Exhibit 10.2

 

Execution Version

 

 

 

MASTER SUPPLY AGREEMENT

 

between

 

D.R. HORTON, INC.,
a Delaware corporation

 

(“Buyer”)

 

and

 

FORESTAR GROUP INC.,
a Delaware corporation

 

(“Supplier”)

 

 

 

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TABLE OF CONTENTS

 

 

Page

 

 

Article I Defined Terms, References And Construction

1

Section 1.1 Defined Terms

1

Section 1.2 References and Construction

1

 

 

Article II Sourcing; Sale And Purchase Of Lots

2

Section 2.1 Sourcing

2

Section 2.2 Collaboration, Evaluation and Contract Rights

2

 

 

Article III Supplier’s General Development Duties And Obligations

3

Section 3.1 Supplier as Developer

3

 

 

Article IV Term And Termination

3

Section 4.1 Term

3

Section 4.2 Termination

3

Section 4.3 Effect of Termination; Survival

3

 

 

Article V General Terms

4

Section 5.1 Business Activities of Buyer

4

Section 5.2 Limitation on Damages

4

 

 

Article VI Confidentiality

4

Section 6.1 Duty of Confidentiality

4

Section 6.2 Exclusions

5

Section 6.3 Required Disclosures

5

Section 6.4 Destruction of Confidential Information

5

 

 

Article VII Notices

5

Section 7.1 General Notice Provisions

5

Section 7.2 Change in Notice Address

7

 

 

Article VIII Definitions

7

Section 8.1 Defined Terms

7

 

 

Article IX Miscellaneous

8

Section 9.1 Assignment; Successors

8

Section 9.2 Entire Agreement

9

Section 9.3 Amendment and Modification

9

Section 9.4 Governing Law

9

Section 9.5 No Waiver

9

 

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Section 9.6 Attorneys’ Fees

9

Section 9.7 Severability

9

Section 9.8 Time of Essence

10

Section 9.9 Counterpart Execution

10

Section 9.10 No Third Party Beneficiaries

10

Section 9.11 No Partnership

10

Section 9.12 Waiver of Jury Trial

10

 

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MASTER SUPPLY AGREEMENT

 

THIS MASTER SUPPLY AGREEMENT (this “Agreement”) is made as of June 29, 2017, by
and between D.R. HORTON, INC., a Delaware corporation (“Buyer”), and FORESTAR
GROUP INC., a Delaware corporation (“Supplier”). Buyer and Supplier are
individually referred to herein as a “Party”, and collectively, the “Parties”.

 

R E C I T A L S

 

A.            Supplier is a developer of single-family residential lots
(“Lots”). Buyer is a national homebuilder.

 

B.            Supplier and Buyer desire to enter into this Agreement for the
purposes of providing an overall framework, understanding and agreement for
(i) sourcing Lot development opportunities between themselves, and
(ii) providing Supplier with a source of demand for Lots and Buyer with a source
of supply of Lots.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein and other good and valuable consideration, the Parties agree as follows:

 

ARTICLE I

 

DEFINED TERMS, REFERENCES AND CONSTRUCTION

 

Section 1.1            Defined Terms. The defined terms used in this Agreement,
and the meaning of such terms or the location within this Agreement where such
terms are defined, appears in Article VIII  hereof.

 

Section 1.2            References and Construction.

 

(a)           All references in this Agreement to articles, sections,
subsections and other subdivisions refer to corresponding articles, sections,
subsections and other subdivisions of this Agreement unless expressly provided
otherwise.

 

(b)           Titles appearing at the beginning of any of such articles,
sections, subsections and other subdivisions are for convenience only and will
not constitute part of such articles, sections, subsections and other
subdivisions and will be disregarded in construing the language contained in the
same.

 

(c)           The words “this Agreement”, “this instrument”, “herein”, “hereof”,
“hereby”, “hereunder” and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited.

 

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(d)           Words in the singular form will be construed to include the plural
and vice versa, unless the context otherwise requires. Pronouns in masculine,
feminine and neuter genders will be construed to include any other gender.

 

(e)           The word “includes” and its derivatives means “includes, but is
not limited to” and corresponding derivative expressions.

 

(f)            All references herein to “$” or “dollars” will refer to U.S.
Dollars.

 

(g)           Any matter requiring the approval of either Buyer or Supplier will
be in the sole and absolute discretion of the Party having the right to approve
the same, unless expressly provided otherwise.

