or any Temple-Inland
Affiliate), Forestar (or any Forestar Affiliate), or Guaranty (or any Guaranty
Affiliate) as the case may be, contained in the Officer’s Certificate, IRS
Ruling Documents, and/or Supplemental Ruling Documents are true, correct and
complete in all material respects).
     4.04. Allocation of Tax Assets.
          (a) In General. In connection with the Spin-Off, Temple-Inland,
Forestar and Guaranty shall cooperate in determining the allocation of any Tax
Assets among Temple-Inland, each Temple-Inland Affiliate, Forestar, each
Forestar Affiliate, Guaranty, and each Guaranty Affiliate. The allocations will
be made in accordance with applicable tax laws. The Parties hereby agree that in
the absence of controlling legal authority or unless otherwise provided under
this Agreement, Tax Assets shall be allocated to the legal entity that created
such Tax Assets. If any federal, state or other alternative minimum tax credit
carryforwards attributable to any Pre-Distribution Period are initially
allocated or subsequently reallocated, pursuant to a Final Determination
(together “Allocated Credit Carryforwards”), to Forestar, a Forestar Affiliate,
Guaranty, or a Guaranty Affiliate, then Forestar and Guaranty, as applicable,
shall pay to Temple-Inland (i) the amount of the Tax Benefit to Forestar (or any
Forestar Affiliate) or Guaranty (or any Guaranty Affiliate), as the case may be,
of such Allocated Credit Carryforwards or (ii) the amount of the Tax Detriment
to Temple-Inland of such Allocated Credit Carryforwards, whichever occurs
earlier. These payments will continue until Temple-Inland fully recovers such
Allocated Credit Carryforwards.

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          (b) Earnings and Profits. Temple-Inland will advise Forestar and
Guaranty in writing of the decrease in Temple-Inland earnings and profits
attributable to the Spin-Off under section 312(h) of the Code on or before the
first anniversary of the relevant Distribution Date; provided, however, that
Temple-Inland shall provide Forestar and Guaranty with estimates of such amounts
(determined in accordance with past practice) prior to such anniversary as
reasonably requested by Forestar and Guaranty. Any reasonable third party cost
incurred after the Spin-Off in connection with determining the earnings and
profits attributable to the Spin-Off shall be allocated among Temple-Inland,
Forestar and Guaranty consistent with the allocation of Unallocated Liabilities
described in Article VI of the Separation Agreement.
Section 5. Indemnification.
     5.01. Temple-Inland Indemnity. Temple-Inland shall indemnify Forestar, each
Forestar Affiliate, Guaranty, each Guaranty Affiliate and their respective
directors, officers and employees, and hold them harmless from and against any
and all Taxes for which Temple-Inland or any Temple-Inland Affiliate is liable
under this Agreement and any loss, cost, damage, fine, penalty, or other expense
of any kind, including reasonable attorneys’ fees and costs, that is
attributable to, or results from, the failure of Temple-Inland, any
Temple-Inland Affiliate or any director, officer or employee to make any payment
required to be made under this Agreement or from the failure of Temple-Inland,
any Temple-Inland Affiliate or any director, officer or employee to provide
complete and accurate information in connection with the preparation of any tax
return. Temple-Inland shall further indemnify Guaranty, each Guaranty Affiliate
and their respective directors, officers and employees, and hold them harmless
from and against state Income Taxes resulting from a Final Determination that
Internal Distribution 2 and External Distribution 2 fail to satisfy the
requirements of section 355(b) of the Code as in effect on May 16, 2006,
including any losses, damages, or other expenses that are attributable to such
failure, subject to the following limitation. Guaranty, Guaranty’s Affiliates,
and the respective directors, officers and employees have made covenants,
provided information and made representations related to tax matters in this
Agreement, the Officer’s Certificate, Spin-Off Tax Opinion, IRS Ruling Documents
and other opinions as to the tax effect of an aspect of the Plan of Separation.
To the extent any Taxes, losses, damages, costs or expenses of any kind result
from an indemnified Person’s breach of any of those covenants or failure to
provide true, correct, and complete information, Temple-Inland shall not be
responsible under the indemnities in this Section 5.01 and shall not indemnify
any Person for those Taxes, losses, damages, costs or expenses, provided that
for the purpose of this section only, statements as to future intention shall
not be the basis for a failure of a representation or the basis for a claim of
providing untrue, incorrect or incomplete information unless the statement was
intentionally misleading or made in bad faith.
     5.02. Forestar Indemnity. Forestar and each Forestar Affiliate shall
jointly and severally indemnify Temple-Inland, each Temple-Inland Affiliate,
Guaranty, each Guaranty Affiliate, and their respective directors, officers and
employees, and hold them harmless from and against any and all Taxes for which
Forestar or any Forestar Affiliate is liable under this Agreement and any loss,
cost, damage, fine, penalty, or other expense of any kind, including reasonable
attorneys’ fees and costs, that is attributable to, or results from, the failure
of Forestar,

