Document:

exv10w12

Exhibit 10.12

FORESTAR GROUP INC.

NONQUALIFIED STOCK OPTION AGREEMENT

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

     1. Grant of Option. Pursuant to, and subject to, the terms and conditions set forth
in the Forestar Group Inc. 2007 Stock Incentive Plan, as amended from time to time (the “Plan”),
the Stock Option Terms and Conditions, and this Option Agreement (collectively, referred to as the
“Plan Documents”), which are herein incorporated by reference, Forestar hereby grants to the
Participant, as a matter of separate agreement and not in lieu of salary or any other compensation
for services, the Option to purchase all or any part of the above stated number of shares of the
Common Stock at the above stated Exercise Price. The Option is a Nonqualified Stock Option and is
not intended to qualify as an incentive stock option under Section 422A of the Code.

     2. Governing Documents. This Award hereunder is subject to all the restrictions,
terms and provisions of the Plan Documents the terms of which the Participant hereby agrees.
Capitalized terms used in this Option Agreement that are not defined herein shall have the meaning
set forth in the Plan or Terms and Conditions.

     3. Exercise of Option. Provided that Participant does not experience a Termination of
Service with Forestar or an Affiliate through each Vesting Date as set forth above, the Option
shall vest and become exercisable with respect to the number of Shares under the Option as provided
in the Vesting Schedule above. The Option may be exercised in whole, at any time, or in part, from
time to time, as to all or any of the Shares as to which the Option is then exercisable (provided
that the Option may not be exercised as to less than the lesser of 100 shares or the number of
shares as to which the Option is then exercisable). Except as otherwise provided in the Plan
Documents, the Option shall not be exercisable following a Termination of Service with Forestar or
one of its Affiliates. The Option may be exercised only upon notice to Forestar and payment of the
Exercise Price and tax withholding in the manner set forth in the Plan Documents.

     4. Term of the Option. The term of the Option shall commence on the Date of Grant and
shall expire on the Expiration Date stated above or such earlier date as is prescribed in the Plan
Documents. In no event shall the Option be exercisable following the Expiration Date.

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

     6. Arbitration. The Participant and Forestar agree that this Option Agreement arises
out of, and is inseparable from, the Participant’s employment or other service with Forestar or
any of its Affiliates. The Participant and Forestar further agree to final and binding
arbitration as the exclusive forum for resolution of any dispute of any nature whatsoever, whether
initiated by the Participant or Forestar, arising out of, related to, or connected with
Participant’s employment or other service with, or termination by, Forestar or any of its
Affiliates. This includes, without limitation, any dispute arising out of the application,
interpretation, enforcement, or claimed breach of this Option Agreement. The only exceptions to
the scope of this arbitration provision are claims arising

 

 

under any written agreement between the
Participant and Forestar or its Affiliate that expressly provides that such claims are not subject
to binding arbitration. Arbitration under this provision shall be conducted under the employment
dispute
rules and procedures of either the American Arbitration Association or of JAMS/Endispute,
according to the preference of the party initiating such arbitration. Appeal from, or
confirmation of, any arbitration award under this paragraph may be made to any court of competent
jurisdiction under standards applicable to appeal or confirmation of arbitration awards under the
Federal Arbitration Act. This arbitration provision and related proceedings shall be subject to
and governed by the Federal Arbitration Act.

