Document:

exv10w10

 

Exhibit 10.10

LICENSE AGREEMENT

     This License Agreement (this “Agreement”) is made as of Dec 6, 1999 by and between Biocoat,
Incorporated (“Biocoat”), a Pennsylvania corporation with its principal place of business at 455
Pennsylvania Ave., Fort Washington, PA 19034 and Concentric Medical Inc., (“Licensee”), a Delaware
corporation with its principal place of business at 2585 Leghorn Street, Mountain View, CA 94043.

     WHEREAS, Biocoat owns patent rights and is licensed under patent rights of others with the
right to sublicense, and possesses know-how and technical information relating to lubricious
hydrophilic coatings, for application to medical devices, such as catheters and guidewires, and

     WHEREAS, Licensee desires to obtain a license from Biocoat under such patent rights and to
have access to Biocoat know-how and technical information to enable Licensee to apply such
coatings, to be furnished by Biocoat, to certain products and Biocoat is agreeable to granting such
a license pursuant to the terms of this Agreement,

     NOW, THEREFORE, in consideration of the terms, conditions and covenants set forth below, the
parties hereby agree as follows:

     1.0 Definitions. For purposes of this Agreement, the following definitions shall apply:

          1.1 “Affiliate” means, with respect to any party, its

 

 

respective direct or indirect ultimate parent company, if any, and any company, firm or other
entity more than fifty percent (50%) of whose issued and voting capital or share participation is
owned or controlled, directly or indirectly, by such party or by its parent company, but only for
so long as such ownership or control shall continue.

          1.2 “Product” means any of the products described in Schedule A, which is attached to
and made part of this Agreement. Licensee reserves the right to add and/or modify Schedule A for
newly developed products, subject to approval by Biocoat, which approval will not be withheld
unless the change conflicts with contractual obligations to a third party.

          1.3 “Net Sales” means the net billings of Licensee and its Affiliates from sales of
Licensed Products to unaffiliated (i.e., other than Affiliate) third parties, after deducting
normal and customary cash and trade discounts, returns, allowances and commissions to agents, and
any excise, sales or use or other similar taxes.

          1.4 “Field” means all actual or potential applications in the human vascular system.

          1.5 “Medical Device Company” means a company which manufactures and markets finished
medical devices as that term is defined in the Current Good Manufacturing Practice regulation of
the Food and Drug Administration.

          1.6 “Patents” means the patents and patent application described in Schedule B, which
is attached to and made a part of this Agreement.

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          1.7 “Technology” means any process for applying a coating of hyaluronan to medical
devices utilizing any adhesive layer consisting of acrylic copolymers.

          1.8 “Proprietary Information” means all know-how, trade secrets, inventions, data,
technology, and information, owned, acquired, developed or controlled by, or licensed to, Biocoat
relating to the Patents or the Technology which is used or useful with respect to Licensed
Products, including the composition and process for producing the acrylic copolymers.

          1.9 “Licensed Product” means any Product indicated for use in the Field which is
processed with a coating of hyaluronan using the Patents or the Proprietary Information.

          1.10 “Territory” means all countries of the world.

     2.0  Grant.

          2.1 Subject to the terms of this Agreement, Biocoat hereby grants to Licensee non-exclusive
licenses in the Territory under the Patents and the Proprietary Information, to make, have made,
use and sell Licensed Products with respect to those Products identified in Schedule A. The
foregoing non-exclusive license does not include the right to grant sublicenses.

          2.2 Biocoat hereby retains the right to develop coatings for, supply coatings to, and enter
into coatings license and supply agreements with third parties so long as such agreements do not
conflict with the rights of Licensee pursuant to this Agreement.

          2.3 Biocoat hereby grants to Licensee a fully paid,

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royalty-free license to use the trademark HYDAK in connection with the Licensed Products made or
sold pursuant to this Agreement. This trademark license shall be in effect only during the term of
this Agreement. Licensee agrees that Biocoat shall have full control over the manner in which
Licensee uses this licensed mark, and shall permit representatives of Biocoat to make inspections
of the facilities of Licensee during normal business hours and with reasonable notice, to insure
that the requirements of this license are fulfilled. All use of the licensed mark, by Licensee,
shall inure to the benefit of Biocoat and Licensee shall not acquire any ownership rights in the
mark by reason of such use.

          2.4 Licensee agrees to include relevant numbers of the Patents in the labeling or other
written information supplied with Licensed Products.

          2.5 Biocoat agrees to supply the proprietary acrylic copolymers needed to produce the Licensed
Products, as set forth in Schedule C, which is attached to and made a part of this Agreement.

     In the event that Biocoat is not, or believes it will not be, able to produce or deliver the
acrylic copolymers for a period of thirty (30) days or more, it will promptly advise Licensee of
such fact and provide the formulas and process description for producing the acrylic copolymers to
Licensee, in sufficient detail to enable Licensee (or a third party of Licensee’s choice) to
manufacture the acrylic copolymers; and will grant to Licensee a royalty-free non-exclusive right
under Biocoat’s intellectual property rights, to make, have made, and use such acrylic
copolymers.

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     In order to ensure that the formulas and process description are delivered, Biocoat will,
within thirty (30) days of the date of this Agreement, and within thirty (30) days of
implementation of any material formula or process change, deliver in escrow the formulas and
process description to William H. Eilberg, Esq., 420 Old York Road, Jenkintown, PA 19046, with
instructions to deliver such to Licensee in the event above stated, or in case Biocoat ceases to
exist without there being a rightful Assignee under Section 13.1 of this Agreement.

          2.6 If Biocoat makes any developments or improvements to the Technology, whether or not such
are patented, Biocoat shall notify Licensee of the existence of such development or improvement,
including sufficient technical detail so that Licensee can understand the significance of the
development or improvement, and will offer Licensee an opportunity to license such development or
improvement on terms to be negotiated. Notwithstanding the preceding sentence, Biocoat shall have
no obligation to notify Licensee of improvements or developments if such notification would violate
an agreement between Biocoat and a third party. If Licensee chooses not to license such
development or improvement, Biocoat shall have no further obligation to Licensee with respect to
such development or improvement.

     3.0 Payments. In consideration of the licenses and other rights granted to Licensee
herein and the disclosure to Licensee of Proprietary Information, Licensee shall make payments to
Biocoat as follows:

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          3.1 Licensee hereby agrees to pay [*] to Biocoat with the signing of this Agreement creditable
against running royalties under Sections 3.2 and 8.2.

          3.2 Except as modified by Sections 3.3 and 8.2, for each three (3) months period ending on the
last day of March, June, September or December after Licensee executes this Agreement, Licensee
shall pay to Biocoat, in U.S. dollars, a royalty amount in accordance with the rates set forth in
Schedule D which is attached to and made part of this Agreement. Quarterly royalty payments shall
be made within forty five (45) days after the end of such three (3) month period. The first
quarterly payment shall include royalties on Net Sales which took place in any preceding quarters.

          3.3 If, for any Licensed Product, in any calendar year, the number of units of such Licensed
Product sold to any and all unaffiliated (i.e., other than an Affiliate) Medical Device Companies
(“OEM” sales or units) exceeds [*]% of the total units sold of such Licensed Product, Licensee
shall adjust the calculation of Net Sales for such Licensed Product by applying the average per
unit price for non-OEM sales (instead of the average per unit price for OEM sales) to the OEM units
sold.

     If it is not possible to determine the average unit price for non-OEM sales, it shall be
assumed that the average unit price for non-OEM sales it [*] times the average unit price for OEM
sales.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
[*], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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          3.4 Overdue payments to Biocoat shall accrue interest, which Licensee shall pay to
Biocoat, at [*]% above the prime rate posted by Chase Manhattan Bank, New York, NY.

          3.5 The payment of royalties as set forth in this Article and in Schedule D is in addition to
the purchase price of the copolymers as set forth in Schedule C.

     4.0 Accounting and Audit.

          4.1 The rate of exchange to be used in computing the amount of the U.S. Dollar equivalent of
the currency in which non-U.S. sales may be expressed shall be the commercial exchange rate in
effect in New York, New York, on the date on which payment for such Net Sales is due.

          4.2 Accompanying each quarterly royalty payment, Licensee will provide Biocoat with a
statement which itemizes the amount of royalty due, by Product. Licensee shall keep accurate
records in sufficient detail to enable the aforesaid payments to be determined, for five (5) years
following the close of the relevant quarter.

          4.3 At Biocoat’s request and expense, Licensee shall permit an independent certified public
accountant, reasonably acceptable to Licensee, to have access once in each royalty year, during
regular business hours and upon reasonable notice to Licensee, to such of the records of Licensee
as may be necessary to verify the accuracy of the reports required under this Agreement. If, in
any royalty year a deficiency in excess of [*] ([*]%) percent exists, Licensee shall reimburse
Biocoat for the reasonable fee and

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
[*], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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expenses of such audit; Licensee shall pay any such deficiency with interest thereon as set
forth in Article 3.3.

     5.0 Confidentiality.

          5.1 During the Term and for a period of five (5) years following its expiration or
termination, each party undertakes to keep secret and confidential and not to disclose to any third
party (except as provided in Section 5.2) any Proprietary Information disclosed to it by the other
party or learned by it from the other party in the course of implementing this Agreement except:

               (a) Information which at the time of disclosure is in the public domain or publicly known or
available;

               (b) Information which, after disclosure, becomes part of the public domain or publicly known
or available by publication or otherwise, except by breach of this Agreement by the receiving
party;

               (c) Information which the receiver receives from a third party; provided, however, that such
information was not illegally or improperly obtained by such third party from the other party; and

               (d) Information which the receiver derives independently of such disclosure.

          5.2 Licensee is allowed to disclose Proprietary Information disclosed to it by Biocoat to a
third-party vendor who needs to know the information in order to apply the Technology on Licensee’s
behalf if such third-party vendor has entered into a non-disclosure agreement approved by Biocoat.

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          5.3 Notwithstanding the above, it shall not be a breach of this Agreement for a party to
disclose the existence of this Agreement or the identity of the other party.

     6.0 Technical Assistance. Following the execution of this Agreement, upon the request
of Licensee, Biocoat shall furnish personnel having knowledge of the Proprietary Information to
consult with Licensee technical personnel concerning the applications of the Technology to the
Licensed Products, provided that Licensee shall (a) reimburse Biocoat for the reasonable travel and
living expenses incurred by such personnel for travel requested by Licensee hereunder, and (b) pay
Biocoat a charge of $[*] per person per day. Biocoat may increase this per person per day charge
from time to time but the rate of such increase shall not exceed increases in the Consumer Price
Index.

     7.0 Warranty.

          7.1 Biocoat warrants that it is the owner of the trademark Hydak and all right, title and
interest in and to the Patents listed in the top section of Schedule B and has licensed the
Biomatrix patents listed in the bottom section of Schedule B and has the unrestricted power and
authority to grant the licenses and give access to the Proprietary Information as provided herein.
Biocoat represents that as of the date of this Agreement it has no knowledge of any pending or
threatened litigation against Biocoat which might impair the rights licensed hereunder, nor does it
have knowledge of any dominant patents or patent rights which might reasonably be infringed by
Licensee manufacture, use and sale of the Licensed Products.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
[*], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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     8.0 Term.

          8.1 This Agreement, unless earlier terminated as provided for in Section 8.4 hereof,
terminates upon the later of: (1) the expiration of the last to expire of the Patents; or (2) ten
(10) years after the date of this Agreement.

          8.2 After the expiration of the last to expire of the Patents, this Agreement converts from a
patent license to a license of know-how at that point and the royalty amounts payable in accordance
with Section 3.2 shall be calculated in accordance with the rates set forth in Schedule D to this
Agreement.

          8.3 The provisions of Sections 4.0, 5.0, and 10.0 shall survive the expiration or termination
of this Agreement.

          8.4 If either party hereto shall commit any breach of any material provision of this
Agreement, and shall not, within thirty (30) days written notice of such breach by the other party,
correct such breach, then such other party shall have the right to terminate this Agreement upon a
further fifteen (15) days notice to the breaching party. The right of either party to take such
action shall not be affected in any way by its failure to take any action with respect to any
previous breach.

