**Exhibit 10.4**GUARANTY FINANCIAL GROUP INC. SAVINGS AND RETIREMENT PLAN(As amended and restated effective January 1, 2008)
 

 
TABLE OF CONTENTS         ARTICLE 1 DEFINITIONS  4   1.1 “Accounts”  4   1.2 “Account Balance”  4   1.3 “Active Funds”  4   1.4 “Actual Deferral Percentage”  4   1.5 “Affiliate Plan”  5   1.6 “After Tax Contributions”  5   1.7 “After Tax Contributions Account”  5   1.8 “Approved Absence”  5   1.9 “Automatic Contribution Arrangement”  6   1.10 “Automatic Contribution Employee”  6   1.11 “Automatic Contribution Participant”  6   1.12 “Automatic Increase Participant”  6   1.13 “Average Contribution Percentage” means  6   1.14 “Before Tax Contributions”  7   1.15 “Before Tax Contributions Account”  7   1.16 “Borrower”  8   1.17 “Code”  8   1.18 “Common Stock”  8   1.19 “Common Stock Fund”  8   1.20 “Company”  8   1.21 “Company Retirement Contributions”  8   1.22 “Company Retirement Contributions Account”  8   1.23 “Compensation”  8   1.24 “Contributing Participant”  9   1.25 “Distribution Event”  9 
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           1.26 “Eligible Borrower”  9   1.27 “Eligible Employee”  9   1.28 “Employee”  10   1.29 “Employee Matters Agreement”  10   1.30 “Employer”  10   1.31 “Employer Matching Contributions”  10   1.32 “Employer Matching Contributions Account”  10   1.33 “ERISA”  10   1.34 “Forestar”  10   1.35 “Forestar Common Stock”  10   1.36 “Forestar Plan”  10   1.37 “Forestar Stock Fund”  10   1.38 “Funds”  10   1.39 “Group”  11   1.40 “Guaranty Common Stock”  11   1.41 “Guaranty Stock Fund”  11   1.42 “Highly Compensated Employee”  11   1.43 “Hour of Service”  11   1.44 “Inactive Participant”  12   1.45 “Investment Committee”  12   1.46 “Loan”  12   1.47 “Merged Plan”  12   1.48 “Merger Date”  12   1.49 “Months of Participation”  12   1.50 “Non-Highly Compensated Employee”  13   1.51 “Non-Residential Loan”  13   1.52 “Notice”  13   1.53 “One Year Break in Service”  13 
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           1.54 “Participant”  13   1.55 “Participant Loan Subaccount”  13   1.56 “Period of Separation”  13   1.57 “Period of Service”  14   1.58 “Period of Severance”  17   1.59 “Plan”  17   1.60 “Plan Administrator”  17   1.61 “Plan Year”  17   1.62 “Profit Sharing Contributions”  17   1.63 “Profit Sharing Contributions Account”  17   1.64 “Qualified Nonelective Contributions”  17   1.65 “Qualified Nonelective Contributions Account”  17   1.66 “Required Beginning Date”  17   1.67 “Residential Loan”  18   1.68 “Rollover Account”  18   1.69 “Rollover Contributions”  18   1.70 “Section 414(n) Leased Employee”  18   1.71 “Section 414 Compensation”  18   1.72 “Section 415 Compensation”  19   1.73 “Severance from Service Date”  20   1.74 “Stock Fund”  20   1.75 “Subaccounts”  20   1.76 “Temple-Inland Common Stock”  20   1.77 “Temple-Inland Savings Plan”  20   1.78 “Temple-Inland Stock Fund”  20   1.79 “Trust Agreement”  20   1.80 “Trust Fund”  21   1.81 “Trustee”  21 
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           1.82 “Valuation Date”  21 ARTICLE 2 ELIGIBILITY AND PARTICIPATION  21   2.1 Participation.  21   2.2 Enrollment as a Contributing Participant.  23   2.3 No Participation by Non-Covered Employees.  25 ARTICLE 3 PARTICIPANT CONTRIBUTIONS  25   3.1 Before Tax Contributions.  25   3.2 Suspension of Contributions.  25   3.3 Changes in Contribution Elections.  26   3.4 Payment of Contributions.  26   3.5 No Make-Up of Contributions.  26   3.6 Limitations on Before Tax Contributions.  26   3.7 Rollovers.  30 ARTICLE 4 EMPLOYER CONTRIBUTIONS  30   4.1 Matching Contributions.  30   4.2 Profit Sharing Contributions.  32   4.3 Qualified Nonelective Contributions.  32   4.4 Reinstatement of Forfeited Account Balances; Payment of Administrative Expenses.  33   4.5 Limitations on Contributions.  33   4.6 Limitations on After Tax Contributions and Employer Matching Contributions.  33 ARTICLE 5 ACCOUNTS  37   5.1 Maintenance of Accounts.  37   5.2 Adjustments to Accounts; Statements Provided to Participants.  37 ARTICLE 6 VESTING AND FORFEITURES  37   6.1 Before Tax Contributions, After TaxContributions, Qualified Nonelective Contributions and Rollover Accounts.  37   6.2 Vesting of Company Retirement Contributions Account.  37 
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           6.3 Vesting of Employer MatchingContributions Account and Profit Sharing Contributions Account.  38   6.4 Forfeitures.  40   6.5 Determination of Period of Service.  40 ARTICLE 7 INVESTMENT OF CONTRIBUTIONS  41   7.1 Investment Funds.  41   7.2 Inactive Funds.  41   7.3 Loan Fund.  42   7.4 Investment of Employer and Participant Contributions.  42   7.5 Change in Investment Elections.  42   7.6 Change in Existing Investments.  43   7.7 Voting of Stock Fund Shares (for Periods Prior to January 1, 2010).  43   7.8 Tender or Exchange Offers (for Periods Prior to January 1, 2010).  44   7.9 Confidentiality (for Periods Prior to January 1, 2010).  44 ARTICLE 8 WITHDRAWALS DURING EMPLOYMENT  45   8.1 Withdrawal of After Tax Contributions.  45   8.2 Withdrawals After Age 591/2.  45   8.3 Withdrawal of Employer Matching Contributions.  45   8.4 Hardship Withdrawals.  45   8.5 Withdrawal of Rollover Accounts.  48   8.6 Withdrawals of Certain Default Before Tax Contributions.  48   8.7 Application for Withdrawals; Processing.  48   8.8 Limit on Number of Withdrawals.  49   8.9 Effect of Withdrawals on Investments.  49   8.10 Timing and Form of Payment of Withdrawals.  49   8.11 Withdrawals Only Available to Employees.  49 ARTICLE 9 PAYMENT OF BENEFITS  49   9.1 Distribution of Benefits Upon Occurrence of Distribution Event.  49 
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           9.2 Payment of Benefits by Trustee; Form of Payment.  50   9.3 Installment Option for Certain Retiring Participants.  51   9.4 Required Minimum Distributions.  51   9.5 Payment to Participant’s Estate.  52   9.6 Incapacity of Payee.  52   9.7 Plan Administrator Determines Payee.  52   9.8 Rollover Distributions.  52   9.9 Distributions Pursuant to Qualified Domestic Relations Orders.  54 ARTICLE 10 LOANS  54   10.1 Availability of Loans; Application for Loans.  54   10.2 Terms of Loans.  55   10.3 Events of Default.  57   10.4 Accounting for Loans.  58 ARTICLE 11 ADMINISTRATION OF THE PLAN  58   11.1 Authority of Plan Administrator.  58   11.2 Claims Procedure.  59   11.3 Financial Statements.  61   11.4 Liability of Plan Administrator.  61   11.5 Standard of Judicial Review of Plan Administrator Action.  61 ARTICLE 12 MANAGEMENT OF THE TRUST FUND  62   12.1 Designation of Trustee.  62   12.2 Plan Assets Held in Trust.  62   12.3 Appointment of Investment Manager.  63 ARTICLE 13 AMENDMENT OF THE PLAN  64   13.1 Amendment.  64 ARTICLE 14 DISCONTINUANCE OF THE PLAN  66   14.1 Right To Terminate Plan.  66   14.2 Valuation of Trust Fund upon Termination.  66 
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           14.3 Continuation of Trust.  66   14.4 Plan Mergers and Transfers of Assets and Liabilities.  66   14.5 Certain Spin-Offs and Mergers.  68 ARTICLE 15 STATEMENT OF INTENT  68   15.1 Qualification.  68   15.2 Section 404(c) of ERISA.  69   15.3 Responsibility of Named Fiduciaries.  69   15.4 Legal Rights and Liabilities.  69 ARTICLE 16 TOP-HEAVY RULES  70   16.1 Applicability of Rules.  70   16.2 Determination of Top-Heavy Status.  70   16.3 Determination of Accrued Benefits.  71   16.4 Vesting for Top-Heavy Years.  72   16.5 Contributions for Top-Heavy Years.  72   16.6 Certain Changes Effective January 1, 2002.  73 ARTICLE 17 GENERAL PROVISIONS  75   17.1 Nonalienation of Benefits.  75   17.2 No Right to Continued Employment.  75   17.3 Rules of Construction.  76   17.4 Appendices.  76 ARTICLE 18 LAPSED BENEFITS  76   18.1 Notification to Participants and Beneficiaries.  76   18.2 Reinstatement of Lapsed Benefits.  77 APPENDIX I  1 APPENDIX II  2 KNUTSON MORTGAGE CORPORATION APPENDIX  4 STOCKTON SAVINGS BANK APPENDIX  1 WESTERN CITIES MORTGAGE CORPORATION APPENDIX  1 
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         TEXAS NATIONAL AGENCY, INC. APPENDIX  1 HEMET FEDERAL SAVINGS AND LOAN ASSOCIATION APPENDIX  1 MINIMUM DISTRIBUTION APPENDIX  1 **APPENDICES**
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**GUARANTY FINANCIAL GROUP INC. SAVINGS AND RETIREMENT PLAN**     This Plan was originally adopted effective as of April 1, 1989 and was named the “GuarantySavings Plan.”     Effective January 1, 1992 the Plan was re-named the “Temple-Inland Financial Services Savingsand Retirement Plan” and was amended and restated to provide for participating employers to makeretirement contributions to the Plan on behalf of eligible employees and to make certain otherchanges.     Effective as of July 1, 1993, the Temple-Inland Food Service Corporation Savings andRetirement Plan (the “Food Service Plan”) was merged into the Plan.     Effective July 1, 1993, the Plan was amended and restated to reflect the merger of the FoodService Plan into the Plan, re-name the Plan the “Temple-Inland Savings and Retirement Plan,”change the investment options available under the Plan, authorize Participants to make after taxcontributions, authorize the Plan Administrator to make Plan loans to participants, and makecertain other changes.     Effective December 30, 1994, the Plan was amended and restated to reflect the merger of theAmerican Federal Bank, F.S.B. Capital Accumulation and Cap-Plus Plan into this Plan as of December30, 1994 and to make certain other changes.     Effective as of January 1, 1995, the Plan was amended and restated to eliminate the ability ofParticipants to make certain hardship withdrawals.     Effective September 2, 1995 the Plan was amended to (a) authorize the contribution byEmployers of “qualified nonelective contributions,” (b) provide for the treatment of Employees whoare represented by United Paperworkers International Union Local 654, (c) increase the maximumamount of Employer Matching Contributions that may be credited for any Plan Year on behalf ofsalaried and nonunion Employees of Temple-Inland Food Service Corporation, (d) provide for threenew investment fund options, and (e) make certain other changes.     Effective January 1, 1996, the Plan was amended and restated to make certain changes inresponse to comments made by the IRS in connection with a determination letter request filed withrespect to the Plan and make certain other changes. The amendments made by such amendment andrestatement were effective as of January 1, 1996, except that the amendments made to Sections 1.4,1.14, 1.22, 1.36, 1.57, 3.6 and 4.6 as of such date were effective as of January 1, 1987.