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any Forestar Affiliate or any director, officer or employee to make any payment
required to be made under this Agreement or from the failure of Forestar, any
Forestar Affiliate or any director, officer or employee to provide complete and
accurate information in connection with the preparation of any tax return.
     5.03 Guaranty Indemnity. Guaranty and each Guaranty Affiliate shall jointly
and severally indemnify Temple-Inland, each Temple-Inland Affiliate, Forestar,
each Forestar affiliate, and their respective directors, officers and employees,
and hold them harmless from and against any and all Taxes for which Guaranty or
any Guaranty Affiliate is liable under this Agreement and any loss, cost,
damage, fine, penalty, or other expense of any kind, including reasonable
attorneys’ fees and costs, that is attributable to, or results from, the failure
of Guaranty, any Guaranty Affiliate or any director, officer or employee to make
any payment required to be made under this Agreement or from the failure of
Guaranty, any Guaranty Affiliate, or any director, officer or employee to
provide complete and accurate information in connection with the preparation of
any tax return.
Section 6. Payments.
     6.01. Estimated Tax Payments. Estimated tax payments attributable to
Pre-Distribution Periods will be made in accordance with past Temple-Inland
practices and the Temple-Inland Inc. Tax Allocation Policy. For
Post-Distribution Periods, Temple-Inland, Forestar, and Guaranty will each be
responsible for payment of their respective estimated tax payments.
     6.02. True-Up Payments. Not later than thirty (30) Business Days after the
filing of a Consolidated or Combined Tax Return (i) Forestar shall pay to
Temple-Inland, or Temple-Inland shall pay to Forestar, as appropriate, an amount
equal to the difference, if any, between the Tax liability of Forestar and the
aggregate amount paid by Forestar with respect to such period under Section 6.01
and (ii) Guaranty shall pay to Temple-Inland, or Temple-Inland shall pay to
Guaranty, as appropriate, an amount equal to the difference, if any, between the
Tax liability of Guaranty and the aggregate amount paid by Guaranty with respect
to such period under Section 6.01
     6.03. Redetermination Amounts. In the event of a redetermination of any Tax
Item reflected on any Consolidated Return or Combined Return (other than Tax
Items relating to Distribution Taxes), as a result of a refund or credit of
Taxes paid, a Final Determination or any settlement or compromise with any
Taxing Authority which in any such case would affect the Tax liability of
Forestar or Tax liability of Guaranty, Temple-Inland shall prepare a revised pro
forma Tax Return in accordance with Section 2.01(a) for the relevant taxable
period reflecting the redetermination of such Tax Item as a result of such
refund, Final Determination, settlement or compromise. Forestar and/or Guaranty
shall pay to Temple-Inland, or Temple-Inland shall pay to Forestar and/or
Guaranty, as appropriate, an amount equal to the difference, if any, between the
Tax liability of Forestar or Tax liability of Guaranty reflected on such revised
pro forma Tax Return and the Tax liability of Forestar or Tax liability of
Guaranty for such period as originally computed pursuant to this Agreement.

