Exhibit 10.1

 

Kenneth M. Jastrow, II

 

Transformation Agreement

 

Transformation Agreement (“Agreement”) made between Kenneth M. Jastrow, II (“Mr.
Jastrow”) and Temple-Inland Inc. (“Company”), as of August 9, 2007, in
consideration of the mutual covenants herein made and upon the following terms
and conditions.

 

1. RECITATIONS:

 

1.1 Contracts. Mr. Jastrow and the Company have the following contractual
relationships:

A. Change in Control Agreement dated October 2, 2000, as amended by amendments
dated August 12, 2002, February 11, 2005, and March 24, 2006 (“CIC Agreement”);

B. Employment Agreement dated February 11, 2005 (“Employment Agreement”);

C. Mr. Jastrow is a participant in the Company’s retirement plan, supplemental
executive retirement plan, stock incentive plan, stock deferral and payment
plan, and other benefit plans (“Benefit Plans”) and has accrued certain benefits
under the Benefit Plans that he is eligible to begin drawing upon his
termination of employment.

Together the CIC Agreement, Employment Agreement and Benefit Plans are referred
to as the “Contracts.”

1.2 Transformation Plan. The Company’s Board of Directors (“Board”) approved a
transformation plan to maximize shareholder value through the separation of the
Company into three separate public companies and the sale of its strategic
timberland (“Transformation Plan”).

1.3 Change in Control. The consummation of the Transformation Plan will
constitute a “Change in Control” as defined in the CIC Agreement.

1.4 Senior Leadership Plan. The Board approved a “Senior Leadership Plan,”
which, among other matters, provides that in connection with the successful
completion of the Transformation Plan, Mr. Jastrow will retire as Chairman and
CEO of the Company. At or about the time the Transformation Plan is completed,
Mr. Jastrow will become the Non-executive Chairman of the Board of Directors of
both Guaranty Financial Group Inc. (“Guaranty”) and Forestar Real Estate Group
(“Forestar”).

1.5 Recognition. The Board recognizes Mr. Jastrow’s long and faithful service to
the Company and its subsidiaries and his leadership. The Board further
recognizes Mr. Jastrow’s leadership skills in developing and implementing the
Transformation Plan. The Board believes Mr. Jastrow’s leadership on the boards
of directors of Guaranty and Forestar will be key to helping Guaranty and
Forestar to generate value for their respective shareholders.

1.6 Purpose. Upon completion of the Transformation Plan, Mr. Jastrow is entitled
to certain payments and other rights under the Contracts. The Contracts have
different notice requirements, covenants, and payment schedules and were entered
into before final regulations were issued under Internal Revenue Code Section
409A (“Section 409A”), which requires a 6-month payment delay on certain kinds
of payments that will come due under the Contracts. The purpose of this
Agreement is to outline the amounts due under the Contracts and payment schedule
for such amounts, modify the Contracts to comply with Section 409A, provide
certainty to both parties regarding the applicability of the CIC Agreement
provisions to the Transformation Plan, and provide a release from Mr. Jastrow to
the Company.

 

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2.

RETIREMENT DATE; TERMINATION OF AGREEMENT; RETIREMENT:

 

2.1 Retirement. Mr. Jastrow shall resign as Chairman of the Board and CEO of the
Company effective on the earlier of December 28, 2007 or the completion of the
spin-offs of both Guaranty and Forestar (such date being the “Transition Date”)
and serve as a non-officer employee until his retirement on January 1, 2008 (the
“Retirement Date”).

2.2      Termination of Agreement by the Board on or Prior to December 28, 2007.
On or prior to December 28, 2007, the Board may unilaterally terminate this
Agreement, in its sole discretion, if it determines that any of the following
conditions exist (or will exist) as of December 28, 2007:

A. The Transformation Plan will not be substantially completed as to any of its
three principal components – timberland sale, spin off of Guaranty and spin off
of Forestar – by December 31, 2007, provided that no termination pursuant to
this Section 2.2 A shall be permitted after the Transition Date and Mr.
Jastrow’s resignation as Chairman of the Board and CEO of the Company.