     7. Section 409A Acknowledgement and Release. Participant understands that the Award
under this Option Agreement is potentially subject to Section 409A of the Code (“409A”) and that
if the Plan and this Option Agreement do not satisfy an exception to 409A or do not comply with
the requirements of 409A and the applicable guidance thereunder, then Participant may incur
adverse tax consequences under 409A. Participant acknowledges and agrees that (a) Participant is
solely responsible for all obligations arising as a result of the tax consequences associated with
this Award including, without limitation, any taxes, interest or penalties associated with 409A,
(b) Participant is not relying upon any written or oral statement or representation by Forestar or
any Affiliate thereof, or any of their respective employees, directors, officers, attorneys or
agents (collectively, the “Company Parties”) regarding the tax effects associated with the
execution of this Option Agreement and the grant, vesting, and/or exercise of this Option under
this Option Agreement and the Plan, and (c) in deciding to enter into this Option Agreement,
Participant is relying on his or her own judgment and the judgment of the professionals of his or
her choice with whom Participant has consulted. Participant hereby releases, acquits and forever
discharges the Company Parties from all actions, causes of actions, suits, debts, obligations,
liabilities, claims, damages, losses, costs and expenses of any nature whatsoever, known or
unknown, on account of, arising out of, or in any way related to the tax effects associated with
the execution of this Option Agreement and any grant, vesting or exercise of an Option under the
Plan and this Option Agreement.

     8. Miscellaneous. The Committee may from time to time modify or amend this Option
Agreement in accordance with the provisions of the Plan Documents. This Option Agreement shall be
binding upon and inure to the benefit of Forestar and its successors and assigns and shall be
binding upon and inure to the benefit of the Participant and his or her legatees, distributees and
personal representatives. This Option Agreement may be executed by Forestar and the Participant
by means of electronic or digital signatures, which shall have the same force and effect as manual
signatures. Participant agrees that clicking “I Accept” in connection with or response to any
electronic communication or other medium has the effect of affixing the Participant’s electronic
signature to this Option Agreement. Participant acknowledges and expressly agrees that the
Participant has read the Option Agreement and the Plan Documents and agrees to their terms. This
Option Agreement shall be governed by and construed in accord with federal law, where applicable,
and otherwise with the laws of the State of Texas.

Nonqualified Stock Option Agreement

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FORESTAR GROUP INC.

STOCK OPTION TERMS AND CONDITIONS

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

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

     b. Change in Control:

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

     (1) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of Forestar (not including in the securities
beneficially owned by such Person any securities acquired directly from
Forestar or its Affiliates) representing 20% or more of the combined voting
power of Forestar’s then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction described in
clauses (a), (b) or (c) of paragraph (3) below;

     (2) within any twenty-four (24) month period, the following individuals
cease for any reason to constitute a majority of the number of directors then
serving on the Board: individuals who, on the Effective Date, constitute the
Board and any new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the election
of directors of Forestar) whose appointment or election by the Board or
nomination for election by Forestar’s shareholders was approved or recommended
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or recommended;

Nonqualified Stock Option Agreement

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     (3) there is consummated a merger, consolidation of Forestar or any
direct or indirect subsidiary of Forestar with any other corporation or any
recapitalization of Forestar (for purposes of this paragraph (III), a
“Business Event”) unless, immediately following
such Business Event (a) the directors of Forestar immediately prior to
such Business Event continue to constitute at least a majority of the board
of directors of Forestar, the surviving entity or any parent thereof, (b) the
voting securities of Forestar outstanding immediately prior to such Business
Event continue to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of Forestar or any
subsidiary of Forestar, at least 60% of the combined voting power of the
securities of Forestar or such surviving entity or any parent thereof
outstanding immediately after such Business Event, and (c) in the event of a
recapitalization, no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of Forestar or such surviving entity or any parent
thereof (not including in the securities Beneficially Owned by such Person
any securities acquired directly from Forestar or its Affiliates)
representing 20% or more of the combined voting power of the then outstanding
securities of Forestar or such surviving entity or any parent thereof (except
to the extent such ownership existed prior to the Business Event);

     (4) the shareholders of Forestar approve a plan of complete liquidation
or dissolution of Forestar;

     (5) there is consummated an agreement for the sale, disposition or
long-term lease by Forestar of substantially all of Forestar’s assets, other
than (a) such a sale, disposition or lease to an entity, at least 50% of the
combined voting power of the voting securities of which are owned by
shareholders of Forestar in substantially the same proportions as their
ownership of Forestar immediately prior to such sale or disposition or (b) the
distribution directly to Forestar’s shareholders (in one distribution or a
series of related distributions) of all of the stock of one or more
subsidiaries of Forestar that represent substantially all of Forestar’s
assets; or

     (6) any other event that the Board, in its sole discretion, determines to
be a Change in Control for purposes of this Agreement.