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     6.04. Payments of Refunds and Credits. If one Party receives a refund or
credit of any Tax to which the other Party is entitled pursuant to Section 3.05,
the Party receiving such refund or credit shall pay to the other Party the
amount of such refund or credit pursuant to Section 6.05.
     6.05. Payments Under This Agreement. In the event that one Party (the
“Owing Party”) is required to make a payment to another Party (the “Owed Party”)
pursuant to this Agreement, then such payments shall be made according to this
Section 6.05.
          (a) In General. All payments shall be made to the Owed Party or to the
appropriate Taxing Authority as specified by the Owed Party within the time
prescribed for payment in this Agreement, or if no period is prescribed, within
twenty (20) days after delivery of written notice of payment owing together with
a computation of the amounts due.
          (b) Treatment of Payments. Unless otherwise required by any Final
Determination, the Parties agree that any payments made by one Party to another
Party pursuant to this Agreement (other than (i) payments of After Tax Amounts
pursuant to Section 6.05(d), and (ii) payments of interest pursuant to
Section 6.05(e)) shall be treated for all Tax purposes as nontaxable payments
(dividend distributions or capital contributions, as the case may be) made
immediately prior to the Spin-Offs and, accordingly, as not includible in the
taxable income of the recipient or as deductible by the payor.
          (c) Prompt Performance. All actions required to be taken (including
payments) by any Party under this Agreement shall be performed within the time
prescribed for performance in this Agreement, or if no period is prescribed,
such actions shall be performed promptly.
          (d) After Tax Amounts. If pursuant to a Final Determination it is
determined that the receipt or accrual of any payment made under this Agreement
(other than payments of interest pursuant to Section 6.05(e)) is subject to any
Tax, the Party making such payment shall be liable for (a) the After Tax Amount
with respect to such payment and (b) interest at the rate described in
Section 6.05(e) on the amount of such Tax from the date such Tax accrues with
respect to the receipt of such payment through the date of payment of such After
Tax Amount. A Party making a demand for a payment pursuant to this Agreement and
for a payment of an After Tax Amount with respect to such payment shall
separately specify and compute such After Tax Amount. However, a Party may
choose not to specify an After Tax Amount in a demand for payment pursuant to
this Agreement without thereby being deemed to have waived its right
subsequently to demand an After Tax Amount with respect to such payment.
          (e) Interest. Payments pursuant to this Agreement that are not made
within the period prescribed in this Agreement (the “Payment Period”) shall bear
interest for the period from and including the date immediately following the
last date of the Payment Period through and including the date of payment at a
per annum rate equal to the Prime Rate plus two percent (2%) (or the maximum
legal rate whichever is lower). Such interest will be payable at the same time
as the payment to which it relates and shall be calculated on the basis of a
year of three hundred sixty-five (365) days and the actual number of days for
which due.

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          (f) Procedures. Any claim for indemnification under this Section 6
shall be governed by, and be subject to, the provisions of Article VII of the
Separation Agreement, which provisions are hereby incorporated by reference into
this Agreement and any references to “Agreement” in such Article VII as
incorporated herein shall be deemed to be references to this Agreement.
Section 7. Tax Proceedings.
     7.01. In General. Except as otherwise provided in this Agreement, the Party
responsible for preparing and filing a Tax Return pursuant to Section 2 (the
“Filing Party”) shall have the exclusive right, in its sole discretion, to
control, contest, and represent the interests of Temple-Inland, any
Temple-Inland Affiliate, Forestar, any Forestar Affiliate, Guaranty or any
Guaranty Affiliate in any Audit relating to such Tax Return and to resolve,
settle or agree to any deficiency, claim or adjustment proposed, asserted or
assessed in connection with or as a result of any such Audit. The Filing Party’s
rights shall extend to any matter pertaining to the management and control of an
Audit, including execution of waivers, choice of forum, scheduling of
conferences and the resolution of any Tax Item. Any costs incurred in handling,
settling, or contesting an Audit shall be borne by the Filing Party.
     7.02. Participation of non-Filing Party. Except as otherwise provided in
this Agreement, the non-Filing Party shall, if requested, be kept reasonably
informed on the status of any Audit involving a Sole Responsibility Item or a
Joint Responsibility Item. The Filing Party shall not (i) settle any Audit it
controls concerning any such Sole Responsibility Item if such Item is more than
$200,000 or (ii) settle any Audit it controls concerning any such Joint
Responsibility Item, in each case without the prior written consent of the
non-Filing Party, and such consent shall not be unreasonably withheld.
     7.03. Notice. Within thirty (30) days after a Party becomes aware of the
existence of a Tax issue that is reasonably expected to give rise to an
indemnification obligation under this Agreement, such Party shall give notice to
the other Party of such issue (such notice shall contain factual information, to
the extent known, describing any asserted tax liability in reasonable detail),
and shall forward to the other Party copies of all notices and material
communications with any Taxing Authority relating to such issue. Notwithstanding
any provision in Section 8.06 to the contrary, if a Party to this Agreement
fails to provide the other Party notice as required by this Section 7.03, and
the failure results in a detriment to the other Party then any amount which the
other Party is otherwise required to pay pursuant to this Agreement shall be
reduced by the amount of such detriment.
     7.04. Control of Distribution Tax Proceedings. Forestar or Guaranty may
assume sole control of any Audits relating to Distribution Taxes if it
acknowledges in writing that it has sole liability for any Distribution Taxes
under Section 4.01(b) or (c), as the case may be, that might arise in such Audit
and can demonstrate to the reasonable satisfaction of Temple-Inland that it can
satisfy its liability for any such Distribution Taxes.

