8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): December 11, 2007

TEMPLE-INLAND INC.

(Exact name of registrant as specified in its charter)

Delaware	Commission File Number	75-1903917
(State or other jurisdiction of	001-08634	(I.R.S. Employer
incorporation or organization)		Identification No.)

1300 MoPac Expressway South
Austin, Texas 78746
(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code: (512) 434-5800

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

     On November 29, 2007, Temple-Inland Inc. (“Temple-Inland”) announced that its Board of Directors had formally approved the spin-off distributions (the “Distributions”) to its stockholders of all of the shares of common stock, par value $1.00 per share, of Forestar Real Estate Group Inc. (“Forestar”), a wholly-owned subsidiary of Temple-Inland that holds directly or indirectly the assets and liabilities associated with Temple-Inland’s real estate business, and Guaranty Financial Group Inc. (“Guaranty”), a wholly-owned subsidiary of Temple-Inland that holds directly or indirectly the assets and liabilities associated with Temple-Inland’s financial services business. To implement the spin-offs, Temple-Inland will distribute to its stockholders one share of Forestar and one share of Guaranty common stock for every three shares of Temple-Inland common stock outstanding as of the close of business on December 14, 2007, the record date for the Distributions. The Distributions are expected to be made on December 28, 2007 and will be structured as tax-free distributions of Forestar and Guaranty common stock.

     In connection with the spin-offs, Temple-Inland has entered into definitive agreements with Forestar and Guaranty that, among other things, set forth the terms and conditions of the spin-offs and provide a framework for Temple-Inland’s relationship with Forestar and Guaranty after the spin-offs. A summary of certain important terms of the definitive agreements are referenced below.

     Separation and Distribution Agreement

     On December 11, 2007, Temple-Inland entered into a Separation and Distribution Agreement (the “Separation Agreement”) with Forestar and Guaranty that sets forth the agreements between Temple-Inland, Forestar and Guaranty regarding the principal transactions necessary to effect the spin-offs of Forestar and Guaranty from Temple-Inland. The Separation Agreement also sets forth other agreements that will govern certain aspects of Temple-Inland’s relationship with Forestar and Guaranty after completion of the spin-offs. A copy of the Separation Agreement is attached hereto as Exhibit 2.1 and is incorporated by reference herein.

     Tax Matters Agreement

     On December 11, 2007, Temple-Inland entered into a Tax Matters Agreement (the “Tax Matters Agreement”) with Forestar and Guaranty that governs Temple-Inland’s, Forestar’s and Guaranty’s respective rights, responsibilities, and obligations after the spin-offs with respect to taxes, including ordinary course of business taxes and taxes, if any, incurred as a result of any failure of the spin-offs, together with certain related transactions, to qualify as tax-free distributions for U.S. federal income tax purposes within the meaning of Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended. A copy of the Tax Matters Agreement is attached hereto as Exhibit 10.1 and is incorporated by reference herein.

     Transition Services Agreement

     On December 11, 2007, Temple-Inland entered into a Transition Services Agreement (“Transition Services Agreement”) with Forestar and Guaranty under which Forestar or Guaranty agree to provide Temple-Inland with various services, including services relating to human resources, payroll, treasury and risk management, environmental management, tax compliance, telecommunications services and information technology services. Unless otherwise indicated, the services to be provided under the Transition Services Agreement will be provided for a specified period of time not to exceed 24 months. A copy of the Transition Services Agreement is attached hereto as Exhibit 10.2 and is incorporated herein by reference.