     Notwithstanding the foregoing, a “Change in Control” under clauses (1)
through (5) above shall not be deemed to have occurred by virtue of the
consummation of any transaction or series of integrated transactions
immediately following which the record holders of the common stock of Forestar
immediately prior to such transaction or series of transactions continue to
have substantially the same proportionate ownership in one or more entities
which, singly or together, immediately following such transaction or series of
transactions, own all or substantially all of the assets of Forestar as
constituted immediately prior to such transaction or series of transactions.

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

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

     (2) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3
under the Exchange Act.

     (3) “Effective Date” means the Date of Grant of the applicable Option.

Nonqualified Stock Option Agreement

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     (4) “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended from time to time.

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

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

     d. Expiration Date: means the date set forth in the Option Agreement upon which
upon which the Option expires and is no longer exercisable.

     e. Forestar: means Forestar Group Inc. and any successor.

     f. Group: means Forestar and its Affiliates.

     g. Plan: means the Forestar Group Inc. 2007 Stock Incentive Plan, as amended
from time to time.

     h. Plan Documents: means the Plan, the Terms and Conditions, and the Option
Agreement.

     i. Retirement: means a Participant’s voluntary Termination of Service after
either (i) attaining age 65 or (ii) attaining age 55 and completing at least five years of
service with Forestar or any of its Affiliates.

     j. Termination of Service: means the Participant’s termination of employment or
other service with the Group for any reason.

     k. Vesting Schedule: means the schedule set forth in the Option Agreement which
provides the dates or events upon which the Shares under the Option (or portion thereof)
vest and become exercisable.

     Capitalized terms used herein but not defined herein shall have the meaning assigned to
such terms in the Plan.

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

Nonqualified Stock Option Agreement

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     3. Exercise of Options:

     a. Options shall only be exercisable at such times as provided in the Plan Documents
and only to the extent that the participant is vested in the Shares subject to the Option
pursuant to the Vesting Schedule set forth in the Option Agreement.

     b. Forestar shall not be required to deliver certificates or instruments for shares
with respect to which an Option is exercised until the exercise price for the shares of
Common Stock being purchased has been paid in full.

     c. In order to exercise an Option, notice must be provided to Forestar in such form as
may be specified by Forestar. Such notice shall state that the Participant elects to
exercise a specified Option, the number of shares of Common Stock in respect of which it is
being exercised, and the manner of payment of the exercise price of the Option.

     d. The notice shall be accompanied by payment of the full Exercise Price of the Option
with respect to the number of shares being purchased. The Exercise Price shall be paid in
cash, by irrevocable instructions to a broker to deliver promptly to Forestar cash equal to
the Exercise Price of the Option, or unless otherwise provided in the applicable Option
Agreement, in whole shares of Common Stock already owned by the Participant, or partly in
cash and partly in such Common Stock. Cash payments shall be made by certified or bank
cashier’s check, or by the wire transfer of immediately available funds, in each case
payable to the order of Forestar (or such other person or entity as may be specified by
Forestar). Payments of the Exercise Price of an Option that are made in the form of Common
Stock (which shall be valued at Fair Market Value) may be made by (i) delivery of stock
certificates in negotiable form, or (ii) unless otherwise determined by the Committee,
delivery of the Participant’s representation that on the date of exercise he or she owns the
requisite number of shares and, unless such shares are registered in the Participant’s name
as verified by Forestar’s transfer agent’s records, a representation executed by the
Participant’s brokerage firm or other entity in whose name such shares are registered that
on the date of exercise the Participant beneficially owns the requisite number of shares
(“Certificateless Exercise”). Delivery of such a representation pursuant to a
Certificateless Exercise shall be treated as the delivery of the specified number of shares
of Common Stock; provided, however, that the number of shares issued to the Participant upon
exercise of the Stock Option shall be reduced by the number of shares specified in the
representation. In addition, to the extent permitted by the Committee in its sole
discretion, a Participant may satisfy payment of the Exercise Price by forfeiting a number
of Shares subject to and outstanding under the Option that, based on the Fair Market Value
on the date of the exercise, are equal in value to the Exercise Price.