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Section 8. Miscellaneous.
     8.01. Cooperation and Exchange of Information.
          (a) Cooperation. The Parties shall each cooperate fully (and each
shall cause its respective Affiliates to cooperate fully) with all reasonable
requests from another Party for information, data files and materials not
otherwise available to the requesting Party in connection with the preparation
and filing of Tax Returns, claims for refund, and Audits concerning issues or
other matters covered by this Agreement or in connection with the determination
of a liability for Taxes or a right to a refund of Taxes. Such cooperation shall
include:
               (i) the retention until the expiration of the applicable statute
of limitations, and the provision upon request, of copies of all Tax Returns,
books, records (including information regarding ownership and Tax basis of
property), documentation and other information relating to the Tax Returns,
including accompanying schedules, related work papers, and documents relating to
rulings or other determinations by Taxing Authorities (collectively, “Tax
Material”), provided, however, that no such retention obligation shall exist to
the extent such Tax Material has previously been provided from one Party to the
other Party;
               (ii) the execution of any document that may be necessary or
reasonably helpful in connection with any Tax Proceeding, or the filing of a Tax
Return or refund claim by a member of the Temple-Inland Group, the Forestar
Group, or the Guaranty Group including certification, to the best of a Party’s
knowledge, of the accuracy and completeness of the information it has supplied;
and
               (iii) the use of the Party’s reasonable best efforts to obtain
any documentation that may be necessary or reasonably helpful in connection with
any of the foregoing. Each Party shall make its employees and facilities
available on a reasonable and mutually convenient basis in connection with the
foregoing matters.
               (iv) the sharing of information to enable each Party to timely
fulfill its reporting requirements pursuant to Treasury Regulations sections
1.355-5 and 1.368-3.
          (b) Retention of Records.
               (i) Temple-Inland, or any Temple-Inland Affiliate, that is in
possession of documentation relating to Forestar, or any Forestar Affiliate,
Guaranty, or any Guaranty Affiliate, including books, records, Tax Returns and
all supporting schedules and information relating thereto that has not been
previously provided to Forestar or Guaranty by Temple-Inland (the “Forestar
Business Records” or “Guaranty Business Records”), and Forestar, or any Forestar
Affiliate, and Guaranty, or any Guaranty Affiliate, that is in possession of
documentation relating to the Temple-Inland, or any Temple-Inland Affiliate,
including books, records, Tax Returns and all supporting schedules and
information relating thereto that has not been previously provided to
Temple-Inland by Forestar or Guaranty (the “Temple-Inland Business Records”),
shall each retain such Forestar Business Records, Guaranty Business Records or
Temple-Inland Business Records (i) for a period of seven (7) years following the
Forestar and Guaranty Distribution