B. Mr. Jastrow breached any of his covenants under this Agreement required to be
performed by December 28, 2007.

C. At any time from the date hereof through December 28, 2007, Mr. Jastrow was
in material breach of any of the Contracts after expiration of any notice period
and opportunity to cure that may be provided in any of the Contracts or under
applicable law.

D. Mr. Jastrow did not remain Chairman of the Board and CEO of the Company until
the Transition Date.

2.3 Termination of Agreement by Mr. Jastrow on or Prior to December 28, 2007. On
or prior to December 28, 2007, Mr. Jastrow may unilaterally terminate this
Agreement, in his sole discretion, if any of the following conditions exist (or
will exist) as of December 28, 2007:

A. The Transformation Plan will not be substantially completed as to any of its
three principal components – timberland sale, spin off of Guaranty and spin off
of Forestar – by December 28, 2007, provided that no termination pursuant to
this Section 2.3 A shall be permitted after the Transition Date and Mr.
Jastrow’s resignation as Chairman of the Board and CEO of the Company.

B. The Company materially breached any of its covenants under this Agreement
required to be performed by December 28, 2007.

C. At any time from the date hereof through December 28, 2007, the Company
materially breached any of the Contracts after expiration of any notice period
and opportunity to cure that may be provided in any of the Contracts or under
applicable law.

2.4 Effect of Termination of Agreement. In the event this Agreement is
terminated in accordance with Section 2.2 or Section 2.3, the terms of the
Employment Agreement and CIC Agreement shall continue in full force and
effect.             

2.5      Waiver. A condition subsequent may be waived by the party whose
obligation is subject to satisfaction of the condition, provided any waiver must
be in writing and specific as to the condition that is the subject of the
waiver. Any condition subsequent that is waived shall be deemed satisfied.

 

 

3.

MR. JASTROW’S COVENANTS:

 

3.1 Confidential Information; Restrictive Covenants and Developments. Mr.
Jastrow confirms and reaffirms the covenants and acknowledgements contained in
Sections 6 and 7 of the Employment Agreement (confidential information,
restrictive covenants and rights to intellectual property and inventions) and
agrees that such covenants shall continue in full force and effect following the
Retirement Date and shall inure to the benefit of the Company, for the
respective periods set forth in such sections of the Employment Agreement.
Notwithstanding his confirmation

 

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and reaffirmation of Sections 6 and 7 of the Employment Agreement, the following
clarifications and limitations shall apply:

A. Mr. Jastrow may use Confidential Information substantially related to the
business of Forestar or of Guaranty for the purposes of that respective
business.

B. Mr. Jastrow may participate as a stockholder, director and Non-Executive
Chairman of the Board of Forestar and of Guaranty, respectively, without
violation of Section 6(b) of the Employment Agreement even if one of those
companies is engaged in a line of business competitive with the business of the
Company or one of its subsidiaries, other than, during the Non-Competition
Period, the paper or forest product lines of business, provided, however,
neither Forestar nor Guaranty or one or their respective affiliates or
successors can engage in the paper or forest product lines of business during
the Non-Competition Period without causing Mr. Jastrow to be in violation of
Section 6(b) of the Employment Agreement so long as he has one of the prohibited
relationships under Section 6(b) of the Employment Agreement.

C. As permitted by Section 2(c) of the Employment Agreement, Mr. Jastrow serves
on the board of directors of Mortgage Bankers Guaranty Insurance Corporation
(“MGIC”) and KB Home (“KB Home”). His continued service on those boards after
the Retirement Date will not be a violation of Section 6(b) of the Employment
Agreement.

D. The Company shall continue to have the rights and remedies, and Mr. Jastrow
shall continue to have the opportunity to cure, as set forth in Section 6(e) of
the Employment Agreement.