     Employee Matters Agreement

     On December 11, 2007, Temple-Inland entered into an Employee Matters Agreement (“Employee Matters Agreement”) with Forestar and Guaranty that allocates liabilities and responsibilities relating to

employee compensation and benefit plans and programs and other related matters in connection with the spin-offs, including the treatment of outstanding Temple-Inland incentive awards, and certain retirement and welfare benefit obligations. The Employee Matters Agreement will also provide that outstanding Temple-Inland stock options, and other stock-based incentive compensation awards, will be equitably adjusted in connection with the distribution. A copy of the Employee Matters Agreement is attached hereto as Exhibit 10.3 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

     (d) Exhibits

2.1	Separation and Distribution Agreement, dated December 11, 2007, among Forestar Real Estate Group Inc., Guaranty Financial Group Inc., and Temple–Inland Inc.
10.1	Tax Matters Agreement, dated December 11, 2007, among Forestar Real Estate Group Inc., Guaranty Financial Group Inc., and Temple–Inland Inc.
10.2	Transition Services Agreement, dated December 11, 2007, among Forestar Real Estate Group Inc., Guaranty Financial Group Inc., and Temple-Inland Inc.
10.3	Employee Matters Agreement, dated December 11, 2007, among Forestar Real Estate Group Inc., Guaranty Financial Group Inc., and Temple-Inland Inc.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	TEMPLE-INLAND INC.
Date: December 11, 2007	By:	/s/ Grant F. Adamson
		Name:	Grant F. Adamson
		Title:	Chief Governance Officer

EXHIBIT INDEX

2.1	Separation and Distribution Agreement, dated December 11, 2007, among Forestar Real Estate Group Inc., Guaranty Financial Group Inc., and Temple–Inland Inc.
10.1	Tax Matters Agreement, dated December 11, 2007, among Forestar Real Estate Group Inc., Guaranty Financial Group Inc., and Temple–Inland Inc.
10.2	Transition Services Agreement, dated December 11, 2007, among Forestar Real Estate Group Inc., Guaranty Financial Group Inc., and Temple-Inland Inc.
10.3	Employee Matters Agreement, dated December 11, 2007, among Forestar Real Estate Group Inc., Guaranty Financial Group Inc., and Temple-Inland Inc.

EX-2.1

Exhibit 2.1

EXECUTION COPY

SEPARATION AND DISTRIBUTION AGREEMENT

by and among

TEMPLE-INLAND INC.,

FORESTAR REAL ESTATE GROUP INC.,

and

GUARANTY FINANCIAL GROUP INC.

Dated as of December 11, 2007

TABLE OF CONTENTS

		Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1	General		2
Section 1.2	References; Interpretation		31
Section 1.3	Agreement Effective; Suspension		31
Section 1.4	Tax Matters		31
Section 1.5	Employee Matters		32
ARTICLE II
THE SEPARATION
Section 2.1	General		32
Section 2.2	Transfer of Assets		32
Section 2.3	Assumption and Satisfaction of Liabilities		33
Section 2.4	Intercompany Accounts		34
Section 2.5	Bank Accounts; Cash Balances		34
Section 2.6	Limitation of Liability		35
Section 2.7	Transfers Not Effected On or Prior to the Effective Time; Transfers Deemed Effective as of the Effective Time		36
Section 2.8	Conveyancing and Assumption Instruments		38
Section 2.9	Further Assurances		38
Section 2.10	Novation of Liabilities		39
Section 2.11	Guarantees		40
Section 2.12	Disclaimers of Representations and Warranties		41
ARTICLE III
CERTAIN ACTIONS PRIOR TO THE DISTRIBUTIONS
Section 3.1	Temple-Inland Reorganization		42
Section 3.2	Certificate of Incorporation; Bylaws; Stockholder Rights Agreement		43
Section 3.3	Directors		43
Section 3.4	Resignations		43
Section 3.5	Forestar Financings		44
Section 3.6	Ancillary Agreements		44
ARTICLE IV
THE DISTRIBUTIONS
Section 4.1	Stock Dividends to Temple-Inland; Distributions		44