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Dates or (ii) until the expiration of the applicable statute of limitations,
whichever is longer. Thereafter, (i) if Temple-Inland wishes to dispose of
Forestar or Guaranty Business Records in its possession, Temple-Inland shall
provide written notice to Forestar or Guaranty describing the documentation
proposed to be destroyed or disposed of sixty (60) Business Days prior to taking
such action, and Forestar or Guaranty may arrange to take delivery of any or all
of the documentation described in the notice at its expense during the
succeeding sixty (60) day period; and (ii) if Forestar or Guaranty wishes to
dispose of Temple-Inland Business Records in its possession, Forestar or
Guaranty shall provide written notice to Temple-Inland describing the
documentation proposed to be destroyed or disposed of sixty (60) Business Days
prior to taking such action, and Temple-Inland may arrange to take delivery of
any or all of the documentation described in the notice at its expense during
the succeeding sixty (60) day period.
               (ii) Forestar, or any Forestar Affiliate, that is in possession
of Guaranty Business Records that have not been previously provided to Guaranty
by Forestar, and Guaranty, or any Guaranty Affiliate, that is in possession of
Forestar Business Records that have not been previously provided to Forestar by
Guaranty shall each retain such Guaranty Business Records or Forestar Business
Records (i) for a period of seven (7) years following the Forestar and Guaranty
Distribution Dates or (ii) until the expiration of the applicable statute of
limitations, whichever is longer. Thereafter, (i) if Forestar wishes to dispose
of Guaranty Business Records in its possession, Forestar shall provide written
notice to Guaranty describing the documentation proposed to be destroyed or
disposed of sixty (60) Business Days prior to taking such action, and Guaranty
may arrange to take delivery of any or all of the documentation described in the
notice at its expense during the succeeding sixty (60) day period; and (ii) if
Guaranty wishes to dispose of Forestar Business Records in its possession,
Guaranty shall provide written notice to Forestar describing the documentation
proposed to be destroyed or disposed of sixty (60) Business Days prior to taking
such action, and Forestar may arrange to take delivery of any or all of the
documentation described in the notice at its expense during the succeeding sixty
(60) day period
     8.02. Dispute Resolution. In the event that any of the Parties disagree as
to the amount or calculation of any payment to be made under this Agreement, or
the interpretation or application of any provision under this Agreement, the
disagreement shall be resolved in accordance with Article IX of the Separation
Agreement provided however that the provisions in section 9.12 of the Separation
Agreement shall not apply. Notwithstanding anything in this Agreement to the
contrary, the dispute resolution provisions set forth in this Section 8.02 shall
not be applicable to any disagreement between the Parties relating to federal
Distribution Taxes and any such dispute shall be settled in a court of law or as
otherwise agreed to by the Parties.
     8.03. Complete Agreement; Construction. This Agreement, including the
Appendix, shall constitute the entire agreement between the Parties with respect
to the subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter. This Agreement
supersedes any prior tax matters agreements between Temple-Inland (or any
Temple-Inland Affiliate), Forestar (or any Forestar Affiliate) and/or Guaranty
(or any Guaranty Affiliate) and such prior tax matters agreements shall have no
further force and effect. In the event of any conflict between the terms and
conditions of the body of this Agreement and the terms and conditions of the
Appendix, the terms and conditions of such Appendix shall control. In the event
of any conflict between the terms and conditions of this

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Agreement and the terms and conditions of the Separation Agreement or any other
Ancillary Agreement, the terms and conditions of this Agreement shall control.
     8.04. Counterparts. This Agreement may be executed in more than one
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the Parties and delivered to the other Parties. Execution of this
Agreement or any other documents pursuant to this Agreement by facsimile or
other electronic copy of a signature shall be deemed to be, and shall have the
same effect as, execution by original signature.
     8.05. Survival of Agreement. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the Parties contained in this
Agreement shall survive the Effective Time and remain in full force and effect
in accordance with their applicable terms.
     8.06. Notices. All notices, requests, claims, demands and other
communications under this Agreement, as between the Parties, shall be in writing
and shall be given or made (and shall be deemed to have been duly given or made
upon receipt unless the day of receipt is not a Business Day, in which case it
shall be deemed to have been duly given or made on the next Business Day) by
delivery in person, by overnight courier service, by facsimile with receipt
confirmed (followed by delivery of an original via overnight courier service) or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective Parties at the following addresses (or at such other address for
a Party as shall be specified in a notice given in accordance with this Section
8.06):
To Temple-Inland:
Temple-Inland Inc.
1300 Mopac Expressway South, 3rd Floor
Austin, TX 78746
Attn: General Counsel
Facsimile: ( 512) 434-8051
To Forestar:
Forestar Real Estate Group Inc.
1300 MoPac Expressway South
Austin, Texas 78746
Attn: General Counsel
Facsimile: (512) 434-5780