3.2  Satisfaction. Mr. Jastrow agrees that the payments outlined in Exhibit “B”
and the performance of the other continuing obligations set forth in Section 4
of this Agreement constitute full satisfaction of the Company’s obligations to
make payments due and payable or that may come due and payable under the
Contracts upon and/or after his termination of employment or resignation as
Chairman of the Board and CEO of the Company.

3.3  Release. On or after January 1, 2008, but before January 30, 2008, Mr.
Jastrow shall execute the “General Release of Claims” in the form set forth in
the attached Exhibit “A” and deliver the General Release of Claims to the
Company. The General Release of Claims shall be effective as of January 1, 2008.

 

4. THE COMPANY’S COVENANTS:

 

4.1 Payments. Subject to receipt and nonrevocation of the General Release of
Claims set forth in 3.3, the Company agrees to pay Mr. Jastrow the amounts of
money and shares set forth in the payment schedule attached as Exhibit “B” on
the dates shown for each scheduled payment.  Such amounts shall be subject to
withholding for applicable taxes and deductions.

4.2. Other Continuing Obligations: In addition to the payments under Section 4.1
of this Agreement, the obligations of the Company to Mr. Jastrow after the
Retirement Date arising under the Contracts and described below shall continue,
as modified below:

A. Mr. Jastrow’s outstanding nonqualified stock options shall vest in full on
the Retirement Date and will continue to be exercisable for the remainder of
their scheduled terms.

B. The Company shall provide the benefits set forth in Section 3(f)(ii) of the
Employment Agreement under the terms thereof (post-employment medical and dental
benefits and office and secretarial support), except that the medical and dental
benefits shall be provided pursuant to one or more third-party insurance
policies and Mr. Jastrow shall pay fair market value rent and the actual cost of
secretarial support, to be paid on the first day of each month during which an
office and support is provided, for the first 6 months of office and secretarial
support. Mr. Jastrow shall reasonably cooperate with the Company in obtaining
such insurance policy (or policies). The Company shall reimburse Mr. Jastrow for
his payments for the first six months for an office and secretarial services on
July 1, 2008. In no event shall the amount of reimbursement to which Mr. Jastrow
is

 

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entitled under this Section 4.2.B. for any taxable year of Mr. Jastrow affect
the amount of reimbursement as to which Mr. Jastrow is entitled under this
Section for any other taxable year. All reimbursements made to Mr. Jastrow under
this Section 4.2.B. shall be taxable income to Mr. Jastrow.

C. The Company shall provide 3 years’ continuation of life insurance and
accidental death and dismemberment insurance as set forth in Section 6.1(B) of
the CIC Agreement. Such insurance shall be provided pursuant to one or more
third-party insurance policies, and Mr. Jastrow shall reasonably cooperate with
the Company in obtaining such insurance policy (or policies). Notwithstanding
the preceding, Mr. Jastrow shall pay the premiums for such life insurance and
accidental death and dismemberment coverage for the period from January 1, 2008
through June 30, 2008, and the Company shall reimburse him (on a taxable basis)
on July 1, 2008 for the amount of such premiums he so pays.

D. The Company shall make any payments required under Section 6.2 (excise tax
gross-up payment) and Section 6.4 (legal fee and expense reimbursement) of the
CIC Agreement, provided that (i) the last sentence of Section 6.2(A) and the
proviso contained in Section 6.2(B) of the CIC Agreement shall not apply and
(ii) no such payments shall be made for fees, expenses, or other amounts
incurred after the later of January 1, 2018 or Mr. Jastrow’s death. To the
extent Mr. Jastrow becomes subject to the additional tax imposed on deferred
compensation arrangements pursuant to Section 409A as a result of any payment or
benefit due under this Agreement, the Company will promptly reimburse him by
paying to him an additional amount such that the net amount retained by him,
after deduction of any additional taxes imposed under Section 409A on such
payments or benefits and any federal, state and local income and other payroll
taxes and additional taxes imposed under Section 409A upon any payment required
by this sentence, shall be equal to the payments or benefits under this
Agreement, provided that the imposition of such additional taxes under Section
409A is not the direct or indirect result of any breach by Mr. Jastrow of any
provision of this Agreement and provided further that Mr. Jastrow shall have on
and after the date of execution of this Agreement cooperated with the Company to
execute any amendment to the provisions hereof reasonably necessary to avoid the
imposition of such tax, but only to the minimum extent necessary to avoid the
application of such tax and only to the extent that Mr. Jastrow would not, as a
result, suffer any overall reduction in the amounts otherwise payable to him
under this Agreement. Any required legal fee and expense reimbursement described
in this Section 4.2.D. shall be made not later than the close of the taxable
year of Mr. Jastrow following the taxable year in which Mr. Jastrow incurs the
expense, and any required reimbursement of taxes described in this Section 4.2.D
shall be made not later than the close of the taxable year of Mr. Jastrow
following the taxable year in which the tax is remitted by Mr. Jastrow. In no
event shall any reimbursement described in this Section 4.2.D. be paid to Mr.
Jastrow prior to July 1, 2008.

