Document:

exv10w27

 

Exhibit 10.27

TEMPLE-INLAND INC.

2008 INCENTIVE PLAN

     1. Definitions. In the Plan, except where the context otherwise indicates, the
following definitions shall apply:

          1.1. “Affiliate” means a corporation, partnership, business trust, limited liability company,
or other form of business organization at least a majority of the total combined voting power of
all classes of stock or other equity interests of which is owned by the Company, either directly or
indirectly, and any other entity designated by the Committee in which the Company has a significant
interest.

          1.2. “Agreement” means an agreement or other document evidencing an Award. An Agreement may
be in written or such other form as the Committee may specify in its discretion, and the Committee
may, but need not, require a Participant to sign an Agreement.

          1.3. “Award” means a grant of an Option, Restricted Stock, a Restricted Stock Unit, a
Performance Award, or an Other Stock-Based Award.

          1.4. “Board” means the Board of Directors of the Company.

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

          1.6. “Committee” means the Management Development and Executive Compensation Committee of the
Board or such other committee(s), subcommittee(s) or person(s) the Board appoints to administer the
Plan or to make and/or administer specific Awards hereunder. If no such appointment is in effect
at any time, “Committee” shall mean the Board. Notwithstanding the foregoing, “Committee” means
the Board for purposes of granting Awards to members of the Board who are not Employees, and
administering the Plan with respect to those Awards, unless the Board determines otherwise.

          1.7. “Common Stock” means the Company’s common stock, par value $1.00 per share.

          1.8. “Company” means Temple-Inland Inc. and any successor thereto.

          1.9. “Date of Exercise” means the date on which the Company receives notice of the exercise of
an Option in accordance with Section 7.

          1.10. “Date of Grant” means the date on which an Award is granted under the Plan.

          1.11. “Eligible Person” means any person who is (a) an Employee, (b) a member of the Board or
the board of directors of an Affiliate, or (c) a consultant or independent contractor to the
Company or an Affiliate.

 

 

          1.12. “Employee” means any person who the Committee determines to be an employee of the
Company or an Affiliate.

          1.13. “Exercise Price” means the price per Share at which an Option may be exercised.

          1.14. “Fair Market Value” means, unless otherwise determined by the Committee, the closing
price of a share of Common Stock on the New York Stock Exchange (“NYSE”) as of the relevant date;
provided, however, that in the case of an Option, in all events Fair Market Value shall be
determined pursuant to a method permitted by Section 409A of the Code for determining the fair
market value of stock subject to a nonqualified stock option that does not provide for a deferral
of compensation within the meaning of Section 409A of the Code.

          1.15. “Incentive Stock Option” means an Option that the Committee designates as an incentive
stock option under Section 422 of the Code.

          1.16. “Nonqualified Stock Option” means an Option that is not an Incentive Stock Option.

          1.17. “Option” means an option to purchase Shares granted pursuant to Section 6.

          1.18. “Option Period” means the period during which an Option may be exercised.

          1.19. “Other Stock-Based Award” means an Award granted pursuant to Section 11.

          1.20. “Participant” means an Eligible Person who has been granted an Award.

          1.21. “Performance Award” means a performance award granted pursuant to Section 10.

          1.22. “Performance Goals” means performance goals that the Committee establishes, which may be
based on satisfactory internal or external audits, achievement of balance sheet or income statement
objectives, cash flow, customer satisfaction metrics and achievement of customer satisfaction
goals, dividend payments, earnings (including before or after taxes, interest, depreciation, and
amortization), earnings growth, earnings per share; economic value added, expenses (including plant
costs and sales, general and administrative expenses), improvement of financial ratings, internal
rate of return, market share, net asset value, net income, net operating gross margin, net
operating profit after taxes (“NOPAT”), net sales growth, NOPAT growth, operating income, operating margin,
comparisons to the performance of other companies, pro forma income, regulatory compliance, return
measures (including return on assets, designated assets, capital, committed capital, net capital
employed, equity, sales, or stockholder equity, and

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return versus the Company’s cost of capital),
revenues, sales, stock price (including growth measures and total stockholder return), comparison
to stock market indices, implementation or completion of one or more projects or transactions
(including mergers, acquisitions, dispositions, and restructurings), working capital, or any other
objective goals that the Committee establishes. Performance Goals may be absolute in their terms
or measured against or in relationship to other companies comparably, similarly or otherwise
situated. Performance Goals may be particular to an Eligible Person or the department, branch,
Affiliate, or division in which the Eligible Person works, or may be based on the performance of
the Company, one or more Affiliates, or the Company and one or more Affiliates, and may cover such
period as the Committee may specify.

          1.23. “Plan” means this Temple-Inland Inc. 2008 Incentive Plan, as amended from time to time.

          1.24. “Restricted Stock” means Shares granted pursuant to Section 8.

          1.25. “Restricted Stock Units” means an Award providing for the contingent grant of Shares (or
the cash equivalent thereof) pursuant to Section 9.

          1.26. “Section 422 Employee” means an Employee who is employed by the Company or a “parent
corporation” or “subsidiary corporation” (each as defined in Sections 424(e) and (f) of the Code)
with respect to the Company, including a “parent corporation” or “subsidiary corporation” that
becomes such after adoption of the Plan.

