Document:

exv10w5

 

Exhibit 10.5

GUARANTY FINANCIAL GROUP INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(as amended and restated effective as of November 28, 2007)

ARTICLE 1

Intent

          This Guaranty Financial Group Inc. Supplemental Executive Retirement Plan is maintained by
Guaranty Financial Group Inc. for the purpose of providing supplemental retirement benefits to
eligible employees.

ARTICLE 2

Definitions

          2.1 “Administrator” means the person(s) or committee appointed to administer the
Retirement Plan.

          2.2 “Affiliate” means any trade or business, whether or not incorporated, that
together with the Company is treated as a single employer under Section 414(b) or 414(c) of the
Code.

          2.3 “Beneficiary” means the person(s) to whom the Participant’s accrued benefit under
the Retirement Plan is payable upon the Participant’s death.

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

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

          2.6 “Company” means Guaranty Financial Group Inc. and any successor thereto.

          2.7 “Participant” means each person who is identified as a Participant for purposes of
Articles 4 and/or 5 hereof.

          2.8 “Plan” means the Guaranty Financial Group Inc. Supplemental Executive Retirement
Plan, as set forth herein and amended from time to time. For periods prior to the date of this
amendment and restatement, the term “Plan” means the Excess Benefits Plan of Temple-Inland
Financial Services Inc. and the Supplemental Benefits Plan of Temple-Inland Financial Services Inc.

          2.9 “Profit Sharing Contributions” means Profit Sharing Contributions under the
Retirement Plan and such other contributions under such plans, if any, as may be designated in an
appendix hereto. For periods prior to January 1, 2008, the term Profit Sharing Contributions means
Company Retirement Contributions under the Retirement Plan.

 

 

          2.10 “Profit Sharing Contributions Account” means a Participant’s “Profit Sharing
Contributions Account” under the Retirement Plan and such other accounts under such plans, if any,
as may be designated in an appendix hereto. For periods prior to January 1, 2008, the term Profit
Sharing Contributions Account means the Participant’s Company Retirement Contributions Account.

          2.11 “Retirement Benefit” has the meaning set forth in Article 3 hereof.

          2.12 “Retirement Plan” means the Guaranty Financial Group Inc. Savings and Retirement
Plan, as amended from time-to-time, and any successor thereto.

          2.13 “Termination of Employment” means a Participant’s “separation from service”
(within the meaning of Section 409A of the Code) with the Company and its Affiliates.

ARTICLE 3

Amount of Retirement Benefit Under Plan

          A Participant’s “Retirement Benefit” under this Plan shall be the sum of the Participant’s
Section 415 Retirement Benefit (if any) under Article 4 and the Participant’s Section 401(a)(17)
Retirement Benefit (if any) under Article 5.

ARTICLE 4

Section 415 Retirement Benefit

          4.1 Eligibility. Each person who is a participant in the Retirement Plan shall be a
“Participant” for purposes of this Article 4 and shall be eligible to receive a Section 415
Retirement Benefit in accordance with, and subject to the terms of, this Article 4.

          4.2 Section 415 Retirement Benefit. A Participant shall be entitled to receive upon
Termination of Employment, a Section 415 Retirement Benefit that is equal to the sum of:

     (a) the excess, if any, of (i) the amount of Profit Sharing Contributions that would
have been credited from time-to-time to the Participant’s Profit Sharing Contributions Account
under the Retirement Plan assuming that the limitations imposed on benefits provided under the
Retirement Plan by reason of Section 415 of the Code did not apply over (ii) the amount of
Profit Sharing Contributions actually credited from time-to-time to the Participant’s Profit
Sharing Contributions Account under the Retirement Plan (the excess of (i) over (ii) being
“Section 415 Contributions”); and

     (b) an amount equal to the return that the Section 415 Contributions would have earned
(or lost) if they had been invested in the U.S. Treasury Fund (within the meaning of the
Retirement Plan), assuming that the Section 415 Contributions had
been credited to the Participant’s Profit Sharing Contributions Account as of the first

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day of the calendar year immediately following the calendar year for which the Section 415
Contribution would have been credited to the Participant’s Profit Sharing Contributions
Account but for the limitations imposed on benefits provided under the Retirement Plan by
reason of Section 415 of the Code.