          8.5 Upon any termination of this Agreement by Licensee under Section 8.4 hereof, all rights
granted herein to Licensee shall terminate. Termination of this Agreement for any reason shall be
without prejudice to Biocoat’s right to receive all payments accrued under Section 3.0 hereof prior
to the effective

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date of such termination and any other remedies which any party may otherwise have.

          8.6 No party shall be liable for failure of or delay in performing any obligation set forth in
this Agreement, and no party shall be deemed in breach of its obligations hereunder, if such
failure or delay is due to natural disasters or any causes reasonably beyond the control of such
party.

          8.7 Termination of this Agreement under Section 8.4 hereof shall not relieve either party of
obligations incurred prior to termination.

     9.0 Infringement. If at any time during the term of this Agreement either Licensee or
Biocoat (a “party”) shall become aware of any third party infringement or threatened infringement
in the Field of any Patent claim or claims embracing a Licensed Product sold by Licensee the
following provisions shall apply:

          9.1 The party having such knowledge shall forthwith give notice to the other party. If there
is disagreement between the parties as to whether the act complained of is in fact an infringement
of any Patent claim or claims, the parties shall refer such issue to a mutually acceptable
independent patent counsel. The opinion of such counsel shall be final and binding on the parties
and costs incurred in that regard shall be shared [*] percent ([*]%) by Licensee and [*] percent
([*]%) by Biocoat.

          9.2 If within ninety (90) days following receipt of notice from Licensee to Biocoat of any
such infringement or ninety (90) days after receipt of the opinion of independent patent

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
[*], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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counsel concluding existence of such infringement, Biocoat fails to halt such infringement or
to initiate litigation to do so, Licensee shall have the right to initiate such litigation in its
own name or in the name of Biocoat as it deems necessary or appropriate. Biocoat shall cooperate
with Licensee as is reasonably necessary in any such litigation brought by Licensee in its own name
or in Biocoat’s name. In addition, Biocoat shall have the right to determine what proportion, if
any, of the expenses of such litigation it will bear by providing written notice thereof to
Licensee within thirty (30) days of the date of receipt by Biocoat of notice that Licensee has
initiated litigation. (It is understood by the parties that the proportion of expenses borne by
Biocoat shall determine Biocoat’s share of monetary recovery as provided in Section 9.3 below.)

          9.3 In the event any monetary recovery in connection with such litigation is obtained
(regardless of whether Licensee or Biocoat brought such litigation), such monetary recovery shall
be applied in the following priority: first, to the reimbursement of Biocoat and Licensee for their
out-of-pocket expenses (including reasonable attorneys fees) in connection with such litigation;
second, the balance to be shared by Biocoat and Licensee in proportion to the amounts spent by the
parties in conducting the litigation as

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provided in Section 9.2 above. If the monetary recovery is less than the out-of-pocket expenses of
Biocoat and Licensee, reimbursement of these expenses shall be in proportion to the amounts spent
by the parties in conducting the litigation as provided herein.

     10.0 Indemnification.

          10.1 Licensee shall indemnify and hold Biocoat (as well as its Directors and Officers)
harmless from and against any and all expenses (including any and all attorneys fees), claims,
demands, liabilities or money judgments for death or bodily injury incurred by or rendered against
Biocoat which arise out of or are related to the use, manufacturing, sale or distribution of a
Licensed Product by Licensee.

     11.0 Third Party Infringement Claims.

          11.1 The parties shall notify each other promptly in writing of any claim, suit or proceeding
threatened or initiated by any third party relating to the use by Licensee of the Patents, the
Technology or the Proprietary Information as permitted under this Agreement (a “Third Party
Infringement Claim”).

          11.2 If Biocoat fails to initiate action to defend any Third Party Infringement Claim within
30 days of such notice, Licensee shall have the right, but not the obligation, to take any action
that it deems necessary or appropriate, in its sole discretion, to defend any Third Party
Infringement Claim. Licensee shall have full control over the defense of any Third Party
Infringement Claim that Biocoat does not defend including, but not limited to, the right to enter
into any settlement with respect to such claim.

          11.3 If any Third Party Infringement Claim is threatened or initiated, the obligation of
Licensee to make royalty payments

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under this Agreement shall cease as of the date such Third Party Infringement Claim is threatened
or initiated; provided, however that all such royalty obligations shall continue to accrue, with
interest at the prime rate posted by Chase Manhattan Bank, New York, NY., until the parties have
settled such Third Party Infringement Claim or a court of competent jurisdiction has entered a
final nonappealable judgment. If such final judgment results in a finding that Licensee’s use of
the Patents, the Technology and the Proprietary Information does not infringe any valid claim of
such third party, Licensee shall promptly pay the amount of accrued and unpaid royalties due
Biocoat, if any, and shall resume payment of royalties otherwise payable under this Agreement. If
such final judgment results in a finding that use of the Patents, the Technology or the Proprietary
Information infringes any valid claim of such third party, Licensee shall have no obligation to pay
any accrued and unpaid royalties or any further royalties to Biocoat. If a threatened Third Party
Infringement Claim does not result in a suit or proceeding being initiated within six (6) months of
the date of such threat, Licensee shall pay promptly the amount of accrued and unpaid royalties due
Biocoat, if any, and shall resume payment of royalties otherwise payable under this Agreement.

          11.4 Licensee shall be entitled to offset against any accrued and unpaid royalties and any
future royalties that would otherwise be payable under this Agreement all damages, losses, costs
and expenses (including reasonable attorneys’ fees and amounts paid in settlement) suffered or
incurred by Licensee in

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connection with any Third Party Infringement Claim.

          11.5 Biocoat agrees to furnish Licensee with full information concerning any Third Party
Infringement Claim, and to render to Licensee full cooperation to facilitate the defense or
settlement of any such claim. If Biocoat does not defend any Third Party Infringement Claim,
Biocoat shall the opportunity to be represented by counsel in any such Third Party Infringement
Claim at its sole option and expense.

     12.0 Insurance. Licensee shall provide Biocoat evidence of product liability coverage
naming Biocoat as an additional insured.

     13.0 General.

          13.1 Assignment. Neither Licensee nor Biocoat shall have the right to assign
(including by sale, merger or, otherwise by operation of law) any or all of its rights and
obligations under this Agreement without the prior written consent of the other party, which
consent shall not be unreasonably withheld, except that consent shall not be required in the event
of a sale by either Licensee or Biocoat of substantially all of its assets to another entity,
provided that such other entity undertakes to accept all terms and conditions hereof and carry out
all obligations hereunder.

     This Agreement and all rights and obligations hereunder shall be binding upon and shall inure
to the benefit of the respective successors, and assignees who rightfully become an Assignee, under
this Section.

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          13.2 Entire Agreement. This Agreement contains the entire agreement between the
parties hereto in respect of the subject matter hereof. This Agreement may not be released,
discharged, abandoned, changed or modified in any manner except by an instrument in writing signed
by a duly authorized officer of each of the parties hereto.

          13.3 Waiver and Severability. The waiver by either of the parties of any breach of
any provision hereof by the other party shall not be construed to be a waiver of any succeeding
breach of such provision or to be a waiver of the enforceability of the provision itself.

          13.4 Governing Law. This Agreement shall be construed and interpreted in accordance
with the laws of the Commonwealth of Pennsylvania whose courts shall, except as limited by the
provisions of the binding arbitration provisions of Section 13.5 below, have jurisdiction over the
parties hereto and all matters arising hereunder.

          13.5 Arbitration. The parties agree that any disputes arising under this Agreement
that cannot be resolved by the parties shall be submitted to binding arbitration in Philadelphia,
PA. if the arbitration is commenced by Licensee, or in San Francisco, CA if the arbitration is
commenced by Biocoat. Both parties agree to be bound, and to abide by the decision reached in such
arbitration including the entry of judgement upon the award of the arbitrator(s) in such
arbitration.

          13.6 Invalidity. If any of the provisions of this

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Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.

          13.7 Notice. Any notice required or to be given hereunder shall be considered
delivered when deposited, postage prepaid, in the United States mail, certified or registered mail,
or by telecopier, to the address of the other party as specified below or as subsequently modified
in writing by the parties.

If to Biocoat:

455 Pennsylvania Ave.

Fort Washington, PA19034

Attn: President

If to Licensee:

2585 Leghorn Street

Mountain View, CA 94043

Attn: Martin Dieck

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed effective the
day and year set forth below, under the Licensee signature.

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Licensee	 	 	 	Biocoat, Incorporated	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Martin Dieck
	 	 	 	By:
	 	/s/ Djoerd Hoekstra	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Martin Dieck
	 	 	 	 	 	Djoerd Hoekstra	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date: 12/6/99	 	 	 	Date: 11/30/99	 	 

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SCHEDULE A

PRODUCTS

     [*]

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
[*], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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SCHEDULE B

Patents of Biocoat, Incorporated

	 	 	 
	U.S. Patents	 	Expiration Date
	4,663,233
	 	October 24, 2005
	4,801,475
	 	January 31, 2006
	5,023,114
	 	January 31, 2006
	5,037,677
	 	January 31, 2006

Foreign Patents

	 	 	 
	France
	 	90 08988
	France
	 	85 12625
	Great Britain
	 	2,163,436
	Israel
	 	75729
	Germany
	 	3529758

Patents of Biomatrix, Inc.

	 	 	 
	U.S. Patents	 	Expiration Date
	4,487,865
	 	December 11, 2001
	4,500,676
	 	December 11, 2001

Foreign Patents

	 	 	 	 	 
	Canada
	 	1,223,383
	 	1,218,776
	Australia
	 	551,704
	 	   551,728
	Japan
	 	1,481,361
	 	none
	Great Britain
	 	2,151,247
	 	2,151,246
	France
	 	84-17,955
	 	84-17,954
	Germany
	 	3,434,123
	 	3,434,042
	Italy
	 	1,178,587
	 	1,178,586

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SCHEDULE C

Licensee shall purchase all proprietary acrylic copolymers and Hydak A-14 hyaluronan solution used
to make Licensed Products from Biocoat.

Licensee has no minimum purchase requirement of such polymers.

The form in which such acrylic copolymers will be supplied to Licensee will be a 30% solids
solution in organic solvent.

Biocoat will certify each batch of acrylic copolymer or hyaluronan solution supplied to Licensee
with regard to conformance with agreed upon specifications.

The current (1999) cost for the acrylic copolymer equals $[*] per liter, plus shipping; the current
cost for the Hydak A-14 hyaluronan solution is $[*] per liter, plus shipping.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
[*], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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SCHEDULE D

ROYALTY RATE SCHEDULE

     1. ROYALTY RATE — Patent License (until expiration of the last to expire patents on [*]).

          a. For the [*] of Net Sales in a given calendar year, the rate will be [*]%,

          b. For Net Sales between [*] and [*] in a given calendar year, the rate will be [*]%,

          c. For Net Sales over [*] in a given calendar year, the rate will be [*]%.

     2. ROYALTY RATE — Know-How License

          a. For the [*] of Net Sales in a given calendar year, the rate will be [*]%,

          b. For Net Sales between [*] and [*] in a given calendar, the rate will be [*]%,

          c. For Net Sales over [*] in a given calendar year, the rate will be [*]%.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
[*], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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Exhibit 10.1

FORM OF

TAX MATTERS AGREEMENT

by and among

TEMPLE-INLAND INC.,

FORESTAR REAL ESTATE GROUP INC. ,

and

GUARANTY FINANCIAL GROUP INC.

Dated as of

[Date]

 

 

TAX MATTERS AGREEMENT

     THIS TAX MATTERS AGREEMENT (this “Agreement”) is entered into as of [    ], 2007 by and among Temple-Inland Inc., a Delaware corporation (“Temple-Inland”), Forestar
Real Estate Group Inc., a Delaware corporation (“Forestar”), and Guaranty Financial Group
Inc., a Delaware Corporation (“Guaranty”); each a “Party” and collectively, the
“Parties.”

