Document:

exv10w1

 

	 	 	 	 	 

Exhibit 10.1

FORESTAR REAL ESTATE GROUP INC.

NONQUALIFIED STOCK OPTION AGREEMENT

     This Agreement (the “Option Agreement”) is entered into between FORESTAR REAL ESTATE GROUP
INC., a Delaware corporation (“Forestar”), and Participant, and is an integral and inseparable term
of Participant’s employment as a salaried employee or other service recipient of Forestar or one of
its Affiliates. In consideration of the mutual covenants hereinafter set forth and for other good
and valuable consideration, Forestar and the Participant hereby agree as follows:

	1.	 	Grant of Option. Pursuant to, and subject to, the terms and conditions set forth in
the Forestar Real Estate Group Inc. 2007 Stock Incentive Plan, as amended from time to time
(the “Plan”), the Stock Option Terms and Conditions, and this Option Agreement (collectively,
referred to as the “Plan Documents”), which are herein incorporated by reference, Forestar
hereby grants to the Participant, as a matter of separate agreement and not in lieu of salary
or any other compensation for services, the Option to purchase all or any part of the above
stated number of shares of the Common Stock at the above stated Exercise Price. The Option is
a Nonqualified Stock Option and is not intended to qualify as an incentive stock option under
Section 422A of the Code.
	 
	2.	 	Governing Documents. This Award hereunder is subject to all the restrictions, terms
and provisions of the Plan Documents to the terms of which the Participant hereby agrees.
Capitalized terms used in this Option Agreement that are not defined herein shall have the
meaning set forth in the Plan or Terms and Conditions.
	 
	3.	 	Exercise of Option. Provided that Participant does not experience a Termination of
Service with Forestar or an Affiliate through each Vesting Date as set forth above, the Option
shall vest and become exercisable with respect to the number of Shares under the Option as
provided in the Vesting Schedule above . The Option may be exercised in whole, at any time,
or in part, from time to time, as to all or any of the Shares as to which the Option is then
exercisable (provided that the Option may not be exercised as to less than the lesser of 100
shares or the number of shares as to which the Option is then exercisable). Except as
otherwise provided in the Plan Documents, the Option shall not be exercisable following a
Termination of Service with Forestar or one of its Affiliates. The Option may be exercised
only upon notice to Forestar and payment of the Exercise Price and tax withholding in the
manner set forth in the Plan Documents.
	 
	4.	 	Term of the Option. The term of the Option shall commence on the Date of Grant and
shall expire on the Expiration Date stated above or such earlier date as is prescribed in the
Plan Documents. In no event shall the Option be exercisable following the Expiration Date.
	 
	5.	 	No Stockholder Rights. The Participant shall have none of the rights of a
stockholder with respect to the shares of Common Stock subject to the Option until such shares
shall have been transferred to the Participant upon the exercise of the Option.
	 
	6.	 	Arbitration. The Participant and Forestar agree that this Option Agreement arises
out of, and is inseparable from, the Participant’s employment or other service with Forestar
or any of its Affiliates. The Participant and Forestar further agree to final and binding
arbitration as the exclusive forum for resolution of any dispute of any nature whatsoever,
whether initiated by the Participant or Forestar, arising out of, related to, or connected
with Participant’s employment or other service with, or termination by, Forestar or any of
its Affiliates. This includes, without limitation, any dispute arising out of the
application, interpretation, enforcement, or claimed breach of this Option Agreement. The
only exceptions to the scope of this arbitration provision are claims arising under any
written

	 	 	 
	Nonqualified Stock Option Agreement
	 	-1-

 

 

	 	 	agreement between the Participant and Forestar or its Affiliate that expressly
provides that such
claims are not subject to binding arbitration. Arbitration under this provision shall be
conducted under the employment dispute rules and procedures of either the American
Arbitration Association or of JAMS/Endispute, according to the preference of the party
initiating such arbitration. Appeal from, or confirmation of, any arbitration award under
this paragraph may be made to any court of competent jurisdiction under standards
applicable to appeal or confirmation of arbitration awards under the Federal Arbitration
Act. This arbitration provision and related proceedings shall be subject to and governed
by the Federal Arbitration Act.
	 
	7.	 	Section 409A Acknowledgement and Release. Participant understands that the Award
under this Option Agreement is potentially subject to Section 409A of the Code (“409A”) and
that if the Plan and this Option Agreement do not satisfy an exception to 409A or do not
comply with the requirements of 409A and the applicable guidance thereunder, then Participant
may incur adverse tax consequences under 409A. Participant acknowledges and agrees that (a)
Participant is solely responsible for all obligations arising as a result of the tax
consequences associated with this Award including, without limitation, any taxes, interest or
penalties associated with 409A, (b) Participant is not relying upon any written or oral
statement or representation by Forestar or any Affiliate thereof, or any of their respective
employees, directors, officers, attorneys or agents (collectively, the “Company Parties”)
regarding the tax effects associated with the execution of this Option Agreement and the
grant, vesting, and/or exercise of this Option under this Option Agreement and the Plan, and
(c) in deciding to enter into this Option Agreement, Participant is relying on his or her own
judgment and the judgment of the professionals of his or her choice with whom Participant has
consulted. Participant hereby releases, acquits and forever discharges the Company Parties
from all actions, causes of actions, suits, debts, obligations, liabilities, claims, damages,
losses, costs and expenses of any nature whatsoever, known or unknown, on account of, arising
out of, or in any way related to the tax effects associated with the execution of this Option
Agreement and any grant, vesting or exercise of an Option under the Plan and this Option
Agreement.
	 