 

ARTICLE II

 

SOURCING; SALE AND PURCHASE OF LOTS

 

Section 2.1            Sourcing. During the Term, Supplier will present to Buyer
all Lot development opportunities that Supplier desires to acquire and develop
that have been approved or conditionally approved by the Company’s Investment
Committee (as that term is defined in the Stockholder’s Agreement), excluding
any Excluded Opportunities (a “Supplier Sourced Opportunity”), and Buyer shall
have the right, but not the obligation, to present Supplier with Lot development
opportunities that Buyer desires to acquire for development (if presented to
Supplier, a “Buyer Sourced Opportunity”). Unless the Parties agree otherwise,
this Agreement will not govern, and Buyer will not have any rights with respect
to (a) any opportunities, developments or ventures owned, under contract, the
subject of a letter of intent or otherwise being pursued, by Supplier, as of the
Effective Time, or (b) any opportunities presented to Supplier by a third-party
builder (individually, an “Excluded Opportunity”, and collectively, the
“Excluded Opportunities”).

 

Section 2.2            Collaboration, Evaluation and Contract Rights. Supplier
and Buyer will collaborate regarding all Supplier Sourced Opportunities and all
Buyer Sourced Opportunities, after considering current and future market
conditions and dynamics. If the Parties agree to pursue a Supplier Sourced
Opportunity or a Buyer Sourced Opportunity, such agreement will be evidenced by
a mutually agreed upon written development plan prepared at the direction of the
Company’s Investment Committee (a “Development Plan”) addressing, among other
things, the number, size, layout and projected price of Lots, phasing, timing,
amenities and entitlements, and will be referred to herein as a “Supplier
Sourced Development” or a “Buyer Sourced Development”, as the case may be. Buyer
or its Affiliates will have (a) a right of first offer (“ROFO”) to buy up to
fifty percent (50%) of the Lots in the first phase (and in any subsequent phase
in which Buyer purchased at least twenty-five percent (25%) of the Lots in the
previous phase) in each Supplier Sourced Development and (b) the right to
purchase up to one hundred percent (100%) of the Lots in each Buyer Sourced
Development, at the then current fair market

 

2

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price and terms per Lot, as mutually agreed to by the Parties. All Lots in a
Supplier Sourced Development in which a Buyer participates as a buyer will be
equitably allocated among Buyer and any other builders in each phase taking into
consideration the location, size and other attributes associated with the Lots.
The agreement evidencing the ROFO for the Lots in the Supplier Sourced
Development (the “ROFO Agreement”), and the purchase and sale agreement for the
Lots in the Buyer Sourced Agreement (the “PSA”), will be negotiated, finalized
and executed as a part of the Development Plan, and in all events the
Development Plan will be finalized, and the ROFO Agreement will be negotiated,
finalized and executed, prior to the expiration of the feasibility period in any
contract to acquire a Supplier Sourced Development. Buyer will assign to
Supplier on an “as-is”, “where-is basis” the contract to acquire a Buyer Sourced
Development after the finalization of the Development Plan and PSA for such
Buyer Sourced Development.

 

ARTICLE III

 

SUPPLIER’S GENERAL DEVELOPMENT DUTIES AND OBLIGATIONS

 

Section 3.1            Supplier as Developer. Supplier, at its sole cost and
expense, will perform and direct, through its employees, agents and contractors,
all functions relative to diligence, entitlement, financing, planning, design
and construction of all on-site and off-site improvements required for any
Development.

 

ARTICLE IV

 

TERM AND TERMINATION

 

Section 4.1            Term. The terms of this Agreement shall commence and
become effective immediately prior to the Effective Time, and prior to such time
this Agreement shall be of no force or effect, and unless earlier terminated
pursuant to Section 4.2, will continue until the earlier of (a) the date that
Buyer’s Voting Percentage (as that term is defined in the Stockholder’s
Agreement) falls below fifteen percent (15%) and (b) June 29, 2037 (the “Term”).

 

Section 4.2            Termination. This Agreement may be terminated (a) upon
written agreement of the Parties, or (b) upon written notice given by a Party,
upon the occurrence of any material breach of this Agreement by the other Party
which is not cured within thirty (30) days following receipt by the breaching
Party of written notice of such breach from the non-breaching Party or (c) by
Supplier at any time that the Buyer’s Voting Percentage falls below twenty-five
percent (25%).

 

Section 4.3            Effect of Termination; Survival. Upon the termination or
expiration of this Agreement, the respective rights of the Parties will
terminate in their entirety; provided, however, that (a) no Party will be
relieved of any liability or obligation arising out of such Party’s breach of
this Agreement prior to such termination or expiration and (b) the Buyer’s and

 

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Supplier’s obligations under any ROFO Agreement and PSA not fully performed or
which expressly survive will survive such termination or expiration until such
obligations are discharged in full; and provided further that the following
provisions will survive such termination or expiration: Article I and
Article VIII (as necessary to interpret any surviving provision hereunder), this
Article IV, Article V, Article VI, Article VII, and Article IX.