          1.27. “Share” means a share of Common Stock.

          1.28. “Ten-Percent Stockholder” means a Section 422 Employee who (applying the rules of
Section 424(d) of the Code) owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or a “parent corporation” or “subsidiary
corporation” (each as defined in Sections 424(e) and (f) of the Code) with respect to the Company.

Unless the context expressly requires the contrary, references in the Plan to (a) the term
“Section” refers to the sections of the Plan, and (b) the word “including” means “including
(without limitation).”

     2. Purpose. The Plan is intended to assist the Company and its Affiliates in
attracting and retaining Eligible Persons of outstanding ability and to promote the alignment of
their interests with those of the stockholders of the Company.

     3. Administration. The Committee shall administer the Plan and shall have plenary
authority, in its discretion, to grant Awards to Eligible Persons, subject to the provisions of the
Plan. The Committee shall have plenary authority and discretion, subject to the provisions of the Plan, to determine the Eligible Persons to whom it grants
Awards, the terms (which terms need not be identical) of all Awards, including without limitation,
the Exercise Price of Options, the time or times at which Awards are granted, the number of Shares
covered by Awards, whether an Option shall be an Incentive Stock

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Option or a Nonqualified Stock
Option, any exceptions to nontransferability, any Performance Goals applicable to Awards, any
provisions relating to vesting, and the periods during which Options may be exercised and
Restricted Stock shall be subject to restrictions. In making these determinations, the Committee
may take into account the nature of the services rendered or to be rendered by Award recipients,
their present and potential contributions to the success of the Company and its Affiliates, and
such other factors as the Committee in its discretion shall deem relevant. Subject to the
provisions of the Plan, the Committee shall have plenary authority to interpret the Plan and
Agreements, prescribe, amend and rescind rules and regulations relating to them, and make all other
determinations deemed necessary or advisable for the administration of the Plan and Awards granted
hereunder. The determinations of the Committee on the matters referred to in this Section 3 shall
be binding and final. The Committee may delegate its authority under this Section 3 and the terms
of the Plan to such extent it deems desirable and is consistent with the requirements of applicable
law.

     4. Eligibility. Awards may be granted only to Eligible Persons, provided that (a)
Incentive Stock Options may be granted only to Eligible Persons who are Section 422 Employees; and
(b) Options may be granted only to persons with respect to whom Shares constitute stock of the
service recipient (within the meaning of Section 409A of the Code and the applicable Treasury
Regulations thereunder).

     5. Stock Subject to Plan.

          5.1. Subject to adjustment as provided in Section 13, the maximum number of Shares that may be
issued under the Plan is 7,375,000 Shares. Shares issued under the Plan may, in whole or in part,
be authorized but unissued Shares or Shares that shall have been, or may be, reacquired by the
Company in the open market, in private transactions, or otherwise. The number of Shares authorized
for issuance under the Plan shall be decreased by 2.33 Shares for each Share issued pursuant to
Awards that are not Options (any Awards that are not Options being “Full Value Awards”).

          5.2. Subject to adjustment as provided in Section 13, the maximum number of Shares with
respect to which an Employee may be granted Awards under the Plan during any calendar year is
500,000 Shares. The maximum number of Shares with respect to which an Employee has been granted
Awards shall be determined in accordance with Section 162(m) of the Code.

          5.3. If an Option expires or terminates for any reason without having been fully exercised, if
shares of Restricted Stock are forfeited, or if Shares covered by an Award are not issued or are
forfeited, the unissued or forfeited Shares that had been subject to the Award shall be available
for the grant of additional Awards; provided, however, that: (a) in the case of Full Value Awards,
the number of Shares that again become available for the grant of Awards under the Plan shall reflect the last sentence of
Section 5.1, so that, by way of example, if 100 shares of Restricted Stock are forfeited, 233
Shares shall again be available for the grant of Awards, subject to the last sentence of Section
5.1; (b) in the case of Shares that are withheld to pay withholding taxes, no such withheld Shares
shall be available for the grant of Awards hereunder; (c) in the case of

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the surrender of all or a
portion of an Option pursuant to Section 6.4 hereof, the excess of the number of Shares as to which
the Option is surrendered over the number of Shares issued to the Participant in consideration for
such surrender shall not be available for the grant of Awards hereunder; and (d) in the case of
delivery of Shares pursuant to Section 7.2 hereof as payment of the Exercise Price, no such Shares
shall be available for the grant of Awards hereunder.

     6. Options.

          6.1. Options granted under the Plan shall be either Incentive Stock Options or Nonqualified
Stock Options, as designated by the Committee. Each Option granted under the Plan shall be
identified as either a Nonqualified Stock Option or an Incentive Stock Option, and each Option
shall be evidenced by an Agreement that specifies the terms and conditions of the Option. Options
shall be subject to the terms and conditions set forth in this Section 6 and such other terms and
conditions not inconsistent with the Plan as the Committee may specify. The Committee, in its
discretion, may condition the grant or vesting of an Option upon the achievement of one or more
specified Performance Goals.

          6.2. The Exercise Price of an Option granted under the Plan shall not be less than 100% of the
Fair Market Value of a Share on the Date of Grant. Notwithstanding the foregoing, in the case of
an Incentive Stock Option granted to an Employee who, on the Date of Grant is a Ten-Percent
Shareholder, the Exercise Price shall not be less than 110% of the Fair Market Value of a Share on
the Date of Grant.