	8.	 	Miscellaneous. The Committee may from time to time modify or amend this Option
Agreement in accordance with the provisions of the Plan Documents. This Option Agreement
shall be binding upon and inure to the benefit of Forestar and its successors and assigns and
shall be binding upon and inure to the benefit of the Participant and his or her legatees,
distributees and personal representatives. This Option Agreement may be executed by Forestar
and the Participant by means of electronic or digital signatures, which shall have the same
force and effect as manual signatures. Participant agrees that clicking “I Accept” in
connection with or response to any electronic communication or other medium has the effect of
affixing the Participant’s electronic signature to this Option Agreement. Participant
acknowledges and expressly agrees that the Participant has read the Option Agreement and the
Plan Documents and agrees to their terms. This Option Agreement shall be governed by and
construed in accord with federal law, where applicable, and otherwise with the laws of the
State of Texas.

	 	 	 
	Nonqualified Stock Option Agreement
	 	-2-

 

 

FORESTAR REAL ESTATE GROUP INC.

2007 STOCK INCENTIVE PLAN

STOCK OPTION TERMS AND CONDITIONS

	1.	 	Definitions: For purposes of this Forestar Real Estate Group Inc. Stock Option Terms
and Conditions (the “Terms and Conditions”), the Forestar Real Estate Group Inc. 2007 Stock
Incentive Plan (the “Plan”), and the Agreement that evidences the grant of an Option under the
Plan (the “Option Agreement”) to which this Terms and Conditions apply, the following terms
shall have the meanings set forth below:

	 
	 	a.	 	Cause: means “cause” as defined in Participant’s employment or service
agreement or in the absence of such an agreement or such a definition, “Cause” will
mean a determination by the Committee that Participant (i) has engaged in personal
dishonesty, willful violation of any law, rule, or regulation (other than minor traffic
violations or similar offenses), or breach of fiduciary duty involving personal profit,
(ii) is unable to satisfactorily perform or has failed to satisfactorily perform
Participant’s duties and responsibilities for Forestar or any Affiliate, (iii) has been
convicted of, or plead nolo contendere to, any felony or a crime involving moral
turpitude, (iv) has engaged in negligence or willful misconduct in the performance of
his or her duties, including but not limited to willfully refusing without proper legal
reason to perform Participant’s duties and responsibilities, (v) has materially
breached any corporate policy or code of conduct established by Forestar or any
Affiliate as such policies or codes may be adopted from time to time, (vi) has violated
the terms of any confidentiality, nondisclosure, intellectual property,
nonsolicitation, noncompetition, proprietary information and inventions, or any other
agreement between Participant and the Forestar related to Participant’s Service, or
(vii) has engaged in conduct that is likely to have a deleterious effect on Forestar or
any Affiliate or their legitimate business interests, including but not limited to
their goodwill and public image.
	 
	 	b.	 	Change in Control:

	 	i.	 	A change in control shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:

	 	(1)	 	any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of Forestar (not including in the
securities beneficially owned by such Person any securities acquired
directly from Forestar or its Affiliates) representing 20% or more of
the combined voting power of Forestar’s then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in connection
with a transaction described in clauses (a), (b) or (c) of paragraph
(3) below;
	 
	 	(2)	 	within any twenty-four (24) month period, the
following individuals cease for any reason to constitute a majority of
the number of directors then serving on the Board: individuals who, on
the Effective Date, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection
with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of Forestar) whose appointment or election by the Board or
nomination for election by Forestar’s shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on the date hereof or
whose appointment, election or nomination for election was previously
so approved or recommended;

	 	 	 
	Nonqualified Stock Option Agreement
	 	-3-

 

 

	 	(3)	 	there is consummated a merger, consolidation of
Forestar or any direct or indirect subsidiary of Forestar with any
other corporation or any recapitalization of Forestar (for purposes of
this paragraph (III), a “Business Event”) unless, immediately following
such Business Event (a) the directors of Forestar immediately prior to
such Business Event continue to constitute at least a majority of the
board of directors of Forestar, the surviving entity or any parent
thereof, (b) the voting securities of Forestar outstanding immediately
prior to such Business Event continue to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of Forestar or any subsidiary of Forestar, at
least 60% of the combined voting power of the securities of Forestar or
such surviving entity or any parent thereof outstanding immediately
after such Business Event, and (c) in the event of a recapitalization,
no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of Forestar or such surviving entity or any parent
thereof (not including in the securities Beneficially Owned by such
Person any securities acquired directly from Forestar or its
Affiliates) representing 20% or more of the combined voting power of
the then outstanding securities of Forestar or such surviving entity or
any parent thereof (except to the extent such ownership existed prior
to the Business Event);
	 
	 	(4)	 	the shareholders of Forestar approve a plan of
complete liquidation or dissolution of Forestar;
	 
	 	(5)	 	there is consummated an agreement for the sale,
disposition or long-term lease by Forestar of substantially all of
Forestar’s assets, other than (a) such a sale, disposition or lease to
an entity, at least 50% of the combined voting power of the voting
securities of which are owned by shareholders of Forestar in
substantially the same proportions as their ownership of Forestar
immediately prior to such sale or disposition or (b) the distribution
directly to Forestar’s shareholders (in one distribution or a series of
related distributions) of all of the stock of one or more subsidiaries
of Forestar that represent substantially all of Forestar’s assets; or
	 
	 	(6)	 	any other event that the Board, in its sole
discretion, determines to be a Change in Control for purposes of this
Agreement.
	 
	 	 	 	Notwithstanding the foregoing, a “Change in Control” under clauses
(1) through (5) above shall not be deemed to have occurred by virtue
of the consummation of any transaction or series of integrated
transactions immediately following which the record holders of the
common stock of Forestar immediately prior to such transaction or
series of transactions continue to have substantially the same
proportionate ownership in one or more entities which, singly or
together, immediately following such transaction or series of
transactions, own all or substantially all of the assets of Forestar
as constituted immediately prior to such transaction or series of
transactions.

	 	ii.	 	For purposes of this definition of “Change in Control”:

	 	(1)	 	“Affiliate” shall have the meaning set forth in
Rule 12b-2 promulgated under Section 12 of the Exchange Act.
	 