 

 
     The Plan was amended and restated effective May 1, 1997 to (a) allow cash rollovercontributions to the Plan, (b) allow the Plan Administrator to provide for the use by Participantsof telephonic or other means of communication to make elections, (c) make certain changes relatingto the merger of other plans into this Plan, (d) incorporate prior amendments made to the Plan, and(e) make certain other changes, including changes made to reflect recent legislation. Theamendments made by such amendment and restatement were effective as of May 1, 1997, except that theamendments made to the definition of “Highly Compensated Employee” and Sections 3.6 and 4.6 wereeffective as of January 1, 1997, the amendments made to Section 3.7 were effective April 1, 1997,the amendment of Appendix I was effective as of October 27, 1997, and the deletion of formerAppendix III was effective as of April 30, 1997.     The Plan was amended and restated effective March 1, 2000 to (a) increase the maximum amountof Employer Matching Contributions that may be made hereunder on behalf of any Participant duringany Plan Year, and (b) to make certain other changes. The amendments made by such amendment andrestatement were, except as provided therein, effective as of March 1, 2000, except that theamendments made to Sections 2.1, 3.2, 4.2, 4.5, 7.5 and 7.6 were effective as of January 1, 2000.     The Plan was amended and restated effective December 1, 2001 to reflect changes in applicablelaw made by the Economic Growth and Tax Relief Reconciliation Act of 2001 and to make certain otherchanges. The amendments made by such amendment and restatement were effective as of December 1,2001, except as otherwise provided therein.     The Plan was amended and restated effective September 1, 2004, to reflect changes to thePlan’s provisions relating to the Funds offered under the Plan and to make certain other changes.     The Plan was amended and restated effective January 1, 2006, to reflect changes in theTreasury Regulations under Sections 401(k) and401(m) of the Code and to make certain otherchanges. The amendments made by such amendment and restatement were effective January 1, 2006,unless otherwise provided herein.     The Plan was amended and restated effective January 1, 2007, (i) to change the vestingschedule for Company Retirement Contributions from a five (5)-year cliff vesting schedule to athree (3)-year graduated vesting schedule, and (ii) to permit a non-spouse beneficiary to elect aDirect Rollover of certain distributions hereunder.
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     The Plan was amended effective December 1, 2007, to add Target Retirement Funds as investmentfunds under Article 7 hereof.     The Plan was amended and restated effective January 1, 2008**,**(i) to provide for the fullvesting of the Employer Matching Contributions Accounts and Company Retirement ContributionsAccounts of a Participant whose employment with the Group is designated as terminating as a resultof the Transformation Plan announced by Temple Inland Inc. in a press release dated February 26,2007; (ii) to eliminate new investments in, but permit transfers out of, the Temple-Inland StockFund, the Guaranty Stock Fund and the Forestar Stock Fund; (iii) to provide for the liquidation theTemple-Inland Stock Fund, the Guaranty Stock Fund and the Forestar Stock Fund, effective December31, 2009; (iv) to provide that Employer Matching Contributions and Profit Sharing Contributionsmade on behalf of a Participant will be invested in the same investment funds in which theParticipant’s Before Tax Contributions are invested; (v) to comply with the qualified automaticcontribution arrangement requirements of Sections 401(k)(13) and 401(m)(12) of the Code, (vi) toallow an Automatic Contribution Participant to withdraw certain default Before Tax Contributions;(vii) to eliminate After-Tax Contributions, (viii) to change the vesting schedule for EmployerMatching Contributions from a three (3)-year graduated schedule to a two (2)-year cliff schedule tocomply with the qualified automatic contribution arrangement requirements of Sections 401(k)(13)and 401(m)(12) of the Code, (ix) to change the vesting schedule for Company RetirementContributions made for Plan Years beginning before January 1, 2008, from a three (3)-year cliffschedule to a two (2)-year cliff vesting schedule, (x) to change the name of the Plan from the“Temple-Inland Savings and Retirement Plan” to the “Guaranty Financial Group Inc. Savings andRetirement Plan,” (xi) to eliminate the mandatory cashout of the vested Accounts of a terminatedParticipant who has attained age sixty-five (65), and (xii) to permit a terminated Participant tocommence distributions of his vested Accounts on his Required Beginning Date in periodicinstallment payments. The amendments made by such amendment and restatement were effective January1, 2008, unless otherwise provided herein.
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**ARTICLE 1****DEFINITIONS**     As used herein, the following terms shall have the following respective meanings, unless adifferent meaning is required by the context:     1.1 “Accounts”means, as applicable, a Participant’s Company Retirement Contributions Account, Before TaxContributions Account, After Tax Contributions Account, Employer Matching Contributions Account,Qualified Nonelective Contributions Account, Profit Sharing Contributions Account, RolloverAccount, and the Subaccounts maintained under such Accounts. The Plan Administrator may establishsuch additional Accounts and Subaccounts as it may determine in its discretion.     1.2 “Account Balance”means the aggregate balance of a Participant’s Accounts.     1.3 “Active Funds”means the investment funds listed in Section 7.1 hereof.     1.4 “Actual Deferral Percentage”means          (a) For each Plan Year the average of the ratios (calculated separately for eachEmployee) of: (i) the amount of Before Tax Contributions and Qualified Nonelective Contributionsto be paid to the Plan on behalf of an Employee for that Plan Year pursuant to Sections 3.1 and 4.3hereof, to (ii) that Employee’s Section 414 Compensation for that Plan Year.          (b) The Actual Deferral Percentage of any Employee who is a Highly CompensatedEmployee for a Plan Year and who is eligible to have before tax contributions allocated to hisaccounts under two (2) or more plans or arrangements described in Section 401(k) of the Code thatare maintained by the Group shall be determined as if all such before tax contributions were madeunder a single plan or arrangement. If such plans or arrangements have different plan years, theActual Deferral Percentage of the Highly Compensated Employee shall be determined by aggregatingthe before tax contributions made on behalf of the Highly Compensated Employee, and thecompensation (using the definition of compensation set forth in the plan or arrangement beingtested) received by the Highly Compensated Employee, during the plan year of the plan orarrangement being tested.
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          (c) If the Plan satisfies the requirements of Section 401(a)(4) or Section 410(b) ofthe Code only if aggregated with one (1) or more other plans or if one (1) or more other planssatisfy the requirements of Section 401(a)(4) or Section 410(b) of the Code only if aggregated withthe Plan, theActual Deferral Percentages of Employees shall be determined as if all such plans were asingle plan. A plan or arrangement described in Section 401(k) of the Code may be aggregated withthis Plan to satisfy the requirements of Section 410(b) of the Code only if such plan orarrangement uses the same testing method as this Plan for purposes of satisfying the actualdeferral percentage test of Section 401(k) of the Code.     1.5 “Affiliate Plan”means a defined contribution plan (other than this Plan) that is maintained by any member ofthe Group and that is intended to be qualified under Section 401(a) of the Code.     1.6 “After Tax Contributions”means the voluntary contributions made by a Participant pursuant to Section 3.1 hereof forPlan Years beginning before January 1, 2008, which are neither deductible for federal income taxpurposes nor reduce a Participant’s taxable income, plus the amount of such contributions made by aParticipant to a Merged Plan that are transferred on behalf of a Participant to this Plan. NoAfter Tax Contributions shall be made by any Participant for Plan Years beginning after December31, 2007.     1.7 “After Tax Contributions Account”means the separate account maintained for each Participant who has made After TaxContributions that accounts for the Participant’s share of the Trust Fund attributable to his AfterTax Contributions.     1.8 “Approved Absence”means an Employee’s period of absence occurring by reason of the following events:          (a) service in the Armed Forces of the United States; provided, however, that theEmployee has re-employment rights under applicable laws and complies with the requirements of suchlaws and is re-employed by the Group;          (b) an approved leave of absence for medical or disability reasons granted to anEmployee pursuant to his Employer’s established personnel rules and policies; or          (c) any other leave of absence approved by his Employer; provided, however, that nosuch leave of absence shall be approved for more than six (6) months in the aggregate.
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     1.9 “Automatic Contribution Arrangement”means the automatic enrollment and contribution provisions of Sections 2.1(c) and (e), 2.2(b)and (c) and 4.1 hereof that are intended to constitute a “qualified automatic contributionarrangement” within the meaning of Treasury Regulation Section 1.401(k)-3(j)(1).     1.10 “Automatic Contribution Employee”means any Employee other than an Employee who has an affirmative election in effect (thatremains in effect) on January 1, 2008, to (a) have Before Tax Contributions made on the Employee’sbehalf in a specified percentage of Compensation, or (b) not have Before Tax Contributions made onthe Employee’s behalf. An Employee shall cease to be an Automatic Contribution Employee if theEmployee makes an election (that remains in effect) to (x) have Before Tax Contributions made onhis behalf in a different percentage of Compensation than provided by Sections 2.2(b) and (c)hereof, or (y) not have any Before Tax Contributions made on his behalf.     1.11 “Automatic Contribution Participant”means an Automatic Contribution Employee who becomes a Participantpursuant toSection 2.1(c)(ii) hereof.     1.12 “Automatic Increase Participant”means (a) each Automatic Contribution Participant, other than an Automatic ContributionParticipant who, by Notice to the Plan Administrator, makes an election (that remains in effect)not to have the automatic increases provided for by Section 2.2(c) hereof apply to the Participant,and (b) each other Participant who, by Notice to the Plan Administrator, makes an election (thatremains in effect) to have Section 2.2(c) hereof apply.     1.13 “Average Contribution Percentage” means          (a) For each Plan Year, the average of the ratios (calculated separately for eachEmployee) of: (i) the sum of the employee contributions and employer matching contributions(within the meaning of Section 401(m) of the Code) under the Plan on behalf of an Employee for therelevant Plan Year, to (ii) that Employee’s Section 414 Compensation for the relevant Plan Year.          (b) The Average Contribution Percentage of any Employee who is a Highly CompensatedEmployee for the Plan Year and who is eligible to make employee contributions or to have matchingcontributions, qualified nonelective contributions or elective deferrals (as defined in Section401(m)(4) of the Code) allocated to his account under two (2) or more plans described in
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Section 401(a) of the Code or arrangements described in Section 401(k) of the Code that aremaintained by the Group shall be determined as if all such contributions and deferrals were madeunder a single plan. If such plans or arrangements have different plan years, the AverageContribution Percentage of the Highly Compensated Employee shall be determined by aggregating suchcontributions and deferrals made by and/or on behalf of the Highly Compensated Employee, and thecompensation (using the definition of compensation set forth in the plan or arrangement beingtested) received by the Highly Compensated Employee, during the plan year of the plan orarrangement being tested.          (c) If the Plan satisfies the requirements of Section 401(a)(4) or Section 410(b) ofthe Code only if aggregated with one (1) or more other plans or if one (1) or more other planssatisfy the requirements of Section 401(a)(4) or Section 410(b) of the Code only if aggregated withthe Plan, the Average Contribution Percentages of Employees shall be determined as if all suchplans were a single plan. A plan may be aggregated with this Plan for purposes of satisfying therequirements of Section 410(b) of the Code only if such plan uses the same testing method as thisPlan to satisfy the actual contribution percentage test of Section 401(m) of the Code.          (d) To the extent permitted by regulations promulgated under Section 401(m) of theCode, the Plan Administrator may elect to take into account “elective deferrals” (within themeaning of Section 401(m) of the Code) and Qualified Nonelective Contributions, in calculating theAverage Contribution Percentage of Employees.          (e) To the extent prohibited by Treasury Regulation Section 1.401(m)-2(a)(5), thePlan Administrator shall not take into account disproportionate matching contributions incalculating the Average Contribution Percentage of Employees.     1.14 “Before Tax Contributions”means the amount of Compensation deferred by a Participant pursuant to Section 3.1 hereof on abefore tax basis, plus the amount of elective deferrals (within the meaning of Section 402(g) ofthe Code) that are transferred on behalf of a Participant to this Plan from a Merged Plan.     1.15 “Before Tax Contributions Account”means the separate account maintained for each Participant who has made Before TaxContributions that accounts for the Participant’s share of the Trust Fund attributable to hisBefore Tax Contributions.