ARTICLE 5

Section 401(a)(17) Retirement Benefit

          5.1 Eligibility. Each person who is a participant in the Retirement Plan shall be a
“Participant” for purposes of this Article 5 and shall be eligible to receive a Section 401(a)(17)
Retirement Benefit in accordance with, and subject to the terms of, this Article 5.

          5.2 Section 401(a)(17) Retirement Benefit. A Participant shall be entitled to receive
upon Termination of Employment, a 
Section 401(a)(17) Retirement Benefit that is equal to the sum
of:

     (a) the excess, if any, of (i) the amount of Profit Sharing Contributions that would
have been credited from time-to-time to the Participant’s Profit Sharing Contributions Account
under the Retirement Plan assuming that the limitations imposed on benefits provided under the
Retirement Plan by reason of Section 401(a)(17) of the Code did not apply over (ii) the amount
of Profit Sharing Contributions actually credited from time-to-time to the Participant’s
Profit Sharing Contributions Account under the Retirement Plan (the excess of (i) over (ii)
being “Section 401(a)(17) Contributions”); and

     (b) an amount equal to the return that the Section 401(a)(17) Contributions would have
earned (or lost) if they had been invested in the U.S. Treasury Fund (within the meaning of
the Retirement Plan), assuming that the Section 401(a)(17) Contributions had been credited to
the Participant’s Profit Sharing Contributions Account as of the first day of the calendar
year immediately following the calendar year for which the Section 401(a)(17) Contribution
would have been credited to the Participant’s Profit Sharing Contributions Account but for the
limitations imposed on benefits provided under the Retirement Plan by reason of Section
401(a)(17) of the Code.

Notwithstanding the foregoing provisions of this Article 5, the amount otherwise payable to a
Participant pursuant to this Article 5 shall be reduced to the extent that the sum of (a) the
amount payable pursuant to the terms of this Article 5, (b) any amount payable to the Participant
under Article 4 hereof, and (c) amounts payable under the Retirement Plan with respect to the
Participant’s Profit Sharing Contributions Account, exceed the amount that would be payable under
the Retirement Plan with respect to the Participant’s Profit Sharing Contributions Account but for
the application of Section 401(a)(17) and Section 415 of the Code (determined by assuming that
amounts credited in excess of such limits
are credited at the time specified in Section 4.2(b) and that such amounts are invested as provided
therein). For purposes of this Article 5, a Participant’s commissions, if any,

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shall not be
included in the definition of “Compensation” as used under the Retirement Plan.

          5.3 Pre-2008 Deferred Compensation. For calendar years beginning before January 1,
2008, the amount determined under clause (a)(i) of Section 5.2 shall include an amount equal to the
amount that would have been credited to the Participant’s Company Retirement Contributions Account
if Deferred Compensation (as defined in the Supplemental Benefits Plan of Temple-Inland Financial
Services Inc. as in effect prior to the date of this amendment and restatement) were taken into
account (at the time such Deferred Compensation would otherwise have been taken into account) in
determining Company Retirement Contributions.

ARTICLE 6 

Payment of Benefits; Vesting

          6.1 Termination of Employment On or After January 1, 2008. In the case of a
Participant who incurs a Termination of Employment on or after January 1, 2008, the Participant’s
Retirement Benefit shall be paid in the form of a lump-sum payment payable as soon as practicable
after the Participant’s Termination of Employment (and in all events within [thirty] days after
such Termination of Employment).

          6.2 Termination of Employment Before January 1, 2008. In the case of a Participant
who incurs a Termination of Employment before January 1, 2008, the Participant’s Retirement Benefit
shall be paid to the Participant in accordance with the terms of the Plan as in effect prior to the
date of this amendment and restatement, any “Participant Consent to Payment” or “Consent to
Distribution”, and the requirements of Section 409A of the Code.

          6.3 Certain Consents to Payment. Notwithstanding anything in this Article 6 to the
contrary and whether or not the Participant has incurred a Termination of Employment, in the case
of any Participant who has executed a Consent to Distribution or a Consent to Payment relating to
this Plan, the Participant’s Retirement Benefit shall be paid in accordance with such Consent to
Distribution or Consent to Payment.