	 	(2)	 	“Beneficial Owner” shall have the meaning set
forth in Rule 13d-3 under the Exchange Act.

	 	 	 
	Nonqualified Stock Option Agreement
	 	-4-

 

 

	 	(3)	 	“Effective Date” means the Date of Grant of the
applicable Option.
	 
	 	(4)	 	“Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended from time to time.
	 
	 	(5)	 	“Person” shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (i)
Forestar or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of Forestar or any of
its Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of Forestar in
substantially the same proportions as their ownership of stock of
Forestar.

	 	c.	 	Disability: means Termination of Service due to a Participant’s
becoming disabled (within the meaning of Section 409A of the Code).
	 
	 	d.	 	Expiration Date: means the date set forth in the Option Agreement upon
which upon which the Option expires and is no longer exercisable.
	 
	 	e.	 	Forestar: means Forestar Real Estate Group Inc. and any successor.
	 
	 	f.	 	Group: means Forestar and its Affiliates.
	 
	 	g.	 	Plan: means the Forestar Real Estate Group Inc. 2007 Stock Incentive
Plan.
	 
	 	h.	 	Plan Documents: means the Plan, the Terms and Conditions, and the
Option Agreement.
	 
	 	i.	 	Retirement: means a Participant’s voluntary Termination of Service
after either (i) attaining age 65 or (ii) attaining age 55 and completing at least five
years of service with Forestar or any of its Affiliates.
	 
	 	j.	 	Termination of Service: means the Participant’s termination of
employment or other service with the Group for any reason.
	 
	 	k.	 	Vesting Schedule: means the schedule set forth in the Option Agreement
which provides the dates or events upon which the Shares under the Option (or portion
thereof) vest and become exercisable.
	 
	 	      Capitalized terms used herein but not defined herein shall have the meaning assigned to such
terms in the Plan.

	2.	 	Option Agreement; Execution and Acceptance: The grant of an Option by Forestar to an
Participant shall be evidenced by, and subject to the terms and conditions of, an Option
Agreement. The Option Agreement shall identify the Participant who has been granted the
Option, the Date of Grant, the number of shares subject to purchase under the Option, the
Exercise Price per Share of the Shares subject to the Option, and dates upon which shares
under the Option become exercisable, and the Expiration Date. An Option shall be immediately
cancelled and expire if the applicable Option Agreement is not executed (in such manner as may
be specified by Forestar) by a Participant (or his or her agent or attorney) and delivered to
Forestar (in such manner as may be specified by Forestar) within 60 days after the Date of
Grant of the Option (unless an extension of such deadline for extenuating circumstances is
approved by a Vice President of Forestar).

	 	 	 
	Nonqualified Stock Option Agreement
	 	-5-

 

 

	3.	 	Exercise of Options:

	 	a.	 	Options shall only be exercisable at such times as provided in the Plan
Documents and only to the extent that the participant is vested in the Shares subject
to the Option pursuant to the Vesting Schedule set forth in the Option Agreement.
	 
	 	b.	 	Forestar shall not be required to deliver certificates or instruments for
shares with respect to which an Option is exercised until the exercise price for the
shares of Common Stock being purchased has been paid in full.
	 
	 	c.	 	In order to exercise an Option, notice must be provided to Forestar in such
form as may be specified by Forestar. Such notice shall state that the Participant
elects to exercise a specified Option, the number of shares of Common Stock in respect
of which it is being exercised, and the manner of payment of the exercise price of the
Option.
	 
	 	d.	 	The notice shall be accompanied by payment of the full Exercise Price of the
Option with respect to the number of shares being purchased. The Exercise Price shall
be paid in cash, by irrevocable instructions to a broker to deliver promptly to
Forestar cash equal to the Exercise Price of the Option, or unless otherwise provided
in the applicable Option Agreement, in whole shares of Common Stock already owned by
the Participant [for a period of at least six months], or partly in cash and partly in
such Common Stock. Cash payments shall be made by certified or bank cashier’s check,
or by the wire transfer of immediately available funds, in each case payable to the
order of Forestar (or such other person or entity as may be specified by Forestar).
Payments of the Exercise Price of an Option that are made in the form of Common Stock
(which shall be valued at Fair Market Value) may be made by (i) delivery of stock
certificates in negotiable form [with an issue date at least six months prior to the
date of exercise], or (ii) unless otherwise determined by the Committee, delivery of
the Participant’s representation that on the date of exercise he or she owns the
requisite number of shares [which he or she has owned for a period of at least six
months] and, unless such shares are registered in the Participant’s name as verified by
Forestar’s transfer agent’s records, a representation executed by the Participant’s
brokerage firm or other entity in whose name such shares are registered that on the
date of exercise the Participant beneficially owns the requisite number of shares [and
has owned such shares for a period of at least six months] (“Certificateless
Exercise”). Delivery of such a representation pursuant to a Certificateless Exercise
shall be treated as the delivery of the specified number of shares of Common Stock;
provided, however, that the number of shares issued to the Participant upon exercise of
the Stock Option shall be reduced by the number of shares specified in the
representation. In addition, to the extent permitted by the Committee in its sole
discretion, a Participant may satisfy payment of the Exercise Price by forfeiting a
number of Shares subject to and outstanding under the Option that, based on the Fair
Market Value on the date of the exercise, are equal in value to the Exercise Price.
	 
	 	e.	 	Notwithstanding as otherwise provided in the Plan Documents, in no event may an
Option be exercised after the Expiration Date.
	 
	 	f.	 	Except as provided in paragraph 5, a Participant may not exercise his Option
unless such Participant is an Participant at the time notice is delivered to Forestar
in accordance with paragraphs 3(c) and (d) above.
	 
	 	g.	 	The exercise of the Option shall be further subject to paragraph 12 herein.