R E C I T A L S:

     WHEREAS, Temple-Inland, acting through its direct and indirect subsidiaries, currently
conducts a number of businesses, including (i) the Retained Business, (ii) the Real Estate
Business, and (iii) the Financial Services Business;

     WHEREAS, as of the date hereof, Temple-Inland and its direct and indirect domestic
subsidiaries are members of an Affiliated Group, of which Temple-Inland is the common parent;

     WHEREAS, the Board of Directors of Temple-Inland has determined that it is appropriate,
desirable and in the best interests of Temple-Inland and its stockholders to separate Temple-Inland
(the “Separation”) into three separate, independent and publicly traded companies: (i) one
comprising the Real Estate Business, which shall be owned and conducted, directly or indirectly, by
Forestar, (ii) one comprising the Financial Services Business, which shall be owned and conducted,
directly or indirectly, by Guaranty, and (iii) one comprising the Retained Business, which shall
continue to be owned and conducted, directly or indirectly, by Temple-Inland;

     WHEREAS, in order to effect the Separation, the Board of Directors of Temple-Inland has
determined that it is appropriate, desirable and in the best interests of Temple-Inland and its
stockholders for Temple-Inland and certain of its subsidiaries to enter into a series of
transactions whereby, among other things, (i) Forestar Real Estate Group LLC will convert to a
corporation under state law and TIN Inc. will contribute certain assets relating to the Real Estate
Business to Forestar (“Internal Contribution 1”) and distribute the stock of Forestar to
Temple-Inland (“Internal Distribution 1”); (ii) Temple-Inland will distribute all of the
issued and outstanding shares of common stock of Forestar, on a pro rata basis to the holders of
the outstanding common stock of Temple-Inland (“External Distribution 1”); (iii) TIN Inc.
will contribute certain assets relating to the Financial Services Business to Guaranty
(“Internal Contribution 2”) and distribute the stock of Guaranty to Temple-Inland
(“Internal Distribution 2”); and (iv) Temple-Inland will contribute certain assets relating
to the Financial Services Business to Guaranty (“Internal Contribution 3”) and distribute
all of the issued and outstanding shares of common stock of Guaranty, on a pro rata basis to the
holders of the outstanding common stock of Temple-Inland (“External Distribution 2”) (such
transactions, the “Spin-Offs”);

     WHEREAS, Temple-Inland, Forestar and Guaranty have determined that it is necessary and
desirable, as part of the Separation, to (i) allocate, transfer, retain or assign to the Forestar
Group, the Real Estate Assets and Real Estate Liabilities, (ii) allocate, transfer, retain or
assign to the Guaranty Group the Financial Services Assets and Financial Services Liabilities, and
(iii)

1

 

allocate, transfer, retain or assign to the Temple-Inland Group, the Retained Business Assets
and Retained Business Liabilities;

     WHEREAS, to effect the Separation, Temple-Inland, Forestar and Guaranty entered into that
certain Separation and Distribution Agreement dated as of even date hereof (as amended or otherwise
modified from time to time, the “Separation Agreement”);

     WHEREAS, it is the intention of the Parties that Internal Contribution 1 and Internal
Distribution 1 together qualify as a reorganization within the meaning of sections 368(a)(1)(D) and
355 of the Code;

     WHEREAS, it is the intention of the Parties that External Distribution 1 qualify as a
distribution within the meaning of section 355 of the Code;

     WHEREAS, it is the intention of the Parties that Internal Contribution 2 and Internal
Distribution 2 together qualify as a reorganization within the meaning of sections 368(a)(1)(D) and
355 of the Code;

     WHEREAS, it is the intention of the Parties that Internal Contribution 3 and External
Distribution 2 together qualify as a reorganization within the meaning of sections 368(a)(1)(D) and
355 of the Code;

     WHEREAS, in connection with the Separation, Forestar (USA) Real Estate Group, Inc. shall,
subject to the terms and provisions of the Separation and Distribution Agreement (as defined
herein), enter into a credit facility for both revolving and term loan borrowings, all or a portion
of the proceeds of which shall be used to repay intercompany debt owed to Temple-Inland;

     WHEREAS, in contemplation of the Separation, pursuant to which the Forestar Group and the
Guaranty Group will cease to be members of the Affiliated Group of which Temple-Inland is the
parent, if (but only if) External Distribution 1 and External Distribution 2 occur, the Parties
have determined to enter into this Agreement, setting forth their agreement with respect to certain
tax matters; and

     NOW, THEREFORE, in consideration of the foregoing premises, the mutual promises and covenants
hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

Section 1. Definitions.

     Capitalized terms used in this Agreement and not otherwise defined in this Section 1 shall
have the meanings set forth in the Separation Agreement. As used in this Agreement, the following
capitalized terms shall have the following meanings:

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     “Affiliated Group” means an affiliated group of corporations within the meaning of
section 1504(a)(1) of the Code that files a consolidated return for United States federal Income
Tax purposes.

     “After Tax Amount” means any additional amount necessary to reflect the hypothetical
Tax consequences of the receipt or accrual of any payment required to be made under this Agreement
(including payment of an additional amount or amounts hereunder and the effect of the deductions
available for interest paid or accrued and for Taxes such as state and local Income Taxes),
determined by using the highest applicable statutory corporate Income Tax rate (or rates, in the
case of an item that affects more than one Tax) for the relevant taxable period (or portion
thereof).

     “Agreement” shall have the meaning set forth in the preamble hereto.

     “Allocated Credit Carryforwards” shall have the meaning set forth in Section 4.04.

     “Audit” means any audit, assessment of Taxes, other examination by any Taxing
Authority, proceeding, or appeal of such a proceeding relating to Taxes, whether administrative or
judicial, including proceedings relating to competent authority determinations.

     “Business Day” shall have the meaning set forth in the Separation Agreement.

     “Carryback Period” shall have the meaning set forth in Section 4.02.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Combined Return” means any Tax Return, other than with respect to United States
federal Income Taxes, filed on a consolidated, combined (including nexus combination, worldwide
combination, domestic combination, line of business combination or any other form of combination)
or unitary basis wherein Forestar (or one or more Forestar Affiliates) or Guaranty (or one or more
Guaranty Affiliates) join in the filing of such Tax Return (for any taxable period or portion
thereof) with Temple-Inland or one or more Temple-Inland Affiliates.

     “Consolidated Return” means any Tax Return with respect to United States federal
Income Taxes filed on a consolidated basis wherein Forestar (or one or more Forestar Affiliates) or
Guaranty (or one or more Guaranty Affiliates) join in the filing of such Tax Return (for any
taxable period or portion thereof) with Temple-Inland or one or more Temple-Inland Affiliates.

     “Deferred Intercompany Item” shall mean any income, gain, deduction or loss from
transactions between members of the same Affiliated Group that is deferred for U.S. federal income
tax purposes under the principles in Treasury Regulations section 1.1502-13, or any similar
provision under state, local or foreign law.

     “Distribution Date” shall mean the Forestar Distribution Date or the Guaranty
Distribution Date, as applicable.

3

 

     “Distribution Taxes” means any Taxes imposed on, or increase in Taxes incurred by,
Temple-Inland or any Temple-Inland Affiliate, and any Taxes of a Temple-Inland shareholder (or
former Temple-Inland shareholder) that are required to be paid or reimbursed by Temple-Inland or
any Temple-Inland Affiliate pursuant to a Final Determination, provided that Temple-Inland shall
have vigorously defended itself in any legal proceeding involving Taxes of a Temple-Inland
shareholder, (without regard to whether such Taxes are offset or reduced by any Tax Asset, Tax
Item, or otherwise) resulting from, or arising in connection with, the failure of Internal
Contribution 1, Internal Distribution 1, Internal Contribution 2, Internal Distribution 2, Internal
Contribution 3, External Distribution 1 or External Distribution 2 to qualify as a transaction in
which no income, gain or loss is recognized pursuant to sections 355 and 368(a)(1)(D) of the Code
(including any Tax resulting from the application of section 355(d) or section 355(e) of the Code
to Internal Distribution 1, Internal Distribution 2, External Distribution 1 or External
Distribution 2) or corresponding provisions of the laws of any other jurisdictions. Any Income Tax
referred to in the immediately preceding sentence shall be determined using the highest applicable
statutory corporate Income Tax rate (or rates, in the case of an item that affects more than one
Tax) for the relevant taxable period (or portion thereof) taking into account deductions for
interest paid or accrued and other related Taxes, such as state and local Taxes.

     “Effective Time” shall have the meaning set forth in the Separation Agreement.

     “Estimated Tax Installment Date” means, with respect to United States federal Income
Taxes, the estimated Tax installment due dates prescribed in section 6655(c) of the Code and, in
the case of any other Tax, means any other date on which an installment payment of an estimated
amount of such Tax is required to be made.

     “External Distribution 1” shall have the meaning set forth in the recitals hereto.

     “External Distribution 2” shall have the meaning set forth in the recitals hereto.

     “Filing Party” shall have the meaning set forth in Section 7.01.

     “Final Determination” means the final resolution of liability for any Tax for any
taxable period, by or as a result of (i) a final and unappealable decision, judgment, decree or
other order by any court of competent jurisdiction; (ii) a final settlement with the IRS, a closing
agreement or accepted offer in compromise under section 7121 or section 7122 of the Code, or a
comparable agreement under the laws of other jurisdictions, which resolves the entire Tax liability
for any taxable period; (iii) any allowance of a refund or credit in respect of an overpayment of
Tax, but only after the expiration of all periods during which such refund may be recovered by the
jurisdiction imposing the Tax; or (iv) any other final disposition, including by reason of the
expiration of the applicable statute of limitations.

     “Financial Services Business” shall have the meaning set forth in the Separation
Agreement.

     “Force Majeure” shall have the meaning set forth in the Separation Agreement.

4

 

     “Forestar” shall have the meaning set forth in the preamble hereto.

     “Forestar Affiliate” means any Person included in the Forestar Group.

     “Forestar Business Records” shall have the meaning set forth in Section 8.01(b).

     “Forestar Common Stock” shall have the meaning set forth in the Separation Agreement.

     “Forestar Distribution Date” shall have the meaning set forth in the Separation
Agreement.

     “Forestar Group” shall have the meaning set forth in the Separation Agreement.

     “Forestar Tax Acts” shall have the meaning set forth in Section 4.01(b).

     “Guaranty” shall have the meaning set forth in the preamble hereto.

     “Guaranty Affiliate” means any Person included in the Guaranty Group.

     “Guaranty Business Records” shall have the meaning set forth in Section 8.01(b).

     “Guaranty Common Stock” shall have the meaning set forth in the Separation Agreement.

     “Guaranty Distribution Date” shall have the meaning set forth in the Separation
Agreement.

     “Guaranty Group” shall have the meaning set forth in the Separation Agreement.

     “Guaranty Tax Acts” shall have the meaning set forth in Section 4.01(c).

     “Income Tax” means any federal, state, local or foreign Tax determined (in whole or in
part) by reference to net income, net worth, gross receipts or capital, or any such Taxes imposed
in lieu of such a Tax, including, without limitation, any franchise Tax.

     “Income Tax Return” means any Tax Return relating to any Income Tax.

     “Internal Contribution 1” shall have the meaning set forth in the recitals hereto.

     “Internal Contribution 2” shall have the meaning set forth in the recitals hereto.

     “Internal Contribution 3” shall have the meaning set forth in the recitals hereto.

     “Internal Distribution 1” shall have the meaning set forth in the recitals hereto.

     “Internal Distribution 2” shall have the meaning set forth in the recitals hereto.

5

 

     “IRS” means the United States Internal Revenue Service or any successor thereto,
including its agents, representatives, and attorneys.

     “IRS Ruling” means the private letter ruling issued by the IRS in connection with the
Separation, which is a condition to the Spin-Offs under the Separation Agreement.

     “IRS Ruling Documents” means the request for the IRS Ruling filed with the IRS,
together with all supplemental filings or other materials subsequently submitted on behalf of
Temple-Inland, the Temple-Inland Affiliates and Temple-Inland’s shareholders to the IRS, the
appendices and exhibits thereto, and the IRS Ruling itself.

     “Joint Responsibility Item” means any Tax Item, including Distribution Taxes, for
which the non-Filing Party’s responsibility under this Agreement could exceed one million dollars
($1,000,000), but not a Sole Responsibility Item.