          6.4 Section 409A Mandatory Delay in Benefit Payments for Specified Employees.
Notwithstanding the preceding provisions of this Article 6, to the extent required by Section 409A
of the Code, the Administrator shall delay payment of the Retirement Benefit of a Participant who
is a “specified employee” (within the meaning of Section 409A of the Code) until the earlier of (a)
the date that is six months after the date of the Participant’s Termination of Employment, or (b)
the date of the specified employee’s death. The aggregate amount of payment(s) otherwise payable
during the delay period (plus interest thereon at a rate equal to [the simple average of the rate
for the last four reporter quarters preceding the Participant’s Termination of Employment under
the U.S. Treasury Fund (within the meaning of the Retirement Plan)] shall be payable to the
specified employee upon the expiration of the delay period.

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          6.5 Survivor Benefits. In the event of a Participant’s death prior to payment of a
Retirement Benefit to which the Participant would otherwise be entitled hereunder, the amount that
would otherwise have been paid to the Participant (determined as of the date of the Participant’s
death) shall be paid to the Participant’s Beneficiary. Any survivor benefits payable to a
Beneficiary pursuant to this Plan shall be paid on the first day of the second calendar month
following the Participant’s death.

          6.6 Vesting of Retirement Benefits. A Participant’s Retirement Benefit shall become
fully vested as of the date that the Participant’s Profit Sharing Contributions Account is fully
vested (the “Vesting Date”). In the event of a Participant’s Termination of Employment prior to
the Participant’s Vesting Date, the Participant shall not be entitled any Retirement Benefit
hereunder and any such Retirement Benefit shall be forfeited in its entirety.

ARTICLE 7

Claims

          7.1 Claims Procedure. Claims for benefits under the Plan shall be filed with the
Administrator. If any Participant or other payee (a “claimant”) claims to be entitled to a benefit
under the Plan and the Administrator determines that such claim should be denied in whole or in
part, the Administrator shall notify such claimant of its decision in writing (which may be
provided electronically). Such notification will be written in a manner calculated to be
understood by the claimant and will contain (a) specific reasons for the denial, (b) specific
reference to pertinent Plan provisions, (c) a description of any additional material or information
necessary for the claimant to perfect such claim and an explanation of why such material or
information is necessary, and (d) a description of the Plan’s review procedures and the time limits
applicable to such procedures, including a statement of the claimant’s right to bring a civil
action under Section 502(a) of ERISA following the rendering of an adverse decision on review.
Such notification will be given within a reasonable period of time, but not later than 90 days
after the claim is received by the Administrator, unless the Administrator determines that special
circumstances require an extension of time for processing the claim. If the Administrator
determines that such an extension of time is required, written notice of the extension shall be
provided to the claimant prior to the end of the initial 90-day period. The extension notice shall
indicate the special circumstances requiring the extension of time and the date by which the
Administrator expects to render its decision. In no event shall the extension exceed an additional
90 days from the end of the initial 90-day period. Any electronic notification provided by the
Administrator under this Article IV shall comply with the standards imposed by 29 C.F.R.
2520.104b-1(c)(1)(i)-(iv).

          7.2 Review Procedure.

               (a) Within 60 days after the date on which a claimant receives a written notice of a denied
claim, the claimant may file a written request with the Administrator for a review of the denied
claim. If the claimant requests a review of the denied claim, the claimant shall be entitled to
submit to the Administrator written

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comments, documents, records and other information relating to
the claim for benefits and to receive, upon request and free of charge, reasonable access to, and
copies of, all documents, records and other information relevant to the claimant’s claim for
benefits. The Administrator shall perform its review taking into account all comments, documents,
records and other information submitted by the claimant relating to the claim without regard to
whether such information was submitted or considered in the initial benefit determination. The
Administrator will notify the claimant of its decision in writing (which may be provided
electronically). If the claim is denied, the notification will be written in a manner calculated
to be understood by the claimant and will contain (i) the specific reasons for the denial, (ii)
references to pertinent provisions of the Plan, (iii) a statement that the claimant is entitled to
receive, upon request and free of charge, reasonable access to, and copies of, all documents,
records and other information relevant to the claimant’s claim for benefits, and (iv) a statement
of the claimant’s right to bring an action under Section 502(a) of ERISA.