	4.	 	Withholding: Forestar’s obligation to deliver shares of Common Stock upon the
exercise of an Option shall be subject to the satisfaction of applicable federal, state and
local tax withholding requirements. Unless otherwise prohibited by the Committee, and in
accordance with rules prescribed by the Committee, each Participant may satisfy any such
withholding tax obligation by any of the following means or by a combination of such means:
(a) tendering a cash payment; (b)

	 	 	 
	Nonqualified Stock Option Agreement
	 	-6-

 

 

	 	 	authorizing Forestar to withhold shares of Common Stock from the shares otherwise issuable
to the Participant as the result of the exercise of an Option, or (c) delivering to Forestar
unencumbered shares of Common Stock already owned by the Participant [for a period of at
least six months]. Shares of Common Stock that are withheld or delivered to satisfy
applicable withholding taxes shall be valued at their Fair Market Value on the date the
withholding tax obligation arises. Only the required statutory minimum tax may be withheld;
excess tax withholding is not allowed.
	 
	5.	 	Termination of Service: In the event of the Termination of Service of a Participant
to whom an Option has been granted, the Option may, subject to the provisions of paragraph 3
hereof, only be exercised following such Termination of Service as follows:

	 	 	 	 	 
	Termination	 	Vested Option Exercise Period	 	Treatment of Unvested Shares
	Death

	 	12 months
	 	Immediately Vest
	Disability

	 	36 months
	 	Immediately Vest
	Retirement

	 	Until Expiration of Option
	 	Immediately Vest
	For Cause

	 	None—All unexercised Shares
are immediately forfeited.
	 	Forfeited
	Other

	 	3 months
	 	Forfeited

	 	 	Options granted under the Plan shall not be affected by any change of employment so long as
the Participant continues to be an employee of the Group. An Option Agreement may contain
such provisions as the Committee may approve with respect to the effect of approved leaves
of absence for employees.
	 
	6.	 	Adjustments upon Changes in Capitalization: Notwithstanding any other provisions of
the Plan, in the event of any change in the outstanding Common Stock by reason of any stock
dividend, split-up, spin-off, recapitalization, reclassification, combination or exchange of
shares, merger, consolidation or liquidation and the like, the Committee shall provide for a
substitution for or adjustment in (i) the number and class of shares subject to outstanding
Options, and (ii) the exercise prices of outstanding Options. The Committee ‘s determinations
with regard to the adjustments or substitutions provided for by this paragraph shall be
conclusive. The Committee may at any time, in its sole discretion, make such amendments to
the terms of Option Agreements as it deems necessary or appropriate to reflect any
adjustments or substitutions made under the Plan or pursuant to this paragraph.
	 
	7.	 	Change in Control: Notwithstanding any contrary waiting period, installment period
or other limitation or restriction in any Option Agreement or in the Plan, the Shares under
each outstanding Option granted under the Plan shall immediately vest, and the Option shall
become exercisable in full, for the aggregate number of unexercised Shares covered thereby, in
the event of a Change in Control. Any provision of the Plan Documents or any Option Agreement
to the contrary notwithstanding, in the event of a merger or consolidation to which Forestar
is a party, the Committee shall take such actions, if any, as it deems necessary or
appropriate to prevent the enlargement or diminishment of Participants’ rights under any
Option, and may, in its discretion, cause any Option to be canceled in consideration of a
payment equal to the product of (a) the number of shares of Common Stock that the Option
covers (and has not previously been exercised) and (b) the excess, if any, of the Fair Market
Value of a share of Common Stock as of the date of cancellation over the Exercise Price of the
Option.
	 
	8.	 	Nonalienation of Benefits: Except as required by applicable law, no right or benefit
under the Plan or any Option shall be subject to anticipation, alienation, sale, assignment,
hypothecation, pledge, exchange, transfer, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, hypothecate, transfer, pledge, exchange, transfer,
encumber or charge the same shall be void. No
right or benefit under the Plan or any Option shall in any manner be liable for or subject
to the debts,

	 	 	 
	Nonqualified Stock Option Agreement
	 	-7-

 

 

	 	 	contracts, liabilities or torts of the person entitled to such benefit. If
any Participant shall become bankrupt or attempt to anticipate, alienate, sell, assign,
hypothecate, pledge, exchange, transfer, encumber or charge any right or benefit under the
Plan or any Option, then such right or benefit shall, in the discretion of the Committee,
cease and terminate, and in such event, the Committee in its discretion may hold or apply
the same or any part thereof for the benefit of the Participant or his beneficiary, spouse,
children or other dependents, or any of them, in such manner and in such proportion as the
Committee may deem proper.
	 
	9.	 	No Right to Continued Employment; No Additional Rights: Nothing contained in the
Plan or in any Option Agreement shall confer on any Participant any right to continue in the
employ or service of Forestar or any of its Affiliates or interfere in any way with the right
of Forestar or an Affiliate to terminate the employment or service of a Participant at any
time, with or without cause, notwithstanding the possibility that the number of shares of
Common Stock purchasable by such person under his or her Option (or Options) may thereby be
reduced or eliminated. Nothing in the Plan Documents or any Option Agreement shall be
construed to give any employee or other service provider of Forestar or any Affiliate any
right to receive an award of Options or as evidence of any agreement or understanding, express
or implied, that Forestar or any Affiliate will employ or retain the Participant in any
particular position or at any particular rate of remuneration, or for any particular period of
time.
	 