          6.3. The Committee shall determine the Option Period for an Option, which shall be
specifically set forth in the Agreement, provided that an Option shall not be exercisable after ten
years (five years in the case of an Incentive Stock Option granted to an Employee who on the Date
of Grant is a Ten-Percent Stockholder) from its Date of Grant.

          6.4. To the extent authorized by the Committee, and in accordance with such rules as the
Committee may prescribe, a Participant may surrender to the Company an Option (or a portion
thereof) that has become exercisable and receive upon such surrender, without any payment to the
Company (other than required tax withholding amounts) that number of Shares (equal to the highest
whole number of Shares) having an aggregate Fair Market Value as of the date of surrender equal to
that number of Shares subject to the Option (or portion thereof) being surrendered multiplied by an
amount equal to the excess of (i) the Fair Market Value on the date of surrender over (ii) the
Exercise Price, plus an amount of cash equal to the fair market value of any fractional Share to
which the Participant would be entitled but for the parenthetical above relating to the issuance of a
whole number of Shares. Any such surrender shall be treated as the exercise
of the Option (or portion thereof).

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     7. Exercise of Options.

          7.1. Subject to the terms of the applicable Agreement, an Option may be exercised, in whole or
in part, by delivering to the Company a notice of the exercise, in such form as the Committee may
prescribe, accompanied by (a) full payment for the Shares with respect to which the Option is
exercised or (b) to the extent provided in the applicable Agreement, irrevocable instructions to a
broker to deliver promptly to the Company cash equal to the exercise price of the Option.

          7.2. To the extent provided in the applicable Agreement or otherwise authorized by the
Committee, payment may be made by delivery (including constructive delivery) of Shares (provided
that such Shares, if acquired pursuant to an Option or other Award granted hereunder or under any
other compensation plan maintained by the Company or any Affiliate, have been held by the
Participant for such period, if any, as the Committee may specify) valued at Fair Market Value on
the Date of Exercise or surrender of the Option (or portion thereof) as provided in Section 6.4.

     8. Restricted Stock Awards. Each grant of Restricted Stock under the Plan shall be
subject to an Agreement specifying the terms and conditions of the Award. Restricted Stock granted
under the Plan shall consist of Shares that are restricted as to transfer, subject to forfeiture,
and subject to such other terms and conditions as the Committee may specify. Such terms and
conditions may provide, in the discretion of the Committee, for the lapse of such transfer
restrictions or forfeiture provisions to be contingent upon the achievement of one or more
specified Performance Goals.

     9. Restricted Stock Unit Awards. Each grant of Restricted Stock Units under the Plan
shall be evidenced by an Agreement that (a) provides for the issuance of Shares (or the cash
equivalent thereof) to a Participant at such time(s) as the Committee may specify and (b) contains
such other terms and conditions as the Committee may specify, including, terms that condition the
issuance or vesting of Restricted Stock Unit Awards upon the achievement of one or more specified
Performance Goals.

     10. Performance Awards. Each Performance Award granted under the Plan shall be
evidenced by an Agreement that (a) provides for the payment of cash or issuance of Shares to a
Participant contingent upon the attainment of one or more specified Performance Goals over such
period as the Committee may specify, and (b) contains such other terms and conditions as the
Committee may specify. If the terms of a Performance Award provide for payment in the form of
Shares, for purposes of Section 5.2, the Performance Award shall be deemed to cover a number of
Shares equal to the maximum number of Shares that may be issued upon payment of the Award. The
maximum cash amount payable to any Employee pursuant to all Performance Awards granted to an
Employee during a calendar year shall not exceed $5 million. The Committee may, in its discretion,
grant Performance Awards pursuant to which the amount and payment of the
Award is determined by reference to a percentage of a bonus or incentive pool that applies to
more than one Participant, and the amount of the bonus or incentive pool may, in the discretion of
the Committee, be either fixed in amount or determined based upon the achievement of one or more
Performance Goals.

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     11. Other Stock-Based Awards. The Committee may in its discretion grant stock-based
awards (including awards based on dividends) of a type other than those otherwise provided for in
the Plan, including the issuance or offer for sale of unrestricted Shares (“Other Stock-Based
Awards”). Other Stock-Based Awards shall cover such number of Shares and have such terms and
conditions as the Committee shall determine, including terms that condition the payment or vesting
the Other Stock-Based Award upon the achievement of one or more Performance Goals.

     12. Dividends and Dividend Equivalents. The terms of an Award, other than an Option,
may provide a Participant with the right, subject to such terms and conditions as the Committee may
specify, to receive dividend payments or dividend equivalent payments with respect to Shares
covered by such Award, which payments may be either made currently or credited to an account
established for the Participant, and may be settled in cash or Shares, as determined by the
Committee. In the discretion of the Committee, payment of dividends or dividend equivalents may be
contingent upon the achievement of one or more Performance Goals.