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		Page
Section 4.2	Fractional Shares		45
Section 4.3	Unclaimed Shares or Cash		45
Section 4.4	Actions in Connection with the Distributions		46
Section 4.5	Sole Discretion of Temple-Inland		47
Section 4.6	Conditions to the Distributions		47
ARTICLE V
CERTAIN COVENANTS
Section 5.1	Legal Names and Other Parties’ Trademarks		48
Section 5.2	Auditors and Audits; Annual and Quarterly Financial Statements and Accounting		50
Section 5.3	No Restrictions on Post-Closing Competitive Activities; Corporate Opportunities		51
ARTICLE VI
CONTINGENT GAINS AND LIABILITIES AND UNALLOCATED ASSETS
AND LIABILITIES
Section 6.1	Unallocated Assets and Contingent Gains		53
Section 6.2	Unallocated Liabilities		54
Section 6.3	Payments		55
Section 6.4	Procedures to Determine Status of Liability or Asset		56
Section 6.5	Certain Case Allocation Matters		58
Section 6.6	Cooperation in Defense and Settlement		58
Section 6.7	Responsibility for Third Party Claims; Contribution; Insolvency		59
ARTICLE VII
RELEASES AND INDEMNIFICATION
Section 7.1	Release of Pre-Distribution Claims		60
Section 7.2	Indemnification by Temple-Inland		63
Section 7.3	Indemnification by Forestar		64
Section 7.4	Indemnification by Guaranty		64
Section 7.5	Procedures for Indemnification		65
Section 7.6	Indemnification Payments		67
Section 7.7	Contribution		67
Section 7.8	Indemnification Obligations Net of Insurance Proceeds and Other Amounts on a Net-Tax Basis		68
Section 7.9	Additional Matters; Survival of Indemnities		68

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		Page
ARTICLE VIII
CONFIDENTIALITY; ACCESS TO INFORMATION
Section 8.1	Provision of Corporate Records		69
Section 8.2	Access to Information		69
Section 8.3	Witness Services		70
Section 8.4	Confidentiality		70
Section 8.5	Privileged Matters		72
Section 8.6	Reimbursement		74
Section 8.7	Ownership of Information		74
Section 8.8	Other Agreements		74
ARTICLE IX
DISPUTE RESOLUTION
Section 9.1	Negotiation; Broad Form Arbitration		74
Section 9.2	Arbitration		77
Section 9.3	Selection of Arbitrator(s)		77
Section 9.4	Arbitration Procedures		78
Section 9.5	Discovery		78
Section 9.6	Confidentiality of Proceedings		79
Section 9.7	Pre-Hearing Procedure and Disposition		79
Section 9.8	Continuity of Service and Performance		80
Section 9.9	Awards		80
Section 9.10	Costs		80
Section 9.11	Adherence to Time Limits		80
Section 9.12	Exclusive Remedy; Limitation on Actions		80
ARTICLE X
INSURANCE
Section 10.1	Policies and Rights Included Within Assets		81
Section 10.2	Claims Made Tail Policies		82
Section 10.3	Occurrence Based Policies		83
Section 10.4	Administration; Other Matters		84
Section 10.5	Agreement for Waiver of Conflict and Shared Defense		86
Section 10.6	Cooperation		86
Section 10.7	Certain Matters Relating to Temple-Inland’s Organizational Documents		86
ARTICLE XI
MISCELLANEOUS
Section 11.1	Complete Agreement; Construction		86

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		Page
Section 11.2	Ancillary Agreements		86
Section 11.3	Counterparts; Electronic Delivery		87
Section 11.4	Survival of Agreements		87
Section 11.5	Expenses		87
Section 11.6	Notices		87
Section 11.7	Waivers and Consents		88
Section 11.8	Amendments		88
Section 11.9	Assignment		88
Section 11.10	Successors and Assigns		89
Section 11.11	Certain Termination and Amendment Rights		89
Section 11.12	Payment Terms		89
Section 11.13	No Circumvention		89
Section 11.14	Subsidiaries		90
Section 11.15	Third Party Beneficiaries		90
Section 11.16	Title and Headings		90
Section 11.17	Exhibits and Schedules		90
Section 11.18	Closing		90
Section 11.19	Governing Law		90
Section 11.20	Consent to Jurisdiction		90
Section 11.21	Specific Performance		91
Section 11.22	Waiver of Jury Trial		91
Section 11.23	Severability		91
Section 11.24	Force Majeure		91
Section 11.25	Interpretation		91
Section 11.26	Authorization		92