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To Guaranty:
Guaranty Financial Group Inc.
8333 Douglas Avenue
Dallas, Texas 75225
Attn: General Counsel
Facsimile: (214) 360-1908
     8.07. Changes in Law.
          (a) Any reference to a provision of the Code or a law of another
jurisdiction shall include a reference to any applicable successor provision or
law.
          (b) If, due to any change in applicable law or regulations or their
interpretation by any court of law or other governing body having jurisdiction
subsequent to the date of this Agreement, performance of any provision of this
Agreement or any transaction contemplated thereby shall become impracticable or
impossible, the Parties hereto shall use their commercially reasonable efforts
to find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such provision.
     8.08. Waivers. The failure of any Party to require strict performance by
any other Party of any provision in this Agreement will not waive or diminish
that Party’s right to demand strict performance thereafter of that or any other
provision hereof.
     8.09. Amendments. Subject to the terms of Section 8.12, this Agreement may
not be modified or amended except by an agreement in writing signed by each of
the Parties.
     8.10. Assignment. Except as otherwise expressly provided for in this
Agreement, this Agreement shall not be assignable, in whole or in part, by any
Party without the prior written consent of the other Party, and any attempt to
assign any rights or obligations arising under this Agreement without such
consent shall be null and void; provided, that a Party may assign this Agreement
in connection with a merger transaction in which such Party is not the surviving
entity or the sale by such Party of all or substantially all of its Assets, and
upon the effectiveness of such assignment, the assigning Party shall be released
from all of its obligations under this Agreement, if the surviving entity of
such merger or the transferee of such Assets shall agree in writing in form and
substance reasonably satisfactory to the other Party, to be bound by the terms
of this Agreement as if named as a “Party” hereto.
     8.11. Successors and Assigns. The provisions of this Agreement and the
obligations and rights hereunder shall be binding upon, inure to the benefit of
and be enforceable by (and against) the Parties and their respective successors
and permitted transferees and assigns.
     8.12. Termination, Etc. Notwithstanding anything to the contrary herein,
this Agreement (including Section 5 (Indemnification) hereof) may be terminated
and abandoned at any time prior to the Forestar Distribution Date or the
Guaranty Distribution Date by and in the sole discretion of Temple-Inland
without the approval of Forestar, Guaranty, or the stockholders of

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Temple-Inland. In the event of such termination, no Party shall have any
liability to any other Party or any other Person. After the earlier of the
Forestar Distribution Date or the Guaranty Distribution Date, this Agreement may
not be terminated except by an agreement in writing signed by each of the
Parties.
     8.13. Third Party Beneficiaries. Except as otherwise expressly provided in
this Agreement, this Agreement is solely for the benefit of the Parties and
should not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, cause of action or other right in excess of those existing
without reference to this Agreement.
     8.14. Interpretations. Titles and headings to sections herein are inserted
for the convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
     8.15. Schedules. The Schedules attached hereto are incorporated herein by
reference and shall be construed with and as an integral part of this Agreement
to the same extent as if the same had been set forth verbatim herein.
     8.16. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws, and not the laws governing conflicts of laws,
of the State of Texas.
     8.17. Consent to Jurisdiction. Subject to the provisions of this section
8.17, each of the Parties irrevocably submits to the exclusive jurisdiction of
(a) the District Court of the State of Texas for Travis County, and (b) the
United States District Court for the Western District of Texas, Austin Division
(“the “Texas Courts”), for the purposes of any suit, action or other proceeding
to compel arbitration or for provisional relief in aid of arbitration in
accordance with Section 8.02 or for provisional relief to prevent irreparable
harm, and to the non-exclusive jurisdiction of the Texas Courts for the
enforcement of any award issued thereunder. Each of the Parties further agrees
that service of any process, summons, notice or document by United States
registered mail to such Party’s respective address set forth above shall be
effective service of process for any action, suit or proceeding in the Texas
Courts with respect to any matters to which it has submitted to jurisdiction in
this Section 8.17. Each of the Parties irrevocably and unconditionally waives
any objection to the laying of venue of any action, suit or proceeding arising
out of this Agreement or the transactions contemplated hereby in the Texas
Courts, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
     8.18. Specific Performance. The Parties agree that irreparable damage would
occur in the event that the provisions of this Agreement were not performed in
accordance with their specific terms. Accordingly, it is hereby agreed that the
Parties shall be entitled to (i) an injunction or injunctions to enforce
specifically the terms and provisions hereof in any arbitration in accordance
with Section 8.02 herein, (ii) provisional or temporary injunctive relief in
accordance therewith in any Texas Court, and (iii) enforcement of any such award
of an arbitral tribunal or a Texas Court in any court of the United States, or
any other court or tribunal sitting in any state of the United States or in any
foreign country that has jurisdiction, this being in addition to any other
remedy or relief to which they may be entitled.