E. The Company shall make any payments that are due and payable or come due and
payable by the Company under Sections 15 or 16 of the Employment Agreement,
provided that no such payments shall be made for fees, expenses, or other
amounts incurred after the later of January 1, 2018 or Mr. Jastrow’s death. Any
required reimbursement described in this Section 4.2.E. shall be made not later
than the close of the taxable year of Mr. Jastrow following the taxable year in
which Mr. Jastrow incurs the expense. In no event shall any reimbursement
described in this Section 4.2.E. be paid to Mr. Jastrow prior to July 1, 2008.

F. Mr. Jastrow hereby agrees that the Company shall not provide 3 years’
continuation of short term disability coverage, long term disability coverage,
and business travel accident coverage as set forth under Section 6.1(B) of the
CIC Agreement.  If Mr. Jastrow obtains such insurance pursuant to one or more
third-party insurance policies covering the three-year period following the
Retirement Date, the Company shall

 

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promptly reimburse Mr. Jastrow for the premiums for such coverage in respect of
the period on or after July 1, 2008.  In no event shall the amount of premiums
as to which Mr. Jastrow is entitled to reimbursement for any taxable year of Mr.
Jastrow affect the amount of premiums as to which Mr. Jastrow is entitled to
reimbursement during any other taxable year. The maximum amount of premiums for
which Mr. Jastrow will be entitled to reimbursement under this Section 4.2.F for
any taxable year of Mr. Jastrow shall be $25,000. Any required reimbursement of
premiums described in this Section 4.2.F shall be made not later than the close
of the taxable year of Mr. Jastrow following the taxable year in which Mr.
Jastrow paid the premium.

G. Mr. Jastrow’s qualified retirement plan benefit shall be paid to him in
monthly installments as set forth under the Temple-Inland Retirement Plan
applicable to salaried employees.

 

5. CHANGE IN CONTROL RABBI TRUST:

 

5.1 Contributions to Rabbi Trust. The Company agrees that if there is a “Change
in Control” (as defined in the CIC Agreement) with respect to the Company (but
not Guaranty or Forestar) subsequent to completion of the Transformation Plan,
the Company shall contribute to the Company’s rabbi trust, for the satisfaction
of obligations hereunder, the following: (a) the gross amount, in cash, of any
amounts that have not previously been paid to Mr. Jastrow pursuant to Section
4.1. (and Exhibit B hereto) or are not thereupon immediately due and payable to
Mr. Jastrow pursuant to Section 4.1 (and Exhibit B hereto); (b) in the case of
insurance benefits described in Section 4.2.B and 4.2.C, the insurance policies
held by the Company that provide such benefits, either on a fully paid up basis
for the entire period for which the insurance coverage is required to be
provided pursuant to Sections 4.2.B and 4.2.C or an additional amount of cash
that, assuming no rate of return on such cash amount and annual premium
escalation of not less than 12%, is sufficient to provide the coverage for the
three year period described in Section 4.2.C or twenty-three years in the case
of the insurance coverage described in Section 4.2.B; and (c) in the case of the
excise tax gross-up described in Section 4.2.D an amount, in cash, determined by
Tax Counsel (as defined in Section 6.2 of the CIC Agreement) to be sufficient to
fully satisfy the Company’s excise tax gross-up obligation, if any.