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     1.16 “Borrower”means any person who has an outstanding loan under Article 10 of this Plan.     1.17 “Code”means the Internal Revenue Code of 1986, as amended, and shall also include all regulationspromulgated thereunder.     1.18 “Common Stock”means Temple-Inland Common Stock, Guaranty Common Stock or Forestar Common Stock, asapplicable.     1.19 “Common Stock Fund”means the Temple-Inland Stock Fund, the Guaranty Stock Fund or the Forestar Stock Fund, asapplicable.     1.20 “Company”means TIN Inc. d/b/a Temple-Inland and any successor to such corporation by merger, purchase,or otherwise. Effective December 28, 2007, the term “Company” means the Guaranty Financial GroupInc., a Delaware Corporation, and any successor to such corporation by merger, purchase, orotherwise.     1.21 “Company Retirement Contributions”means contributions made by an Employer pursuant to former Section 4.1 hereof for Plan Yearsbeginning before January 1, 2008, plus the amount of any similar contributions (as determined bythe Plan Administrator) that are transferred to this Plan from a Merged Plan on behalf of aParticipant. No Company Retirement Contributions shall be made by the Company for Plan Yearsbeginning after December 31, 2007.     1.22 “Company Retirement Contributions Account”means the separate account for each Participant which shall account for his share of the TrustFund attributable to Company Retirement Contributions made on his behalf.     1.23 “Compensation”means wages paid by an Employer to an Employee, as reported by the Employer in Box 1 on FormW-2, and elective deferrals (within the meaning of Section 402(g)(3) of the Code) under any plansponsored by the Group, payroll reduction contributions made on a before tax basis under anycafeteria plan (within the meaning of Section 125 of the Code) or qualified transportation fringebenefit plan (within the meaning of Section 132(f) of the Code) sponsored by the Group, butexcludes reimbursements or other expense allowances, fringe benefits (cash and noncash), movingexpenses, welfare benefits, deferred compensation, and, in the case of a Highly CompensatedEmployee only, stock option income and payments made with respect to performance units orrestricted stock. If for any Plan Year a Participant’s Compensation exceeds the two hundredthousand dollar ($200,000) (one hundred fifty
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thousand dollar ($150,000) for Plan Years beginningbefore January 1, 2002) limitation imposed by Section 401(a)(17) of the Code, as adjusted asprovided therein, such excess amount shall not be taken into account for such Plan Year forpurposes of this Section or any other provision of the Plan. Notwithstanding the foregoing, thedefinition of the term “Compensation” under this Section 1.23 is a safe harbor definition ofcompensation set forth in Treasury Regulations Section 1.414(s)-1(c)(3), as modified by TreasuryRegulations Sections 1.414(s)-1(c)(4) and (5), and does not include any compensation amount that isnot Section 415 Compensation.     1.24 “Contributing Participant”shall mean a Participant who elects to make Before Tax Contributions to the Plan pursuant toArticle 3 hereof.     1.25 “Distribution Event”means, with respect to a Participant: (a) the Participant’s retirement, death, disability, orseverance from employment (separation from service, for periods prior to January 1, 2002) with theGroup; or (b) the sale or other disposition by any member of the Group to an unrelated corporationof all or substantially all of the assets used in a trade or business, but only with respect to aParticipant who continues employment with the acquiring corporation and the acquiring corporationdoes not maintain the Plan after the disposition; (c) the sale or other disposition by any memberof the Group of its interest in a subsidiary to an unrelated entity but only with respect to aParticipant who continues employment with the subsidiary and the acquiring entity does not maintainthe Plan after the disposition; and (d) the terminationof the Plan without establishment or maintenance of an alternative defined contribution plan(as defined in Treasury Regulation Section 1.401(k) — 1(d)(4)); provided however, that thepreceding clauses (b) and (c) shall not apply on and after January 1, 2002. Notwithstanding theforegoing, if a Participant has a change in job status from Employee to Section 414(n) LeasedEmployee, such change in job status shall not constitute a Distribution Event.     1.26 “Eligible Borrower”means any Participant who has an Account Balance under this Plan or any alternate payee whohas a right to an Account Balance under this Plan, provided that such Participant or alternatepayee is a “party in interest” (within the meaning of Section 3(14) of ERISA).     1.27 “Eligible Employee”means an Employee who is an active Employee on the December 31 of a Plan Year for which hisEmployer makes a Profit Sharing Contribution hereunder.
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     1.28 “Employee”means a person who is employed by an Employer on a salaried, salaried plus commission,commission-only or hourly basis and who is not covered by a collective bargaining agreement enteredinto with an Employer, unless such agreement, by specific reference to the Plan provides forcoverage under the Plan.     1.29 “Employee Matters Agreement”means the Employee Matters Agreement by and among Temple-Inland Inc., Forestar and the Companyentered into pursuant to the Transformation Plan announced by Temple Inland Inc. in a press releasedated February 26, 2007.     1.30 “Employer”means each of the entities listed on Appendix I hereto, subject to such limitations orrestrictions as to participation by employees of such entities as may be reflected on such AppendixI.     1.31 “Employer Matching Contributions”means the contributions made by an Employer pursuant to Section 4.1 hereof, plus the amount ofany employer matching contributions (within the meaning of Section 401(m)(4) of the Code)transferred on behalf of a Participant to this Plan from a Merged Plan.     1.32 “Employer Matching Contributions Account”means the separate account for each Participant which shall account for his share of the TrustFund attributable to any Employer Matching Contributions made or transferred to this Plan on hisbehalf.     1.33 “ERISA”means the Employee Retirement Income Security Act of 1974, as now in effect or hereafteramended and shall also include all regulations promulgated thereunder.     1.34 “Forestar”means Forestar Real Estate Group Inc., a Delaware Corporation.     1.35 “Forestar Common Stock”means common stock, par value one dollar ($1.00) per share, of Forester.     1.36 “Forestar Plan”means the Forestar Savings and Retirement Plan maintained by Forestar.     1.37 “Forestar Stock Fund”means an investment fund hereunder invested in Forestar Common Stock.     1.38 “Funds”means the investment funds provided for by Sections 7.1 and 7.2 hereof.
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     1.39 “Group”means the Company, and any entity that is treated as a single employer together with theCompany pursuant toSections 414(b), 414(c) or 414(m) of the Code or is required to be aggregatedwith the Company pursuant to regulations under Section 414(o) of the Code. For the purpose underthe Plan of determining the Period of Service of a Participant, each entity shall be included inthe Group only for such period or periods during which it is treated as a single employer togetherwith the Company pursuant to Sections 414(b), 414(c) or 414(m) of the Code or is required to beaggregated with the Company pursuant to regulations under Section 414(o) of the Code, except asprovided in Section 1.57 hereof.     1.40 “Guaranty Common Stock”means common stock, par value one dollar ($1.00) per share, of the Company.     1.41 “Guaranty Stock Fund”means an investment fund hereunder invested in Guaranty Common Stock.     1.42 “Highly Compensated Employee”means any Employee who, with respect to the Group, is described in either clauses (a) or (b)below:          (a) Was a “5-percent owner” (as described in Section 414(q) of the Code) at any timeduring the Plan Year or the twelve (12) month period preceding the Plan Year (the “Lookback Year”);or          (b) Received Section 415 Compensation from the Group in excess of eighty thousanddollars ($80,000) (as adjusted for cost-of-living increases) for the Lookback Year and was in thegroup of employees for such year consisting of the top twenty percent of employees when ranked onthe basis of Section 415 Compensation during such year.     1.43 “Hour of Service”means          (a) An hour for which an employee is paid, or entitled to payment, for theperformance of duties for any member of the Group. Such hours will be credited to the employee forthe computation period in which the duties are performed; and          (b) An hour for which an employee is paid, or entitled to payment, by any member ofthe Group on account of a period of time during which no duties are performed (irrespective ofwhether
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the employment relationship has terminated) due to vacation, holiday, illness, incapacity(including disability), layoff, jury duty, military duty or leave of absence. Hours under thisparagraph will be calculated and credited pursuant to Section 2530.200b-2 of the Department ofLabor Regulations which is incorporated herein by reference; and          (c) An hour for which back pay, irrespective of mitigation of damages, is eitherawarded or agreed to by any member of the Group. An hour of service will not be credited bothunder (a) or (b), as the case may be, and under this subsection (c). Such hours will be creditedto employees for the computation period or periods to which the award or agreement pertains ratherthan the computation period in which the award, agreement or payment is made.          (d) Hours of service shall be credited for any individual considered to be a Section414(n) Leased Employee.     1.44 “Inactive Participant”means a Participant who is employed by the Group, but who is not an Employee.     1.45 “Investment Committee”means the Guaranty Financial Group Inc. Investment Committee, as appointed by the Board ofDirectors of the Company.     1.46 “Loan”means a loan made pursuant to Article 10 hereof or that is treated as a Loan pursuant toSection 10.2(j) hereof     1.47 “Merged Plan”means a tax-qualified defined contribution plan that is merged into this Plan or from whichaccount balances are transferred (other than pursuant to a rollover) to this Plan, in either casewith the consent of the Board of Directors or Chief Executive Officer of the Company.     1.48 “Merger Date”means the date as of which a Merged Plan is merged into this Plan or as of which accountbalances are transferred to this Plan from a Merged Plan, as designated by the Plan Administrator.     1.49 “Months of Participation”means the number of calendar months (with partial months being counted as full months) duringthe period beginning on (a) the date on which an Employee provides Notice to the Plan Administratorelecting to make Before Tax Contributions (or After Tax Contributions for Plan Years beginningbefore January 1, 2008) hereunder, or (b) in the case of an Automatic Contribution Employee, theday after the expiration of the election period set forth in Section 2.2(b)(ii) hereof, and
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endingon the date the Participant ceases to be employed by any member of the Group. If the PlanAdministrator determines that there are insufficient records to determine a Participant’s Months ofParticipation pursuant to the foregoing provisions of this Section 1.49, the Plan Administrator maydetermine a Participant’s Months of Participation using such methods and assumptions as itdetermines necessary or appropriate in its sole discretion, provided that such methods andassumptions are applied in a consistent and nondiscriminatorymanner to similarly situated Participants. In the case of a Participant described in Section1.57(b)(ii), (iv) or (xi) hereof, the Participant’s Months of Participation shall include theParticipant’s “months of participation” in the Merged Plan, the Temple-Inland Savings Plan or theForestar Plan, as applicable.     1.50 “Non-Highly Compensated Employee”means, with respect to a Plan Year, an Employee who is eligible to participate in the Planpursuant to Article 2 hereof and who is not a Highly Compensated Employee.     1.51 “Non-Residential Loan”means any Loan that is not a Residential Loan.     1.52 “Notice”means a notice, application or request provided by a Participant to a designated party in suchform (which may be written, telephonic, electronic, or another means of communication) as may bespecified by the party to receive such Notice.     1.53 “One Year Break in Service”means a consecutive twelve (12) month Period of Severance during which an Employee does notperform an Hour of Service and is not on an Approved Absence.     1.54 “Participant”means (a) an Employee who is eligible to participate in the Plan under Article 2 hereof, and(b) except for purposes of Articles 2 (other than Section 2.1(f) and 2.3), 3, 4, 8, 9, and 16hereof, any person on whose behalf an Account is maintained under the Plan.     1.55 “Participant Loan Subaccount”means the separate Subaccount maintained for each Participant who has an outstanding Loan andto which the promissory note evidencing any such Loan shall be allocated.     1.56 “Period of Separation”means a period of time commencing with the date a person separates from service with the Groupand ending with the date that person resumes employment with the Group.
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     1.57 “Period of Service”means          (a) The period commencing on the date a person is credited with an Hour of Serviceafter April 1, 1989, and ending on the date a Period of Severance begins, including any Period ofSeparation of less than twelve (12) consecutive months. The determination of a Participant’sPeriod of Service shall be subject to the rules set forth in Section 6.5 hereof. For purposes ofdetermining a Participant’s Period of Service, the Severance from Service Date of a Participant whois absent from service beyond the first anniversary of the first day of absence for maternity orpaternity reasons is the second anniversary of the first day of such absence. The period betweenthe first and second anniversaries of the first day of absence from work shall be neither a Periodof Service nor a Period of Severance. For purposes of this paragraph, an absence from work formaternity or paternity reasons means an absence (i) by reason of the pregnancy of the individual,(ii) by reason of a birth of a child of the individual, (iii) by reason of the placement of a childwith the individual in connection with the adoption of such child by such individual, or (iv) forpurposes of caring for such child for a period beginning immediately following such birth orplacement.          (b) Notwithstanding Section 1.57(a) hereof:               (i) For purposes of determining the Period of Service of an Employee who wasemployed by an Employer on April 1, 1989, periods of employment by (A) Guaranty Federal Savings andLoan Association, Dallas, Texas, (B) First Federal Savings and Loan Association of Austin, Austin,Texas, and (C) Delta Savings Association of Texas, Alvin, Texas, prior to April 1, 1989, shall beconsidered service for the Group;               (ii) The Period of Service of a Participant whose service for vesting purposes undera Merged Plan was determined on a basis other than hours of service shall include the servicecredited under such plan as of its Merger Date (provided that if the Merged Plan was at any time anAffiliate Plan, no duplication of credited service shall occur);               (iii) In the case of a Participant who became an Employee (A) on or about September30, 2000 in connection with the purchase by Guaranty Business Credit Corporation of certain assetsof Capital Factors, Inc., (B) on or about October 2, 2000 in connection with the purchase byTimberline Insurance Managers, Inc. of certain assets of FG Holdings, Inc., or (C) on or aboutJanuary 26,
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2001 in connection with the purchase by Guaranty Business Credit Corporation of certainassets of Finova Capital Corporation, periods of employment with Capital Factors, Inc., FGHoldings, Inc., or Finova Capital Corporation, as applicable, prior to the date of becoming anEmployee shall be considered service for the Group for purposes of determining the Participant’sPeriod of Service for purposes of Section 6.2 hereof; and               (iv) The Period of Service of a Participant whose service for vesting purposes undera Merged Plan was determined based on hours of service shall consist of the following: (A) anumber of years equal to the number of years of service credited to the Participant before the planyear or other computation period used for determining years of service under the Merged Plan (the“Computation Period”) during which the Merger Date occurs; (B) the greater of (I) the period ofservice that would be credited to the Participant under the elapsed time method for his serviceduring the entire Computation Period in which the Merger Date occurs, or (II) the service takeninto account for the Computation Period that includes the Merger Date under the hours of servicemethod as of the Merger Date; and (C) the Period of Service credited to the Participant for servicesubsequent to the Merger Date commencing on the day after the last day of the Computation Period inwhich the Merger Date occurs.               (v) The Period of Service of a Participant who became an Employee in connection withGuaranty Residential Lending, Inc.’s purchase of the assets of Old Kent Mortgage Company from FifthThird Bancorp of Cincinnati, Ohio, shall include periods of service credited under the Old KentThrift Plan.               (vi) A Participant’s Period of Service shall include the Participant’s Period ofService credited to the Participant under the Joint Venture Master 401(k) Plan maintained by TINInc., except to the extent that the inclusion of such service would result in a duplication ofcredited service with respect to any period.               (vii) For purposes of determining the Period of Service of an Employee who was hiredin connection with that certain Stock Sale Agreement by and between PLM International, Inc. andGuaranty Bank that closed on or about January 1, 2000, periods of employment with American FinanceGroup, Inc. and/or its affiliates shall be considered Service for the Group.