 

ARTICLE V

 

GENERAL TERMS

 

Section 5.1            Business Activities of Buyer. Except as expressly set
forth herein, nothing in this Agreement will prevent or limit (a) Buyer from
engaging in any business activities, as Buyer shall determine in its sole
discretion, including activities in competition with Supplier, any Opportunities
or any Developments or (b) Supplier from engaging in any business activities, as
Supplier shall determine in its sole discretion, including activities in
competition with Buyer, any Opportunities, any Developments or any Excluded
Opportunities.

 

Section 5.2            Limitation on Damages. In no event will either Party be
liable to the other for (and each Party hereby waives all rights to) any
speculative, consequential, or punitive damages for any breach of or default
under this Agreement.

 

ARTICLE VI

 

CONFIDENTIALITY

 

Section 6.1            Duty of Confidentiality. With respect to any nonpublic
information disclosed by a Party (or its Affiliates or representatives) (the
“Disclosing Party”) to the other Party (or its Affiliates or representatives)
(the “Receiving Party”) for the purpose of this Agreement or otherwise
accessible to such Receiving Party during the performance hereunder, which
nonpublic information is either marked or otherwise identified as confidential
or proprietary or would reasonably be considered confidential or proprietary in
light of the nature of the information (collectively, the “Confidential
Information”), the Receiving Party agrees that (a) it will keep such
Confidential Information confidential, using at least the same degree of care
used to protect its own confidential or proprietary information, but not less
than reasonable care, to prevent the disclosure or accessibility to others of
the Disclosing Party’s Confidential Information and (b) it will use the
Disclosing Party’s Confidential Information only for the purpose of performing
its obligations under this Agreement. The Receiving Party will limit
dissemination of and access to the Disclosing Party’s Confidential Information
to only such of its Affiliates, advisers, employees, agents or contactors or
consultants who have a need to know for the purpose of this Agreement; provided,
however, that any third party to which Confidential Information is provided by a
Receiving Party is subject to confidentiality obligations with respect to such
Confidential Information at least as protective as the obligations set forth
herein.

 

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Section 6.2            Exclusions. Specifically excluded from the foregoing
obligations is any and all information that the Receiving Party can show: (a) is
already known to the Receiving Party at the time of disclosure and is not
subject to a confidentiality obligation (other than any information that is
transferred to Buyer as a purchased asset pursuant to either a ROFO Agreement or
a PSA) or thereafter is independently developed by the Receiving Party without
breach of this Agreement; (b) is already in the public domain at the time of
disclosure, or thereafter becomes publicly known other than as the result of a
breach by the Receiving Party of its obligations under this Agreement; or (c) is
received from a third party without breach of this Agreement or a
confidentiality obligation to the Disclosing Party known to the Receiving Party.

 

Section 6.3            Required Disclosures. If, upon advice of counsel, any
Disclosing Party’s Confidential Information is required to be disclosed by law,
regulation or legal process by the Receiving Party, then the Receiving Party
will promptly notify the Disclosing Party and, insofar as is permissible and
reasonably practicable, give the Disclosing Party an opportunity to appear and
to object to such production before producing the requested information. Any
such production will be limited to that portion of the Confidential Information
required to be disclosed.

 

Section 6.4            Destruction of Confidential Information. Upon the
termination or expiration of this Agreement, other than as required by
applicable law, each Party, as a Receiving Party, will destroy the Confidential
Information of the Disclosing Party in such Receiving Party’s possession and
provide a written certification of destruction with respect thereto to such
Disclosing Party.

 

ARTICLE VII

 

NOTICES

 

Section 7.1            General Notice Provisions. All notices and other
communications hereunder will be in writing and will be deemed duly given (a) on
the date of receipt, if delivered personally, (b) on the date of receipt, if
delivered by facsimile or e-mail during normal business hours on a Business Day
or, if delivered outside of normal business hours on a Business Day, on the
first Business Day thereafter, (c) on the first Business Day following the date
of dispatch if delivered utilizing a next-day service by a recognized next-day
courier or (d) on the earlier of confirmed receipt or the fifth Business Day
following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder will be
delivered to the addresses set forth below:

 

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If to Buyer:

D.R. Horton, Inc.