	10.	 	Exclusion from Pension, Profit-Sharing and Other Benefit Computations: By acceptance
of an Option award under the Plan, a Participant shall be deemed to have agreed that any
compensation arising from the Option constitutes special incentive compensation that shall not
be taken into account as “salary”, “pay”, “compensation” or “bonus” in determining the amount
of any payment under any pension, retirement or profit-sharing plan of Forestar or any
Affiliate. In addition, each Participant shall be deemed to have agreed that neither the
award, vesting, nor exercise of an Option shall be taken into account in determining the
amount of any life insurance coverage or short or long-term disability coverage provided by
Forestar or any Affiliate.
	 
	11.	 	Non-Transferability of Option. Notwithstanding any provision of the Plan Documents
to the contrary, an Option may be exercised, during the lifetime of Participant, only by
Participant or Participant’s guardian or legal representative and may not be assigned or
transferred in any manner except by will or by the laws of descent and distribution.
	 
	12.	 	Compliance with Securities Law. Notwithstanding any provision of the Plan Documents
to the contrary, the grant of the Option and the issuance of Common Stock will be subject to
compliance with all applicable requirements of federal, state, or foreign law with respect to
such securities and with the requirements of any stock exchange or market system upon which
the Common Stock may then be listed. The Option may not be exercised if the issuance of
shares of Common Stock upon exercise would constitute a violation of any applicable federal,
state, or foreign securities laws or other law or regulations or the requirements of any stock
exchange or market system upon which the Common Stock may then be listed. In addition, the
Option may not be exercised unless (1) a registration statement under the Act is at the time
of exercise of the Option in effect with respect to the shares issuable upon exercise of the
Option or (2) in the opinion of legal counsel to Forestar, the shares issuable upon exercise
of the Option may be issued in accordance with the terms of an applicable exemption from the
registration requirements of the Act. THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE
EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE PARTICIPANT MAY NOT
BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS OTHERWISE EXERCISABLE.
The inability of Forestar to obtain from any regulatory body having jurisdiction the
authority, if any, deemed by Forestar’s legal counsel to be necessary to the lawful issuance
and sale of any shares subject to the Option will relieve Forestar of any liability in respect
of the failure to issue or sell such shares as to which such requisite authority has not been
obtained. As a condition to the exercise of the Option, Forestar may require the Participant
to satisfy any qualifications that may be necessary or appropriate to evidence compliance with
any applicable law or regulation and to make
any representation or warranty with respect to such compliance as may be requested by
Forestar.

	 	 	 
	Nonqualified Stock Option Agreement
	 	-8-

 

 

	 	 	Notwithstanding as otherwise provided in the Plan Documents, if the exercise of
the Option is prevented by the provisions of this paragraph, the Option will remain
exercisable until 30 days after the date the Participant is notified by Forestar that the
Option is exercisable, but in any event no later than the Expiration Date. Forestar makes no
representation as to the tax consequences of any such delayed exercise. The Participant
should consult with the Participant’s own tax advisor as to the tax consequences of any such
delayed exercise.
	 
	13.	 	Rights as Shareholder. Unless and until a certificate or certificates representing
such Shares will have been issued by Forestar to Participant following the exercise of an
Option, Participant (or any other person permitted to exercise this Option pursuant to the
terms of the Plan Documents) will not be or have any of the rights or privileges of a
shareholder of Forestar with respect to Shares acquirable upon an exercise of this Option.
	 
	14.	 	Applicability: These Terms and Conditions shall apply to all Options to which the
Committee designates it as applying, and the Committee may designate it as applying to an
Option in whole or in part in its discretion.
	 
	15.	 	Plan Controls: In the event of any conflict between the Plan and the terms of an
Option Agreement or the Terms and Conditions, the Plan shall govern.

	 	 	 
	Nonqualified Stock Option Agreement
	 	-9-exv10w2

 

Exhibit 10.2

FORESTAR REAL ESTATE GROUP INC.

RESTRICTED STOCK AGREEMENT

     This Restricted Stock Agreement is entered into between FORESTAR REAL ESTATE GROUP INC., a
Delaware corporation (“Forestar”) and Participant, and is an integral and inseparable term of
Participant’s employment or other service as an employee, non-employee director, or other service
provider of Forestar or an Affiliate. In consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, Forestar and Participant hereby agree as
follows:

	 	1.	 	Grant of Restricted Stock. Subject to the restrictions, terms and conditions of this
Agreement and the Plan Documents (as hereafter defined), Forestar hereby awards to Participant
the number of shares of Restricted Stock stated above (the “Restricted Stock”). The
Restricted Stock may, in the discretion of Forestar, be issued in the form or in the form of a
certificate held by Forestar or Forestar’s transfer agent in escrow. Any certificate relating
to the Restricted Stock shall be registered in the name of Participant and shall bear an
appropriate legend describing the terms, conditions, and restrictions applicable to the
Restricted Stock. Participant shall have no right to delivery of a certificate relating to
Restricted Stock until the applicable Forfeiture Restrictions has lapsed, and the delivery of
such certificate shall be in accordance with the procedures established by Forestar in its
discretion.
	 
	 	2.	 	Governing Documents. This Agreement and the Restricted Stock awarded hereby are
subject to all the restrictions, terms and provisions of the Forestar Real Estate Group Inc.
2008 Incentive Plan (the “Plan”) and the Forestar Standard Terms and Conditions for Restricted
Stock (the “Standard Terms and Conditions”; together with the Plan, the “Plan Documents”)
which are herein incorporated by reference and to the terms of which Participant hereby
agrees. Capitalized terms used in this Agreement that are not defined herein shall have the
meaning set forth in the Plan Documents.
	 