Schedule 1.1(39)	Exclusive Forestar Contingent Gain
Schedule 1.1(40)	Exclusive Forestar Contingent Liability
Schedule 1.1(41)	Exclusive Guaranty Contingent Gain
Schedule 1.1(42)	Exclusive Guaranty Contingent Liability
Schedule 1.1(43)	Exclusive Temple-Inland Contingent Gain
Schedule 1.1(44)	Exclusive Temple-Inland Contingent Liability
Schedule 1.1(47)(v)	Financial Services Assets
Schedule 1.1(47)(viii)(A)	Assets Not Considered Financial Services Assets
Schedule 1.1(49)(vi)	Financial Services Contracts
Schedule 1.1(50)(i)	Financial Services Liabilities
Schedule 1.1(50)(v)	Financial Services Liabilities Related to Indebtedness
Schedule 1.1(50)(vi)	Financial Services Actions
Schedule 1.1(50)(viii)	Financial Services Guarantees
Schedule 1.1(50)(ix)(A)	Liabilities Not Considered Financial Services Liabilities
Schedule 1.1(65)	Forestar Group
Schedule 1.1(87)	Guaranty Group
Schedule 1.1(120)(v)	Real Estate Assets
Schedule 1.1(120)(viii)(A)	Assets Not Considered Real Estate Assets
Schedule 1.1(122)(vi)	Real Estate Contracts

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Schedule 1.1(123)(i)	Real Estate Liabilities
Schedule 1.1(123)(v)	Real Estate Liabilities Related to Indebtedness
Schedule 1.1(123)(vi)	Real Estate Actions
Schedule 1.1(123)(viii)	Real Estate Guarantees
Schedule 1.1(123)(ix)(A)	Liabilities Not Considered Real Estate Liabilities
Schedule 1.1(131)(v)	Retained Business Assets
Schedule 1.1(131)(viii)(A)	Assets Not Considered Retained Business Assets
Schedule 1.1(132)(vi)	Retained Business Contracts
Schedule 1.1(133)(i)	Retained Business Liabilities
Schedule 1.1(133)(v)	Retained Business Liabilities Related to Indebtedness
Schedule 1.1(133)(vi)	Retained Business Actions
Schedule 1.1(133)(viii)	Retained Business Guarantees
Schedule 1.1(133)(ix)(A)	Liabilities Not Considered Retained Business Liabilities
Schedule 1.1(164)(iii)	Unallocated Liabilities
Schedule 2.4(b)	Intercompany Accounts to Remain Outstanding
Schedule 2.5(a)(i)	Forestar Accounts
Schedule 2.5(a)(ii)	Guaranty Accounts
Schedule 2.5(b)	Temple-Inland Accounts
Schedule 2.6(b)	Non-Terminated Intercompany Contracts
Schedule 2.11(a)	Forestar Removal of Guarantees
Schedule 2.11(b)	Guaranty Removal of Guarantees
Schedule 2.11(c)	Temple-Inland Removal of Guarantees
Schedule 3.5	Forestar Borrowing Amount
Schedule 4.6(f)	Regulatory Approvals
Schedule 9.3(c)	List of Potential Arbitrators
Schedule 11.5(b)	Advisors Whose Fees Are to be Paid by Temple-Inland

Exhibits

Exhibit A	Reorganization Actions
Exhibit B	Employee Matters Agreement
Exhibit C	Tax Matters Agreement
Exhibit D	Master Transition Services Agreement

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SEPARATION AND DISTRIBUTION AGREEMENT

          SEPARATION AND DISTRIBUTION AGREEMENT (this “Agreement”), dated as of December 11, 2007, by and among Temple-Inland Inc., a Delaware corporation (“Temple-Inland”), Forestar Real Estate Group Inc., a Delaware corporation (“Forestar”), and Guaranty Financial Group Inc., a Delaware corporation (“Guaranty”). Each of Temple-Inland, Forestar and Guaranty is sometimes referred to herein as a “Party” and collectively, as the “Parties”.