 

 

1361 Horton Circle

 

 

Arlington, Texas 76011

 

 

Attn:

Ted I. Harbour

 

 

 

Thomas B. Montano

 

 

Fax:

(817) 928-6120

 

 

E-mail:

tharbour@drhorton.com

 

 

 

tbmontano@drhorton.com

 

 

 

 

 

With a copy (which will

 

 

 

not constitute notice) to:

Gardere Wynne Sewell LLP

 

 

2021 McKinney Avenue, Suite 1600

 

 

Dallas, Texas 75201

 

 

Attn:

Kevin L. Kelley

 

 

Fax:

(214) 999-3503

 

 

E-mail:

kkelley@gardere.com

 

 

 

 

 

And:

Gibson, Dunn & Crutcher LLP

 

 

2100 McKinney Avenue, Suite 1100

 

 

Dallas, Texas 75201

 

 

Attn:

Jeffrey A. Chapman

 

 

 

Eduardo Gallardo

 

 

Fax:

(214) 571-2920

 

 

 

(212) 351-5245

 

 

E-mail:

jchapman@gibsondunn.com

 

 

 

egallardo@gibsondunn.com

 

 

 

 

 

If to Supplier:

Forestar Group Inc.

 

 

6300 Bee Cave Road

 

 

Building Two, Suite 500

 

 

Austin, Texas 78746-5149

 

 

Attn:

Charles D. Jehl

 

 

Fax:

(512) 433-5203

 

 

E-mail:

chuckjehl@forestargroup.com

 

 

 

 

 

With a copy (which will

 

 

 

not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

 

 

1440 New York Avenue NW

 

 

Washington, DC 20005

 

 

Attn:

Jeremy D. London

 

 

Fax:

(212) 735-2000

 

 

E-mail:

Jeremy.London@skadden.com

 

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Section 7.2            Change in Notice Address. Either Party may, by notice
given as aforesaid, designate a different address or addresses for notices to be
given to it.

 

ARTICLE VIII

 

DEFINITIONS

 

Section 8.1            Defined Terms. Unless the context otherwise requires, the
following terms, in their singular or plural forms, used in this Agreement will
have the meanings set forth below:

 

“Affiliate” means, with respect to any Person, any other Person that directly,
or indirectly through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such first Person.

 

“Agreement” has the meaning set forth in the preamble.

 

“Business Day” means any day that is not a Saturday, a Sunday or another day on
which the Federal Reserve Bank of Dallas is closed.

 

“Buyer” has the meaning set forth in the preamble.

 

“Buyer Sourced Development” has the meaning set forth in Section 2.2.

 

“Buyer Sourced Opportunity” has the meaning set forth in Section 2.1.

 

“Confidential Information” has the meaning set forth in Section 6.1.

 

“Control”, including the terms “Controlled by” and “under common Control with”,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, as trustee or executor, as general partner or
managing member, by Contract or otherwise.

 

“Development” means either a Supplier Sourced Development or a Buyer sourced
Development.

 

“Development Plan” has the meaning set for in Section 2.2

 

“Disclosing Party” has the meaning set forth in Section 6.1.

 

“Effective Time” has the meaning set forth in the Merger Agreement.

 

“Excluded Opportunity” shall have the meaning set forth in Section 2.1.

 

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“Governmental Entity” means any United States or non-United States federal,
national, supranational, state, provincial, local or other government, or any
governmental, regulatory or administrative authority, branch, agency or
commission, or any court, tribunal or arbitral or judicial body, or any
self-regulatory organization or stock exchange.

 

“Lots” has the meaning set forth in the recitals.

 

“Merger Agreement” means that certain Merger Agreement, of even date hereof, by
and between Buyer, Supplier and Force Merger Sub, Inc.

 

“Party” and “Parties” has the meaning set forth in the preamble.

 

“Opportunity” means either a Supplier Sourced Opportunity or a Buyer Sourced
Opportunity.

 

“Persons” means an individual, corporation, partnership, limited liability
company, limited liability partnership, syndicate, trust, association,
organization or other entity, including any Governmental Entity.

 

“PSA” has the meaning set forth in Section 2.2.

 

“Receiving Party” has the meaning set forth in Section 6.1.

 

“ROFO Agreement” has the meaning set forth in Section 2.2.

 

“Stockholder’s Agreement” means that certain Stockholder’s Agreement, of even
date hereof, by and between Buyer and Supplier.

 

“Supplier” has the meaning set forth in the preamble.

 

“Supplier Sourced Development” has the meaning set forth in Section 2.2.

 

“Supplier Sourced Opportunity” has the meaning set forth in Section 2.1.

 

“Term” has the meaning set forth in Section 4.1.