5.2 No Limitation on Rights. To the extent that the amounts and benefits paid or
provided by the rabbi trust do not pay or provide the full amount of payments or
benefits required to be provided hereunder, the Company shall remain fully
liable to pay or provide such amounts or benefits. In no event shall the amount
contributed to the rabbi trust by the Company (whether in cash, property, or
insurance policies) with respect to the payments and benefits to be provided
under this Agreement be less than the amount required to be contributed to the
rabbi trust by the Company (whether in cash, property, or insurance policies)
pursuant to the terms of the rabbi trust with respect to the payments and
benefits to be provided hereunder.

 

6. EMPLOYMENT AGREEMENT:

 

6.1 Retirement by Mutual Agreement. The retirement by Mr. Jastrow occurs under
circumstances that are a “Change in Control” under the CIC Agreement, is
voluntary and is by mutual agreement with the Company. The parties agree that
there is not “Cause” as that term is defined in the Employment Agreement. As of
the Retirement Date, the “Employment Period” as defined in the Employment
Agreement ends.

6.2 Effect on Employment Agreement. Unless this Agreement has been terminated in
accordance with Section 2.2 or 2.3, the provisions of Sections 1-5 (other than
Section 3(f)(ii) to the extent provided in Section 4.2.B hereof) and 13-14 of
the Employment Agreement shall be deemed to be fully executed, satisfied or
superseded and shall no longer be in effect after December 28, 2007 (the
Transition Date in the case of Sections 2(a) and 2(b) of the Employment
Agreement). The other sections of the Employment Agreement shall continue in
full force and

 

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effect and are incorporated and made part of this Agreement and shall apply to
this Agreement (including without limitation the provisions relating to notice,
governing law, withholding, amendment, dispute resolution and indemnification),
provided that in the event of conflict between a specific provision of this
Agreement and any of the incorporated provisions, the specific provision of this
Agreement shall control, including without limitation the provisions of Sections
3.2, 4.1 and 4.2 hereof.

6.3 Effect on CIC Agreement. After December 28, 2007, unless this Agreement has
been terminated in accordance with Section 2.2 or 2.3, the provisions of
Sections 3, 4, 5, 6, and 7 of the CIC Agreement (other than to the extent
provided in Section 4 hereof), and those portions of Section 15 containing the
definition of terms used exclusively in the foregoing sections, shall be deemed
to be fully executed, satisfied or superseded and shall no longer be in effect.
The other sections of the CIC Agreement shall continue in full force and effect,
provided that in the event of conflict between a specific provision of this
Agreement the specific provision of this Agreement shall control, including
without limitation the provisions of Sections 3.2, 4.1 and 4.2 hereof.

 

7. EMPLOYEE MATTERS AGREEMENT AND OTHER SEVERANCE AGREEMENTS: Incident to the
spin offs of Forestar and Guaranty under the Transformation Plan, the Company,
Forestar and Guaranty will enter into various severance agreements dealing with
post spin off rights, duties, powers and obligations among the three companies
(“Severance Agreements”). Among those agreements will be an “Employee Matters
Agreement” that, among other matters, deals with the allocation of various
obligations related to payments or the issuance of shares of capital stock that
result from various incentive compensation arrangements made by the Company. The
obligations under those incentive compensation arrangements shall be divided
post spin offs among the Company, Forestar and Guaranty. As divided, subject to
satisfaction of any applicable conditions, each of those companies shall be
severally liable as of the date of the spin offs for those obligations to the
employees holding rights to receive performance bonuses, rights to receive
shares of such company’s common stock, rights to be paid the value of shares of
such company’s stock and options to acquire shares of such company’s stock
(together, “Equity Incentives”) in accordance with the Employee Matters
Agreements and to the extent applicable, the other Severance Agreements. Mr.
Jastrow agrees to the division of his Equity Incentives post spin off in
accordance with the Employee Matters Agreement and, to the extent applicable,
the other Severance Agreements. Mr. Jastrow also agrees to sole and several
liability for each company assuming an obligation or part of an obligation to
him post spin off, notwithstanding any other provision in this Agreement that is
to the contrary. Mr. Jastrow’s agreement is conditioned upon the division of his
Equity Incentives being divided under the Severance Agreement by the same
methods as are used to divide the same or substantially similar obligations to
other employees so that his rights to his Equity Incentives and the other
employee’s rights to the same or substantially similar Equity Incentives are
treated pari passu. In the absence of manifest error or bad faith, the
determinations by the Company, Forestar and Guaranty as to how to divide the
Equity Incentive obligations ratably among the employees holding those rights
shall be final and binding upon Mr. Jastrow. All shares of stock issued to Mr.
Jastrow by any of the Company, Forestar and Guaranty shall be registered on a
recognized national stock exchange or on the NASDAQ stock market.