R E C I T A L S:

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

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

          WHEREAS, in order to effect the Separation, the Parties and their Subsidiaries will enter into a series of transactions whereby certain assets of Temple-Inland and its Affiliates will be reorganized (the “Reorganization”) such that (i) Temple-Inland and/or one or more members of the Temple-Inland Group will, collectively, own all of the Retained Business Assets and Assume (or retain) all of the Retained Business Liabilities, (ii) Forestar and/or one or more members of the Forestar Group will, collectively, own all of the Real Estate Assets and Assume (or retain) all of the Real Estate Liabilities, and (iii) Guaranty and/or one or more members of the Guaranty Group will, collectively, own all of the Financial Services Assets and Assume (or retain) all of the Financial Services Liabilities;

          WHEREAS, following the Reorganization and the Separation, Temple-Inland intends to distribute to the holders of Temple-Inland Common Stock on a pro rata basis (in each case without consideration being paid by such stockholders) (i) all of the issued and outstanding shares of common stock of Forestar, $1.00 par value per share (the “Forestar Common Stock”), and (ii) all of the issued and outstanding shares of common stock, $1.00 par value per share, of Guaranty (the “Guaranty Common Stock”) (such transactions, including the Reorganization, the Separation and the Distributions, as they may be amended or modified in accordance with the terms and subject to the conditions of this Agreement from time to time, collectively, the “Plan of Separation”);

          WHEREAS, in connection with the Plan of Separation, Forestar shall, subject to the terms and provisions of this Agreement, enter into a credit facility providing for both revolving and term loan borrowings, a portion of the proceeds of which shall be used to repay to Temple-Inland certain intercompany debt of Forestar;

          WHEREAS, it is the intention of the Parties that each of the contributions of Assets to, and the Assumption of Liabilities by, Forestar and Guaranty, together with the corresponding distributions of all of the Forestar Common Stock and the Guaranty Common Stock, respectively, qualifies as a reorganization within the meaning of Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the “Code”);

          WHEREAS, this Agreement is intended to constitute a “plan of reorganization” within the meaning of Section 1.368-2(g) of the U.S. Treasury Regulations with respect to (i) the contribution of Assets to, and Assumption of Liabilities by, Forestar, together with the corresponding distribution of Forestar Common Stock and (ii) the contribution of Assets to, and Assumption of Liabilities by, Guaranty, together with the corresponding distribution of Guaranty Common Stock;

          WHEREAS, it is the intention of the Parties that the distribution of each of the Forestar Common Stock and the Guaranty Common Stock to the stockholders of Temple-Inland will qualify as a tax-free distribution to such stockholders within the meaning of Section 355(a) of the Code;

          WHEREAS, it is the intention of the Parties that the contribution of certain land and other property from TIN Inc., a Delaware corporation and wholly-owned subsidiary of Temple-Inland, to Forestar will qualify under Section 351(a) of the Code;

          WHEREAS, this Agreement sets forth the plan of reorganization and the process by which each of the Real Estate Business, the Financial Services Business, and the Retained Business will be reorganized and separated and, thereafter, all of the issued and outstanding shares of each of Forestar Common Stock and Guaranty Common Stock will be distributed to holders of Temple-Inland Common Stock; and

          WHEREAS, the Board of Directors of Temple-Inland has (i) determined that the Plan of Separation and the other transactions contemplated by this Agreement and the Ancillary Agreements are appropriate, desirable and in the best interests of Temple-Inland and its stockholders and (ii) approved this Agreement and each of the Ancillary Agreements.

          NOW, THEREFORE, in consideration of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

          Section 1.1 General.

          As used in this Agreement, the following terms shall have the following meanings:

     (1) “2007 Internal Control Audit and Management Assessments” shall have the meaning set forth in Section 5.2(a)(i).

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     (2) “Action” shall mean any demand, action, claim, charge, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation by or before any Governmental Entity or in any arbitration or mediation.

     (3) “Affiliate” shall mean, when used with respect to a specified Person, a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such specified Person. For the purposes of this definition, “control”, when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by Contract or otherwise. It is expressly agreed that no Party or member of any Group shall be deemed to be an Affiliate of another Party or member of such other Party’s Group by reason of having one or more directors in common.

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

     (5) “Agreement Disputes” shall have the meaning set forth in Section 9.1(a).