     “Officer’s Certificate” means a letter executed by an officer of Temple-Inland,
Forestar or Guaranty and provided to Spin-Off Tax Counsel or Tax Counsel as a condition for the
completion of the Spin-Off Tax Opinion, a Supplemental Tax Spin-Off Opinion or Supplemental Tax
Opinion.

     “Owed Party” shall have the meaning set forth in Section 6.05.

     “Owing Party” shall have the meaning set forth in Section 6.05.

     “Parties” shall have the meaning set forth in the preamble hereto.

     “Payment Period” shall have the meaning set forth in Section 6.05(e).

     “Person” shall have the meaning set forth in the Separation Agreement.

     “Post-Distribution Period” means any taxable period beginning after the relevant
Distribution Date.

     “Pre-Distribution Period” means any taxable period ending on or before the relevant
Distribution Date.

     “Prime Rate” shall have the meaning set forth in the Separation Agreement.

     “Real Estate Assets” shall have the meaning set forth in the Separation Agreement.

     “Real Estate Business” shall have the meaning set forth in the Separation Agreement.

     “Real Estate Liabilities” shall have the meaning set forth in the Separation
Agreement.

     “Retained Business Assets” shall have the meaning set forth in the Separation
Agreement.

6

 

     “Retained Business” shall have the meaning set forth in the Separation Agreement.

     “Retained Business Liabilities” shall have the meaning set forth in the Separation
Agreement.

     “Separation” shall have the meaning set forth in the preamble hereto.

     “Separation Agreement” shall have the meaning set forth in the recitals hereto.

     “Sole Responsibility Item” means any Tax Item for which the non-Filing Party has the
entire economic liability under this Agreement.

     “Spin-Offs” shall have the meaning set forth in the recitals hereto.

     “Spin-Off Tax Counsel” means Skadden, Arps, Slate, Meagher & Flom LLP.

     “Spin-Off Tax Opinion” means the opinion to be issued by Spin-Off Tax Counsel, as one
of the conditions to completing the Spin-Offs, addressing certain United States federal Income Tax
consequences of the Spin-Offs under section 355 of the Code.

     “Supplemental Ruling” means any ruling (other than the IRS Ruling) issued by any
Taxing Authority in connection with the Spin-Offs.

     “Supplemental Ruling Documents” means any request for a Supplemental Ruling, together
with any supplemental filings or other materials subsequently submitted, the appendices and
exhibits thereto, and any Supplemental Rulings issued.

     “Supplemental Spin-Off Tax Opinion” means any opinion (other than the Spin-Off Tax
Opinion) issued by any tax counsel in connection with the Spin-Offs.

     “Supplemental Tax Opinion” shall have the meaning set forth in Section 4.03(c).

     “Tax Asset” means any Tax Item that has been recognized for Tax purposes, but has not
been realized during the taxable period, and that could reduce a Tax in another taxable period,
including a net operating loss, net capital loss, investment tax credit, foreign tax credit,
charitable deduction or credit related to alternative minimum tax or any other Tax credit.

     “Tax Benefit” means a reduction in the Tax liability (or increase in refund or credit
or any item of deduction or expense) of a taxpayer (or of the Affiliated Group, or similar group of
entities as defined under corresponding provisions of the laws of any other jurisdiction, of which
it is a member) for any taxable period. Except as otherwise provided in this Agreement, a Tax
Benefit shall be deemed to have been realized or received from a Tax Item in a taxable period only
if and to the extent that the Tax liability of the taxpayer (or of the Affiliated Group, or similar
group of entities as defined under corresponding provisions of the laws of any other jurisdiction,
of which it is a member) for such period, after taking into account the effect of the

7

 

Tax Item on the Tax liability of such taxpayer (or of the Affiliated Group, or similar group of
entities as defined under corresponding provisions of the laws of any other jurisdiction, of which
it is a member) in the current period and all prior periods, is less than it would have been had
such Tax liability been determined without regard to such Tax Item.

     “Tax Counsel” means a nationally recognized law firm mutually agreed upon by
Temple-Inland and Forestar or Temple-Inland and Guaranty, as applicable, to provide a Supplemental
Tax Opinion.

     “Tax Detriment” means an increase in the Tax liability (or reduction in refund or
credit or any item of deduction or expense) of a taxpayer (or of the Affiliated Group, or similar
group of entities as defined under corresponding provisions of the laws of any other jurisdiction,
of which it is a member) for any taxable period. Except as otherwise provided in this Agreement, a
Tax Detriment shall be deemed to have been realized or incurred from a Tax Item in a taxable period
only if and to the extent that the Tax liability of the taxpayer (or of the Affiliated Group, or
similar group of entities as defined under corresponding provisions of the laws of any other
jurisdiction, of which it is a member) for such period, after taking into account the effect of the
Tax Item on the Tax liability of such taxpayer (or of the Affiliated Group, or similar group of
entities as defined under corresponding provisions of the laws of any other jurisdiction, of which
it is a member) in the current period and all prior periods, is more than it would have been had
such Tax liability been determined without regard to such Tax Item.

     “Tax Item” means any item of income, gain, loss, deduction, expense or credit, or
other attribute that may have the effect of increasing or decreasing any Tax.

     “Tax Return” means any return, report, certificate, form or similar statement or
document (including any related or supporting information or schedule attached thereto and any
information return, amended tax return, claim for refund or declaration of estimated Tax) required
to be supplied to, or filed with, a Taxing Authority in connection with the determination,
assessment or collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.

     “Tax Material” shall have the meaning set forth in Section 8.01(a).

     “Taxes” means all federal, state, local or foreign taxes, charges, fees, duties,
levies, imposts, rates or other assessments, including income, gross receipts, excise, property,
sales, use, license, capital stock, transfer, franchise, value added or other taxes, (including any
interest, penalties or additions attributable thereto) and a “Tax” shall mean any one of such
Taxes.

     “Taxing Authority” means any governmental authority or any subdivision, agency,
commission or authority thereof or any quasi-governmental or private body having jurisdiction over
the assessment, determination, collection or imposition of any Tax (including the IRS).

     “Temple-Inland” shall have the meaning set forth in the preamble hereto.

     “Temple-Inland Affiliate” means any Person included in the Temple-Inland Group.

8

 

     “Temple-Inland Business Records” shall have the meaning set forth in Section 8.01(b).

     “Temple-Inland Group” shall have the meaning set forth in the Separation Agreement.

     “Temple-Inland Tax Acts” shall have the meaning set forth in Section 4.01(a).

     “Temple-Inland Inc. Tax Allocation Policy” means the Temple-Inland Inc. Tax Allocation
Policy by and between Temple-Inland Inc. and members of the Temple-Inland Group effective January
1, 2003.

     “Unallocated Liabilities” shall have the meaning set forth in the Separation
Agreement.

Section 2. Preparation and Filing of Tax Returns.

     2.01. Temple-Inland’s Responsibility. Subject to the other applicable provisions of
this Agreement and consistent with past practices, Temple-Inland shall have sole and exclusive
responsibility for the preparation and filing of:

          (a) all Consolidated Returns and all Combined Returns for any taxable period;

          (b) all Tax Returns (other than Consolidated Returns and Combined Returns) with respect to
any Temple-Inland Affiliate for any taxable period;

          (c) all Tax Returns with respect to Forestar, any Forestar Affiliate, or the Real Estate
Business or any part thereof, that are required to be filed (taking into account any extension of
time which has been requested or received) on or prior to the Forestar Distribution Date and which
have been, under past practices, prepared and filed by Temple-Inland.

          (d) all Tax Returns with respect to Guaranty, any Guaranty Affiliate, or the Financial
Services Business or any part thereof, that are required to be filed (taking into account any
extension of time which has been requested or received) on or prior to the Guaranty Distribution
Date and which have been, under past practices, prepared and filed by Temple-Inland.

     2.02. Forestar’s Responsibility. Forestar shall have sole and exclusive
responsibility for the preparation and filing of all Tax Returns (other than Consolidated Returns
and Combined Returns) with respect to Forestar and/or any Forestar Affiliate due after the Forestar
Distribution Date.

     2.03. Guaranty’s Responsibility. Guaranty shall have sole and exclusive
responsibility for the preparation and filing of all Tax Returns (other than Consolidated Returns
and Combined Returns) with respect to Guaranty and/or any Guaranty Affiliate due after the Guaranty
Distribution Date.

9

 

     2.04. Agent. Subject to the other applicable provisions of this Agreement, (i)
Forestar hereby irrevocably designates, and agrees to cause each Forestar Affiliate to so
designate, Temple-Inland as its sole and exclusive agent and attorney-in-fact to take such action
(including execution of documents) as Temple-Inland, acting in good faith, may deem appropriate in
any and all matters (including Audits) relating to any Tax Return described in Section 2.01 and
(ii) Guaranty hereby irrevocably designates, and agrees to cause each Guaranty Affiliate to so
designate, Temple-Inland as its sole and exclusive agent and attorney-in-fact to take such action
(including execution of documents) as Temple-Inland, acting in good faith, may deem appropriate in
any and all matters (including Audits) relating to any Tax Return described in Section 2.01.

     2.05. Manner of Tax Return Preparation.

          (a) Unless otherwise required by a Taxing Authority, the Parties hereby agree to prepare and
file all Tax Returns, and to take all other actions, in a manner consistent with (1) this
Agreement, (2) the Temple-Inland Inc. Tax Allocation Policy, (3) the Spin-Off Tax Opinion, (4) any
Supplemental Spin-Off Tax Opinion, (5) any Supplemental Tax Opinion, (6) the IRS Ruling Documents,
and (7) any Supplemental Ruling Documents. All Tax Returns shall be filed on a timely basis
(taking into account applicable extensions) by the Party responsible for filing such returns under
this Agreement.

          (b) With respect to any Consolidated Return or Combined Return: (1) Forestar and Guaranty
shall each provide Temple-Inland with a pro forma draft of the portion of such Tax Return that
reflects Forestar and/or any Forestar Affiliate, and Guaranty and/or any Guaranty Affiliate, as
applicable, at least sixty (60) days prior to the due date (with applicable extensions) for the
filing of such Tax Return; (2) Within twenty (20) days after receiving the pro forma draft Tax
Returns, Temple-Inland shall review the drafts and provide comments and questions to Forestar and
Guaranty (in writing if requested by Forestar and/or Guaranty); (3) Forestar and Guaranty shall
cooperate with Temple-Inland by responding (in writing if requested) and resolving the comments and
questions from Temple-Inland within ten (10) days of receiving comments and questions from
Temple-Inland.

Nothing in this Section 2.05(b) shall alter the sole and exclusive responsibility for the
preparation and filing of Tax Returns under Sections 2.01, 2.02 and 2.03. If Forestar or Guaranty,
as applicable, has not responded to the Temple-Inland comments and questions in a timely manner
pursuant to Section 2.05(b) above, or in the case of a dispute regarding the reporting of any Tax
Item, such dispute has not been resolved by the due date (with applicable extensions) for the
filing of any Tax Return, Temple-Inland shall file such Tax Return reporting all Tax Items in the
manner as it deems appropriate, provided, however, that Temple-Inland agrees that
it will thereafter file an amended Tax Return, if necessary, reporting any disputed Tax Item in the
manner determined under Section 8.02, and any other Tax Item as agreed upon by Temple-Inland and
Forestar or Temple-Inland and Guaranty.

10

 

Section 3. Liability for Taxes.

     3.01. Liability for Pre-Distribution Period Taxes. Liability for all Taxes related to
Pre-Distribution Periods or portions thereof, other than Taxes described in Section 4, shall be
allocated in a manner consistent with the Temple-Inland Inc. Tax Allocation Policy and past
practices.

     3.02 Liability for Post-Distribution Period Taxes. With respect to Post-Distribution
Periods or portions thereof, Temple-Inland and any Temple-Inland affiliate, Forestar and any
Forestar affiliate, and Guaranty and any Guaranty affiliate, shall be liable for their respective
Taxes.

     3.03. Joint Liability for Certain Unallocated Taxes. Any Taxes not otherwise
allocated by Section 3.01, Section 3.02 or Section 4 shall be allocated in the manner consistent
with the allocation of Unallocated Liabilities described in Article VI of the Separation Agreement.