     e. Notwithstanding as otherwise provided in the Plan Documents, in no event may an
Option be exercised after the Expiration Date.

     f. Except as provided in paragraph 5, a Participant may not exercise his Option unless
such Participant is an Participant at the time notice is delivered to Forestar in accordance
with paragraphs 3(c) and (d) above.

     g. The exercise of the Option shall be further subject to paragraph 12 herein.

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

Nonqualified Stock Option Agreement

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(a) tendering a cash payment; (b)
authorizing Forestar to withhold shares of Common Stock from the shares otherwise issuable to the
Participant as the result of the exercise of an Option, or (c) delivering to Forestar unencumbered
shares of Common Stock already owned by the Participant. Shares of Common Stock that are withheld
or delivered to
satisfy applicable withholding taxes shall be valued at their Fair Market Value on the date
the withholding tax obligation arises. Only the required statutory minimum tax may be withheld;
excess tax withholding is not allowed.

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

	 	 	 	 	 
	 	 	Vested Option Exercise	 	Treatment of Unvested
	Termination	 	Period	 	Shares
	Death

	 	12 months
	 	Immediately Vest
	 
	 	 	 	 
	Disability

	 	36 months
	 	Immediately Vest
	 
	 	 	 	 
	Retirement

	 	Until Expiration of Option
	 	Immediately Vest
	 
	 	 	 	 
	For Cause

	 	None—All unexercised Shares 

are
immediately forfeited
	 	Forfeited
	 
	 	 	 	 
	Other

	 	3 months
	 	Forfeited

Options granted under the Plan shall not be affected by any change of employment so long as the
Participant continues to be an employee of the Group. An Option Agreement may contain such
provisions as the Committee may approve with respect to the effect of approved leaves of absence
for employees.

     6. Adjustments upon Changes in Capitalization: Notwithstanding any other provisions
of the Plan, in the event of any change in the outstanding Common Stock by reason of any stock
dividend, split-up, spin-off, recapitalization, reclassification, combination or exchange of
shares, merger, consolidation or liquidation and the like, the Committee shall provide for a
substitution for or adjustment in (i) the number and class of shares subject to outstanding
Options, and (ii) the exercise prices of outstanding Options. The Committee ‘s determinations with
regard to the adjustments or substitutions provided for by this paragraph shall be conclusive. The
Committee may at any time, in its sole discretion, make such amendments to the terms of Option
Agreements as it deems necessary or appropriate to reflect any adjustments or substitutions made
under the Plan or pursuant to this paragraph.

     7. Change in Control: Notwithstanding any contrary waiting period, installment period
or other limitation or restriction in any Option Agreement or in the Plan, the Shares under each
outstanding Option granted under the Plan shall immediately vest, and the Option shall become
exercisable in full, for the aggregate number of unexercised Shares covered thereby, in the event
of a Change in Control. Any provision of the Plan Documents or any Option Agreement to the
contrary notwithstanding, in the event of a merger or consolidation to which Forestar is a party,
the Committee shall take such actions, if any, as it deems necessary or appropriate to prevent the
enlargement or diminishment of Participants’ rights under any Option, and may, in its discretion,
cause any Option to be canceled in consideration of a cash 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,

Nonqualified Stock Option Agreement

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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 event, the
Committee in its discretion may hold or apply the same or any part thereof for the benefit of the
Participant or his beneficiary, spouse, children or other dependents, or any of them, in such
manner and in such proportion as the Committee may deem proper.