     (6) “Allocable Portion of Insurance Proceeds” shall have the meaning set forth in Section 10.4(c).

     (7) “Allocable Share of the Deductible” shall have the meaning set forth in Section 10.4(d).

     (8) “Allocated Percentage” means the Forestar Percentage, the Guaranty Percentage, or the Temple-Inland Percentage, as the case may be.

     (9) “Amended Financial Report” shall have the meaning set forth in Section 5.2(b).

     (10) “Ancillary Agreements” shall mean all of the written Contracts, instruments, assignments or other arrangements (other than this Agreement) entered into in connection with the transactions contemplated hereby, including the Conveyancing and Assumption Instruments, the Employee Matters Agreement, the Tax Matters Agreement and the Transition Services Agreement.

     (11) “Assets” shall mean assets, properties, claims and rights (including goodwill), wherever located (including in the possession of vendors or other third parties or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the Records or financial statements of any Person, including (but not limited to) the following:

          (i) all accounting and other legal and business books, records, ledgers and files whether printed, electronic or written;

          (ii) all apparatuses, computers and other electronic data processing and communications equipment, fixtures, machinery, rolling stock, equipment, furniture, office equipment, automobiles, trucks, aircraft and other transportation equipment, special and general tools, test devices, molds, tooling, dies, prototypes and models and other tangible personal property;

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          (iii) all inventories of products, goods, materials, parts, raw materials and supplies;

          (iv) all interests in and rights with respect to real property of whatever nature, including easements, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise;

          (v) all interests in any capital stock or other equity interests of any Subsidiary or any other Person, all bonds, notes, debentures or other securities issued by any Subsidiary or any other Person, all loans, advances or other extensions of credit or capital contributions to any Subsidiary or any other Person and all other investments in securities of any Person;

          (vi) all Contracts, leases of personal property, open purchase orders for raw materials, supplies, parts or services, unfilled orders for the manufacture and sale of products and other Contracts or commitments;

          (vii) all deposits, letters of credit and performance and surety bonds;

          (viii) all written (including in electronic form) technical information, data, specifications, research and development information, engineering drawings and specifications, operating and maintenance manuals, and materials and analyses prepared by consultants and other third parties;

          (ix) all Intellectual Property;

          (x) all Software;

          (xi) all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, customer and vendor data, correspondence and lists, product data and literature, artwork, design, development and business process files and data, vendor and customer drawings, specifications, quality records and reports and other books, records, studies, surveys, reports, plans and documents;

          (xii) all prepaid expenses, trade accounts and other accounts and notes receivables;

          (xiii) all rights under Contracts, all claims or rights against any Person, choses in action or similar rights whether sounding in tort, contract or otherwise, whether accrued or contingent;

          (xiv) all rights under insurance policies and all rights in the nature of insurance, indemnification or contribution;

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          (xv) all licenses, permits, approvals and authorizations which have been issued by any Governmental Entity;

          (xvi) all cash or cash equivalents, bank accounts, brokerage accounts, lock boxes and other third-party deposit arrangements; and

          (xvii) all interest rate, currency, commodity or other swap, collar, cap or other hedging or similar Contracts or arrangements.

     (12) “Assume” shall have the meaning set forth in Section 2.3; and the terms “Assumed” and “Assumption” shall have their correlative meanings.

     (13) “Audited Party” shall have the meaning set forth in Section 5.2(a)(ii).

     (14) “Benefit Plan” shall have the meaning set forth in the Employee Matters Agreement.

     (15) “Business” shall mean the Retained Business, the Real Estate Business or the Financial Services Business, as applicable.

     (16) “Business Day” means any day that is not a Saturday, a Sunday or any other day on which banks are required or authorized by Law to be closed in the city of New York, New York.

     (17) “Business Entity” shall mean any corporation, partnership, limited liability company, joint venture, unincorporated associations, trust for a business purpose, or other entity which may legally hold title to Assets.

     (18) “Claims Administration” shall mean the processing of Insured Claims, including the reporting of claims to the insurance carriers, management and defense of claims and providing for appropriate releases upon settlement of claims.