     13. Capital Events and Adjustments.

          13.1. In the event of any change in the outstanding Common Stock by reason of any stock
dividend, stock split, reverse stock split, spin-off, split-off, recapitalization,
reclassification, combination or exchange of shares, merger, consolidation, liquidation or the
like, the Committee shall provide for a substitution for or adjustment in: (a) the number and class
of securities subject to outstanding Awards or the type of consideration to be received upon the
exercise or vesting of outstanding Awards, (b) the Exercise Price of Options, (c) the aggregate
number and class of Shares for which Awards thereafter may be granted under the Plan, and (d) the
maximum number of Shares with respect to which an Employee may be granted Awards during any
calendar year.

          13.2. Any provision of the Plan or any Agreement to the contrary notwithstanding, in the event
of a merger or consolidation to which the Company is a party, the Committee shall take such
actions, if any, as it deems necessary or appropriate to prevent the enlargement or diminishment of
Participants’ rights under the Plan and Awards granted hereunder, and may, in its discretion, cause
any Award granted hereunder to be canceled in consideration of a cash payment equal to the fair
value of the canceled Award, as determined by the Committee in its discretion. The fair value of
an Option shall be deemed to be equal to the product of (a) the number of Shares the Option covers
(and has not previously been exercised) and (b) the excess, if any, of the Fair Market Value of a
Share as of the date of cancellation over the Exercise Price of the Option.

     14. Termination or Amendment. The Board may amend or terminate the Plan in any
respect at any time; provided, however, that after the stockholders of the Company have approved
the Plan, the Board shall not amend or terminate the Plan without approval of (a) the Company’s
stockholders to the extent applicable law or regulations or the requirements of the principal
exchange or interdealer quotation system on which the

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Common Stock is listed or quoted, if any,
requires stockholder approval of the amendment or termination, and (b) each affected Participant if
the amendment or termination would adversely affect the Participant’s rights or obligations under
any Award granted prior to the date of the amendment or termination.

     15. Modification, Substitution of Awards. Subject to the terms and conditions of the
Plan, the Committee may modify the terms of any outstanding Awards; provided, however, that (a) no
modification of an Award shall, without the consent of the Participant, alter or impair any of the
Participant’s rights or obligations under such Award, and (b) subject to Section 13, in no event
may an Option be (i) modified to reduce the Exercise Price of the Option or (ii) cancelled or
surrendered in consideration for cash, other Awards, or the grant of a new Option with a lower
Exercise Price.

     16. Foreign Employees. Without amendment of the Plan, the Committee may grant Awards
to Eligible Persons who are subject to the laws of foreign countries or jurisdictions on such terms
and conditions different from those specified in the Plan as may in the judgement of the Committee
be necessary or desirable to foster and promote achievement of the purposes of the Plan. The
Committee may make such modifications, amendments, procedures, sub-plans and the like as may be
necessary or advisable to comply with provisions of laws of other countries or jurisdictions in
which the Company or any Affiliate operates or has employees.

     17. Stockholder Approval. The Plan, and any amendments hereto requiring stockholder
approval pursuant to Section 14 are subject to approval by vote of the stockholders of the Company
at the next annual or special meeting of stockholders following adoption by the Board.

     18. Withholding. The Company’s obligation to issue or deliver Shares or pay any
amount pursuant to the terms of any Award granted hereunder shall be subject to satisfaction of
applicable federal, state, local, and foreign tax withholding requirements. To the extent
authorized by the Committee, and in accordance with such rules as the Committee may prescribe, a
Participant may satisfy any withholding tax requirements by one or any combination of the following
means: (a) tendering a cash payment, (b) authorizing the Company to withhold Shares otherwise
issuable to the Participant, or (c) delivering to the Company already-owned and unencumbered
Shares.

     19. Term of Plan. Unless sooner terminated by the Board pursuant to Section 14, the
Plan shall terminate on the date that is ten years after the earlier of the date that the Plan is
adopted by the Board or approved by the Company’s stockholders, and no Awards may be granted or
awarded after such date. The termination of the Plan shall not affect the validity of any Award
outstanding on the date of termination.

     20. Indemnification of Committee. In addition to such other rights of indemnification
as they may have as members of the Board or Committee, the Company shall indemnify members of the
Committee against all reasonable expenses, including attorneys’ fees, actually and reasonably
incurred in connection with the defense of any action, suit or proceeding, or in connection with
any appeal therein, to which they or any

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of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any Award granted hereunder, and against all
amounts reasonably paid by them in settlement thereof or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, if such members acted in good faith and in a manner which
they believed to be in, and not opposed to, the best interests of the Company.

     21. General Provisions.

          21.1. The establishment of the Plan shall not confer upon any Eligible Person any legal or
equitable right against the Company, any Affiliate or the Committee, except as expressly provided
in the Plan. Participation in the Plan shall not give an Eligible Person any right to be retained
in the service of the Company or any Affiliate.

          21.2. Neither the adoption of the Plan nor its submission to the Company’s stockholders shall
be taken to impose any limitations on the powers of the Company or its Affiliates to issue, grant
or assume options, warrants, rights, restricted stock or other awards otherwise than under the
Plan, or to adopt other stock option, restricted stock, or other plans, or to impose any
requirement of stockholder approval upon the same.

          21.3. The interests of any Eligible Person under the Plan and/or any Award granted hereunder
are not subject to the claims of creditors and may not, in any way, be transferred, assigned,
alienated or encumbered except to the extent provided in an Agreement.