     3.04. Payment of Tax Liability. If one Party is liable or responsible for Taxes,
under Sections 3.01 through 3.03, with respect to Tax Returns for which another party is
responsible for preparing and/or filing, or with respect to Taxes that are paid by another Party,
then the liable or responsible Party shall pay the Taxes (or a reimbursement of such Taxes) to the
other Party pursuant to Section 6.05.

     3.05. Computation. Consistent with the past application of the Temple-Inland Inc.
Tax Allocation Policy, Temple-Inland shall provide Forestar and Guaranty, as applicable, with a
written calculation in reasonable detail (including copies of all work sheets and other materials
used in preparation thereof) setting forth the amount of any Tax liability of Forestar or Guaranty,
as applicable, for which Forestar or Guaranty is liable under Section 3.01. Forestar and Guaranty,
as applicable, shall have the right to review and comment on such calculation. Any dispute with
respect to such calculation shall be resolved pursuant to Section 8.02; provided,
however, that, notwithstanding any dispute with respect to any such calculation, in no
event shall any payment attributable to the amount of any Tax liability of Forestar or Guaranty be
paid later than the date provided in Section 6.

Section 4. Distribution Taxes and Deconsolidation.

     4.01. Distribution Taxes.

          (a) Temple-Inland’s Liability for Distribution Taxes. Notwithstanding Sections 3.01
through 3.05, Temple-Inland shall be liable for any Distribution Taxes, to the extent that such
Distribution Taxes are attributable to, caused by, or result from, one or more of the following
(collectively, “Temple-Inland Tax Acts”):

               (i) any action or omission by Temple-Inland or any Temple-Inland Affiliate, at any time, that
is inconsistent with any information, covenant or representation in an Officer’s Certificate,
Spin-Off Tax Opinion, Supplemental Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling
Documents or Supplemental Ruling Documents (disclosure by Temple-Inland (or any Temple-Inland
Affiliate) to Forestar (or any Forestar Affiliate) or

11

 

Guaranty (or any Guaranty Affiliate) of any action or fact that is inconsistent with any
information, covenant or representation submitted to Spin-Off Tax Counsel, Tax Counsel, the IRS, or
other Taxing Authority, as applicable, in connection with an Officer’s Certificate, Spin-Off Tax
Opinion, Supplemental Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling Documents or
Supplemental Ruling Documents, shall not relieve Temple-Inland (or any Temple-Inland Affiliate) of
liability under this Agreement);

               (ii) any action or omission by Temple-Inland or any Temple-Inland Affiliate, after the
Spin-Offs (including any act or omission that is in furtherance of, connected to, or part of a plan
or series of related transactions (within the meaning of section 355(e) of the Code) occurring on
or prior to the Spin-Offs), including a cessation, transfer to affiliates, or disposition of the
active trades or businesses, stock buyback or payment of an extraordinary dividend;

               (iii) any acquisition of any stock or assets of Temple-Inland or any Temple-Inland Affiliate,
by one or more other Persons prior to or following the Spin-Offs;

               (iv) any issuance of stock by Temple-Inland or any Temple-Inland Affiliate, after the
Spin-Offs, including any issuance pursuant to the exercise of employee stock options or other
employment related arrangements, or the exercise of warrants; or

               (v) any change in ownership of stock in Temple-Inland or any Temple-Inland Affiliate after
the Spin-Offs.

          (b) Forestar’s Liability for Distribution Taxes. Notwithstanding Sections 3.01
through 3.05, Forestar, and each Forestar Affiliate shall be jointly and severally liable for any
Distribution Taxes, to the extent that such Distribution Taxes are attributable to, caused by, or
result from, one or more of the following (collectively, “Forestar Tax Acts”):

               (i) any action or omission by Forestar or any Forestar Affiliate, at any time, that is
inconsistent with any information, covenant or representation in an Officer’s Certificate, Spin-Off
Tax Opinion, Supplemental Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling Documents or
Supplemental Ruling Documents, (disclosure by Forestar (or any Forestar Affiliate) to Temple-Inland
(or any Temple-Inland Affiliate) of any action or fact that is inconsistent with any information,
covenant or representation submitted to Spin-Off Tax Counsel, Tax Counsel, the IRS, or other Taxing
Authority, as applicable, in connection with an Officer’s Certificate, Spin-Off Tax Opinion,
Supplemental Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling Documents, Supplemental
Ruling Documents, shall not relieve Forestar (or any Forestar Affiliate) of liability under this
Agreement);

               (ii) any action or omission by Forestar or any Forestar Affiliate, after the Spin-Off
(including any act or omission that is in furtherance of, connected to, or part of a plan or series
of related transactions (within the meaning of section 355(e) of the Code) occurring on or prior to
the Distribution), including a cessation, transfer to affiliates, or disposition of the active
trades or businesses, stock buyback or payment of an extraordinary dividend;

12

 

               (iii) any acquisition of any stock or assets of Forestar or any Forestar Affiliate, by one or
more other Persons (other than Temple-Inland or any Temple-Inland Affiliate) prior to or following
the Spin-Off;

               (iv) any issuance of stock by Forestar or any Forestar Affiliate, after the Spin-Off,
including any issuance pursuant to the exercise of employee stock options or other employment
related arrangements, or the exercise of warrants; or

               (v) any change in ownership of stock in Forestar or any Forestar Affiliate after the
Spin-Off.

          (c) Guaranty’s Liability for Distribution Taxes. Notwithstanding Sections 3.01
through 3.05, Guaranty, and each Guaranty Affiliate shall be jointly and severally liable for any
Distribution Taxes, to the extent that such Distribution Taxes are attributable to, caused by, or
result from, one or more of the following (collectively, “Guaranty Tax Acts”):

               (i) any action or omission by Guaranty or any Guaranty Affiliate, at any time, that is
inconsistent with any information, covenant or representation in an Officer’s Certificate, Spin-Off
Tax Opinion, Supplemental Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling Documents or
Supplemental Ruling Documents, (disclosure by Guaranty (or any Guaranty Affiliate) to Temple-Inland
(or any Temple-Inland Affiliate) of any action or fact that is inconsistent with any information,
covenant or representation submitted to Spin-Off Tax Counsel, Tax Counsel, the IRS, or other Taxing
Authority, as applicable, in connection with an Officer’s Certificate, Spin-Off Tax Opinion,
Supplemental Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling Documents, Supplemental
Ruling Documents, shall not relieve Guaranty (or any Guaranty Affiliate) of liability under this
Agreement);

               (ii) any action or omission by Guaranty or any Guaranty Affiliate, after the Spin-Off
(including any act or omission that is in furtherance of, connected to, or part of a plan or series
of related transactions (within the meaning of section 355(e) of the Code) occurring on or prior to
the Distribution), including a cessation, transfer to affiliates, or disposition of the active
trades or businesses, stock buyback or payment of an extraordinary dividend;

               (iii) any acquisition of any stock or assets of Guaranty or any Guaranty Affiliate, by one or
more other Persons (other than Temple-Inland or any Temple-Inland Affiliate) prior to or following
the Spin-Off;

               (iv) any issuance of stock by Guaranty or any Guaranty Affiliate, after the Spin-Off,
including any issuance pursuant to the exercise of employee stock options or other employment
related arrangements, or the exercise of warrants; or

               (v) any change in ownership of stock in Guaranty or any Guaranty Affiliate after the
Spin-Off.

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          (d) Joint Liability for Remaining Distribution Taxes. In the event that Distribution
Taxes are not otherwise allocated by Sections 4.01(a), (b) or (c), then the liability for such
Distribution Taxes shall be allocated in the manner consistent with the allocation of Unallocated
Liabilities described in Article VI of the Separation Agreement. In the event that one or more
Temple-Inland Tax Acts occur simultaneously with one or more Forestar Tax Acts or Guaranty Tax Acts
and these result in Distribution Taxes, then the allocation of the liability for such Distribution
Taxes shall be allocated in the manner consistent with the allocation of Unallocated Liabilities
described in Article VI of the Separation Agreement, and, Sections 4.01(a), (b) or (c) shall not
control the allocation of such Distribution Taxes.

          (e) Representation. Each of Temple-Inland, Forestar and Guaranty represents that, as
of the date of this Agreement, neither it nor its Affiliates know of any fact that it reasonably
believes or should believe may cause Internal Contribution 1, Internal Distribution 1, External
Distribution 1, Internal Contribution 2, Internal Distribution 2, Internal Contribution 3, or
External Distribution 2 to fail to qualify for U.S. federal income tax purposes as transactions in
which no income, gain, or loss is recognized pursuant to section 355 of the Code.

     4.02. Carrybacks.

          (a) In General. Temple-Inland agrees to pay to Forestar or Guaranty, as applicable,
the Tax Benefits from the use, in accordance with applicable law, in any Pre-Distribution Period
(the “Carryback Period”) of a carryback of any Tax Asset of the Forestar Group or Guaranty
Group from a Post-Distribution Period (other than a carryback of any Tax Asset attributable to
Distribution Taxes for which the liability is borne by Temple-Inland or any Temple-Inland
Affiliate). In the absence of controlling legal authority, if the Temple-Inland Group and either
the Forestar Group or Guaranty Group or both, as applicable, can carryback Tax Assets from the same
Post-Distribution Period to a Carryback Period, the Tax Assets of the Temple-Inland Group shall be
carried back and absorbed by the Temple-Inland Group first. If subsequent to the payment by
Temple-Inland to Forestar or Guaranty of the Tax Benefit of a carryback of a Tax Asset of the
Forestar Group or the Guaranty Group, there shall be a Final Determination which results in a (1)
change to the amount of the Tax Asset so carried back or (2) change to the amount of such Tax
Benefit, Forestar or Guaranty, as applicable, shall repay to Temple-Inland, or Temple-Inland shall
repay to Forestar or Guaranty, as the case may be, any amount which would not have been payable to
such other Party pursuant to this Section 4.02(a) had the amount of the Tax Benefit been determined
in light of these events. Nothing in this Section 4.02(a) shall require Temple-Inland to file an
amended Tax Return or claim for refund of United States federal Income Taxes; provided,
however, that Temple-Inland shall use its reasonable efforts to carryback a Tax Asset of
the Forestar Group or the Guaranty Group.

          (b) Net Operating Losses. Notwithstanding any other provision of this Agreement,
Forestar and Guaranty each hereby expressly agree to elect (under section 172(b)(3) of the Code
and, to the extent feasible, any similar provision of any state, local or foreign Tax law) to
relinquish any right to carryback net operating losses to any Pre-Distribution Periods of
Temple-Inland (in which event no payment shall be due from Temple-Inland to Forestar in respect of
such net operating losses).

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          (c) Computation. Consistent with the past application of the Temple-Inland Inc. Tax
Allocation Policy, Temple-Inland shall provide Forestar and Guaranty, as applicable, with a written
calculation in reasonable detail (including copies of all work sheets and other materials used in
preparation thereof) setting forth the amount of any Tax Benefit relating to such carryback of any
Tax Asset of the Forestar Group or Guaranty Group from a Post-Distribution Period (other than a
carryback of any Tax Asset attributable to Distribution Taxes for which the liability is borne by
Temple-Inland or any Temple-Inland Affiliate). Forestar and Guaranty, as applicable, shall have
the right to review and comment on such calculation. Any dispute with respect to such calculation
shall be resolved pursuant to Section 8.02.

     4.03. Continuing Covenants.

          (a) In General. Each of Temple-Inland, Forestar and Guaranty agrees (1) not to take
any action (or cause its Affiliates to take any action) reasonably expected to result in an
increased Tax liability to the other, a reduction in a Tax Asset of the other or an increased
liability to the other under this Agreement, and (2) to take any action (and cause its Affiliates
to take any action) reasonably requested by the other that would reasonably be expected to result
in a Tax Benefit or avoid a Tax Detriment to the other, provided, in either such case, that the
taking or refraining to take such action does not result in any additional cost not fully
compensated for by the other Party or any other adverse effect to such Party. The Parties hereby
acknowledge that the preceding sentence is not intended to limit, and therefore shall not apply to,
the rights of the Parties with respect to matters otherwise covered by this Agreement.

