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

 

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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:

 

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

 

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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/ David V. Auld

  Name:  

David V. Auld

  Title:  

Chief Executive Officer

SUPPLIER: FORESTAR GROUP INC., a Delaware corporation By:  

/s/ Phillip J. Weber

  Name:  

Phillip J. Weber

  Title:   Chief Executive Officer

Signature Page