               (b) The review provided for by Section 7.2(a) will be made within a reasonable period of time,
but not later than 60 days after the Administrator receives the request for review, unless the
Administrator determines that special circumstances require an extension of time for processing the
claim. If the Administrator determines that an extension of time is required, written notice of
the extension shall be furnished to the claimant prior to the end of the initial 60-day period.
The extension notice shall indicate the special circumstances requiring the extension of time and
the date by which the Administrator expects to render its decision. In no event shall the
extension exceed an additional 60 days from the end of the initial 60-day period. If the extension
of time is needed due to the claimant’s failure to submit information necessary to make a decision,
the period during which the Administrator must make a decision shall be tolled from the date the
extension notice is sent to the claimant until the date the claimant responds to the request for
additional information.

ARTICLE 8

Administration

          This Plan shall be administered by the Administrator. The Administrator shall have all powers
necessary to carry out the provisions of this Plan, including, without reservation, the power to
delegate administrative matters to other persons and to interpret this Plan in its discretion.

ARTICLE 9

Miscellaneous

          9.1 Amendment or Termination. The Board may amend or terminate the Plan at any time;
provided, however, that no amendment or termination of the Plan may reduce a
Participant’s Retirement Benefit after it is vested without the consent of the Participant (or in
the event of the Participant’s death, the Participant’s Beneficiary).

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          9.2 Effect on Excess Benefits Plan and Supplemental Benefits Plan. The adoption of
this amendment and restatement shall effectuate and constitute the amendment and restatement of the
Excess Benefits Plan of Temple-Inland Financial Services Inc. and the Supplemental Benefits Plan of
Temple-Inland Financial Services Inc. into a single plan document as of the date hereof.

          9.3 No Duplication of Benefits. Notwithstanding any provision of this Plan to the
contrary, the Retirement Benefits payable under Articles 4 and 5 shall be determined and
coordinated by the Administrator so as to prevent any duplication of benefits under this Plan or
any other supplemental pension or retirement plan, program or agreement.

          9.4 No Alienation of Benefits. Participants and Beneficiaries shall have no right to
alienate, anticipate, commute, sell, assign, transfer, pledge, encumber or otherwise convey the
right to receive any payment under this Plan, and any payment under this Plan or rights thereto
shall not be subject to the debts, liabilities, contracts, engagements or torts of Participants or
Beneficiaries nor to attachment, garnishment or execution, nor shall they be transferable by
operation of law in the event of bankruptcy or insolvency. Any attempt, whether voluntary or
involuntary, to effect any such action shall be null, void, and of no effect.

          9.5 No Rights to Continued Employment. Nothing contained herein shall be construed as
conferring upon a Participant the right to continue in the employ of the Company or any Affiliate.

          9.6 Incapacity. If the Administrator determines that any Participant or Beneficiary
is unable to care for his or her affairs because of illness or accident, any Retirement Benefit or
survivor benefit payment due hereunder (unless a prior claim therefor shall have been made by a
duly appointed guardian, committee, or other legal representative) may be paid to such
Participant’s or Beneficiary’s spouse, child, brother or sister, or to any person deemed by the
Administrator to have incurred expenses for such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liabilities of the Company hereunder.

          9.7 Withholding. The Company shall have the right to deduct from any payment to be
made pursuant to this Plan or any other payment to be made to a Participant or Beneficiary by the
Company or any of its affiliates any Federal, state or local taxes required by law to be withheld
with respect to the participation of the Participant in this Plan and payments made hereunder.

          9.8 No Funding of Benefits. To the extent a Participant or any other person acquires
a right to receive payments from the Company under this Plan, such right shall be no greater than
the right of any unsecured general creditor of the Company, and such
person shall have only the unsecured promise of the Company that such payments shall be made.

          9.9 Top-Hat Plan; Excess Plan. The Plan, except with respect to the Section 415
Retirement Benefits provided pursuant to Article 4 hereof, is intended to qualify as a

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“top-hat”
plan for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and
shall cover a select group of management or highly compensated employees. The Section 415
Retirement Benefits provided pursuant to Article 4 hereof and related provisions of the Plan shall
constitute a separate excess benefit plan within the meaning of Section 3(36) of ERISA.