     9. No Right to Continued Employment; No Additional Rights: Nothing contained in the
Plan or in any Option Agreement shall confer on any Participant any right to continue in the employ
or service of Forestar or any of its Affiliates or interfere in any way with the right of Forestar
or an Affiliate to terminate the employment or service of a Participant at any time, with or
without cause, notwithstanding the possibility that the number of shares of Common Stock
purchasable by such person under his or her Option (or Options) may thereby be reduced or
eliminated. Nothing in the Plan Documents or any Option Agreement shall be construed to give any
employee or other service provider of Forestar or any Affiliate any right to receive an award of
Options or as evidence of any agreement or understanding, express or implied, that Forestar or any
Affiliate will employ or retain the Participant in any particular position or at any particular
rate of remuneration, or for any particular period of time.

     10. Exclusion from Pension, Profit-Sharing and Other Benefit Computations: By
acceptance of an Option award under the Plan, a Participant shall be deemed to have agreed that any
compensation arising from the Option constitutes special incentive compensation that shall not be
taken into account as “salary”, “pay”, “compensation” or “bonus” in determining the amount of any
payment under any pension, retirement or profit-sharing plan of Forestar or any Affiliate. In
addition, each Participant shall be deemed to have agreed that neither the award, vesting, nor
exercise of an Option shall be taken into account in determining the amount of any life insurance
coverage or short or long-term disability coverage provided by Forestar or any Affiliate.

     11. Non-Transferability of Option. Notwithstanding any provision of the Plan
Documents to the contrary, an Option may be exercised, during the lifetime of Participant, only by
Participant or Participant’s guardian or legal representative and may not be assigned or
transferred in any manner except by will or by the laws of descent and distribution.

     12. Compliance with Securities Law. Notwithstanding any provision of the Plan
Documents to the contrary, the grant of the Option and the issuance of Common Stock will be subject
to compliance with all applicable requirements of federal, state, or foreign law with respect to
such securities and with the requirements of any stock exchange or market system upon which the
Common Stock may then be listed. The Option may not be exercised if the issuance of shares of
Common Stock upon exercise would constitute a violation of any applicable federal, state, or
foreign securities laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Common Stock may then be listed. In addition, the Option may not be
exercised unless (1) a registration statement under the Act is at the time of exercise of the
Option in effect with respect to the shares issuable upon exercise of the Option or (2) in the
opinion of legal counsel to Forestar, the shares issuable upon exercise of the Option may be issued
in accordance with the terms of an applicable exemption from the registration requirements of the
Act. THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING
CONDITIONS ARE SATISFIED. ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN
DESIRED EVEN THOUGH THE OPTION IS OTHERWISE EXERCISABLE. The inability of Forestar to obtain from
any regulatory body having jurisdiction the

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authority, if any, deemed by Forestar’s legal counsel
to be necessary to the lawful issuance and sale of any shares subject to the Option will relieve
Forestar of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority has not been obtained. As a condition to the
exercise of the Option, Forestar may require the Participant to satisfy any qualifications that may
be necessary or appropriate to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect to such compliance as may be requested by
Forestar. Notwithstanding as otherwise provided in the Plan Documents, if the exercise of the
Option is prevented by the provisions of this paragraph, the Option will remain exercisable until
30 days after the date the Participant is notified by Forestar that the Option is exercisable, but
in any event no later than the Expiration Date. Forestar makes no representation as to the tax
consequences of any such delayed exercise. The Participant should consult with the Participant’s
own tax advisor as to the tax consequences of any such delayed exercise.

     13. Rights as Shareholder. Unless and until a certificate or certificates
representing such Shares will have been issued by Forestar to Participant following the exercise of
an Option, Participant (or any other person permitted to exercise this Option pursuant to the terms
of the Plan Documents) will not be or have any of the rights or privileges of a shareholder of
Forestar with respect to Shares acquirable upon an exercise of this Option.

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

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

Nonqualified Stock Option Agreement

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Exhibit 10.13

FORESTAR GROUP INC.