          21.4. The Plan shall be governed, construed and administered in accordance with the laws of
the State of Texas without giving effect to the conflict of laws principles.

          21.5. The Committee may require each person acquiring Shares pursuant to Awards granted
hereunder to represent to and agree with the Company in writing that such person is acquiring the
Shares without a view to distribution thereof. The certificates for such Shares may include any
legend which the Committee deems appropriate to reflect any restrictions on transfer. All
certificates for Shares issued pursuant to the Plan shall be subject to such stock transfer orders
and other restrictions as the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon which the Common
Stock is then listed or interdealer quotation system upon which the Common Stock is then quoted,
and any applicable federal or state securities laws. The Committee
may place a legend or legends on any such certificates to make appropriate reference to such
restrictions.

          21.6. The Company shall not be required to issue any certificate or certificates for Shares
with respect to Awards granted under the Plan, or record any person as a holder of record of
Shares, without obtaining, to the complete satisfaction of the Committee, the approval of all
regulatory bodies the Committee deems necessary,

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and without complying to the Board’s or
Committee’s complete satisfaction, with all rules and regulations under federal, state or local law
the Committee deems applicable.

          21.7. To the extent that the Plan provides for issuance of stock certificates to reflect the
issuance of Shares, the issuance may be effected on a noncertificated basis, to the extent not
prohibited by applicable law or the rules of any stock exchange or automated dealer quotation
system on which the Shares are traded. No fractional Shares shall be issued or delivered pursuant
to the Plan or any Award. The Committee shall determine whether cash, other Awards, or other
property shall be issued or paid in lieu of any fractional Shares or whether any fractional Shares
or any rights thereto shall be forfeited or otherwise eliminated.

          21.8. Notwithstanding any other provision of the Plan to the contrary, to the extent any Award
(or a modification of an Award) under the Plan results in the deferral of compensation (for
purposes of Section 409A of the Code), the terms and conditions of the Award shall comply with
Section 409A of the Code.

10exv10w28

 

Exhibit 10.28

TEMPLE-INLAND INC.

NONQUALIFIED STOCK OPTION AGREEMENT

     This Agreement is entered into between TEMPLE-INLAND INC., a Delaware corporation
(“Temple-Inland”) and the Employee named above, and is an integral and inseparable term of
Employee’s employment as a salaried employee of Temple-Inland or one of its Affiliates. In
consideration of the mutual covenants hereinafter set forth and for other good and valuable
consideration, Temple-Inland and the Employee hereby agree as follows:

	1.	 	Grant of Option. Pursuant to, and subject to the terms and conditions set forth in
the Plan, Temple-Inland hereby irrevocably grants to the Employee, as a matter of separate
agreement and not in lieu of salary or any other compensation for services, the option to
purchase all or any part of the above stated number of shares of the Common Stock at the above
stated price on the terms and conditions herein set forth (the “Option”). The Option is a
Nonstatutory Stock Option and is not intended to qualify as an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

	2.	 	Governing Documents. This Agreement and the award hereunder is subject to all the
restrictions, terms and provisions of the Temple-Inland Inc. 2008 Incentive Plan (the “Plan”)
and of the Temple-Inland Inc. Stock Option Terms and Conditions dated February 1, 2008 (the
“Terms and Conditions”; and together with the Plan, the “Plan Documents”) which are herein
incorporated by reference and to the terms of which the Employee hereby agrees. Capitalized
terms used in this Agreement that are not defined herein shall have the meaning set forth in
the Plan Documents.

	3.	 	Exercise of Option. The Option shall become exercisable in installments on and after
each “Date Exercisable” as stated above. The Option may be exercised in whole, at any time,
or in part, from time to time, as to all or any of the shares as to which the Option is then
exercisable under the Option (provided that the Option may not be exercised as to less than
the lesser of 100 shares or the number of shares as to which the Option is then exercisable).
The term of the Option shall commence on the Date of Grant and shall expire on the Expiration
Date stated above or such earlier date as is prescribed in the Plan Documents. Except as
otherwise provided in the Plan Documents, the Option shall not be exercisable unless the
Employee shall, at the time of exercise, be an employee of Temple-Inland or one of its
Affiliates. The Option may be exercised only upon notice to Temple-Inland and payment of the
Exercise Price and tax withholding in the manner set forth in the Plan Documents.

	4.	 	No Stockholder Rights. The Employee shall have none of the rights of a stockholder
with respect to the shares of Common Stock subject to the Option until such shares shall have
been transferred to the Employee upon the exercise of the Option.

	5.	 	Employment Requirement. The Employee agrees that the Employee will remain in the
employ of Temple-Inland or of an Affiliate for a period ending on one year from the date
hereof and that the Employee will, during such employment, devote his or her time, energy and
skill to the service of Temple-Inland or such Affiliate and the promotion of its interests,
subject to vacations, sick leave and other absences in accordance with the regular policies of
Temple-Inland or such Affiliate. Notwithstanding the foregoing, if the Employee has been
granted one or more options under the Plan or the Temple-Inland Inc. 2003 Stock Incentive
Plan, the period of time during which the Employee shall be obligated to remain in the employ
of Temple-Inland or of an Affiliate hereunder and under the terms of such other option
agreement or agreements shall run concurrently and not consecutively. Such employment shall
be at the pleasure of Temple-Inland or such Affiliate and shall be at such compensation as
Temple-Inland or such Affiliate shall determine from time to time. Upon termination of the
Employee’s employment (voluntary or involuntary, with or without cause) within the one (1)
year period described above without the

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written consent of Temple-Inland or such Affiliate to waive this requirement, the Option
shall forthwith terminate.