 

ARTICLE IX

 

MISCELLANEOUS

 

Section 9.1            Assignment; Successors. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement may be assigned or
delegated, in whole or in part, by operation of law or otherwise, by a Party
without the prior written consent of the other Party, and any such assignment
without such prior written consent will be null and void; provided,

 

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however, that either Party may freely assign this Agreement and its rights and
obligations hereunder, in whole or in part, to (a) its Affiliates and (b) any
successor to all or substantially all of its assets, whether by purchase,
merger, consolidation, reconstitution or reorganization, in each case, without
the prior written consent of the other Party.  Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the Parties and their respective successors and assigns.

 

Section 9.2            Entire Agreement. This Agreement constitutes the entire
agreement, and supersedes all prior agreements, arrangements, communications and
understandings, whether written or oral, between the Parties with respect to the
subject matter hereof and thereof.

 

Section 9.3            Amendment and Modification. This Agreement may not be
amended, modified or supplemented in any manner, whether by course of conduct or
otherwise, except by an instrument in writing specifically designated as an
amendment hereto, signed on behalf of each Party; provided that, in the case of
Supplier, any such amendment, modification or supplement must be approved by a
majority of the Independent Directors (as defined in the Stockholder’s
Agreement) that are not Affiliated Directors (as defined in the Stockholder’s
Agreement).

 

Section 9.4            Governing Law. This Agreement and the rights and
obligations of the Parties will be governed by, and construed in accordance
with, the laws of the State of Texas. Each Party agrees to submit to the
jurisdiction of the State of Texas, and any suit will be brought and maintained
in the state or federal courts located in Tarrant County, Texas.

 

Section 9.5            No Waiver. No failure or delay of any Party in exercising
any right or power hereunder will operate as a waiver thereof, nor will any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power, or any course of
conduct, preclude any other or further exercise thereof or the exercise of any
other right or power. Any agreement on the part of any Party to any such waiver
will be valid only if set forth in a written instrument executed and delivered
by a duly authorized officer on behalf of such Party.

 

Section 9.6            Attorneys’ Fees. In the event of any legal proceeding
between the Parties arising out of the subject matter of this Agreement,
including, without limitation, in any bankruptcy or appellate proceedings, in
addition to any other award to which it will be entitled, the substantially
prevailing party will be entitled to an award for the reasonable attorneys’ fees
and costs incurred by it in connection with such proceedings.

 

Section 9.7            Severability. If any term or other provision of this
Agreement is held to be invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other conditions and provisions of this
Agreement will nevertheless remain in full force and effect so long as either
(a) the economic or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to either Party or (b) such Party
waives its rights under

 

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this Section with respect thereto. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the Parties
will negotiate in good faith to modify this Agreement so as to effect the
original intent of the Parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.

 

Section 9.8            Time of Essence. Time will be of the essence of this
Agreement in all respects and any waiver of any time provision will not be
effective unless in writing and signed by both Parties.

 

Section 9.9            Counterpart Execution. This Agreement may be executed in
two or more counterparts, all of which will be considered one and the same
instrument and will become effective when one or more counterparts have been
signed by each of the Parties and delivered to each other Party. Delivery of an
executed counterpart of this Agreement by facsimile or other electronic image
scan transmission will be effective as delivery of an original counterpart
hereof.

 

Section 9.10          No Third Party Beneficiaries. The provisions of this
Agreement are solely for the benefit of the Parties, and no third party
beneficiary is intended nor will be deemed created hereunder.

 

Section 9.11          No Partnership. Nothing contained in this Agreement is
intended to create, nor will it be construed to make, Supplier and Buyer
partners or joint venturers.

 

Section 9.12          Waiver of Jury Trial. BUYER AND SUPPLIER HEREBY AGREE THAT
IN THE EVENT OF ANY DISPUTE, CLAIM OR CONTROVERSY ARISING UNDER, OR PURSUANT TO,
THIS AGREEMENT, THE PARTIES WAIVE ANY RIGHT THEY MAY OTHERWISE HAVE TO HAVE SUCH
DISPUTE RESOLVED BY JURY TRIAL.

 

The remainder of this page is intentionally left blank; signature page follows.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the date first written above.

 

 

 

BUYER:

 

 

 

D.R. HORTON, INC.,

 

a Delaware corporation

 

 

 

 

 

 

 

 

 

By:

/s/ Phillip J. Weber

 

 

Name:

Phillip J. Weber

 

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

 

 

SUPPLIER:

 

 

 

FORESTAR GROUP INC.,

 

a Delaware corporation

 

 

 

 

 

 

 

 

 

By:

/s/ David V. Auld

 

 

Name:

David V. Auld

 

 

Title:

Chief Executive Officer

 

Signature Page

 

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