RESTRICTED STOCK AGREEMENT

(Tier I)

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

	1.	 	Grant of Restricted Stock. Subject to the restrictions, terms and conditions of this
Agreement and the Plan Documents (as hereafter defined), Forestar hereby awards to Participant
the number of shares of Restricted Stock as stated above. The Restricted Stock may, in the
discretion of Forestar, be issued in the form of a certificate held by Forestar or Forestar’s
transfer agent in escrow. Any certificate relating to the Restricted Stock shall be
registered in the name of Participant and shall bear an appropriate legend describing the
terms, conditions, and restrictions applicable to the Restricted Stock. Participant shall have
no right to delivery of a certificate relating to Restricted Stock until the applicable
Forfeiture Restrictions has lapsed, and the delivery of such certificate shall be in
accordance with the procedures established by Forestar in its discretion.
	 
	2.	 	Governing Documents. This Agreement and the Restricted Stock awarded hereby are
subject to all the restrictions, terms and provisions of the Forestar Group Inc. 2007 Stock
Incentive Plan (as amended, the “Plan”) and the Forestar Standard Terms and Conditions for
Restricted Stock (the “Standard Terms and Conditions”; together with the Plan, the “Plan
Documents”) which are herein incorporated by reference and to the terms of which Participant
hereby agrees. Capitalized terms used in this Agreement that are not defined herein shall
have the meaning set forth in the Plan Documents.
	 
	3.	 	Dividend, Voting and Other Rights. Subject to the Forfeiture Restrictions and
issuance of a certificate relating to the Restricted Stock, Participant will have all of the
rights of a shareholder with respect to the Restricted Stock covered by this Agreement,
including the right to vote the Restricted Stock and receive any dividends that may be paid
thereon, provided that in the event that a cash dividend becomes payable with respect to the
Common Stock, Participant shall be entitled to such dividend with respect to the Restricted
Stock only if the Dividend Payment Performance Goal set forth in Schedule A hereto is
satisfied. In the event that such Performance Goal is not satisfied, the amount of the
dividend payable with respect to the Restricted Stock shall be paid to Forestar. Any
additional Common Stock or property that Participant may become entitled to receive pursuant
to a stock split, stock dividend, a merger, reorganization or the like shall be subject to the
same restrictions as the Restricted Stock covered by this Agreement.
	 
	4.	 	Vesting Requirements. Except as otherwise provided in the Plan Documents and subject
to the conditions of paragraphs 5 and 6 hereof: (a) Restricted Stock covered hereby shall vest
as of the occurrence of a Vesting Date, provided that Participant has not incurred a
Separation From Service prior to the Vesting Date, (b) none of the Restricted Stock shall vest
upon the Scheduled Vesting Date unless the Performance Goal set forth in Exhibit A hereto has
been achieved, and (c) any Restricted Stock that has not vested on or prior to the earlier of
Participant’s Separation From Service or the Scheduled

			
	 	 	 
	Restricted Stock Agreement
	 	-1-

 

 

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

			
	 	 	 
	Restricted Stock Agreement — Tier 1
	 	-2-

 

 

EXHIBIT A

Performance Goal for Vesting of Restricted Stock:

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

Performance Goal for Payment of Dividends:

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

			
	 	 	 
	Restricted Stock Agreement — Tier 1
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FORESTAR GROUP INC.

STANDARD TERMS AND CONDITIONS

FOR RESTRICTED STOCK

	1.	 	Certain Definitions: For purposes of this Forestar Group Inc. Standard Terms and
Conditions for Restricted Stock (the “Standard Terms and Conditions”), the Forestar Group Inc.
2007 Stock Incentive Plan (as amended, the “Plan,” and together with the Standard Terms and
Conditions, the “Plan Documents”), and Restricted Stock to which this Standard Terms and
Conditions applies, the following terms shall have the meanings set forth below:

	 	a.	 	Change in Control:

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

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

			
	 	 	 
	Restricted Stock Agreement — Tier 1
	 	-4-

 

 

	 	 	 	indirectly, of securities of Forestar or such surviving entity or any
parent thereof (not including in the securities Beneficially Owned by
such Person any securities acquired directly from Forestar or its
Affiliates) representing 20% or more of the combined voting power of
the then outstanding securities of Forestar or such surviving entity or
any parent thereof (except to the extent such ownership existed prior
to the Business Event);
	 