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               (viii) For purposes of determining the Period of Service of an Employee who becameemployed by the Group in connection with that certain Asset Purchase Agreement by and amongGuaranty Insurance Services, Inc., TCT Insurance Group, LP, TCT GP, LLC, and TCT Holdings LLP thatclosed as of February 1, 2004, periods of employment with TCT Insurance Group, LP and/or itsaffiliates shall be considered service for the Group.               (ix) For purposes of determining the Period of Service of an Employee who becameemployed by the Group in connection with that certain Branch Purchase and Assumption Agreemententered into on July 1, 2004 by and between Pan American Bank, FSB, United PanAm Financial Corp.,and Guaranty Bank, periods of employment with Pan American Financial and/or its affiliates shall beconsidered service for the Group.               (x) In the case of an individual who became an Employee on or about July 1, 2007, inconnection with the purchase by Guaranty Insurance Services Inc. of certain assets of Hilliard BoxInsurance, periods of employment with Hilliard Box Insurance prior to the date of becoming anEmployee shall be considered service for the Group for purposes of determining the Employee’sPeriod of Service for purposes of eligibility to receive allocations of Company RetirementContributions hereunder.               (xi) If a Participant transferred employment to an Employer from Temple-Inland Inc.,any member of the “Temple-Inland Group” (within the meaning of the Employee Matters Agreement),Forestar or any member of the “Forestar Group” (within the meaning of the Employee MattersAgreement) and such employment transfer is covered by the Employee Matters Agreement, theParticipant’s Period of Service shall include the Participant’s “Period of Service” credited to theParticipant under the Temple-Inland Savings Plan or the Forestar Plan, except to the extent thatthe inclusion of such service would result in a duplication of credited service with respect to anyperiod.               (xii) An Employee’s Period of Service shall include prior service with a corporationor other entity acquired by any member of the Group or from which any member of the Group acquiredall or a part of the assets of a trade or business to such extent as may be provided by theagreement pursuant to which the applicable member of the Group acquired such corporation, otherentity, or assets of all or a part of a trade or business.
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     1.58 “Period of Severance”means a period of time commencing on a person’s Severance from Service Date and ending withthe date that person resumes his employment with the Group.     1.59 “Plan”means the Temple-Inland Savings and Retirement Plan. Effective December 28, 2007, the term“Plan” means the Guaranty Financial Group Inc. Savings and Retirement Plan.     1.60 “Plan Administrator”means the individual or committee appointed by the Board of Directors or Chief ExecutiveOfficer of the Company to manage and administer the Plan as provided in Article 11 hereof. ThePlan Administrator shall be a “named fiduciary” for the purposes of Section 402(a)(1) of ERISA,responsible for the administration, operation and interpretation of the Plan.     1.61 “Plan Year”means the calendar year commencing on January 1 and ending on the following December 31.     1.62 “Profit Sharing Contributions”means the discretionary profit sharing contributions, if any, made by an Employer for a PlanYear beginning on or after January 1, 2008, pursuant to Section 4.2 hereof, plus the amount of anyprofit sharing contributions transferred on behalf of a Participant to this Plan from a MergedPlan.     1.63 “Profit Sharing Contributions Account”means the separate account for each Participant which shall account for his share of the TrustFund attributable to any Profit Sharing Contributions made or transferred to the Plan on theParticipant’s behalf.     1.64 “Qualified Nonelective Contributions”means contributions made by an Employer pursuant to Section 4.3 hereof for Plan Yearsbeginning before January 1, 2008, plus the amount of any qualified nonelective contributions(within the meaning of Section 401(m)(4)(c) of the Code) transferred on behalf of a Participant tothis Plan from a Merged Plan. No Qualified Nonelective Contributions shall be made by the Companyfor Plan Years beginning after December 31, 2007.     1.65 “Qualified Nonelective Contributions Account”means the separate account maintained for each Participant who has been allocated QualifiedNonelective Contributions that accounts for the Participant’s share of the Trust Fund attributableto Qualified Nonelective Contributions.     1.66 “Required Beginning Date”means the later of (a) April 1 of the calendar year following the calendar year in which aParticipant attains age 701/2, or (b) in the case of a Participant who is not a five
17

 
percent (5%)owner (as defined in Section 416 of the Code) with respect to the Plan Year during which theParticipant attains age 701/2, April 1 of the calendar year following the calendar year in which theParticipant has a severance from employment with the Group.     1.67 “Residential Loan”means any Loan that is used to acquire any dwelling unit that within a reasonable period oftime is to be used (determined at the time the loan is made) as the principal residence of theEligible Borrower.     1.68 “Rollover Account”means the separate account maintained for each Participant which shall account for his shareof the Trust Fund attributable to his Rollover Contributions.     1.69 “Rollover Contributions”means rollover contributions made to the Plan pursuant to Section 3.7 hereof plus the amountof any rollover contributions transferred on behalf of a Participant to this Plan from a MergedPlan.     1.70 “Section 414(n) Leased Employee”means, any person who is not an employee of a recipient of the leased employee’s services(“recipient”) if (a) such services are provided pursuant to an agreement between the recipient andany other person (the “leasing organization”), (b) such person has performed such services for therecipient (or for the recipient and related persons) on a substantially full-time basis for aperiod of at least one year, and (c) such services are performed under the primary direction orcontrol by the recipient.     1.71 “Section 414 Compensation”means wages paid by an Employer to an Employee, as reported by an Employer in Box 1 on FormW-2, plus elective deferrals (within the meaning of Section 402(g)(3) of the Code) under any plansponsored by the Group and compensation reduction contributions made on a before tax basis underanycafeteria plan (within the meaning of Section 125 of the Code) or qualified transportationfringe benefit plan (within the meaning of Section 132(f) of the Code) sponsored by any member ofthe Group, minus any compensation amount that is not Section 415 Compensation; provided,however, that the Plan Administrator may elect to (a) use any definition of compensationpermitted under Section 414(s) of the Code and the regulations thereunder for any Plan Year and/or(b) limit the compensation taken into account with respect to an Employee to that portion of thePlan Year during which the Employee was eligible to participate in the Plan. In no event may aParticipant’s Section 414 Compensation exceed the two hundred thousand dollar ($200,000) (onehundred fifty thousand
18

 
dollar ($150,000) for Plan Years beginning before January 1, 2002)limitation imposed by Section 401(a)(17) of the Code, as adjusted as provided therein.     1.72 “Section 415 Compensation”means          (a) Wages paid to an Employee by an Employer, as reported by an Employer in Box 1 onForm W-2, plus elective deferrals (within the meaning of Section 402(g)(3) of the Code) under anyplan sponsored by the Group and compensation reduction contributions made on a before tax basisunder any cafeteria plan (within the meaning of Section 125 of the Code) or qualifiedtransportation fringe benefit plan (within the meaning of Section 132(f) of the Code) sponsored byany member of the Group. Except as provided herein, Section 415 Compensation for a Plan Year isthe compensation actually paid or made available during such Plan Year. In no event may aParticipant’s Section 415 Compensation exceed the two hundred thousand dollar ($200,000) limitationimposed by Section 401(a)(17) of the Code, as adjusted as provided therein.          (b) For Plan Years beginning on and after January 1, 2008, the term “Section 415Compensation” shall also include compensation paid by the later of 2 1/2 months after aParticipant’s severance from employment with the Group or the end of the Plan Year that includesthe date of the Participant’s severance from employment with the Group if the payment is: (i)regular compensation for services during the Participant’s regular working hours, or compensationfor services outside the Participant’s regular working hours (such as overtime or shiftdifferential), commissions, bonuses, or other similar payments, and absent a severance fromemployment, the payments would have been paid to the Participant while the Participant continued inemployment with the Group; or (ii) for unused accrued bonafide sick, vacation or other leave that the Participant would have been able to use ifemployment with the Group had continued.          (c) Any payments not described in Sections 1.72(a) and 1.72(b) hereof shall not beconsidered “Section 415 Compensation” if paid after severance from employment with the Group, evenif they are paid by the later of 2 1/2 months after the date of severance from employment or theend of the Plan Year that includes the date of severance from employment, except (i) payments to anindividual who does not currently perform services for the Group by reason of qualified militaryservice (within the meaning of Section 414(u)(1) of the Code) to the extent the payments do notexceed the amounts the
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individual would have received if the individual had continued to performservices for the Group rather than entering qualified military service, or (ii) compensation paidto a Participant who is permanently and totally disabled (within the meaning of Section 22(e)(3) ofthe Code); provided that salary continuation applies to all Participants who are permanently andtotally disabled for a fixed or determinable period or the Participant was not a Highly CompensatedEmployee immediately before becoming disabled.     1.73 “Severance from Service Date”means the earlier of:          (a) the date a person terminates his employment with the Group by reason ofquitting, retirement, death or discharge, or          (b) the date twelve (12) consecutive months after the date a person remains absentfrom service with the Group (with or without pay) for any reason other than quitting, retirement,death or discharge.     1.74 “Stock Fund”means the Temple-Inland Stock Fund, the Guaranty Stock Fund or the Forestar Stock Fund, asapplicable.     1.75 “Subaccounts”means the subaccounts established for each Participant that account for the investment of eachParticipant’s Accounts in the funds described in Sections 7.1, 7.2 and 10.4 hereof, and for suchother amounts as the Plan Administrator deems it necessary or appropriate to establish asubaccount.     1.76 “Temple-Inland Common Stock”means common stock, par value one dollar ($1.00) per share, of Temple-Inland Inc., a DelawareCorporation.     1.77 “Temple-Inland Savings Plan”means the Temple-Inland Salaried Savings Plan, the Temple-Inland Nonsalaried Savings Plan, theTemple-Inland Savings Plan for Union Employees, the El Morro Corrugated Box Corporation Savings andInvestment Plan or the Joint Venture Master 401(k) Plan, as applicable, each maintained by TIN Inc.     1.78 “Temple-Inland Stock Fund”means common stock, par value one dollar ($1.00) per share, of Temple-Inland Inc., a DelawareCorporation.     1.79 “Trust Agreement”means the agreement between the Company and the Trustee, as provided for in Article 12 hereof,as the same may hereafter be amended from time to time.