	 	3.	 	Dividend, Voting and Other Rights. Subject to the Forfeiture Restrictions and
issuance of a certificate relating to the Restricted Stock, Participant will have all of the
rights of a shareholder with respect to the Restricted Stock covered by this Agreement,
including the right to vote the Restricted Stock and receive any dividends that may be paid
thereon, provided that in the event that a cash dividend becomes payable with respect to the
Common Stock, Participant shall be entitled to such dividend with respect to the Restricted
Stock only if the Dividend Payment Performance Goal set forth in Schedule A hereto is
satisfied. In the event that such Performance Goal is not satisfied, the amount of the
dividend payable with respect to the Restricted Stock shall be paid to Forestar. Any
additional Common Stock or property that Participant may become entitled to receive pursuant
to a stock split, stock dividend, a merger, reorganization or the like shall be subject to the
same restrictions as the Restricted Stock covered by this Agreement.
	 
	 	4.	 	Vesting Requirements. Except as otherwise provided in the Plan Documents and subject
to the conditions of paragraphs 5 and 6 hereof: (a) Restricted Stock covered hereby shall vest
as of the occurrence of a Vesting Date, provided that Participant has not incurred a
Separation From Service prior to the Vesting Date, (b) none of the Restricted Stock shall vest
upon the Scheduled Vesting Date unless the Performance Goal set forth in Exhibit A hereto has
been achieved, and (c) any Restricted Stock that has not vested on or prior to the earlier of
Participant’s Separation From Service or the Scheduled Vesting Date shall be forfeited, and
Participant shall not thereafter have any rights with respect to the Restricted Stock so
forfeited.

	 	 	 
	Restricted Stock Agreement
	 	-1-

 

 

	 	5.	 	Committee Certification of Performance Goals. Notwithstanding anything herein to the
contrary, in no event shall any Restricted Stock vest as of the Scheduled Vesting Date or any
cash dividend be paid to Participant unless the Committee has certified that the applicable
Performance Goal set forth in Exhibit A hereto has been achieved. The Restricted Stock shall
be forfeited to the Company if the applicable Performance Goal has not been satisfied as of
the Scheduled Vesting Date.
	 
	 	6.	 	Lifting of Restrictions. Upon the occurrence of a Vesting Date, the Forfeiture
Restrictions applicable to the Restricted Stock, pursuant to the terms of this Agreement,
shall lapse.
	 
	 	7.	 	Arbitration. Participant and Forestar agree that this Agreement arises out of, and
is inseparable from, Participant’s employment or other service with Forestar or any of its
Affiliates. Participant and Forestar further agree to final and binding arbitration as the
exclusive forum for resolution of any dispute of any nature whatsoever, whether initiated by
Participant or Forestar, arising out of, related to, or connected with Participant’s
employment or other service with, or termination by, Forestar or any of its Affiliates. This
includes, without limitation, any dispute arising out of the application, interpretation,
enforcement, or claimed breach of this Agreement. The only exceptions to the scope of this
arbitration provision are claims arising under any written agreement between Participant and
Forestar or its Affiliate that expressly provides that such claims are not subject to binding
arbitration. Arbitration under this provision shall be conducted under the employment dispute
rules and procedures of either the American Arbitration Association or of JAMS/Endispute,
according to the preference of the party initiating such arbitration. Appeal from, or
confirmation of, any arbitration award under this paragraph may be made to any court of
competent jurisdiction under standards applicable to appeal or confirmation of arbitration
awards under the Federal Arbitration Act. This arbitration provision and related proceedings
shall be subject to and governed by the Federal Arbitration Act. 
	 
	 	8.	 	Election Under Section 83(b) of the Code. Participant understands that Participant
should consult with Participant’s tax advisor regarding the advisability of filing with the
Internal Revenue Service an election under section 83(b) of the Code with respect to the
Restricted Stock so acquired by Participant for which the Forfeiture Restrictions have not
lapsed. This election must be filed no later than 30 days after the date on which Participant
is issued such Restricted Stock. This time period cannot be extended. Participant
acknowledges (1) that Participant has been advised to consult with a tax advisor regarding the
tax consequences to Participant of the receipt of the Restricted Stock and (2) that timely
filing of a section 83(b) election is Participant’s sole responsibility, even if Participant
requests Forestar or its representative to file such election on Participant’s behalf.
	 
	 	9.	 	Miscellaneous. The Committee may from time to time modify or amend this Agreement in
accordance with the provisions of the Plan. This Agreement shall be binding upon and inure to
the benefit of Forestar and its successors and assigns and shall be binding upon and inure to
the benefit of Participant and his or her legatees, distributees and personal representatives.
By signing this Agreement, Participant acknowledges and expressly agrees that Participant has
read the Agreement and the Plan Documents and agrees to their terms. This Agreement may be
executed by Forestar and Participant by means of electronic or digital signatures, which shall
have the same force and effect as manual signatures. Participant acknowledges and agrees that
clicking “I Accept” on the Company’s online grant acceptance screen has the effect of affixing
Participant’s electronic signature to this Agreement. This Agreement shall be governed by and
construed in accord with federal law, where applicable, and otherwise with the laws of the
State of Texas.

	 	 	 
	Restricted Stock Agreement
	 	-2-

 

 

EXHIBIT A

Performance Goal for Vesting of Restricted Stock:

The Performance Goal for the vesting of Restricted Stock is a Return on Assets (“ROA”) of at least
one percent (annualized) for the Performance Measurement Period. ROA means earnings before
interest and taxes (as currently shown on the company income statement, or the reported equivalent
in the event of any change in reporting); divided by beginning of year total assets defined as
company total assets (or the reported equivalent in the event of any change in reporting. For
purposes of the foregoing, “Performance Measurement Period” means the period beginning the first
day of Forestar’s fiscal year that includes the Date of Grant and ending on the last day of the
fiscal year immediately preceding the Scheduled Vesting Date.