	6.	 	Arbitration. The Employee and Temple-Inland agree that this Agreement arises out
of, and is inseparable from, the Employee’s employment with Temple-Inland or any of its
Affiliates. The Employee and Temple-Inland further agree to final and binding arbitration as
the exclusive forum for resolution of any dispute of any nature whatsoever, whether initiated
by the Employee or Temple-Inland, arising out of, related to, or connected with Employee’s
employment with, or termination by, Temple-Inland or any of its Affiliates. This includes,
without limitation, any dispute arising out of the application, interpretation,
enforcement, or claimed breach of this Agreement. The only exceptions to the scope of this
arbitration provision are claims arising under any written agreement between the Employee and
Temple-Inland or its Affiliate that expressly provides that such claims are not subject
to binding arbitration. Arbitration under this provision shall be conducted
under the employment dispute rules and procedures of either the American Arbitration
Association or of JAMS/Endispute, according to the preference of the party initiating such
arbitration. Appeal from, or confirmation of, any arbitration award under this paragraph
may be made to any court of competent jurisdiction under standards applicable to appeal or
confirmation of arbitration awards under the Federal Arbitration Act. This arbitration
provision and related proceedings shall be subject to and governed by the Federal Arbitration
Act.

	7.	 	Stockholder Approval. The Option granted hereby is granted subject to approval of
the Plan at Temple-Inland’s first annual stockholders meeting following the date of this
Agreement, and if the Plan is not so approved by Temple-Inland’s stockholders at such
stockholders meeting, the Option shall be immediately cancelled and shall be void ab
initio.

	8.	 	Miscellaneous. The Committee may from time to time modify or amend this Agreement
in accordance with the provisions of the Plan Documents. This Agreement shall be binding
upon and inure to the benefit of Temple-Inland and its successors and assigns and shall be
binding upon and inure to the benefit of the Employee and his or her legatees, distributees
and personal representatives. By signing this Agreement, the Employee acknowledges and
expressly agrees that the Employee has read the Agreement and the Plan Documents and agrees
to their terms. This Agreement may be executed by Temple-Inland and the Employee by means of
electronic or digital signatures, which shall have the same force and effect as manual
signatures. The Employee acknowledges and agrees that clicking “I Accept” on the Company’s
online grant acceptance screen has the effect of affixing the Employee’s electronic signature
to this Agreement. This Agreement shall be governed by and construed in accord with federal
law, where applicable, and otherwise with the laws of the State of Texas.

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TEMPLE-INLAND INC.

STOCK OPTION TERMS AND CONDITIONS

FEBRUARY 1, 2008

1.
Definitions: For purposes of this Temple-Inland Inc. Stock Option Terms and Conditions
(the “Terms and Conditions”), the Temple Inland Inc. 2008 Incentive Plan (the “Plan”; and
together with the Terms and Conditions, the “Plan Documents”), and the Options to which this
Terms and Conditions applies, the following terms shall have the meanings set forth below:

	 	a.	 	Change in Control:

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

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

3

 

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

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

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

	 	b.	 	Disability: means Termination of Service due to a Participant’s
becoming disabled (within the meaning of Section 409A of the Code).

4

 

	 	c.	 	Exercise Price: means the Exercise Price, as defined in the Plan.
	 
	 	d.	 	Group: means Temple-Inland and its Affiliates.
	 
	 	e.	 	Participant: means any Eligible Employee who has been granted an
Option, or any transferee of an Option by reason of the death of the Eligible Employee
or pursuant to the requirements of applicable law.
	 
	 	f.	 	Plan: means the Temple-Inland Inc. 2008 Incentive Plan.
	 
	 	g.	 	Retirement: means a Participant’s Termination of Service after either
(i) attaining age 65 or (ii) attaining age 55 and completing at least five years of
service with Temple-Inland or any of its Affiliates.
	 
	 	h.	 	Temple-Inland: means Temple-Inland Inc. and any successor.
	 
	 	i.	 	Termination of Service: means the Eligible Employee’s termination of
employment by the Group for any reason.

	 	 	Capitalized terms used herein but not defined herein shall have the meaning assigned to such
terms in the Plan.
	 
	2.	 	Acceptance of Option Agreement: An Option shall be immediately cancelled and expire
if the applicable Option Agreement is not accepted (in such manner as may be specified by
Temple-Inland) by a Participant (or his or her agent or attorney) and delivered to
Temple-Inland (in such manner as may be specified by Temple-Inland) within 60 days after the
Grant Date of the Option (unless an extension of such deadline for extenuating circumstances
is approved by a Vice President of Temple-Inland).