          (b) Restrictions. Temple-Inland, Forestar, and Guaranty, respectively, agree that
they will not knowingly take or fail to take, or permit any Temple-Inland Affiliate, any Forestar
Affiliate, or any Guaranty Affiliate, as applicable, to knowingly take or fail to take, any action
where such action or failure to act would be inconsistent with any information, covenant or
representation that relates to facts or matters related to Temple-Inland (or any Temple-Inland
Affiliate), Forestar (or any Forestar Affiliate), or Guaranty (or any Guaranty Affiliate), or
within the control of Temple-Inland, Forestar, or Guaranty and is contained in an Officer’s
Certificate, Spin-Off Tax Opinion, Supplemental Tax Opinion, Supplemental Spin-Off Tax Opinion, IRS
Ruling Documents or Supplemental Ruling Documents, (except where such information, covenant or
representation was not previously disclosed to Temple-Inland, Forestar, or Guaranty) other than as
permitted by this Section 4.03. For this purpose an action is considered inconsistent with a
representation if the representation states that there is no plan or intention to take such action.
Temple-Inland, Forestar, and Guaranty, respectively, agree that they will not take (and it will
cause the Temple-Inland Affiliates, Forestar Affiliates, and Guaranty Affiliates to refrain from
taking) any position on a Tax Return that is inconsistent with the treatment of Internal
Contribution 1, Internal Distribution 1, External Distribution 1, Internal Contribution 2, Internal
Distribution 2, Internal Contribution 3, and External Distribution 2 as transactions in which no
income, gain, or loss is recognized pursuant to section 355 of the Code.

          (c) Certain Forestar Actions Following the Spin-Off. Forestar agrees that, during
the two (2) year period following the Spin-Off, Forestar shall not (i) sell or otherwise transfer
in a single transaction or series of transactions 50% or more of the gross or net assets of the
active trade or business (for purposes of section 355(b) of the Code) or 50% or more of its
consolidated

15

 

gross or net assets (such percentages to be measured based on fair market values as of the date of
the applicable Spin-Off); (ii) merge or consolidate Forestar or any Forestar Affiliate with any
other entity, without regard to which party is the surviving entity except for intragroup mergers
involving Forestar affiliates that are wholly-owned within the group; (iii) transfer any assets in
a transaction described in section 351 (other than a transfer to a corporation which files a United
States federal consolidated Income Tax Return with Forestar and which is wholly-owned, directly or
indirectly, by Forestar), section 721 (other than transfers in the ordinary course of business) or
subparagraph (C) or (D) of section 368(a)(1) of the Code (other than a 368(a)(1)(C) or (D)
reorganization between Forestar affiliates that are wholly-owned within the group); (iv) issue
stock of Forestar or any Forestar Affiliate (or any instrument that is convertible or exchangeable
into any such stock) in an acquisition or public or private offering (excluding any issuance
pursuant to the exercise of employee stock options or other employment related arrangements having
customary terms and conditions and that satisfy the requirements of Treasury Regulations section
1.355-7(d)(8), or any successor provision thereto), or (v) facilitate or otherwise participate in
any acquisition (whether solicited or unsolicited) of stock in Forestar that would result in any
shareholder owning five percent (5%) or more of the outstanding stock of Forestar; provided
however, Forestar shall be permitted to take such action or one or more actions set forth
in the foregoing clauses (i) through (v) if, prior to taking such action, Forestar obtains, at its
own expense, (A) a supplemental opinion, in form and substance reasonably acceptable to
Temple-Inland, from Tax Counsel that such action will not result in Distribution Taxes (a
“Supplemental Tax Opinion”), (B) a Supplemental Ruling that such action will not result in
Distribution Taxes, or (C) a written statement from Temple-Inland waiving the requirement to obtain
a Supplemental Tax Opinion or Supplemental Ruling. Temple-Inland and Forestar hereby agree that
they will act in good faith to take all reasonable steps necessary to amend this Section 4.03(c),
from time to time, by mutual agreement, to (i) add certain actions to the list contained herein, or
(ii) remove certain actions from the list contained herein, in either case, in order to reflect any
relevant change in law, regulation or administrative interpretation occurring after the date of
this Agreement.

          (d) Certain Guaranty Actions Following the Spin-Off. Guaranty agrees that, during
the two (2) year period following the Spin-Off, Guaranty shall not (i) sell or otherwise transfer
in a single transaction or series of transactions 50% or more of the gross or net assets of the
active trade or business (for purposes of section 355(b) of the Code) or 50% or more of its
consolidated gross or net assets (such percentages to be measured based on fair market values as of
the date of the applicable Spin-Off); (ii) merge or consolidate Guaranty or any Guaranty Affiliate
with any other entity, without regard to which party is the surviving entity except for intragroup
mergers involving Guaranty affiliates that are wholly-owned within the group; (iii) transfer any
assets in a transaction described in section 351 (other than a transfer to a corporation which
files a United States federal consolidated Income Tax Return with Guaranty and which is
wholly-owned, directly or indirectly, by Guaranty), section 721 (other than transfers in the
ordinary course of business) or subparagraph (C) or (D) of section 368(a)(1) of the Code (other
than a 368(a)(1)(C) or (D) reorganization between Guaranty affiliates that are wholly-owned within
the group); (iv) issue stock of Guaranty or any Guaranty Affiliate (or any instrument that is
convertible or exchangeable into any such stock) in an acquisition or public or private offering
(excluding any issuance pursuant to the exercise of employee stock options or other employment
related arrangements having customary terms and conditions and that satisfy the requirements of

16

 

Treasury Regulations section 1.355-7(d)(8), or any successor provision thereto), or (v) facilitate
or otherwise participate in any acquisition (whether solicited or unsolicited) of stock in Guaranty
that would result in any shareholder owning five percent (5%) or more of the outstanding stock of
Guaranty; provided however, Guaranty shall be permitted to take such action or one
or more actions set forth in the foregoing clauses (i) through (v) if, prior to taking such action,
Guaranty obtains, at its own expense, (A) a Supplemental Tax Opinion, (B) a Supplemental Ruling
that such action will not result in Distribution Taxes, or (C) a written statement from
Temple-Inland waiving the requirement to obtain a Supplemental Tax Opinion or Supplemental Ruling.
Temple-Inland and Guaranty hereby agree that they will act in good faith to take all reasonable
steps necessary to amend this Section 4.03(d), from time to time, by mutual agreement, to (i) add
certain actions to the list contained herein, or (ii) remove certain actions from the list
contained herein, in either case, in order to reflect any relevant change in law, regulation or
administrative interpretation occurring after the date of this Agreement.

          (e) Cooperation. The Parties agree that, at the request of the other Party, the
Parties shall cooperate fully to seek to obtain, as expeditiously as possible, the Spin-Off Tax
Opinion, any Supplemental Spin-Off Tax Opinion, any Supplemental Tax Opinion, the IRS Ruling,
and/or any Supplemental Ruling. Such cooperation shall include the execution of any documents that
may be necessary or reasonably helpful in connection with obtaining the Spin-Off Tax Opinion,
Supplemental Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling, and/or Supplemental Ruling
(including any power of attorney, Officer’s Certificate, IRS Ruling Documents, Supplemental Rulings
Documents, and/or reasonably requested written representations confirming that (i) Temple-Inland,
Forestar or Guaranty, as the case may be, has read the Officer’s Certificate, IRS Ruling Documents,
and/or Supplemental Ruling Documents, and (ii) all information and representations, if any,
relating to Temple-Inland (or any Temple-Inland Affiliate), Forestar (or any Forestar Affiliate),
or Guaranty (or any Guaranty Affiliate) as the case may be, contained in the Officer’s Certificate,
IRS Ruling Documents, and/or Supplemental Ruling Documents are true, correct and complete in all
material respects).

     4.04. Allocation of Tax Assets.

          (a) In General. In connection with the Spin-Off, Temple-Inland, Forestar and
Guaranty shall cooperate in determining the allocation of any Tax Assets among Temple-Inland, each
Temple-Inland Affiliate, Forestar, each Forestar Affiliate, Guaranty, and each Guaranty Affiliate.
The allocations will be made in accordance with applicable tax laws. The Parties hereby agree that
in the absence of controlling legal authority or unless otherwise provided under this Agreement,
Tax Assets shall be allocated to the legal entity that created such Tax Assets. If any federal,
state or other alternative minimum tax credit carryforwards attributable to any Pre-Distribution
Period are initially allocated or subsequently reallocated, pursuant to a Final Determination
(together “Allocated Credit Carryforwards”), to Forestar, a Forestar Affiliate, Guaranty, or a
Guaranty Affiliate, then Forestar and Guaranty, as applicable, shall pay to Temple-Inland (i) the
amount of the Tax Benefit to Forestar (or any Forestar Affiliate) or Guaranty (or any Guaranty
Affiliate), as the case may be, of such Allocated Credit Carryforwards or (ii) the amount of the
Tax Detriment to Temple-Inland of such Allocated Credit Carryforwards, whichever occurs earlier.
These payments will continue until Temple-Inland fully recovers such Allocated Credit
Carryforwards.

17

 

          (b) Earnings and Profits. Temple-Inland will advise Forestar and Guaranty in writing
of the decrease in Temple-Inland earnings and profits attributable to the Spin-Off under section
312(h) of the Code on or before the first anniversary of the relevant Distribution Date;
provided, however, that Temple-Inland shall provide Forestar and Guaranty with
estimates of such amounts (determined in accordance with past practice) prior to such anniversary
as reasonably requested by Forestar and Guaranty. Any reasonable third party cost incurred after
the Spin-Off in connection with determining the earnings and profits attributable to the Spin-Off
shall be allocated among Temple-Inland, Forestar and Guaranty consistent with the allocation of
Unallocated Liabilities described in Article VI of the Separation Agreement.

Section 5. Indemnification.

     5.01. Temple-Inland Indemnity. Temple-Inland shall indemnify Forestar, each Forestar
Affiliate, Guaranty, each Guaranty Affiliate and their respective directors, officers and
employees, and hold them harmless from and against any and all Taxes for which Temple-Inland or any
Temple-Inland Affiliate is liable under this Agreement and any loss, cost, damage, fine, penalty,
or other expense of any kind, including reasonable attorneys’ fees and costs, that is attributable
to, or results from, the failure of Temple-Inland, any Temple-Inland Affiliate or any director,
officer or employee to make any payment required to be made under this Agreement or from the
failure of Temple-Inland, any Temple-Inland Affiliate or any director, officer or employee to
provide complete and accurate information in connection with the preparation of any tax return.
Temple-Inland shall further indemnify Guaranty, each Guaranty Affiliate and their respective
directors, officers and employees, and hold them harmless from and against state Income
Taxes resulting from a Final Determination that Internal Distribution 2 and External Distribution 2
fail to satisfy the requirements of section 355(b) of the Code as in effect on May 16,
2006, including any losses, damages, or other expenses that are attributable to such
failure, subject to the following limitation. Guaranty, Guaranty’s Affiliates, and the respective
directors, officers and employees have made covenants, provided information and made
representations related to tax matters in this Agreement, the Officer’s Certificate, Spin-Off Tax
Opinion, IRS Ruling Documents and other opinions as to the tax effect of an aspect of the Plan of
Separation. To the extent any Taxes, losses, damages, costs or expenses of any kind result from an
indemnified Person’s breach of any of those covenants or failure to provide true, correct, and
complete information, Temple-Inland shall not be responsible under the indemnities in this Section
5.01 and shall not indemnify any Person for those Taxes, losses, damages, costs or expenses,
provided that for the purpose of this section only, statements as to future intention shall not be
the basis for a failure of a representation or the basis for a claim of providing untrue, incorrect
or incomplete information unless the statement was intentionally misleading or made in bad faith.