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     1.80 “Trust Fund” means all the assets at any time held under the Plan by the Trustee as provided for in Article12 hereof.     1.81 “Trustee” means the trustee or trustees selected by the Plan Administrator which may at any time beacting as Trustee under the Trust Agreement.     1.82 “Valuation Date” means (a) the last day of each calendar year that the New York Stock Exchange is open fortrading, and (b) except as otherwise determined by either the Plan Administrator or the Trustee inits sole discretion and either with or without prior notice to Participants, each other day (orportion thereof) that the New York Stock Exchange is open for trading.**ARTICLE 2****ELIGIBILITY AND PARTICIPATION**     2.1 Participation.          (a) Each Employee who was a Participant in this Plan or the Temple-Inland SavingsPlan as of December 27, 2007, and is employed by an Employer on December 28, 2007, shall be aParticipant in this Plan as of December 28, 2007.          (b) Each Employee who was a Participant in this Plan as of December 31, 2007, and isemployed by an Employer on January 1, 2008, shall be a Participant as of January 1, 2008.          (c) Each Employee not described in Section 2.1(b) hereof shall become a Participantas soon as practicable after the earlier of (i) the Employee’s providing Notice to the PlanAdministrator pursuant to Section 2.2 hereof to elect to have Before Tax Contributions made on theEmployee’s behalf in a specified percentage of Compensation, or (ii) in the case of an AutomaticContribution Employee, the expiration of thirty (30) days from the later of (A) the Employee’s mostrecent date of hire as an Employee, or (B) the date the notice described in Section 2.1(e) hereofis provided to the Employee, unless the Employee has elected, by Notice to the Plan Administrator,not to have Before Tax Contributions made on his behalf; provided, however, that inno event shall an Employee become a Participant unless he is an Employee as of the date he wouldotherwise become a Participant.
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          (d) Each Employee who does not become a Participant under Section 2.1(a), (b) or (c)hereof shall become a Participant as of the date on which his Employer makes a Profit SharingContribution, if any, on his behalf pursuant to Section 4.2 hereof.          (e) Within a reasonable period of time before each Plan Year beginning on or afterJanuary 1, 2008, the Plan Administrator shall provide each Employee a written notice of theAutomatic Contribution Arrangement hereunder, which notice shall include the following information:(i) the Employee’s rights and obligations under the Automatic Contribution Arrangement, (ii) thelevel of Before Tax Contributions that will be made on the Employee’s behalf if the Employee doesnot make an affirmative election to make Before Tax Contributions, (iii) the Employee’s right toelect not to have Before Tax Contributions made on the Employee’s behalf (or to elect to haveBefore Tax Contributions made in a different percentage of Compensation than provided in Sections2.2(b) and 2.2(c) hereof, (iv)how contributions made by and on the Employee’s behalf under the Automatic ContributionArrangement will be invested in the absence of an investment election by the Employee, (v) thereasonable period of time after receipt of such notice and before the Employee’s first Before TaxContribution for such Plan Year under the Automatic Contribution Arrangement during which theEmployee may make contribution and investment elections hereunder, and (vi) the Employee’s right towithdraw Before Tax Contributions made under the Automatic Contribution Arrangement pursuant toSection 8.6 hereof, and the procedures to elect such a withdrawal.          (f) Each Participant shall (i) provide Notice to the Plan Administrator designatinga beneficiary who shall receive any benefits payable pursuant to Section 9.1 hereof in the event ofthe death of the Participant, and (ii) agree to the terms of the Plan. A Participant may designateone or more persons as beneficiary; provided, however, that if more than one (1) person is named,the Participant shall indicate the shares and precedence of each person. A married Participant’sspouse shall be deemed to be his beneficiary regardless of any contrary designation on file orlater filed with the Plan Administrator, unless the spouse consents (acknowledging the effect ofsuch consent) to the designation of a beneficiary other than the spouse and such consent iswitnessed by a notary public or the Plan Administrator. A Participant may change his beneficiaryfrom time to time by Notice to the Plan Administrator but only with the written consent of hisspouse (witnessed by the Plan Administrator or a notary public), if he has a spouse at such
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time. The consent of a previously designated nonspouse beneficiary shall not be required in any case. Inthe event the Participant fails to effectively designate a beneficiary as to any distribution, suchdistribution shall be made to such deceased Participant’s spouse (as set forth above) if living, ifnot, then to such deceased Participant’s estate.          (g) Notwithstanding the foregoing provisions of this Section 2.1, in no event shall(i) an Employee be eligible to become a Participant in this Plan to the extent that becoming aParticipant would cause any plan maintained or formerly maintained by the Group to fail to satisfythe requirements of Treasury Regulations Section 1.401(k)-1(d), or (ii) any person who is a leasedemployee (including a Section 414(n) Leased Employee), a consultant or any other person who is notclassified by an Employer as an employee (not taking into account any retroactive reclassificationof any person as an Employee) be eligible to become a Participant in this Plan.     2.2 Enrollment as a Contributing Participant.           (a) An Employee who is a Participant or who is eligible to become a Participant mayelect to become a Contributing Participant by providing Notice to the Plan Administratorauthorizing the deduction by his Employer of Before Tax Contributions from his Compensation andspecifying the Funds in which his Before Tax Contributions and other amounts shall be invested,subject to the terms of Article 7 hereof.          (b) Notwithstanding anything herein to the contrary, an Automatic ContributionParticipant shall be deemed to have elected to contribute to the Plan as Before Tax Contributionsthree percent (3%) of the Employee’s Compensation for the period beginning on the date on which theParticipant first becomes an Automatic Contribution Participant and ending on the last day of thePlan Year next following the Plan Year in which the Participant first becomes an AutomaticContribution Participant (the “Initial Contribution Period.). An Automatic ContributionParticipant may elect to change or suspend his contribution election at any time in accordance withArticle 3 hereof.          (c) The percentage of Compensation that an Automatic Increase Participantcontributes to the Plan as Before Tax Contributions shall be increased by one percent (1%)effective as of the first payroll period beginning on or after January 1 of each Plan Yearbeginning after the expiration of the Participant’s Initial Contribution Period; provided,however, that no increase with respect to an
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Automatic Increase Participant shall occurpursuant to this Section 2.2(c) if the percentage of Compensation contributed to the Plan by theAutomatic Increase Participant as Before Tax Contributions would exceed ten percent (10%). Unlessan Automatic Contribution Participant elects otherwise by providing Notice to the PlanAdministrator, the Automatic Contribution Participant shall be treated as an Automatic IncreaseParticipant immediately upon becoming an Automatic Contribution Participant. A Participant who isnot an Automatic Contribution Participant but who has elected to become an Automatic IncreaseParticipant shall become an Automatic Increase Participant as soon as practicable after the PlanAdministrator receives Notice from the Participant of such election. An Automatic IncreaseParticipant may elect to cease to be an Automatic Increase Participant at any time by providingNotice to the Plan Administrator, and such election shall be effective as soon as practicable afterthe Plan Administrator’s receipt of such Notice. Notwithstanding the foregoing, the rate of anAutomatic Contribution Participant’s Before Tax Contribution on January 1, 2008, shall not be less than the rate in effect as ofDecember 31, 2007, unless the Automatic Contribution Participant elects a lower rate.          (d) The authorizations, designations and elections made pursuant to Section 2.1hereof and this Section 2.2 shall be deemed to be continuing as to current and succeeding PlanYears until changed by prior Notice to the Plan Administrator.          (e) In the case of an Employee who becomes an Employee and a Participant in thisPlan on December 28, 2007, and who immediately prior to becoming a Participant was both employed byTemple-Inland Inc. or any member of the “Temple-Inland Group” (within the meaning of the EmployeeMatters Agreement) and was a participant in the Temple-Inland Savings Plan, such Participant’s (i)affirmative elections under the applicable foregoing plan with respect to (A) making before taxcontributions, and (B) the investment of contributions made under the applicable foregoing plan onthe Participant’s behalf, and (ii) designation of a beneficiary (or beneficiaries) under theapplicable foregoing plan, shall be treated as if made under, and with respect to, this Plan andshall continue in effect under this Plan until changed in accordance with the terms of this Plan.          (f) In the case of an Employee who becomes a Participant in this Plan and whoimmediately prior to becoming a Participant was both employed by a member of the Group and was aparticipant in a Merged Plan, and, if the Plan Administrator so determines, such Participant’s (i)affirmative
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elections under the Merged Plan with respect to (A) making before tax contributions,and (B) the investment of contributions made under the Merged Plan on the Participant’s behalf, and(ii) designation of a beneficiary (or beneficiaries) under the Merged Plan shall be treated as ifmade under, and with respect to, this Plan and shall continue in effect under this Plan untilchanged in accordance with the terms of this Plan.     2.3 No Participation by Non-Covered Employees.          (a) Notwithstanding any provision of this Plan to the contrary, an InactiveParticipant shall not be eligible to make Before Tax Contributions under Article 3 hereof or beentitled to any Employer Matching Contributions or Profit Sharing Contributions under Article 4hereof.          (b) If an Inactive Participant again becomes an Employee, he (i) may elect to resumemaking Before Tax Contributions by giving prior Notice to the Plan Administrator, and such          election shall be effective as soon as practicable after the Plan Administrator’s receipt ofsuch election, and (ii) shall be eligible to be allocated Employer Matching Contributions andProfit Sharing Contributions, subject to, and in accordance with, the terms of Article 4 hereof.          (c) Notwithstanding any provision of this Plan to the contrary, an Employee who hasrights under Chapter 43 of Title 38, United States Code, resulting from qualified military service,shall be credited with service and entitled to make Before Tax Contributions to this Plan and to beallocated Employer Matching Contributions and Profit Sharing Contributions to the extent requiredby applicable law and Section 414(u) of the Code.**ARTICLE 3****PARTICIPANT CONTRIBUTIONS**     3.1 Before Tax Contributions. Each Participant may elect to make Before Tax Contributions to the Plan of any wholepercentage of his Compensation for each payroll period. The minimum amount of Before TaxContributions with respect to each payroll period shall be one percent (1%), and, except aspermitted pursuant to Section 3.6(f) hereof, the maximum amount shall be fifty percent (50%).     3.2 Suspension of Contributions. A Participant may voluntarily suspend his Before Tax Contributions by giving prior Notice tothe Plan Administrator, and such suspension shall be effective as soon as practicable after thePlan Administrator’s receipt of such Notice. A Participant may resume
25

 
making Before TaxContributions by giving prior Notice to the Plan Administrator, and such election shall beeffective as soon as practicable after the Plan Administrator’s receipt of such election.     3.3 Changes in Contribution Elections.     A Participant may increase or decrease, subject to Section 3.1 hereof, the amount of hisBefore Tax Contributions by giving prior Notice to the Plan Administrator. Such changes in BeforeTax Contributions shall become effective as soon as practicable after receipt of Notice by the PlanAdministrator.     3.4 Payment of Contributions.          (a) Participants’ Before Tax Contributions shall be transferred to the Trustee underthe Plan on the earliest date that such amounts can reasonably be segregated from the Employer’sgeneral assets, but in no event later than the fifteenth (15th) day of the calendar month followingthe month in which the Before Tax Contributions withheld would otherwise have been paid to theParticipant. In no event shall an Employer transfer a Before Tax Contribution to the Trustee onbehalf of a Participant prior to the date the Participant performs the services with respect towhich the Before Tax Contribution is being made (or the date the Compensation for such serviceswould be currently available, if earlier) unless such pre-funding is to accommodate a bona fideadministrative concern and is not for the principal purpose of accelerating deductions for federalincome tax purposes.          (b) Participants’ Before Tax Contributions shall be treated under the Plan, ERISAand the Code as nonforfeitable Employer contributions. Before Tax Contributions shall not berequired to be made from the current or accumulated profits of an Employer.     3.5 No Make-Up of Contributions. Subject to Section 3.6(f) hereof, no Participant who fails to make the maximum amount ofBefore Tax Contributions permitted under Section 3.1 hereof, or who voluntarily suspends his BeforeTax Contributions in accordance with Section 3.2 hereof, shall be permitted to make up suchcontributions in any subsequent payroll period.     3.6 Limitations on Before Tax Contributions.          (a) No Participant shall be permitted to have Before Tax Contributions made to thePlan during any Plan Year to the extent such contributions, plus any elective deferrals under anyother tax-qualified plan, exceed the dollar limit imposed under Section 402(g) of the Code, asadjusted in accordance therewith, except to the extent permitted under Section 3.6(f) hereof. AParticipant shall promptly notify
26

 
the Plan Administrator if such limitation is exceeded and theamount of such excess, plus gain or loss allocable thereto for the Plan Year, and the periodbeginning on the day after the close of such Plan Year and ending seven (7) days prior to the dateof distribution of excess contributions for such Plan Year (the “Gap Period”), shall be distributedto such Participant within three and one-half (31/2) months after the close of the Plan Year duringwhich such excess contributions were made or as of such later date that is permissible underapplicable regulations as may be determined by the Plan Administrator. Except asotherwise determined by the Plan Administrator, the income allocable to a Participant’s excessBefore Tax Contributions for a Plan Year, and the Gap Period for such Plan Year, shall bedetermined by multiplying the total investment income or loss (including dividends, interest,realized gains or losses, and unrealized appreciation or depreciation) allocated to theParticipant’s Before Tax Contributions Account for such Plan Year and Gap Period by a fraction:               (i) the numerator of which is the amount of excess Before Tax Contributionsallocated to the Employee’s Before Tax Contributions Account for the Plan Year; and               (ii) the denominator of which is the Employee’s total Before Tax ContributionsAccount balance as of the beginning of the Plan Year increased by the total of the Employee’sBefore Tax Contributions for the Plan Year and the Gap Period for such Plan Year.     (b) If for any Plan Year beginning before January 1, 2008, the Actual DeferralPercentage for Highly Compensated Employees would exceed the greater of: (i) the Actual DeferralPercentage of the Non-Highly Compensated Employees for the preceding Plan Year multiplied by oneand one-fourth (1.25), or (ii) the lesser of: (A) two percent (2%) plus the Actual DeferralPercentage of Non-Highly Compensated Employees for the preceding Plan Year, or (B) the ActualDeferral Percentage of Non-Highly Compensated Employees for the preceding Plan Year multiplied bytwo (2), the Before Tax Contributions of the Highly Compensated Employees shall be reduced as setforth in Sections 3.6(c) and 3.6(d) hereof. Notwithstanding the foregoing, the Actual DeferralPercentage for Non-Highly Compensated Employees shall be determined by using the Non-HighlyCompensated Employees’ Compensation and the Before Tax Contributions and Qualified Non-electiveContributions made on behalf of such Employees for the current Plan Year rather than the precedingPlan Year, as permitted by, and in accordance with, Section 401(k)(3) of the Code.