	 	(4)	 	the shareholders of Forestar approve a plan of
complete liquidation or dissolution of Forestar;
	 
	 	(5)	 	there is consummated an agreement for the sale,
disposition or long-term lease by Forestar of substantially all of
Forestar’s assets, other than (a) such a sale, disposition or lease to an
entity, at least 50% of the combined voting power of the voting
securities of which are owned by shareholders of Forestar in
substantially the same proportions as their ownership of Forestar
immediately prior to such sale or disposition or (b) the distribution
directly to Forestar’s shareholders (in one distribution or a series of
related distributions) of all of the stock of one or more subsidiaries of
Forestar that represent substantially all of Forestar’s assets; or
	 
	 	(6)	 	any other event that the Board, in its sole
discretion, determines to be a Change in Control for purposes of this
Agreement.
	 
	 	 	 	Notwithstanding the foregoing, a “Change in Control” under clauses (1)
through (5) above shall not be deemed to have occurred by virtue of the
consummation of any transaction or series of integrated transactions
immediately following which the record holders of the common stock of
Forestar immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate
ownership in one or more entities which, singly or together,
immediately following such transaction or series of transactions, own
all or substantially all of the assets of Forestar as constituted
immediately prior to such transaction or series of transactions.

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

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

			
	 	 	 
	Restricted Stock Agreement — Tier 1
	 	-5-

 

 

	 	b.	 	Forestar: means Forestar Group Inc. and any successor thereto.
	 
	 	c.	 	Forfeiture Restrictions : means the following restrictions, which lapse
upon the vesting of the Restricted Stock in accordance with the Restricted Stock
Agreement: the Restricted Stock, except to the extent that the Restricted Stock vested
(1) may not be sold, assigned, pledged, exchanged, hypothecated, or otherwise
transferred, encumbered, or disposed of by Participant and (2) will be forfeited to
Forestar by Participant for no consideration upon Participant’s Separation from Service
for any reason.
	 
	 	d.	 	Participant: means the employee, non-employee director or other service
provider of Forestar or an Affiliate who is granted Restricted Stock under the Plan.
	 
	 	e.	 	Restricted Stock: means Restricted Stock granted under the Plan.
	 
	 	f.	 	Restricted Stock Agreement: means the written agreement executed by
Forestar and a Participant evidencing the grant of Restricted Stock.
	 
	 	g.	 	Separation From Service: means a Participant’s separation from service
(within the meaning of Section 409A of the Code) with Forestar and its Affiliates after
the Date of Grant of the relevant Restricted Stock.
	 
	 	h.	 	Vesting Date: means, with respect to an award of Restricted Stock, the
earliest of (a) such date or dates as the Committee shall specify in the Restricted
Stock Agreement evidencing such award of Restricted Stock as the Scheduled Vesting
Date(s), (b) the occurrence of a Change in Control, (d) the Participant’s death, or (e)
the Participant’s becoming disabled (within the meaning of Section 409A of the Code).

Capitalized terms used herein but not defined herein shall have the meaning assigned to such
terms in the Plan.

	2.	 	Acceptance of Restricted Stock Agreement: The grant of Restricted Stock shall be
evidenced by, and subject to the terms and conditions of, a Restricted Stock Agreement and
each Participant who has been granted the Restricted Stock will have received information
relating to the Date of Grant, the number of shares of Restricted Stock, the condition(s)
under which the Restricted Stock vests and the Forfeiture Restrictions lapse, and all other
rights with respect to Restricted Stock. Restricted Stock shall be immediately cancelled and
expire if the applicable Restricted Stock Agreement is not accepted (in such manner as may be
specified by Forestar) by such Participant (or his or her agent or attorney) and delivered to
Forestar (in such manner as may be specified by Forestar) within 60 days after the Date of
Grant of the Restricted Stock (unless an extension of such deadline for extenuating
circumstances is approved by a Vice President of Forestar). 
	 