Performance Goal for Payment of Dividends:

The Performance Goal for the payment of cash dividends is positive earnings before interest and
taxes (as currently shown on the company income statement, or the reported equivalent in the event
of any change in reporting) for the trailing four quarters preceding the applicable dividend
payment date.

	 	 	 
	Restricted Stock Agreement
	 	-3-

 

 

FORESTAR REAL ESTATE GROUP INC.

STANDARD TERMS AND CONDITIONS

FOR RESTRICTED STOCK

	1.	 	Certain Definitions: For purposes of this Forestar Real Estate Group Inc. Standard
Terms and Conditions for Restricted Stock (the “Standard Terms and Conditions”), the Forestar
Real Estate Group Inc. 2008 Incentive Plan (the “Plan,” and together with the Standard Terms
and Conditions, the “Plan Documents”), and Restricted Stock to which this Standard Terms and
Conditions applies, the following terms shall have the meanings set forth below:

	 	a.	 	Change in Control:

	 	i.	 	A change in control shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:

	 	(1)	 	any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of Forestar (not including in the
securities beneficially owned by such Person any securities acquired
directly from Forestar or its Affiliates) representing 20% or more of
the combined voting power of Forestar’s then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in connection
with a transaction described in clauses (a), (b) or (c) of paragraph
(3) below;
	 
	 	(2)	 	within any twenty-four (24) month period, the
following individuals cease for any reason to constitute a majority of
the number of directors then serving on the Board: individuals who, on
the Effective Date, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection
with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of Forestar) whose appointment or election by the Board or
nomination for election by Forestar’s shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on the date hereof or
whose appointment, election or nomination for election was previously
so approved or recommended;
	 
	 	(3)	 	there is consummated a merger, consolidation of
Forestar or any direct or indirect subsidiary of Forestar with any
other corporation or any recapitalization of Forestar (for purposes of
this paragraph (3), a “Business Event”) unless, immediately following
such Business Event (a) the directors of Forestar immediately prior to
such Business Event continue to constitute at least a majority of the
board of directors of Forestar, the surviving entity or any parent
thereof, (b) the voting securities of Forestar outstanding immediately
prior to such Business Event continue to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of Forestar or any subsidiary of Forestar, at
least 60% of the combined voting power of the securities of Forestar or
such surviving entity or any parent thereof outstanding immediately
after such Business Event, and (c) in the event of a recapitalization,
no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of Forestar or such surviving entity or any parent
thereof (not including in the securities Beneficially Owned by such
Person any securities acquired directly from Forestar or its
Affiliates) representing 20% or more of the combined voting power of
the then outstanding securities of Forestar or such surviving entity or any
parent

	 	 	 
	Restricted Stock Agreement
	 	-4-

 

 

	 	 	 	thereof (except to the extent such ownership existed prior to
the Business Event);
	 
	 	(4)	 	the shareholders of Forestar approve a plan of
complete liquidation or dissolution of Forestar;
	 
	 	(5)	 	there is consummated an agreement for the sale,
disposition or long-term lease by Forestar of substantially all of
Forestar’s assets, other than (a) such a sale, disposition or lease to
an entity, at least 50% of the combined voting power of the voting
securities of which are owned by shareholders of Forestar in
substantially the same proportions as their ownership of Forestar
immediately prior to such sale or disposition or (b) the distribution
directly to Forestar’s shareholders (in one distribution or a series of
related distributions) of all of the stock of one or more subsidiaries
of Forestar that represent substantially all of Forestar’s assets; or
	 
	 	(6)	 	any other event that the Board, in its sole
discretion, determines to be a Change in Control for purposes of this
Agreement.
Notwithstanding the foregoing, a “Change in Control” under clauses
(1) through (5) above shall not be deemed to have occurred by virtue
of the consummation of any transaction or series of integrated
transactions immediately following which the record holders of the
common stock of Forestar immediately prior to such transaction or
series of transactions continue to have substantially the same
proportionate ownership in one or more entities which, singly or
together, immediately following such transaction or series of
transactions, own all or substantially all of the assets of Forestar
as constituted immediately prior to such transaction or series of
transactions.

	 	ii.	 	For purposes of this definition of “Change in Control”:

	 	(1)	 	“Affiliate” shall have the meaning set forth in
Rule 12b-2 promulgated under Section 12 of the Exchange Act.
	 
	 	(2)	 	“Beneficial Owner” shall have the meaning set
forth in Rule 13d-3 under the Exchange Act.
	 
	 	(3)	 	“Effective Date” means, the Date of Grant of
the applicable Restricted Stock.
	 
	 	(4)	 	“Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended from time to time.
	 
	 	(5)	 	“Person” shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (i)
Forestar or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of Forestar or any of
its Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of Forestar in
substantially the same proportions as their ownership of stock of
Forestar.

	 	b.	 	Forestar: means Forestar Real Estate Group Inc. and any successor
thereto.
	 
	 	c.	 	Forfeiture Restrictions : means the following restrictions, which lapse
upon the vesting of the Restricted Stock in accordance with the Restricted Stock
Agreement: the Restricted Stock, except to the extent that the Restricted Stock vested
(1) may not be sold, assigned, pledged, exchanged, hypothecated, or otherwise
transferred, encumbered, or disposed of by Participant and (2) will be forfeited to
Forestar by Participant for no consideration upon Participant’s Separation from Service
for any reason.