	 	3.	 	Exercise of Options:
	 
	 	a.	 	Temple-Inland shall not be required to deliver certificates or instruments for
shares with respect to which an Option is exercised until the exercise price for the
shares of Common Stock being purchased has been paid in full, except as provided in
paragraph 3.d. hereof.
	 
	 	b.	 	In order to exercise an Option, notice must be provided to Temple-Inland in
such form as may be specified by Temple-Inland. Such notice shall state that the
Participant elects to exercise a specified Option, the number of shares of Common Stock
in respect of which it is being exercised, and the manner of payment of the exercise
price of the Option.
	 
	 	c.	 	Except as provided in paragraph 3.d. hereof, the notice shall be accompanied by
payment of the full exercise price of the Option with respect to the number of shares
being purchased. The Exercise Price shall be paid in cash, by irrevocable instructions
to a broker to deliver promptly to Temple-Inland cash equal to the Exercise Price of
the Option, or unless otherwise provided in the applicable Option Agreement, in whole
shares of Common Stock held by the Participant for such period, if any, as may be
specified by the Committee, or partly in cash and partly in such Common Stock. Cash
payments shall be made by certified or bank cashier’s check, or by the wire transfer of
immediately available funds, in each case payable to the order of Temple-Inland (or
such other person or entity as may be specified by Temple-Inland). Payments of the
Exercise Price of an Option that are made in the form of Common Stock (which shall be
valued at Fair Market Value) may be made by (i) delivery of stock certificates in
negotiable form with an issue date indicating the Common Stock has been held by the
Participant for such period, if any, as may be specified by the Committee, or (ii)
unless otherwise determined by the Committee, delivery of the Participant’s
representation that on the

5

 

date of exercise he or she owns the requisite number of shares which he or she has
held for such period, if any, as may be specified by the Committee, and, unless such
shares are registered in the Participant’s name as verified by Temple-Inland’s
transfer agent’s records, a representation executed by the Participant’s brokerage
firm or other entity in whose name such shares are registered that on the date of
exercise the Participant beneficially owns the requisite number of shares and has
held such shares for such period, if any, as may be specified by the Committee,
(“Certificateless Exercise”). Delivery of such a representation pursuant to a
Certificateless Exercise shall be treated as the delivery of the specified number of
shares of Common Stock; provided, however, that the number of shares issued to the
Participant upon exercise of the Option shall be reduced by the number of shares
specified in the representation.

	 	d.	 	Unless otherwise prohibited by the Committee, and in accordance with such rules
as the Committee may prescribe, a Participant may surrender to Temple-Inland an Option
(or a portion thereof) that has become exercisable and receive upon such surrender,
without any payment to Temple-Inland (other than required tax withholding amounts) that
number of shares (equal to the highest whole number of shares) having an aggregate Fair
Market Value as of the date of surrender equal to that number of shares subject to the
Option (or portion thereof) being surrendered multiplied by an amount equal to the
excess of (i) the Fair Market Value on the date of surrender over (ii) the Exercise
Price, plus an amount of cash equal to the fair market value of any fractional share to
which the Participant would be entitled but for the parenthetical above relating to the
issuance of a whole number of shares. Any such surrender shall be treated as the
exercise of the Option (or portion thereof) and the provisions of paragraph 3.c. hereof
shall not apply.
	 
	 	e.	 	Except as provided in paragraph 5 hereof, no Option may be exercised at any
time unless the holder thereof is then an Employee of the Group.

	4.	 	Withholding: Temple-Inland’s obligation to deliver shares of Common Stock upon the
exercise of an Option shall be subject to the satisfaction of applicable federal, state and
local tax withholding requirements. Unless otherwise prohibited by the Committee, and in
accordance with rules prescribed by the Committee, each Participant may satisfy any such
withholding tax obligation by any of the following means or by a combination of such means:
(a) tendering a cash payment; (b) authorizing Temple-Inland to withhold shares of Common Stock
from the shares otherwise issuable to the Participant as the result of the exercise of an
Option, or (c) delivering to Temple-Inland unencumbered shares of Common Stock held by the
Participant for such period, if any, as may be specified by the Committee. Shares of Common
Stock that are withheld or delivered to satisfy applicable withholding taxes shall be valued
at their Fair Market Value on the date the withholding tax obligation arises. Only the
required statutory minimum tax may be withheld; excess tax withholding is not allowed.

	5.	 	Termination of Employment: In the event of the Termination of Service of a
Participant to whom an Option has been granted, the Option may, subject to the provisions of
paragraph 3 hereof, be exercised as follows:

	 	 	 	 	 
	 	 	Vested Option Exercise	 	Treatment of Unvested
	Termination	 	Period	 	Options
	 
	Death

	 	12 months
	 	Immediately Vest
	Disability

	 	36 months
	 	Immediately Vest
	Retirement

	 	Until Expiration of Option
	 	Immediately Vest
	Other Termination of
Service

	 	3 months
	 	Forfeited

6

 

	 	 	Notwithstanding the foregoing, in no event may an Option be exercised after expiration of
its stated term. Options granted under the Plan to Eligible Employees shall not be affected
by any change of employment so long as the Participant continues to be an employee of the
Group. An Agreement may contain such provisions as the Committee may approve with respect
to the effect of approved leaves of absence for employees.
	 