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     8.19. Waiver of Jury Trial. SUBJECT TO SECTIONS 8.02, 8.17 AND 8.18 HEREIN,
EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY COURT
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF AND PERMITTED UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 8.19.
     8.20. Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby, and the Parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions, the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
     8.21. Force Majeure. No Party (or any person acting on its behalf) shall
have any liability or responsibility for failure to fulfill any obligation
(other than a payment obligation) under this Agreement so long as and to the
extent to which the fulfillment of such obligation is prevented, frustrated,
hindered or delayed as a consequence of circumstances of Force Majeure. A Party
claiming the benefit of this provision shall, as soon as reasonably practicable
after the occurrence of any such event: (a) notify the other Party of the nature
and extent of any such Force Majeure condition and (b) use due diligence to
remove any such causes and resume performance under this Agreement as soon as
reasonably practicable.
     8.22. No Circumvention. The Parties agree not to directly or indirectly
take any actions, act in concert with any person who takes an action, or cause
or allow any member Affiliate to take any actions (including the failure to take
a reasonable action) such that the resulting effect is to materially undermine
the effectiveness of any of the provisions of this Agreement (including
adversely affecting the rights or ability of any Party to successfully pursue
indemnification, contribution or payment pursuant to Sections 5 and 6).
     8.23. Authorization. Each of the Parties hereby represents and warrants
that it has the power and authority to execute, deliver and perform this
Agreement, that this Agreement has been duly authorized by all necessary
corporate action on the part of such Party, that this Agreement constitutes a
legal, valid and binding obligation of each such Party and that the execution,
delivery and performance of this Agreement by such Party does not contravene or
conflict with any provision of law or of its charter or bylaws or any material
agreement, instrument or order binding on such Party.

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     8.24. Setoff. All payments to be made by any Party under this Agreement may
be netted against payments due to such Party under this Agreement, but otherwise
shall be made without setoff, counterclaim or withholding, all of which are
hereby expressly waived.
     8.25. Confidentiality. The Parties shall comply with the confidentiality
provisions in Article VIII of the Separation Agreement.
     8.26. Affiliates. Each of the Parties shall cause to be performed all
actions, agreements and obligations set forth herein to be performed by any
Affiliate of such Party or by any entity that becomes an Affiliate of such Party
on and after the relevant Distribution Date.
     8.27. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
     8.28. Effective Time. This Agreement shall be effective as of the Effective
Time.
[Signature Pages Follow]

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          IN WITNESS WHEREOF, the Parties caused this Tax Matters Agreement to
be duly executed as of the day and year first above written.

                  TEMPLE-INLAND INC.    
 
           
 
  By:   /s/ Doyle R. Simons    
 
           
 
  Name:   Doyle R. Simons    
 
  Title:   Executive Vice President    
 
                FORESTAR REAL ESTATE GROUP INC.    
 
           
 
  By:   /s/ James M. DeCosmo    
 
           
 
  Name:   James M. DeCosmo    
 
  Title:   President and Chief Executive Officer    
 
                GUARANTY FINANCIAL GROUP INC.    
 
           
 
  By:   /s/ Michael D. Calcote    
 
           
 
  Name:   Michael D. Calcote    
 
  Title:   Executive Vice President and Treasurer    
 
           

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