 

8. INTEGRATION: This Agreement constitutes the entire understanding of the
parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, discussions, writings, and agreements between them.

 

9. JOINDER BY FORESTAR AND GUARANTY: Forestar and Guaranty join in this
Agreement to evidence that they are bound by those provisions of this Agreement
that affect their respective interests, including without limitation Sections 2,
3.1, 4.1 (to the extent obligations under Exhibit B are allocated to Forestar
and Guaranty) and 7 of this Agreement .

 

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

 

 

/s/ Kenneth M. Jastrow, II

Kenneth M. Jastrow, II

 

 

Temple-Inland Inc.

 

/s/ Doyle R. Simons

 

By: Doyle R. Simons

 

Its: Executive Vice President

 

 

Guaranty Financial Group Inc.

 

/s/ Kenneth R. Dubuque

 

By: Kenneth R. Dubuque

 

Its: CEO and President

 

 

Forestar Real Estate Group LLC

 

/s/ James M. DeCosmo

 

By: James M. DeCosmo

 

Its: President

 

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Exhibit “A”

 

GENERAL RELEASE OF CLAIMS AGREEMENT

 

This General Release of Claims Agreement (hereinafter referred to as “this
Agreement”) is made by and between Temple-Inland Inc. (hereinafter referred to
as the "Company") and Kenneth M. Jastrow, II (hereinafter referred to as
"Employee") and is effective as of the date of Employee’s signature below.

 

In consideration of their mutual promises and obligations set out below, Company
and Employee agree to the following terms:

 

1.         Conditions of Separation. Employee’s employment with Company will
terminate effective with the close of business on January 1, 2008 (the
“Separation Date”).

 

2.         Payments and Other Considerations. The parties agree that the
consideration described in Section 4.2.A of the Transformation Agreement between
Employee and the Company dated August 9, 2007 (“Transformation Agreement”)with
respect to stock options granted prior to 2006 (the “Consideration”) would not
be paid to Employee but for his execution of this General Release of Claims
Agreement.

 

EMPLOYEE UNDERSTANDS THAT THIS GENERAL RELEASE OF CLAIMS AGREEMENT INCLUDES A
RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

 

3.        Waiver and Release of All Claims. In consideration of the agreements
made by Company in this Agreement, Employee on behalf of himself, his agents,
representatives, executors, attorneys, administrators, heirs or assigns, hereby
releases, acquits and forever discharges Company, Forestar Real Estate Group,
and Guaranty Financial Group Inc., their divisions, parents, subsidiaries,
affiliates, predecessors, assigns, successors, officers, officials, directors,
shareholders, employees, agents, and each of them, whether past or present,
(hereinafter collectively referred to as the "Released Parties") from any and
all charges, actions, causes of actions, claims, damages, obligations, suits,
agreements, costs, expenses, attorneys' fees and with regard to the payment of
all wages, benefits, back pay, debts, obligations, compensatory damages,
punitive damages, actual damages, or any other liability of any kind whatsoever,
suspected or unsuspected, known or unknown, which have or could have arisen out
of Employee's employment with and/or separation of employment from Company or
any Released Party and/or any other occurrence or claim whatsoever, known or
unknown, arising on or before the effective date of this Agreement, including,
but not limited to:

 

a.         Claims which could have arisen under Title VII of the Civil Rights
Act of 1964, as amended; the Civil Rights Act of 1991; the Americans With
Disabilities Act; the Age Discrimination in Employment Act, as amended; the
Family and Medical Leave Act; the Fair Labor Standards Act; the Equal Pay Act;
the National Labor Relations Act; the Worker Adjustment and Retraining
Notification Act; the Employee Retirement Income Security Act; the
Sarbanes-Oxley Act of 2002; the Texas Commission on Human Rights Act, and/or any
other federal, state or municipal employment discrimination statute (including
claims based on sex, sexual harassment, sexual orientation, age, race, national
origin, religion, ancestry, harassment, marital status, handicap, disability,
retaliation, any other legally protected group status, and/or attainment of
benefit plan rights); and/or

 

b.         Claims arising out of any other federal, state, or local statute,
law, constitution, ordinance or regulation;

 

c.         Any other claim whatsoever including, but not limited to, claims
relating to implied or express employment contracts; and/or

 

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d.

Claims based on theories of tort, whether under common law or otherwise,

 

but excluding claims which Employee cannot by law waive and claims for breach of
this Agreement. Notwithstanding the general language of this release, it is
understood that Employee’s release of claims is not intended to waive any rights
as a terminating employee to: (a) benefits under the Transformation Agreement or
any vested benefits under a benefit plan which by its terms specifically
provides for the vesting of benefits; (b) to apply for unemployment compensation
benefits under state law; (c) to elect COBRA continuation coverage; or (d) any
rights to indemnification under the Company’s Certificate of Incorporation,
By-laws, Transformation Agreement, or Contracts (as defined in the
Transformation Agreement).

 

4.         Entire Agreement. This Agreement together with the Transformation
Agreement constitutes the entire agreement between Employee and Company. No
other promises or agreement shall be binding unless hereafter in writing and
signed by both parties.

 

5.         Time To Review, Attorney Consultation & Revocation. Employee
acknowledges and agrees that Company is hereby advising him that: (a) this
Agreement contains a release of claims under the Age Discrimination in
Employment Act, as amended; (b) he can and should consult with an attorney with
respect to the matters contained in this Agreement; (c) he has been given a
period of at least twenty one (21) days to decide whether to accept its terms;
(d) he may accept this offer at any point during that time by returning this
Agreement, signed by him, to Leslie K. O’Neal, Vice President & Corporate
Secretary, 1300 S. MoPac Expwy., Austin, Texas 78746, within that time period;
and (e) he may revoke this Agreement any time during a period of up to seven (7)
days from the date he tenders this signed Agreement to Company. Any revocation
must be made in writing and be delivered by hand or otherwise within the
required time to Leslie K. O’Neal at the address above. Employee understands
that he will become entitled to the Consideration in accordance with the
Transformation Agreement once this 7-day revocation period has expired and this
Agreement becomes final and irrevocable.

 

6.         Separability. If any portion of this Agreement is found to be
unenforceable, the remainder of this Agreement shall remain in full force and
effect.

 

7.         Construction. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas, without regard to its conflicts
of law principles.

 

8.         Non-Admission. All parties acknowledge that this Agreement does not
constitute an admission by Company of any liability whatsoever, but results from
the desire to expeditiously resolve possibly disputed issues of fact and law,
and further acknowledge that Company denies all allegations of violation of any
law, statute, ordinance, regulation, common law, tort or contract.

 

9.        Full Knowledge, Consent and Voluntary Signing of Agreement. Employee
acknowledges and agrees that: (a) he has carefully read this Agreement and fully
understands its meaning, intent and terms; (b) he has full knowledge of its
legal consequences; (c) he agrees to all the terms of this Agreement and is
voluntarily signing below; (d) other than as stated herein, he attests that no
promise or inducement has been offered for this Agreement; and (e) he is legally
competent to execute this Agreement and accepts full responsibility therefor.