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          (c) In order to determine the amount by which Highly Compensated Employees’ BeforeTax Contributions must be reduced pursuant to Section 3.6(b) hereof and identifying the HighlyCompensated Employees whose Before Tax Contributions shall be reduced, the Plan Administratorshall:               (i) Determine the maximum Actual Deferral Percentage for Highly CompensatedEmployees permitted under Section 3.6(b) hereof, if applicable;               (ii) Identify the Highly Compensated Employees with Actual Deferral Percentages inexcess of the maximum percentage amount determined pursuant to the preceding clause (i);               (iii) Determine the dollar amount of the reduction in each such Highly CompensatedEmployee’s Before Tax Contributions that would be required so that the Actual Deferral Percentageof Highly Compensated Employees would not exceed the percentage limit determined pursuant to thepreceding clause (i), with the dollar amount of such reductions being determined under a processwhereby the Actual Deferral Percentage of the Highly Compensated Employee(s) with the highestActual Deferral Percentage(s) is reduced so that it is equal to that of the Highly CompensatedEmployee(s) with the next highest Actual Deferral Percentage and repeating such process until theActual Deferral Percentage of Highly Compensated Employees does not exceed the limit prescribed bySection 3.6(b) hereof, if applicable; and               (iv) Cause Before Tax Contributions equal to the total dollar amount of Before TaxContributions determined pursuant to the preceding clause (iii) (the “Excess Deferrals”) to berefunded in accordance with Sections 3.6(d) and 3.6(e) hereof to the Highly Compensated Employeesidentified therein.          (d) The Before Tax Contributions of the Highly Compensated Employee(s) with thehighest dollar amount of Before Tax Contributions shall be reduced by the amount required to causethe Before Tax Contributions of such Highly Compensated Employee(s) to be equal to the Before TaxContributions of the Highly Compensated Employee(s) who have the next highest dollar amount ofBefore Tax Contributions; provided, however, if a lesser reduction would equal the amount of ExcessDeferrals, the lesser reduction shall be made. The process provided for by the by the precedingsentence shall be repeated until the total amount of the reductions equals the amount of ExcessDeferrals. If the Actual Deferral Percentage of any Employee who is a Highly Compensated Employeefor a Plan Year is
28

 
determined taking into consideration before tax contributions allocated to hisaccounts under two (2) or more plans or arrangements described in Section 401(k) of the Code thatare maintained by the Group, as described in Section 1.3 hereof, and the before tax contributionsof the Highly Compensated Employee must be reduced to satisfy the requirements of Section 401(k)(3)of the Code, only the before-tax contributions made to the plan being corrected shall be reduced.          (e) Any Before Tax Contributions in excess of the amount permitted under thisSection 3.6, along with any gain or loss allocable thereto for the Plan Year and the Gap Period (asdefined in Section 3.6(a) hereof) for such Plan Year, shall be refunded to the Highly CompensatedEmployees identified in Section 3.6(d) hereof within two and one-half (21/2) months after the closeof the Plan Year or as of such later date as may be determined by the Plan Administrator, providedthat such later date shall not be later than the close of the Plan Year following the Plan Year inwhich the excess amounts were contributed. Allocable gain or loss shall be determined in the samemanner as described in the last sentence of Section 3.6(a) hereof. Notwithstanding the foregoing,the Plan Administrator may, in lieu of refunding all or a portion of excess Before TaxContributions to the Highly Compensated Employees, recharacterize all or a portion of such excessBefore Tax Contributions as After Tax Contributions within two and one-half (21/2) months of theclose of the Plan Year in which the excess contributions were made. Any such recharacterizationshall comply with applicable regulations under the Code. Employer Matching Contributions that areattributable to Before Tax Contributions distributed pursuant to Section 3.6(a) or this Section3.6(e) shall be forfeited and used to reduce future Employer contributions. The amount of BeforeTax Contributions to be recharacterized as After Tax Contributions or refunded to any HighlyCompensated Employee shall be reduced by the amount of any Before Tax Contributions previouslydistributed to the Employee for such Plan Year.          (f) Effective for Plan Years beginning on and after January 1, 2002, Participantswho are eligible to make Before Tax Contributions hereunder and who have attained age 50 before theclose of the Plan Year shall be eligible to make “catch-up contributions” in accordance with, andsubject to the limitations of, Section 414(v) of the Code. Such catch-up contributions shall notbe taken into account for purposes of the provisions of the Plan implementing the requiredlimitations of Sections 402(g) and 415 of the Code. The Plan shall not be treated as failing tosatisfy the provisions of the Plan implementing the
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requirements of Sections 401(k)(3), 410(b) or416 of the Code, as applicable, by reason of Participants making such catch-up contributions.          (g) The Plan Administrator may at any time, in its sole discretion, and upon noticeto the affected Participants, unilaterally reduce, on a prospective basis, the maximum percentageof Compensation that Highly Compensated Employees may make as Before Tax Contributions to the Plan.          (h) Notwithstanding any other provision of the Plan, effective for Plan Yearsbeginning after December 31, 2007, (i) the Automatic Contribution Arrangement provisions ofSections 2.1(c) and (e), 2.2(b) and (c) and 4.1 hereof are intended to constitute a “qualifiedautomatic contribution arrangement” within the meaning of Treasury Regulations Section1.401(k)-3(j)(i), and satisfy the Actual Deferral Percentage and Average Contribution Percentagetests of Section 401(k) and (m), respectively, of the Code, and (ii) the Actual Deferral Percentageprovisions of Sections 3.6(b), (c), (d), (e) and (g) hereof and the Qualified NonelectiveContribution provisions of Section 4.2 hereof, shall not be effective.     3.7 Rollovers. Employees may, subject to such rules as may be prescribed by the Plan Administrator, roll overall or a portion of (a) an eligible rollover distribution (within the meaning of Section 402(c)(4)of the Code), (b) a rollover amount (within the meaning of Section 403(a)(4) of the Code), or (c) arollover contribution (within the meaning of Section 408(d)(3)(A)(ii) of the Code) to this Plan,(each, a “Rollover Amount”); provided, however, that (x) in no event may any“after-tax” employee contributions be rolled over into this Plan, and (y) Rollover Amounts may betransferred to the Plan only in the form of cash and/or, in the discretion of the PlanAdministrator, one or more participant loan notes. If, after an amount has been rolled over tothis Plan, the Plan Administrator determines that such amount was not a valid Rollover Amount, thePlan Administrator shall distribute such amount to the applicable Participant, together withearnings attributable thereto, within a reasonable period after such determination.**ARTICLE 4****EMPLOYER CONTRIBUTIONS**     4.1 Matching Contributions.     (a) Subject to Sections 4.5 and 4.6 hereof, each Employer shall make EmployerMatching Contributions to the Plan with respect to each Participant who is an Employee of thatEmployer in an amount equal to two hundred percent (200%) of the first two percent (2%) of eachsuch Participant’s
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Compensation contributed to the Plan as Before Tax Contributions each payrollperiod plus an amount equal to one hundred percent (100%) of the next two percent (2%) of each suchParticipant’s Compensation contributed to the Plan as Before Tax Contributions each payroll period.Employer Matching Contributions made pursuant to this Section 4.1(a) shall be transferred to theTrustee under the Plan concurrently with thedelivery of the Participants’ Before Tax Contributions and shall be allocated to the Accountsof the Participants on whose behalf they were made upon receipt by the Trustee (or as soon aspracticable thereafter).          (b) Subject to Sections 4.5 and 4.6 hereof, in the event that the total amount ofEmployer Matching Contributions made to the Plan with respect to a Participant for a Plan Yearbeginning before January 1, 2008, is less than an amount equal to the sum of (i) two hundredpercent (200%) of the first two percent (2%) of such Participant’s Compensation contributed to thePlan as Before Tax Contributions for such Plan Year, and (ii) one hundred percent (100%) of thenext two percent (2%) of such Participant’s Compensation contributed to the Plan as Before TaxContributions for such Plan Year (the sum of (a) and (b) being the “Total Match”), the Employershall make an additional Employer Matching Contribution to the Plan with respect to the Participantfor such Plan Year equal to the difference between (x) the Total Match for such Plan Year, and (y)the amount of Employer Matching Contributions made to the Plan on behalf of the Participantpursuant to Section 4.1(a) hereof for such Plan Year (such additional contribution being a “True-UpContribution”). Employer Matching Contributions made pursuant to this Section 4.1(b) shall betransferred to the Trustee not later than the date required under the Code in order for suchcontributions to be deductible for such Plan Year for federal income tax purposes and shall beallocated to the Accounts of the Participants on whose behalf they were made upon receipt by theTrustee (or as soon as practicable thereafter). Notwithstanding the foregoing, an Employer may, inits discretion, calculate and contribute to the Plan True-Up Contributions more frequently than ona Plan Year basis. The Employer shall not make any True-Up Contributions for any Plan Yearbeginning after December 31, 2007.          (c) An Employer shall transfer to the Trustee an Employer Matching Contribution madewith respect to a Before Tax Contribution made during a Plan Year quarter not later than the lastday of the immediately following Plan Year quarter. In no event shall an Employer transfer anEmployer Matching Contribution made pursuant to this Section 4.1 to the Trustee on behalf of aParticipant prior to
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the date the Participant performs the services with respect to which theEmployer Matching Contribution is being made (or the date the Compensation for such services wouldbe currently available, if earlier) unless such pre-funding is to accommodate a bona fideadministrative concern and is not for the principal purpose of accelerating deductions for federalincome tax purposes.     4.2 Profit Sharing Contributions. Subject to the restrictions imposed by Section 4.5 hereof, and in addition to thecontributions required by Section 4.1 hereof, each Employer, by action of its Board of Directors,may elect to make a discretionary Profit Sharing Contribution for a Plan Year in an amountdetermined by the Employer’s Board of Directors, up to two percent (2%) of the aggregateCompensation of its Eligible Employees, to be allocated among the Profit Sharing ContributionsAccounts of the Employer’s Eligible Employees for such Plan Year. An Eligible Employee’s share ofany Profit Sharing Contribution for a Plan Year shall be equal to the Eligible Employee’sCompensation for such Plan Year multiplied by a fraction, the numerator of which is the EligibleEmployee’s Compensation for such Plan Year, and the denominator of which is the total Compensationof all the Employer’s Eligible Employees for such Plan Year. Any election by the Employer’s Boardof Directors shall be evidenced by a resolution adopted by the Board of Directors on or beforeDecember 31 of the Plan Year for which any such Profit Sharing Contribution is to be made.Eligible Employees shall be promptly notified of the amount of any Profit Sharing Contribution madeon their behalf for any Plan Year by any reasonable form of communication that the PlanAdministrator considers convenient. Any such Profit Sharing Contribution may be transferred to theTrustee under the Plan, without interest, at any time prior to the required filing date, includingany extensions of time granted by the Internal Revenue Service, of the Employer’s federal incometax return for that Plan Year and shall be immediately allocated among the Profit SharingContributions Accounts of the Eligible Employees on whose behalf it was made.     4.3 Qualified Nonelective Contributions. In the discretion of the Company, the Employers may make contributions to the Plan that are“qualified nonelective contributions” (within the meaning of Section 401(m)(4)(C) of the Code).Such contributions shall be allocated to Participants who are Non-Highly Compensated Employees inproportion to their Compensation for the applicable Plan Year in such amounts, at such times and asof such dates as shall be determined by the Employers in accordance with
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Treasury RegulationsSection 1.401(k)-2(a)(6). The provisions of this Section 4.3 shall not be effective for Plan Yearsbeginning after December 31, 2007.     4.4 Reinstatement of Forfeited Account Balances; Payment of AdministrativeExpenses.          (a) Each Employer shall contribute to the Plan any amount necessary to reinstate anyCompany Retirement Contributions, Employer Matching Contributions, and Profit Sharing Contributionspreviously forfeited pursuant to Section 6.4 hereof.          (b) To the extent not paid by the Trustee from the Trust Fund, each Employer shallpay its pro rata share of all administrative expenses of the Plan and of all fees and retainers ofthe Plan’s Trustee, consultants, auditors and counsel (who may, but need not, be counsel to theCompany and to the Trustee). All expenses directly relating to the investments of the Trust Fundsuch as taxes, commissions, registration charges, etc. shall be paid by the Trustee from the TrustFund.     4.5 Limitations on Contributions. The limitations imposed by Section 415 of the Code are hereby incorporated by reference. Forpurposes of applying the limitations imposed by Section 415 of the Code, “compensation” as referredto therein, shall mean Section 415 Compensation.     4.6 Limitations on After Tax Contributions and Employer MatchingContributions.          (a) If for any Plan Year beginning before January 1, 2008, the Average ContributionPercentage of Highly Compensated Employees for any Plan Year would exceed the greater of: (i) theAverage Contribution Percentage of Non-Highly Compensated Employees for the preceding Plan Yearmultiplied by one and one-fourth (1.25), or (ii) the lesser of: (A) two percent (2%) plus theAverage Contribution Percentage of Non-Highly Compensated Employees for the preceding Plan Year, or(B) the Average Contribution Percentage of Non-Highly Compensated Employees for the preceding PlanYear multiplied by two (2), the After Tax Contributions and/or Employer Matching Contributions ofthe Highly Compensated Employees shall be reduced as set forth in Sections 4.6(b) and 4.6(c)hereof. Notwithstanding anything herein, the Average Contribution Percentage for Non-HighlyCompensated Employees shall be determined by using the Non-Highly Compensated Employees’Compensation, After Tax Contributions and Employer Matching Contributions made on their behalf forthe current Plan Year rather than the preceding Plan Year, as permitted by, and in accordance with,Section 401(m)(2) of the Code.