	 	 	 
	Restricted Stock Agreement
	 	-5-

 

 

	 	d.	 	Participant: means the employee, non-employee director or other service
provider of Forestar or an Affiliate who is granted Restricted Stock under the Plan.
	 
	 	e.	 	Restricted Stock: means Restricted Stock granted under the Plan.
	 
	 	f.	 	Restricted Stock Agreement: means the written agreement executed by
Forestar and a Participant evidencing the grant of Restricted Stock.
	 
	 	g.	 	Separation From Service: means a Participant’s separation from service
(within the meaning of Section 409A of the Code) with Forestar and its Affiliates after
the Date of Grant of the relevant Restricted Stock.
	 
	 	h.	 	Vesting Date: means, with respect to an award of Restricted Stock, the
earliest of (a) such date or dates as the Committee shall specify in the Restricted
Stock Agreement evidencing such award of Restricted Stock as the Scheduled Vesting
Date(s), (b) the occurrence of a Change in Control, (d) the Participant’s death, or (e)
the Participant’s becoming disabled (within the meaning of Section 409A of the Code).

	 	 	Capitalized terms used herein but not defined herein shall have the meaning assigned to such
terms in the Plan.
	 
	2.	 	Acceptance of Restricted Stock Agreement: The grant of Restricted Stock shall be
evidenced by, and subject to the terms and conditions of, a Restricted Stock Agreement and
each Participant who has been granted the Restricted Stock will have received information
relating to the Date of Grant, the number of shares of Restricted Stock, the condition(s)
under which the Restricted Stock vests and the Forfeiture Restrictions lapse, and all other
rights with respect to Restricted Stock. Restricted Stock shall be immediately cancelled and
expire if the applicable Restricted Stock Agreement is not accepted (in such manner as may be
specified by Forestar) by such Participant (or his or her agent or attorney) and delivered to
Forestar (in such manner as may be specified by Forestar) within 60 days after the Date of
Grant of the Restricted Stock (unless an extension of such deadline for extenuating
circumstances is approved by a Vice President of Forestar). 
	 
	3.	 	Nonalienation of Benefits: Except as required by applicable law, no right or benefit
under the Plan or any Restricted Stock Agreement shall be subject to anticipation, alienation,
sale, assignment, hypothecation, pledge, exchange, transfer, encumbrance or charge, and any
attempt to anticipate, alienate, sell, assign, hypothecate, transfer, pledge, exchange,
transfer, encumber or charge the same shall be void. No right or benefit hereunder shall in
any manner be liable for or subject to the debts, contracts, liabilities or torts of the
person entitled to such benefit. If any Participant shall become bankrupt or attempt to
anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or
charge any right or benefit under the Plan or any Restricted Stock Agreement, then such right
or benefit shall, in the discretion of the Committee, cease and terminate, and in such event,
the Committee in its discretion may hold or apply the same or any part thereof for the benefit
of the Participant or his beneficiary, spouse, children or other dependents, or any of them,
in such manner and in such proportion as the Committee may deem proper.
	 
	4.	 	Withholding: Forestar’s obligation to remove the Forfeiture Restrictions on the
Restricted Stock upon the vesting of the Restricted Stock in accordance with, and subject to
the terms of, the applicable Restricted Stock Agreement, shall be subject to the satisfaction
of applicable federal, state and local tax withholding requirements. Unless otherwise
prohibited by the Committee, and in accordance with rules prescribed by the Committee, a
Participant may satisfy withholding tax obligations by either of the following means or by a
combination of such means: (i) tendering a cash payment; (ii) authorizing Forestar to withhold
shares of Common Stock as to which the restrictions imposed hereunder are lifted on the
applicable Vesting Date, or (iii) delivering to Forestar unencumbered shares of Common Stock
held by the Participant for such period, if any, as may be specified by the Committee. Shares
of Common Stock that are withheld or delivered to satisfy applicable withholding taxes shall
be valued at their Fair Market Value on the date the withholding tax obligation arises. Only
the required statutory minimum tax may be withheld; excess tax withholding is not allowed.
	 
	5.	 	No Right to Continued Employment; No Additional Rights: Nothing contained in the
Plan or in any Restricted Stock Agreement shall confer on any Participant any right to
continue in the employ of Forestar or any of its Affiliates or interfere in any way with the
right of Forestar or an Affiliate to terminate the employment of a Participant at any time,
with or without cause, notwithstanding the

	 	 	 
	Restricted Stock Agreement
	 	-6-

 

 

	 	 	Restricted Stock awarded to the Participant may be forfeited. Nothing in the Plan Documents
or any Restricted Stock Agreement shall be construed to give any employee of Forestar or any
Affiliate any right to receive an award of Restricted Stock or as evidence of any agreement
or understanding, express or implied, that Forestar or any Affiliate will employ the
Participant in any particular position or at any particular rate of remuneration, or for any
particular period of time.
	 
	6.	 	Exclusion from Pension, Profit-Sharing and Other Benefit Computations: By acceptance
of a Restricted Stock award under the Plan, a Participant shall be deemed to have agreed that
any compensation arising out of the award constitutes special incentive compensation that
shall not be taken into account as “salary”, “pay”, “compensation” or “bonus” in determining
the amount of any payment under any pension, retirement or profit-sharing plan of Forestar or
any Affiliate. In addition, each Participant shall be deemed to have agreed that neither the
award, vesting nor payment of Restricted Stock shall be taken into account in determining the
amount of any life insurance coverage or short or long-term disability coverage provided by
Forestar or any Affiliate.
	 
	7.	 	Applicability: This Standard Terms and Conditions shall apply to Restricted Stock as
to which the Committee designates it as applying, and the Committee may designate it as
applying in whole or in part in its discretion to a Restricted Stock award.
	 
	8.	 	Plan Controls: In the event of any conflict between the Plan and the terms of a
Restricted Stock Agreement or the Standard Terms and Conditions, the Plan shall govern.

 
	 	 	 
	Restricted Stock Agreement
	 	-7-

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