     5.02. Forestar Indemnity. Forestar and each Forestar Affiliate shall jointly and
severally indemnify Temple-Inland, each Temple-Inland Affiliate, Guaranty, each Guaranty Affiliate,
and their respective directors, officers and employees, and hold them harmless from and against any
and all Taxes for which Forestar or any Forestar Affiliate is liable under this Agreement and any
loss, cost, damage, fine, penalty, or other expense of any kind, including reasonable attorneys’
fees and costs, that is attributable to, or results from, the failure of Forestar,

18

 

any Forestar Affiliate or any director, officer or employee to make any payment required to be made
under this Agreement or from the failure of Forestar, any Forestar Affiliate or any director,
officer or employee to provide complete and accurate information in connection with the preparation
of any tax return.

     5.03 Guaranty Indemnity. Guaranty and each Guaranty Affiliate shall jointly and
severally indemnify Temple-Inland, each Temple-Inland Affiliate, Forestar, each Forestar affiliate,
and their respective directors, officers and employees, and hold them harmless from and against any
and all Taxes for which Guaranty or any Guaranty Affiliate is liable under this Agreement and any
loss, cost, damage, fine, penalty, or other expense of any kind, including reasonable attorneys’
fees and costs, that is attributable to, or results from, the failure of Guaranty, any Guaranty
Affiliate or any director, officer or employee to make any payment required to be made under this
Agreement or from the failure of Guaranty, any Guaranty Affiliate, or any director, officer or
employee to provide complete and accurate information in connection with the preparation of any tax
return.

Section 6. Payments.

     6.01. Estimated Tax Payments. Estimated tax payments attributable to
Pre-Distribution Periods will be made in accordance with past Temple-Inland practices and the
Temple-Inland Inc. Tax Allocation Policy. For Post-Distribution Periods, Temple-Inland, Forestar,
and Guaranty will each be responsible for payment of their respective estimated tax payments.

     6.02. True-Up Payments. Not later than thirty (30) Business Days after the filing of
a Consolidated or Combined Tax Return (i) Forestar shall pay to Temple-Inland, or Temple-Inland
shall pay to Forestar, as appropriate, an amount equal to the difference, if any, between the Tax
liability of Forestar and the aggregate amount paid by Forestar with respect to such period under
Section 6.01 and (ii) Guaranty shall pay to Temple-Inland, or Temple-Inland shall pay to Guaranty,
as appropriate, an amount equal to the difference, if any, between the Tax liability of Guaranty
and the aggregate amount paid by Guaranty with respect to such period under Section 6.01

     6.03. Redetermination Amounts. In the event of a redetermination of any Tax Item
reflected on any Consolidated Return or Combined Return (other than Tax Items relating to
Distribution Taxes), as a result of a refund or credit of Taxes paid, a Final Determination or any
settlement or compromise with any Taxing Authority which in any such case would affect the Tax
liability of Forestar or Tax liability of Guaranty, Temple-Inland shall prepare a revised pro forma
Tax Return in accordance with Section 2.01(a) for the relevant taxable period reflecting the
redetermination of such Tax Item as a result of such refund, Final Determination, settlement or
compromise. Forestar and/or Guaranty shall pay to Temple-Inland, or Temple-Inland shall pay to
Forestar and/or Guaranty, as appropriate, an amount equal to the difference, if any, between the
Tax liability of Forestar or Tax liability of Guaranty reflected on such revised pro forma Tax
Return and the Tax liability of Forestar or Tax liability of Guaranty for such period as originally
computed pursuant to this Agreement.

19

 

     6.04. Payments of Refunds and Credits. If one Party receives a refund or credit of
any Tax to which the other Party is entitled pursuant to Section 3.05, the Party receiving such
refund or credit shall pay to the other Party the amount of such refund or credit pursuant to
Section 6.05.

     6.05. Payments Under This Agreement. In the event that one Party (the “Owing
Party”) is required to make a payment to another Party (the “Owed Party”) pursuant to
this Agreement, then such payments shall be made according to this Section 6.05.

          (a) In General. All payments shall be made to the Owed Party or to the appropriate
Taxing Authority as specified by the Owed Party within the time prescribed for payment in this
Agreement, or if no period is prescribed, within twenty (20) days after delivery of written notice
of payment owing together with a computation of the amounts due.

          (b) Treatment of Payments. Unless otherwise required by any Final Determination, the
Parties agree that any payments made by one Party to another Party pursuant to this Agreement
(other than (i) payments of After Tax Amounts pursuant to Section 6.05(d), and (ii) payments of
interest pursuant to Section 6.05(e)) shall be treated for all Tax purposes as nontaxable payments
(dividend distributions or capital contributions, as the case may be) made immediately prior to the
Spin-Offs and, accordingly, as not includible in the taxable income of the recipient or as
deductible by the payor.

          (c) Prompt Performance. All actions required to be taken (including payments) by any
Party under this Agreement shall be performed within the time prescribed for performance in this
Agreement, or if no period is prescribed, such actions shall be performed promptly.

          (d) After Tax Amounts. If pursuant to a Final Determination it is determined that
the receipt or accrual of any payment made under this Agreement (other than payments of interest
pursuant to Section 6.05(e)) is subject to any Tax, the Party making such payment shall be liable
for (a) the After Tax Amount with respect to such payment and (b) interest at the rate described in
Section 6.05(e) on the amount of such Tax from the date such Tax accrues with respect to the
receipt of such payment through the date of payment of such After Tax Amount. A Party making a
demand for a payment pursuant to this Agreement and for a payment of an After Tax Amount with
respect to such payment shall separately specify and compute such After Tax Amount. However, a
Party may choose not to specify an After Tax Amount in a demand for payment pursuant to this
Agreement without thereby being deemed to have waived its right subsequently to demand an After Tax
Amount with respect to such payment.

          (e) Interest. Payments pursuant to this Agreement that are not made within the
period prescribed in this Agreement (the “Payment Period”) shall bear interest for the
period from and including the date immediately following the last date of the Payment Period
through and including the date of payment at a per annum rate equal to the Prime Rate plus two
percent (2%) (or the maximum legal rate whichever is lower). Such interest will be payable at the
same time as the payment to which it relates and shall be calculated on the basis of a year of
three hundred sixty-five (365) days and the actual number of days for which due.

20

 

          (f) Procedures. Any claim for indemnification under this Section 6 shall be governed
by, and be subject to, the provisions of Article VII of the Separation Agreement, which provisions
are hereby incorporated by reference into this Agreement and any references to “Agreement” in such
Article VII as incorporated herein shall be deemed to be references to this Agreement.

Section 7. Tax Proceedings.

     7.01. In General. Except as otherwise provided in this Agreement, the Party
responsible for preparing and filing a Tax Return pursuant to Section 2 (the “Filing
Party”) shall have the exclusive right, in its sole discretion, to control, contest, and
represent the interests of Temple-Inland, any Temple-Inland Affiliate, Forestar, any Forestar
Affiliate, Guaranty or any Guaranty Affiliate in any Audit relating to such Tax Return and to
resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in
connection with or as a result of any such Audit. The Filing Party’s rights shall extend to any
matter pertaining to the management and control of an Audit, including execution of waivers, choice
of forum, scheduling of conferences and the resolution of any Tax Item. Any costs incurred in
handling, settling, or contesting an Audit shall be borne by the Filing Party.

     7.02. Participation of non-Filing Party. Except as otherwise provided in this
Agreement, the non-Filing Party shall, if requested, be kept reasonably informed on the status of
any Audit involving a Sole Responsibility Item or a Joint Responsibility Item. The Filing Party
shall not (i) settle any Audit it controls concerning any such Sole Responsibility Item if such
Item is more than $200,000 or (ii) settle any Audit it controls concerning any such Joint
Responsibility Item, in each case without the prior written consent of the non-Filing Party, and
such consent shall not be unreasonably withheld.

     7.03. Notice. Within thirty (30) days after a Party becomes aware of the existence
of a Tax issue that is reasonably expected to give rise to an indemnification obligation under this
Agreement, such Party shall give notice to the other Party of such issue (such notice shall contain
factual information, to the extent known, describing any asserted tax liability in reasonable
detail), and shall forward to the other Party copies of all notices and material communications
with any Taxing Authority relating to such issue. Notwithstanding any provision in Section 8.06 to
the contrary, if a Party to this Agreement fails to provide the other Party notice as required by
this Section 7.03, and the failure results in a detriment to the other Party then any amount which
the other Party is otherwise required to pay pursuant to this Agreement shall be reduced by the
amount of such detriment.

     7.04. Control of Distribution Tax Proceedings. Forestar or Guaranty may assume sole
control of any Audits relating to Distribution Taxes if it acknowledges in writing that it has sole
liability for any Distribution Taxes under Section 4.01(b) or (c), as the case may be, that might
arise in such Audit and can demonstrate to the reasonable satisfaction of Temple-Inland that it can
satisfy its liability for any such Distribution Taxes.

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Section 8. Miscellaneous.

     8.01. Cooperation and Exchange of Information.

          (a) Cooperation. The Parties shall each cooperate fully (and each shall cause its
respective Affiliates to cooperate fully) with all reasonable requests from another Party for
information, data files and materials not otherwise available to the requesting Party in connection
with the preparation and filing of Tax Returns, claims for refund, and Audits concerning issues or
other matters covered by this Agreement or in connection with the determination of a liability for
Taxes or a right to a refund of Taxes. Such cooperation shall include:

               (i) the retention until the expiration of the applicable statute of limitations, and the
provision upon request, of copies of all Tax Returns, books, records (including information
regarding ownership and Tax basis of property), documentation and other information relating to the
Tax Returns, including accompanying schedules, related work papers, and documents relating to
rulings or other determinations by Taxing Authorities (collectively, “Tax Material”),
provided, however, that no such retention obligation shall exist to the extent such
Tax Material has previously been provided from one Party to the other Party;

               (ii) the execution of any document that may be necessary or reasonably helpful in connection
with any Tax Proceeding, or the filing of a Tax Return or refund claim by a member of the
Temple-Inland Group, the Forestar Group, or the Guaranty Group including certification, to the best
of a Party’s knowledge, of the accuracy and completeness of the information it has supplied; and

               (iii) the use of the Party’s reasonable best efforts to obtain any documentation that may be
necessary or reasonably helpful in connection with any of the foregoing. Each Party shall make its
employees and facilities available on a reasonable and mutually convenient basis in connection with
the foregoing matters.

               (iv) the sharing of information to enable each Party to timely fulfill its reporting
requirements pursuant to Treasury Regulations sections 1.355-5 and 1.368-3.

          (b) Retention of Records.

               (i) Temple-Inland, or any Temple-Inland Affiliate, that is in possession of documentation
relating to Forestar, or any Forestar Affiliate, Guaranty, or any Guaranty Affiliate, including
books, records, Tax Returns and all supporting schedules and information relating thereto that has
not been previously provided to Forestar or Guaranty by Temple-Inland (the “Forestar Business
Records” or “Guaranty Business Records”), and Forestar, or any Forestar Affiliate, and
Guaranty, or any Guaranty Affiliate, that is in possession of documentation relating to the
Temple-Inland, or any Temple-Inland Affiliate, including books, records, Tax Returns and all
supporting schedules and information relating thereto that has not been previously provided to
Temple-Inland by Forestar or Guaranty (the “Temple-Inland Business Records”), shall each
retain such Forestar Business Records, Guaranty Business Records or Temple-Inland Business Records
(i) for a period of seven (7) years following the Forestar and Guaranty Distribution

22

 

Dates or (ii) until the expiration of the applicable statute of limitations, whichever is longer.
Thereafter, (i) if Temple-Inland wishes to dispose of Forestar or Guaranty Business Records in its
possession, Temple-Inland shall provide written notice to Forestar or Guaranty describing the
documentation proposed to be destroyed or disposed of sixty (60) Business Days prior to taking such
action, and Forestar or Guaranty may arrange to take delivery of any or all of the documentation
described in the notice at its expense during the succeeding sixty (60) day period; and (ii) if
Forestar or Guaranty wishes to dispose of Temple-Inland Business Records in its possession,
Forestar or Guaranty shall provide written notice to Temple-Inland describing the documentation
proposed to be destroyed or disposed of sixty (60) Business Days prior to taking such action, and
Temple-Inland may arrange to take delivery of any or all of the documentation described in the
notice at its expense during the succeeding sixty (60) day period.