          9.10 Headings. The headings of Sections hereof are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the provisions of the Plan.

          9.11 Applicable Law. This Plan shall be construed and enforced in accordance with the
laws of the State of Texas, except to the extent preempted by federal law.

          9.12 Section 409A of the Code. The Plan is intended to comply with the requirements
of Section 409A of the Code, and the Administrator shall administer and interpret the Plan in
accordance with such requirements. If any provision of the Plan conflicts with the requirements of
Section 409A of the Code, the requirements of Section 409A of the Code shall supersede any such
Plan provision.

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Exhibit 10.6

GUARANTY FINANCIAL GROUP INC.

2007 STOCK 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.

               1.2. “Agreement” means a written agreement or other document evidencing an Award that shall be
in such form as the Committee may specify. The Committee in its discretion 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 Guaranty Financial Group 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.

               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 or (b) a member of the board
of directors of the Company or an Affiliate, or (c) a consultant, or independent contractor to the
Company or an Affiliate.

               1.12. “Employee” means any individual 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, 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

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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 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, 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 Guaranty Financial Services Inc. 2007 Stock 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.

          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 identification
of their interests with those of the stockholders of the Company and its Affiliates.

          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 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 4,200,000 Shares, provided that no more than 2,100,000 Shares may be
issued pursuant to Awards that are not Options. 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.

               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 the
number of shares which, in the aggregate, do not exceed $3 million in Fair Market Value as of their
respective date of grant. 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.

          6. Options.

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               6.1. Options granted under the Plan to Eligible Persons shall be either Incentive Stock
Options or Nonqualified Stock Options, as designated by the Committee; provided, however, that
Incentive Stock Options may be granted only to Eligible Persons who are Section 422 Employees on
the Date of Grant. Each Option granted under the Plan shall be identified as either a Nonqualified
Stock Option or an Incentive Stock Option and 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 the Common Stock 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 provided in an Agreement, 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).

          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, in the case of an Option, 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

5

 

Award granted hereunder or under any
other compensation plan maintained by the Company or any Affiliate, have been held by the
Participant for at least six months, or such other period, if any, as the Committee may specify),
valued at Fair Market Value on the Date of Exercise.

          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 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 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 and/or issuance of Shares to a
Participant contingent upon the attainment of one or more specified Performance Goals, and (b)
contains such other terms and conditions as the Committee may specify. For purposes of Section 5.2
hereof, a 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 if the terms of the Award provide for
payment in the form of Shares. 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.

          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 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 the
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.

6

 

          13. Capital Events and Adjustments. In the event of any change in the outstanding
Common Stock by reason of any stock dividend, stock split, reverse stock split, spin-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, and
(c) the aggregate number and class of Shares for which Awards thereafter may be granted under the
Plan.

          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 stockholder approval of the amendment is required by applicable law or
regulations or the requirements of the principal exchange or interdealer quotation system on which
the Common Stock is listed or quoted, if any, and (b) each affected Participant if such amendment
or termination would adversely affect such Participant’s rights or obligations under any Award
granted prior to the date of such amendment or termination.

          15. Modification, Substitution of Awards.

               15.1. 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 the grant of a
new Option with a lower Exercise Price.

               15.2. 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 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.

               15.3. The Committee shall issue Awards hereunder, as contemplated by and provided in, the
Employee Matters Agreement by and among Temple-Inland Inc., Guaranty Financial Group Inc. and
Forestar Real Estate Group Inc. (the “Employee
Matters Agreement”), to reflect the conversion of, and adjustments to, awards granted under
the Temple-Inland Stock Plans (as defined in the Employee Matters Agreement).

7

 

          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. 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 provided
in the applicable Agreement and in accordance with rules as the Committee may prescribe, a
Participant may satisfy any such withholding tax obligation 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.

          18. 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 that 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.

          19. 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 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.

          20. General Provisions.

               20.1. 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.

               20.2. 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,

8

 

restricted stock, or other plans, or to impose any
requirement of stockholder approval upon the same.

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

               20.4. 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 law principles.

               20.5. 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.

               20.6. 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 such
Shares, without obtaining, to the complete satisfaction of the Committee, the approval of all
regulatory bodies the Committee deems necessary, 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.

               20.7. 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.

               20.8. 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.

9

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