	6.	 	Adjustments upon Changes in Capitalization: Notwithstanding any other provisions of
the Plan, in the event of any change in the outstanding Common Stock by reason of any stock
dividend, split-up, spin-off, recapitalization, reclassification, combination or exchange of
shares, merger, consolidation or liquidation and the like, the Committee shall provide for a
substitution for or adjustment in (i) the number and class of shares subject to outstanding
Options, and (ii) the exercise prices of outstanding Options. The Committee’s determinations
with regard to the adjustments or substitutions provided for by this paragraph shall be
conclusive. The Committee may at any time, in its sole discretion, make such amendments to
the terms of Option Agreements as it deems necessary or appropriate to reflect any adjustments
or substitutions made under the Plan or pursuant to this paragraph. With respect to such
options and/or other awards, if any, that may have been granted to the Participant under the
Temple-Inland Inc. 2003 Stock Incentive Plan prior to the date hereof, the Participant (a)
acknowledges and agrees that pursuant to memoranda dated August 9, 2007, November 14, 2007,
and January 11, 2008, the Participant has been advised of certain changes and adjustments made
by the Committee to such options and other awards (including changes and adjustments relating
to Temple-Inland’s spin-off of Guaranty Financial Group Inc. and Forestar Real Estate Group
Inc., and such options’ and other awards’ change in control and retirement provisions), (b)
acknowledges and agrees to such changes and adjustments, and (c) acknowledges and agrees that
with respect to such options, if any, the Temple-Inland Inc. Stock Option Terms and Conditions
document dated November 2, 2007 (the “November 2, 2007 Option Terms and Conditions”) and
included in the prospectus dated January 1, 2008 for the Temple-Inland Inc. 2003 Stock
Incentive Plan supersedes and replaces the previously in effect Temple Inland Inc. Standard
Terms and Conditions document to the extent provided in the November 2, 2007 Option Terms and
Conditions.
	 
	7.	 	Change in Control: Notwithstanding any contrary waiting period, installment period
or other limitation or restriction in any Option Agreement or in the Plan, each outstanding
Option granted under the Plan shall become exercisable in full for the aggregate number of
shares covered thereby, in the event of a Change in Control. Any provision of the Plan
Documents or any Option Agreement to the contrary notwithstanding, in the event of a merger or
consolidation to which Temple-Inland is a party, the Committee shall take such actions, if
any, as it deems necessary or appropriate to prevent the enlargement or diminishment of
Participants’ rights under any Option, and may, in its discretion, cause any Option to be
canceled in consideration of a payment equal to the product of (a) the number of shares of
Common Stock that the Option covers (and has not previously been exercised) and (b) the
excess, if any, of the Fair Market Value of a share of Common Stock as of the date of
cancellation over the Exercise Price of the Option.
	 
	8.	 	Nonalienation of Benefits: Except as required by applicable law, no right or benefit
under the Plan or any Option shall be subject to anticipation, alienation, sale, assignment,
hypothecation, pledge, exchange, transfer, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, hypothecate, transfer, pledge, exchange, transfer,
encumber or charge the same shall be void. No right or benefit under the Plan or any Option
shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of
the person entitled to such benefit. If any Participant shall become bankrupt or attempt to
anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or
charge any right or benefit under the Plan or any Option, then such right or benefit shall, in
the discretion of the Committee, cease and terminate, and in such

7

 

	 	 	event, the Committee in its discretion may hold or apply the same or any part thereof for
the benefit of the Participant or his beneficiary, spouse, children or other dependents, or
any of them, in such manner and in such proportion as the Committee may deem proper.
	 
	9.	 	No Right to Continued Employment; No Additional Rights: Nothing contained in the
Plan or in any Option Agreement shall confer on any Participant any right to continue in the
employ of Temple-Inland or any of its Affiliates or interfere in any way with the right of
Temple-Inland or an Affiliate to terminate the employment of a Participant at any time, with
or without cause, notwithstanding the possibility that the number of shares of Common Stock
purchasable by such person under his or her Option (or Options) may thereby be reduced or
eliminated. Nothing in the Plan Documents or any Option Agreement shall be construed to give
any employee of Temple-Inland or any Affiliate any right to receive an award of Options or as
evidence of any agreement or understanding, express or implied, that Temple-Inland or any
Affiliate will employ the Participant in any particular position or at any particular rate of
remuneration, or for any particular period of time.
	 
	10.	 	Exclusion from Pension, Profit-Sharing and Other Benefit Computations: By acceptance
of an Option award under the Plan, a Participant shall be deemed to have agreed that any
compensation arising from the Option constitutes special incentive compensation that shall not
be taken into account as “salary”, “pay”, “compensation” or “bonus” in determining the amount
of any payment under any pension, retirement or profit-sharing plan of Temple-Inland or any
Affiliate. In addition, each Participant shall be deemed to have agreed that neither the
award, vesting, nor exercise of an Option shall be taken into account in determining the
amount of any life insurance coverage or short or long-term disability coverage provided by
Temple-Inland or any Affiliate.

	11.	 	Applicability: This Terms and Conditions shall apply to all Options to which the
Committee designates it as applying, and the Committee may designate it as applying to an
Option in whole or in part in its discretion.

	12.	 	Plan Controls: In the event of any conflict between the Plan and the terms of an
Option Agreement or the Terms and Conditions, the Plan shall govern.

8

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