               (ii) Forestar, or any Forestar Affiliate, that is in possession of Guaranty Business Records
that have not been previously provided to Guaranty by Forestar, and Guaranty, or any Guaranty
Affiliate, that is in possession of Forestar Business Records that have not been previously
provided to Forestar by Guaranty shall each retain such Guaranty Business Records or Forestar
Business Records (i) for a period of seven (7) years following the Forestar and Guaranty
Distribution Dates or (ii) until the expiration of the applicable statute of limitations, whichever
is longer. Thereafter, (i) if Forestar wishes to dispose of Guaranty Business Records in its
possession, Forestar shall provide written notice to Guaranty describing the documentation proposed
to be destroyed or disposed of sixty (60) Business Days prior to taking such action, and Guaranty
may arrange to take delivery of any or all of the documentation described in the notice at its
expense during the succeeding sixty (60) day period; and (ii) if Guaranty wishes to dispose of
Forestar Business Records in its possession, Guaranty shall provide written notice to Forestar
describing the documentation proposed to be destroyed or disposed of sixty (60) Business Days prior
to taking such action, and Forestar may arrange to take delivery of any or all of the documentation
described in the notice at its expense during the succeeding sixty (60) day period

     8.02. Dispute Resolution. In the event that any of the Parties disagree as to the
amount or calculation of any payment to be made under this Agreement, or the interpretation or
application of any provision under this Agreement, the disagreement shall be resolved in accordance
with Article IX of the Separation Agreement provided however that the provisions in section 9.12 of
the Separation Agreement shall not apply. Notwithstanding anything in this Agreement to the
contrary, the dispute resolution provisions set forth in this Section 8.02 shall not be applicable
to any disagreement between the Parties relating to federal Distribution Taxes and any such dispute
shall be settled in a court of law or as otherwise agreed to by the Parties.

     8.03. Complete Agreement; Construction. This Agreement, including the Appendix,
shall constitute the entire agreement between the Parties with respect to the subject matter hereof
and shall supersede all previous negotiations, commitments and writings with respect to such
subject matter. This Agreement supersedes any prior tax matters agreements between Temple-Inland
(or any Temple-Inland Affiliate), Forestar (or any Forestar Affiliate) and/or Guaranty (or any
Guaranty Affiliate) and such prior tax matters agreements shall have no further force and effect.
In the event of any conflict between the terms and conditions of the body of this Agreement and the
terms and conditions of the Appendix, the terms and conditions of such Appendix shall control. In
the event of any conflict between the terms and conditions of this

23

 

Agreement and the terms and conditions of the Separation Agreement or any other Ancillary
Agreement, the terms and conditions of this Agreement shall control.

     8.04. Counterparts. This Agreement may be executed in more than one counterparts,
all of which shall be considered one and the same agreement, and shall become effective when one or
more such counterparts have been signed by each of the Parties and delivered to the other Parties.
Execution of this Agreement or any other documents pursuant to this Agreement by facsimile or other
electronic copy of a signature shall be deemed to be, and shall have the same effect as, execution
by original signature.

     8.05. Survival of Agreement. Except as otherwise contemplated by this Agreement, all
covenants and agreements of the Parties contained in this Agreement shall survive the Effective
Time and remain in full force and effect in accordance with their applicable terms.

     8.06. Notices. All notices, requests, claims, demands and other communications under
this Agreement, as between the Parties, shall be in writing and shall be given or made (and shall
be deemed to have been duly given or made upon receipt unless the day of receipt is not a Business
Day, in which case it shall be deemed to have been duly given or made on the next Business Day) by
delivery in person, by overnight courier service, by facsimile with receipt confirmed (followed by
delivery of an original via overnight courier service) or by registered or certified mail (postage
prepaid, return receipt requested) to the respective Parties at the following addresses (or at such
other address for a Party as shall be specified in a notice given in accordance with this Section
8.06):

	 	 	 	 	 
	 	 	To Temple-Inland:
	 
	 	 	 	 
	 

	 	 	 	Temple-Inland Inc.
	 

	 	 	 	1300 Mopac Expressway South
	 

	 	 	 	Austin, TX 78746
	 

	 	 	 	[Attn: Morris Davis, General Counsel]
	 
	 	 	 	 
	 

	 	 	 	Facsimile: ( )
	 
	 	 	 	 
	 	 	To Forestar:
	 
	 	 	 	 
	 

	 	 	 	Forestar Real Estate Group Inc.
	 

	 	 	 	[Address]
	 

	 	 	 	Attn: [To come]
	 

	 	 	 	Facsimile: ( )
	 
	 	 	 	 
	 	 	To Guaranty:
	 
	 	 	 	 
	 

	 	 	 	Guaranty Financial Group Inc.

24

 

	 	 	 	 	 
	 

	 	 	 	[Address]
	 

	 	 	 	Attn: [To come]
	 

	 	 	 	Facsimile: ( )

     8.07. Changes in Law.

          (a) Any reference to a provision of the Code or a law of another jurisdiction shall include a
reference to any applicable successor provision or law.

          (b) If, due to any change in applicable law or regulations or their interpretation by any
court of law or other governing body having jurisdiction subsequent to the date of this Agreement,
performance of any provision of this Agreement or any transaction contemplated thereby shall become
impracticable or impossible, the Parties hereto shall use their commercially reasonable efforts to
find and employ an alternative means to achieve the same or substantially the same result as that
contemplated by such provision.

     8.08. Waivers. The failure of any Party to require strict performance by any other
Party of any provision in this Agreement will not waive or diminish that Party’s right to demand
strict performance thereafter of that or any other provision hereof.

     8.09. Amendments. Subject to the terms of Section 8.12, this Agreement may not be
modified or amended except by an agreement in writing signed by each of the Parties.

     8.10. Assignment. Except as otherwise expressly provided for in this Agreement, this
Agreement shall not be assignable, in whole or in part, by any Party without the prior written
consent of the other Party, and any attempt to assign any rights or obligations arising under this
Agreement without such consent shall be null and void; provided, that a Party may assign this
Agreement in connection with a merger transaction in which such Party is not the surviving entity
or the sale by such Party of all or substantially all of its Assets, and upon the effectiveness of
such assignment, the assigning Party shall be released from all of its obligations under this
Agreement, if the surviving entity of such merger or the transferee of such Assets shall agree in
writing in form and substance reasonably satisfactory to the other Party, to be bound by the terms
of this Agreement as if named as a “Party” hereto.

     8.11. Successors and Assigns. The provisions of this Agreement and the obligations
and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and
against) the Parties and their respective successors and permitted transferees and assigns.

     8.12. Termination, Etc. Notwithstanding anything to the contrary herein, this
Agreement (including Section 5 (Indemnification) hereof) may be terminated and abandoned at any
time prior to the Forestar Distribution Date or the Guaranty Distribution Date by and in the sole
discretion of Temple-Inland without the approval of Forestar, Guaranty, or the stockholders of
Temple-Inland. In the event of such termination, no Party shall have any liability to any other
Party or any other Person. After the earlier of the Forestar Distribution Date or the Guaranty

25

 

Distribution Date, this Agreement may not be terminated except by an agreement in writing signed by
each of the Parties.

     8.13. Third Party Beneficiaries. Except as otherwise expressly provided in this
Agreement, this Agreement is solely for the benefit of the Parties and should not be deemed to
confer upon third parties any remedy, claim, liability, reimbursement, cause of action or other
right in excess of those existing without reference to this Agreement.

     8.14. Interpretations. Titles and headings to sections herein are inserted for the
convenience of reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.

     8.15. Schedules. The Schedules attached hereto are incorporated herein by reference
and shall be construed with and as an integral part of this Agreement to the same extent as if the
same had been set forth verbatim herein.

     8.16. Governing Law. This Agreement shall be governed by and construed in accordance
with the internal laws, and not the laws governing conflicts of laws, of the State of Texas.

     8.17. Consent to Jurisdiction. Subject to the provisions of this section 8.17, each
of the Parties irrevocably submits to the exclusive jurisdiction of (a) the District Court of the
State of Texas for Travis County, and (b) the United States District Court for the Western District
of Texas, Austin Division (“the “Texas Courts”), for the purposes of any suit, action or
other proceeding to compel arbitration or for provisional relief in aid of arbitration in
accordance with Section 8.02 or for provisional relief to prevent irreparable harm, and to the
non-exclusive jurisdiction of the Texas Courts for the enforcement of any award issued thereunder.
Each of the Parties further agrees that service of any process, summons, notice or document by
United States registered mail to such Party’s respective address set forth above shall be effective
service of process for any action, suit or proceeding in the Texas Courts with respect to any
matters to which it has submitted to jurisdiction in this Section 8.17. Each of the Parties
irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or
proceeding arising out of this Agreement or the transactions contemplated hereby in the Texas
Courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.

     8.18. Specific Performance. The Parties agree that irreparable damage would occur in
the event that the provisions of this Agreement were not performed in accordance with their
specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled to (i) an
injunction or injunctions to enforce specifically the terms and provisions hereof in any
arbitration in accordance with Section 8.02 herein, (ii) provisional or temporary injunctive
relief in accordance therewith in any Texas Court, and (iii) enforcement of any such award of an
arbitral tribunal or a Texas Court in any court of the United States, or any other court or
tribunal sitting in any state of the United States or in any foreign country that has jurisdiction,
this being in addition to any other remedy or relief to which they may be entitled.

26

 

     8.19. Waiver of Jury Trial. SUBJECT TO SECTIONS 8.02, 8.17 AND 8.18 HEREIN, EACH OF
THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY WITH RESPECT TO ANY COURT PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF AND
PERMITTED UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.19.

     8.20. Severability. In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not in any way be affected or
impaired thereby, and the Parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions, the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable provisions.

     8.21. Force Majeure. No Party (or any person acting on its behalf) shall have any
liability or responsibility for failure to fulfill any obligation (other than a payment obligation)
under this Agreement so long as and to the extent to which the fulfillment of such obligation is
prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. A
Party claiming the benefit of this provision shall, as soon as reasonably practicable after the
occurrence of any such event: (a) notify the other Party of the nature and extent of any such Force
Majeure condition and (b) use due diligence to remove any such causes and resume performance under
this Agreement as soon as reasonably practicable.

     8.22. No Circumvention. The Parties agree not to directly or indirectly take any
actions, act in concert with any person who takes an action, or cause or allow any member Affiliate
to take any actions (including the failure to take a reasonable action) such that the resulting
effect is to materially undermine the effectiveness of any of the provisions of this Agreement
(including adversely affecting the rights or ability of any Party to successfully pursue
indemnification, contribution or payment pursuant to Sections 5 and 6).

     8.23. Authorization. Each of the Parties hereby represents and warrants that it has
the power and authority to execute, deliver and perform this Agreement, that this Agreement has
been duly authorized by all necessary corporate action on the part of such Party, that this
Agreement constitutes a legal, valid and binding obligation of each such Party and that the
execution, delivery and performance of this Agreement by such Party does not contravene or conflict
with any provision of law or of its charter or bylaws or any material agreement, instrument or
order binding on such Party.

27

 

     8.24. Setoff. All payments to be made by any Party under this Agreement may be
netted against payments due to such Party under this Agreement, but otherwise shall be made without
setoff, counterclaim or withholding, all of which are hereby expressly waived.

     8.25. Confidentiality. The Parties shall comply with the confidentiality provisions
in Article VIII of the Separation Agreement.

     8.26. Affiliates. Each of the Parties shall cause to be performed all actions,
agreements and obligations set forth herein to be performed by any Affiliate of such Party or by
any entity that becomes an Affiliate of such Party on and after the relevant Distribution Date.

     8.27. Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. This Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the party drafting or causing any instrument
to be drafted.

     8.28. Effective Time. This Agreement shall be effective as of the Effective Time.

[Signature Pages Follow]

28

 

               IN WITNESS WHEREOF, the Parties caused this Tax Matters Agreement to be duly executed as of
the day and year first above written.

	 	 	 	 	 	 	 
	 	 	TEMPLE-INLAND INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	FORESTAR REAL ESTATE GROUP INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	GUARANTY FINANCIAL GROUP INC.
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 

29

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