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          (b) In order to determine the amount by which Highly Compensated Employees’ AfterTax Contributions and/or Employer Matching Contributions must be reduced and identifying the HighlyCompensated Employees whose After Tax Contribution and/or Employer Matching Contributions shall bereduced, the Plan Administrator shall:               (i) Determine the maximum Average Contribution Percentage for Highly CompensatedEmployees permitted under Section 4.6(a) hereof;               (ii) Identify the Highly Compensated Employees with Average Contribution Percentagesin excess of the maximum percentage amount determined pursuant to the preceding clause (i);               (iii) Determine the dollar amount of the reduction in each such Highly CompensatedEmployee’s After Tax Contributions and/or Employer Matching Contributions that would be required sothat the Average Contribution Percentage of Highly Compensated Employees would not exceed thepercentage limit determined pursuant to the preceding clause (i), with the dollar amount of suchreductions being determined under a process whereby the Average Contribution Percentage of theHighly Compensated Employee(s) with the highest Average Contribution Percentage(s) is reduced sothat it is equal to that of the Highly Compensated Employee(s) with the next highest AverageContribution Percentage and repeating such process until the Average Contribution Percentage ofHighly Compensated Employees does not exceed the limits prescribed by Section 4.6(a) hereof; and               (iv) Cause After Tax Contributions and/or Employer Matching Contributions equal tothe total dollar amount of After Tax Contributions and/or Employer Matching Contributionsdetermined pursuant to the preceding clause (iii) (the “Excess Contributions”) to be refunded inaccordance with Sections 4.6(c) and 4.6(d) hereof to the Highly Compensated Employees identifiedtherein.          (c) After Tax Contributions and/or Employer Matching Contributions of the HighlyCompensated Employee(s) with the highest total amount of After Tax Contributions and/or EmployerMatching Contributions shall be reduced by the amount required to cause the After Tax Contributionsand/or Employer Matching Contributions of such Highly Compensated Employee(s) to be equal to theAfter Tax Contributions and/or Employer Matching Contributions of the Highly CompensatedEmployee(s)
34

 
who have the next highest total amount of After Tax Contributions and/or Employer MatchingContributions; provided, however, if a lesser reduction would equal the amount ofExcess Contributions, the lesser reduction shall be made. The process provided for by thepreceding sentence shall be repeated until the total amount of the reductions equals the amount ofExcess Contributions. For purposes of the foregoing, reductions made to a Highly CompensatedEmployee’s After Tax Contributions and/or Employer Matching Contributions pursuant to this Section4.6(c) shall be made in the following order: (i) After Tax Contributions with respect to which noEmployer Matching Contributions were made; (ii) other After Tax Contributions and related EmployerMatching Contributions; and (iii) other Employer Matching Contributions. If the AverageContribution Percentage of any Employee who is a Highly Compensated Employee for a Plan Year isdetermined taking into consideration employee after tax contributions and/or employer matchingcontributions allocated to his accounts under two (2) or more plans or arrangements described inSection 401(m) of the Code that are maintained by the Group, pursuant to Section 1.13 hereof, andthe employee after tax contributions and/or employer matching contributions of the HighlyCompensated Employee must be reduced to satisfy the requirements of Section 401(m) of the Code,only the employee after-tax contributions and/or employer matching contributions made to the planbeing corrected shall be reduced.          (d) After Tax Contributions and any vested Employer Matching Contributions in excessof the amount permitted under this Section 4.6, along with any gain or loss allocable thereto forthe Plan Year and the Gap Period (as defined in Section 3.6(a) hereof for such Plan Year, shall bedistributed to the Highly Compensated Employees identified in Section 4.6(c) hereof within two andone-half (21/2) months after the close of the relevant Plan Year (or as of such later date as may bedetermined by the Plan Administrator, provided that such later date shall not be later than theclose of the Plan Year following the Plan Year in which the excess amounts were contributed). Theincome allocable for a Plan Year, plus the Gap Period (as defined in Section 3.6(a) hereof) forsuch Plan Year, to a Highly Compensated Employee’s excess After Tax Contributions and/or EmployerMatching Contributions shall be determined by multiplying the total investment income or loss(including dividends, interest, realized gains or losses, and unrealized appreciation ordepreciation) allocated to the Employee’s After Tax Contributions Account and/or Employer MatchingContributions Account for such Plan Year and Gap Period by a fraction:
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               (i) the numerator of which is the amount of excess After Tax Contributions and/orEmployer Matching Contributions allocated to the Employee’s After Tax Contributions Account and/orEmployer Matching Contributions Account for the Plan Year; and               (ii) the denominator of which is the Employee’s total After Tax ContributionsAccount balance and/or Employer Matching Contributions Account balance as of the beginning of thePlan Year increased by the total of the Employee’s After Tax Contributions and/or Employer MatchingContributions for the Plan Year and the Gap Period for such Plan Year.          (e) Nonvested Employer Matching Contributions that are attributable to After TaxContributions that are distributed and any nonvested Employer Matching Contribution that areotherwise reduced pursuant to this Section 4.6 (together with any allocable gain or loss, asdetermined in accordance with the provisions of Section 4.6(d) hereof) shall be forfeited withintwo and one-half (21/2) months after the close of the relevant Plan Year (or as of such later date asmay be determined by the Plan Administrator, provided that such later date shall not be later thanthe close of the Plan Year following the Plan Year in which the excess amounts were contributed)and used to reduce future Employer contributions and shall not be considered a contribution for anypurpose of the Plan, except to the extent required by applicable regulations.          (f) The Plan Administrator at any time, in its sole discretion, and upon notice tothe affected Participants, may unilaterally reduce, on a prospective basis, the maximum percentageof Compensation that Highly Compensated Employees may make as After Tax Contributions to the Plan.          (g) Notwithstanding any other provision of the Plan, effective for Plan Yearsbeginning after December 31, 2007, (i) the Automatic Contribution Arrangement provisions ofSections 2.1(c) and (e), 2.2(b) and (c) and 4.1 hereof are intended to constitute a “qualifiedautomatic contribution arrangement” described in Treasury Regulations Section 1.401(k)-3(j)(i), andsatisfy the Actual Deferral Percentage and Average Contribution Percentage tests of Sections 401(k)and 401(m), respectively, of the Code, and (ii) the Average Contribution Percentage provisions ofthis Section 4.6 shall not be effective.