 

10.      Standards of Business Conduct Certification. Employee acknowledges that
he has read and understood the Temple-Inland Inc. Standards of Business Conduct
and Ethics (“SOBCE”). In this connection Employee certifies to Company that: (a)
he has in the past reported through the SOBCE’s reporting procedures any
violations of the SOBCE of which he was aware; (b) he is aware of no other
violations of the SOBCE which he has not previously reported; and (c) he is not
aware of any conduct by any employee of Company (or any part of Temple-Inland
Inc.) that he believes may constitute a violation

 

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of any laws or regulations relating to fraud against shareholders. The only
exception(s) to these certifications by Employee, if any, are the following
matters:____________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

_____________________

 

[These lines to be filled-in by Employee, if applicable, at the time he signs
this Agreement. If he leaves these lines blank, Employee agrees that he has
nothing to report. Note: reporting information in this section does not in any
way adversely affect any of Employee’s rights and responsibilities set out in
this Agreement.]

 

WHEREFORE, EMPLOYEE AGREES THAT HE HAS READ AND VOLUNTARILY ENTERED INTO THIS
AGREEMENT WITH FULL KNOWLEDGE OF ITS SIGNIFICANCE.

 

EMPLOYEE:

TEMPLE-INLAND:

 

 

 

by

Kenneth M. Jastrow, II

 

Title:

 

Date:

Date:

 

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Exhibit “B”

 

 

Kenneth M. Jastrow, II

Payment Schedule

Date

Type of Payment

Payment Form

Payment Amount or Formula

January 2, 2008

2007 Bonus (to be calculated based on estimated results through year end or last
day of employment, if earlier)

Cash

Bonus formula approved by Compensation Committee on 2/2/2007 with remaining
balance of after tax special litigation gain

 

Restricted Stock Units (RSUs)

Stock*

12,333 shares

 

 

Section 409A grandfathered Deferred Bonus

Phantom Stock

Stock*

44,994 shares

February 1, 2008

Section 409A grandfathered amount of the Supplemental Executive Retirement Plan
(SERP)

Cash

$3,833,419

 

 

 

 

February 4, 2008

Performance Stock Units (PSUs)**

Cash

Cash value of 70,000 shares * based on closing price on NYSE on February 4, 2008

 

 

 

 

 

July 1, 2008

3X Salary Under Section 6.1(A) of CIC Agreement

Cash

$2,886,000

 

3X Target Bonus under Section 6.1(A) of CIC Agreement

Cash

$6,468,507

 

3X 401(k) match under Section 6.1(F) of CIC Agreement

Cash

$12,000

 

RSUs

Stock*

239,898 shares

 

RSUs**

Cash

Cash value of 52,500 shares* based on closing price on NYSE on July 1, 2008

 

Deferred Bonus

Phantom Stock, including amounts payable under Section 6.1 (E)(ii) of CIC
Agreement***

Stock*

38,251 shares*

 

Nongrandfathered SERP amount, including amounts payable under Section 6.1(D) and
Section 6.1(E)(i) of CIC Agreement

Cash

$20,283,482

 

 

 

 

 

 

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February 3, 2009

RSUs**

Cash

Cash value of 72,500 shares* based on closing price on NYSE on February 3, 2009

 

 

 

 

February 2, 2010

RSUs**

Cash

Cash value of 150,000 shares* based on closing price on NYSE on February 2, 2010

 

* Number of shares is stated above as a pre-Transformation Plan amount, but
actual payment will be based on number of shares adjusted to reflect special
dividends to shareholders, including any dividends for sale of forest and shares
distributed by dividend for spin-offs of Guaranty and Forestar.

 

** Subject to satisfaction of applicable performance criteria. Dates of payment
for PSUs may be accelerated to the extent provided in the applicable PSU
agreements.

 

***Actual amount will be adjusted to reflect reinvestment of dividends through
the date of payment.

 

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