	3.	 	Nonalienation of Benefits: Except as required by applicable law, no right or benefit
under the Plan or any Restricted Stock Agreement shall be subject to anticipation, alienation,
sale, assignment, hypothecation, pledge, exchange, transfer, encumbrance or charge, and any
attempt to anticipate, alienate, sell, assign, hypothecate, transfer, pledge, exchange,
transfer, encumber or charge the same shall be void. No right or benefit hereunder shall in
any manner be liable for or subject to the debts, contracts, liabilities or torts of the
person entitled to such benefit. If any Participant shall become bankrupt or attempt to
anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or
charge any right or benefit under the Plan or any Restricted Stock Agreement, then such right
or benefit shall, in the discretion of the Committee, cease and terminate, and in such event,
the Committee in its discretion may hold or apply the same or any part thereof for the benefit
of the Participant or his beneficiary, spouse, children or other dependents, or any of them,
in such manner and in such proportion as the Committee may deem proper.

			
	 	 	 
	Restricted Stock Agreement — Tier 1
	 	-6-

 

 

	4.	 	Withholding: Forestar’s obligation to remove the Forfeiture Restrictions on the
Restricted Stock upon the vesting of the Restricted Stock in accordance with, and subject to
the terms of, the applicable Restricted Stock Agreement, shall be subject to the satisfaction
of applicable federal, state and local tax withholding requirements. Unless otherwise
prohibited by the Committee, and in accordance with rules prescribed by the Committee, a
Participant may satisfy withholding tax obligations by either of the following means or by a
combination of such means: (i) tendering a cash payment; (ii) authorizing Forestar to withhold
shares of Common Stock as to which the restrictions imposed hereunder are lifted on the
applicable Vesting Date, or (iii) delivering to Forestar unencumbered shares of Common Stock
held by the Participant for such period, if any, as may be specified by the Committee. Shares
of Common Stock that are withheld or delivered to satisfy applicable withholding taxes shall
be valued at their Fair Market Value on the date the withholding tax obligation arises. Only
the required statutory minimum tax may be withheld; excess tax withholding is not allowed.
	 
	5.	 	No Right to Continued Employment; No Additional Rights: Nothing contained in the
Plan or in any Restricted Stock Agreement shall confer on any Participant any right to
continue in the employ of Forestar or any of its Affiliates or interfere in any way with the
right of Forestar or an Affiliate to terminate the employment of a Participant at any time,
with or without cause, notwithstanding the Restricted Stock awarded to the Participant may be
forfeited. Nothing in the Plan Documents or any Restricted Stock Agreement shall be construed
to give any employee of Forestar or any Affiliate any right to receive an award of Restricted
Stock or as evidence of any agreement or understanding, express or implied, that Forestar or
any Affiliate will employ the Participant in any particular position or at any particular rate
of remuneration, or for any particular period of time.
	 
	6.	 	Exclusion from Pension, Profit-Sharing and Other Benefit Computations: By acceptance
of a Restricted Stock award under the Plan, a Participant shall be deemed to have agreed that
any compensation arising out of the award constitutes special incentive compensation that
shall not be taken into account as “salary”, “pay”, “compensation” or “bonus” in determining
the amount of any payment under any pension, retirement or profit-sharing plan of Forestar or
any Affiliate. In addition, each Participant shall be deemed to have agreed that neither the
award, vesting nor payment of Restricted Stock shall be taken into account in determining the
amount of any life insurance coverage or short or long-term disability coverage provided by
Forestar or any Affiliate.
	 
	7.	 	Applicability: This Standard Terms and Conditions shall apply to Restricted Stock as
to which the Committee designates it as applying, and the Committee may designate it as
applying in whole or in part in its discretion to a Restricted Stock award.
	 
	8.	 	Plan Controls: In the event of any conflict between the Plan and the terms of a
Restricted Stock Agreement or the Standard Terms and Conditions, the Plan shall govern.

			
	 	 	 
	Restricted Stock Agreement — Tier 1
	 	-7-

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