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**ARTICLE 5****ACCOUNTS**     5.1 Maintenance of Accounts. The Plan Administrator shall maintain for each Participant such Accounts as may be necessaryto reflect the portion of the Participant’s interest in the Trust Fund that is attributable toCompany Retirement Contributions, Before Tax Contributions, After Tax Contributions, EmployerMatching Contributions, Profit Sharing Contributions, Qualified Nonelective Contributions, andRollover Contributions held by the Trustee on the Participant’s behalf.     5.2 Adjustments to Accounts; Statements Provided to Participants. As of eachValuation Date, the Accounts of each Participant shall be adjusted to reflectcontributions, withdrawals, distributions, income earned or accrued, and increase or decrease inthe value of Trust Fund assets since the preceding Valuation Date. Trust Fund earnings or lossesshall be allocated proportionately on the basis of Account balances among the respective Accountsand in a fair and equitable manner as determined by the Plan Administrator. The Plan Administratorshall provide each Participant with a statement of his Account balances under the Plan on aquarterly basis.**ARTICLE 6****VESTING AND FORFEITURES**     6.1 Before Tax Contributions, After Tax Contributions, Qualified NonelectiveContributions and Rollover Accounts. The Before Tax Contributions Account, AfterTax Contributions Account, Qualified Nonelective Contributions Account and Rollover Accountof a Participant shall be fully vested and nonforfeitable at all times.     6.2 Vesting of Company Retirement Contributions Account. In the case of aParticipant who is created with at least one (1) Hour of Service on or afterJanuary 1, 2008, the Participant’s Company Retirement Contributions Account shall be fully vestedand nonforfeitable upon the first to occur of the following: (a) the Participant’s completion of aPeriod of Service of two (2) years (three (3) years for the Plan Year beginning on January 1, 2007,and five (5) years for Plan Years beginning before January 1, 2007), (b) the Participant’sattainment of age sixty-five (65) (which shall be the Plan’s normal retirement age) while anemployee of the Group, (c) the Participant’s death while employed by the Group, or (d) the
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Participant’s total disability while an employee of theGroup, as certified by either the Social Security Administration or the applicable Groupmember’s long-term disability carrier.     6.3 Vesting of Employer Matching Contributions Account and Profit SharingContributions Account.          (a) In the case of a Participant who is credited with at least one (1) Hour ofService on or after January 1, 2008, and who was hired as an Employee prior to such date, theParticipant’s Employer Matching Contributions Account shall vest in accordance with the followingschedule:   If the Period of Service of the The Vested Percentage of EmployerParticipant, in Months, Equals or Matching Contributions Account ShallExceeds Be   Twelve (12) thirty-four (34)Twenty-four (24) one hundred (100)          (b) In the case of a Participant who is credited with at least one (1) Hour ofService on or after January 1, 2008, and who was hired as an Employee prior to such date, theParticipant’s Profit Sharing Contributions Account shall vest in accordance with the followingschedule:     The Vested Percentage of ProfitIf the Period of Service of the Sharing Contributions AccountParticipant, in Months, Is Shall Be   Less than twenty-four (24) zero (0)At least twenty-four (24) one hundred (100)          (c) In the case of a Participant who is hired as an Employee after December 31,2007, the Participant’s Employer Matching Contributions Account and Profit Sharing ContributionsAccount, shall vest in accordance with the following schedule:
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     The Vested Percentage of Employer  Matching Contributions andIf the Period of Service of the Profit Sharing ContributionsParticipant, In Months, Is Accounts Shall Be   Less than twenty-four (24) zero (0)At least twenty-four (24) one hundred (100)          (d) For purposes of Sections 6.3(a) through 6.3(c) hereof, in the case of aParticipant described in Section 1.57(b)(xi) hereof who was an Employee of Temple-Inland Inc.(including any member of the “Temple-Inland Group” (within the meaning of the Employee MattersAgreement)) or Forestar (including any member of the “Forestar Group” (within the meaning of theEmployee Matters Agreement)) on December 28, 2007, and who was continuously employed byTemple-Inland Inc. and/or Forestar for the period beginning on such date and ending on the date ofa transfer of employment from Temple-Inland Inc. or Forestar to an Employer, the Participant shallbe treated as being hired as an Employee before January 1, 2008.          (e) Notwithstanding the foregoing provisions of this Section 6.3, the EmployerMatching Contributions Account, Company Retirement Contributions and Profit Sharing Contributionsof any Participant shall be fully vested and nonforfeitable upon the occurrence of any of theevents described in clauses (c) through (d) of Section 6.2 hereof. If a Participant makes awithdrawal or receives a distribution from any of his Accounts (other than a distribution thatresults in the forfeiture of the nonvested portion of such Account pursuant to Section 6.4 hereof)prior to the date that he has a vested percentage of one hundred percent (100%) with respect tosuch Account, a separate subaccount shall be established for the balance of such Account as of thetime of distribution and the vested portion of such account shall be equal to P(AB+D)-D, where P isthe vested percentage at the relevant time; AB is the account balance at the relevant time; D isthe amount of the distribution; and the relevant time is the time at which, under the Plan, thevested percentage in the Account cannot increase.          (f) Notwithstanding the foregoing provisions of this Section 6.3, in the case of aParticipant who was a participant in a Merged Plan, the vested percentage of such Participant’sCompany Retirement Contributions Account, Employer Matching Contributions Account, Profit SharingContributions Account, and/or Subaccounts hereunder shall not be less than if the vesting scheduleunder
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the Merged Plan applicable to amounts allocated to such Accounts and/or Subaccounts applied tosuch Accounts and/or Subaccounts under this Plan, except as otherwise provided in an Appendixhereto and permitted under Section 411(a)(10) of the Code.     6.4 Forfeitures.          (a) The nonvested portion (if any) of a Participant’s Accounts shall be forfeited asof the earlier of (i) the last day of the Plan Year in which the Participant receives adistribution of his entire vested Account Balance (provided such distribution is made not laterthan the end of the second Plan Year following the Plan Year in which the Participant terminatesemployment with the Group), or (ii) in case of a Participant who does not have a nonforfeitableright to any portion of his Account Balance attributable to Employer contributions (includingelective deferrals, within the meaning of Section 402(g) of the Code), the last day of the PlanYear in which the Participant incurs five (5) consecutive One Year Breaks in Service. If a formeremployee of the Group who has forfeited the nonvested portion of his Accounts later resumesemployment by the Group before he has five (5) consecutive One Year Breaks in Service, that portionof his Accounts that was previously forfeited shall be reinstated (unadjusted for Trust Fundearnings and/or losses subsequent to the date of forfeiture) and he shall receive full credit forhis previous Periods of Service. The source of the reinstated funds shall first be from the thenapplicable forfeitures, and to the extent necessary then from Employer contributions as provided inSection 4.4(a) hereof.          (b) Except to the extent provided in Sections 3.6, 4.5 and 4.6 hereof, forfeituresunder the Plan shall result only from a Participant’s termination of employment with the Groupbefore satisfying the vesting requirements of Sections 6.2 and 6.3 hereof. All forfeitures underthe Plan shall be used for the following purposes: (i) to reinstate forfeited Accounts pursuant toSection 4.4 hereof; (ii) to reduce administrative expenses of the Plan; and (iii) to reduce theamount of any subsequent contributions of the applicable Employer under Article 4 hereof.     6.5 Determination of Period of Service. In determining the Period of Service ofa Participant for purposes of Sections 6.2 and 6.3 hereof, a Participant who has five (5) ormore consecutive One Year Breaks in Service shall receivecredit for his Period of Service prior to such One Year Breaks in Service only if he had anynonforfeitable interest in his Account Balance attributable to Employer contributions (includingelective deferrals within the meaning ofSection 402(g) of the Code) at the time of his separation
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from service with the Group.Notwithstanding the foregoing, in the case of any Participant who has incurred five (5) consecutiveOne Year Breaks in Service, his Period of Service after such One Year Breaks in Service shall notbe taken into account for determining the vested percentage of his Accounts attributable to periodsprior to such five (5) consecutive One Year Breaks in Service.**ARTICLE 7****INVESTMENT OF CONTRIBUTIONS**     7.1 Investment Funds. Contributions made to the Plan shall be invested inaccordance with the provisions of thisArticle 7 (except as provided in Section 10.4 hereof) in such investment funds as the InvestmentCommittee may designate from time-to-time, provided that such investment funds shall include:          (a) A U.S. Treasury Fund, which shall be provided by such investment vehicle as maybe designated by the Investment Committee and          (b) Effective December 1, 2007, one or more Target Retirement Funds, which shall beprovided by such vehicle(s) as may be designated by the Investment Committee.     7.2 Inactive Funds. The Plan shall maintain a Temple-Inland Stock Fund, a Guaranty Stock Fund and a Forestar StockFund. No new contributions may be invested in any of the Stock Funds and no amounts may betransferred into any of the Stock Funds pursuant to Section 7.6 hereof. Effective December 28,2007, any dividends paid on shares of Common Stock allocated to a Participant’s Stock FundSubaccount (including any dividends paid prior to, and pending investment on, such date) shall beinvested in the same Active Funds in which the Participant’s Before Tax Contributions are thenbeing invested. If the Participant is not making Before Tax Contributions to his Before TaxContribution Account at that time, such dividends shall be invested in the Target Retirement Fundappropriate for the Participant’s age. If any amounts remain allocated to any Stock Fund as ofDecember 31, 2009, such amounts shall automatically be transferred, as soon as administrativelypracticable after such date, to and among the same investment funds in which the Participant’sBefore Tax Contributions are then being invested. If the Participant is not making Before TaxContributions to his Before Tax Contribution Account at that time, such amounts shall beautomatically transferred to the Target Retirement Fund appropriate for the Participant’s age.
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     7.3 Loan Fund. The Plan shall maintain a Loan Fund which shall consist of promissory notes evidencing Loansmade pursuant to Article 10 hereof.     7.4 Investment of Employer and Participant Contributions. Contributions under the Plan shall be invested as follows:          (a) Except as provided in Section 7.4(b) hereof, Before Tax Contributions, EmployerMatching Contributions, Profit Sharing Contributions, if any, and Rollover Contributions, if any,shall be invested in accordance with the investment elections made by Participants;provided, however, that in the case of any Participant (including, but not limitedto, an Automatic Contribution Participant) who does not have in effect a valid investment election,such Participant’s Before Tax Contributions, Employer Matching Contributions, Profit SharingContributions, if any, and Rollover Contributions, if any, shall be invested in the TargetRetirement Fund appropriate for the Participant’s age. A Participant may direct, in one percent(1%) increments, that the Participant’s Before Tax Contributions, Employer Matching Contributions,Profit Sharing Contributions, if any, and Rollover Contributions, if any, be invested in any of theActive Funds.          (b) Subject to Section 7.2 hereof, Employer Matching Contributions made prior toDecember 28, 2007, shall be invested entirely in the Stock Funds unless a Participant elects inaccordance with Section 7.6 hereof to transfer all or a portion of such amounts to and among any ofthe Active Funds.          (c) Company Retirement Contributions and Qualified Nonelective Contributions madefor Plan Years beginning before January 1, 2008, shall be invested entirely in the U.S. TreasuryFund, except to the extent a Participant may elect in accordance with Section 7.6 hereof totransfer all or a portion of such amounts to and among any of the Active Funds.          (d) Amounts transferred to this Plan from a Merged Plan shall be invested in theActive Funds in accordance with rules specified by the Plan Administrator.          (e) Subaccounts shall be established for each Participant under each Fund to whichcontributions on his behalf have been allocated.     7.5 Change in Investment Elections. A Participant may change his investment election by giving prior Notice to the PlanAdministrator in accordance with rules prescribed by the Plan Administrator.
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     7.6 Change in Existing Investments.          (a) In accordance with rules prescribed by the Plan Administrator, a Participant maytransfer all or any portion (in one percent (1%) increments) of his Before Tax ContributionsAccount, After Tax Contributions Account, Employer Matching Contributions Account, CompanyRetirement Contributions Account, Profit Sharing Contributions Account, Qualified NonelectiveContributions Account, and Rollover Account invested in any of the Funds to any of the ActiveFunds.          (b) Transfers made pursuant to this Section 7.6 will be effected as of (a) the closeof business on the Valuation Date that the transfer instruction is received by the Trustee if theinstruction is received on or before the Cut-Off Time, or (b) as of the close of business on thenext Valuation Date, if the instruction is received after the Cut-Off Time or on a day that is nota Valuation Date. Notwithstanding the foregoing, the Plan Administrator or the Trustee may, in itssole discretion and either with or without prior notice to Participants, suspend, delay, limit orrestrict the execution of Participant transfer elections for some or all Participants for suchperiods as the Plan Administrator or the Trustee may determine in the event of electronic or othercommunications failures or for purposes of facilitating the merger of a Merged Plan into this Plan.For purposes of this Section 7.6, “Cut-Off Time” means the time prescribed by the PlanAdministrator or the Trustee.     7.7 Voting of Stock Fund Shares (for Periods Prior to January 1, 2010).Before each annual or special meeting of the shareholders of Temple-Inland Inc., the Companyor Forestar, each Participant with a Temple-Inland Stock Fund Subaccount, Guaranty Stock FundSubaccount or Forestar Stock Fund Subaccount shall be furnished a copy of the applicable proxysolicitation material for such meeting, together with a request for his confidential instructionsto the Trustee as to how the shares of Common Stock held in the respective Stock Fund then creditedto his respective Stock Fund Subaccount (excluding therefrom any fractional shares) as of the mostrecent practicable Valuation Date prior to such record date for which information is availableshould be voted. On each matter, the Trustee shall vote:          (a) shares of Common Stock held in the respective Stock Fund for which it hasreceived timely voting instructions in accordance with such instructions; and          (b) shares of Common Stock held in the respective Stock Fund for which it has notreceived timely voting instructions from Participants, or which are pending allocation toParticipants’
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Accounts, in the same proportion as it votes those shares of Common Stock held in therespective Stock Fund for which it has received timely voting instructions from Participants onsuch matter, unless the Trustee determines that doing so would be inconsistent with Title I ofERISA.     7.8 Tender or Exchange Offers (for Periods Prior to January 1, 2010). EachParticipant shall have the right, to the extent of shares of Common Stock allocated tohis respective Stock Fund Subaccount as of the most recent practicable Valuation Date prior to suchrecord date for which information is available, to direct the Trustee in writing as to the mannerin which to respond to a tender or exchange offer with respect to such shares. The Trustee shallutilize its best efforts to timely distribute or to cause to be distributed to each Participantsuch information as will be distributed to shareholders of Temple-Inland Inc., the Company orForestar in connection with any such tender or exchange offer. Upon timely receipt of such writtendirections from the Participant, the Trustee shall respond as directed with respect to the sharesof Common Stock held in the respective Stock Fund representing all, but not less than all, of theshares over which that Participant has the right of direction. If the Trustee shall not havereceived timely written directions from any Participant as to the manner in which to respond tosuch a tender or exchange offer, the Trustee shall not tender or exchange any such shares withrespect to which that Participant has the right of direction. Shares of Common Stock held in aStock Fund by the Trustee pending allocation to Participants’ Accounts shall be tendered orexchanged by the Trustee in the same proportion as are tendered or exchanged those shares withrespect to which Participants have the right of direction.     7.9 Confidentiality (for Periods Prior to January 1, 2010). Informationrelating to the purchase, holding, and sale of Common Stock, and the directionsreceived by the Trustee from Participants pursuant to Sections 7.7 and 7.8 hereof shall be held bythe Trustee in accordance with procedures developed by the Plan Administrator that are designed tosafeguard the confidentiality of such information (except to the extent provided therein). TheInvestment Committee shall be responsible for ensuring that the procedures provided for by Sections 7.7 and 7.8hereof and this Section 7.9 are sufficient to safeguard the confidentiality of such Participantinformation, that such procedures are being followed, and that an independent fiduciary isappointed to carry out any activities which the Investment Committee determines involve apotential for undue employer influence upon Participants and beneficiaries with respect to thedirect or indirect exercise of shareholder rights.
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**ARTICLE 8**