     (19) “Code” shall have the meaning set forth in the recitals hereto.

     (20) “Commission” shall mean the United States Securities and Exchange Commission.

     (21) “Confidential Information” shall mean any and all of the following information in written, oral, electronic or other tangible or intangible form, without regard to whether the information is subject to being copyrighted or patented:

          (i) all information that is a trade secret under applicable trade secret or other Law or is required to be maintained in confidence by any Law or under any Contract;

          (ii) all information concerning product specifications, data, know-how, formulae, compositions, processes, methodologies, designs, sketches, photographs, graphs, drawings, samples, models, inventions and ideas, improvements, past, current and planned research and development, current and planned manufacturing or distribution

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methods and processes, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, computer hardware, computer software (including all versions, source and object codes and all related files and data), software and database technologies, systems, structures and architectures, and other similar technical or business information;

          (iii) all information concerning any Business and its affairs (which includes earnings reports and forecasts, macro-economic reports and forecasts, business and strategic plans, general market evaluations and surveys, litigation presentations and risk assessments, financing and credit-related information, financial projections, tax returns and accountants’ materials, historical, current and projected sales, capital spending budgets and plans, business plans, strategic plans, marketing and advertising plans, client and customer lists and files, Contracts, the names and backgrounds of key employees and personnel training techniques and materials, however documented, and other similar financial, business or employee information);

          (iv) communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), communications and materials otherwise related to or made or prepared in connection with or in preparation for any legal proceeding; and

          (v) all notes, analyses, compilations, studies, summaries and other material that contain or are based, in whole or in part, upon any information included in the foregoing subparts (i) – (iv).

     (22) “Consents” shall mean any consents, waivers or approvals from, or notification requirements to, any Person, other than a Governmental Entity.

     (23) “Contingent Claim Committee” means a committee that shall be established in accordance with Section 6.4.

     (24) “Contingent Gain” means any claim or other right, other than claims or rights related to Taxes (which are governed by the Tax Matters Agreement), of Temple-Inland, Forestar, Guaranty or any of their respective Affiliates, whenever arising, against any Person other than a Person released or intended to be released from a claim or other right under Section 7.1 and to the extent that:

          (i) such claim or other right has accrued as of the Relevant Time (based on then existing Law); and

          (ii) the existence or scope of the obligation of such other Person as of the Relevant Time with respect to such claim or other right was not acknowledged, fixed or determined due to a dispute or other uncertainty as of the Relevant Time or as a result of the failure of such claim or other right to have been discovered or asserted as of the Relevant Time (it being understood that the existence of any pending, threatened or contemplated Action (or any contingent Asset reflected in the consolidated financial

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statements in accordance with generally accepted accounting principles as applied in the U.S.) as of the Relevant Time with respect to any claim or other right shall not be sufficient for such claim or other right to be considered acknowledged, fixed or determined).

          For purposes of this definition and Section 1.1(25), “accrued” shall mean that all of the elements necessary for the assertion of a claim with respect to such matter shall have occurred on or prior to the Relevant Time, such that the claim, had it been asserted in an Action on or prior to the Relevant Time, would not be dismissed by a court for lack of ripeness or similar grounds.

          The Parties agree that no claim or other right relating to, arising out of or resulting from any obligation of any Person to perform the executory portion of any Contract existing as of the Relevant Time shall be deemed to be a Contingent Gain.

          Notwithstanding the foregoing, none of

          (A) any Insurance Proceeds, or

          (B) any reversal of any litigation or other reserve for accounting purposes

          shall be deemed to be a Contingent Gain.

     (25) “Contingent Liability” means any Liability, other than Liabilities for Taxes (which are governed by the Tax Matters Agreement) and Liabilities for any Benefit Plans (which are governed by the Employee Matters Agreement), of Temple-Inland, Forestar or Guaranty or any of their respective Affiliates, whenever arising, to any Person unless that Person has released or the Liability to that Person is intended to be released under Section 7.1, if and to the extent that:

          (i) such Liability has accrued as of the Relevant Time (based on then existing Law); and

          (ii) the existence or scope of the obligation of Forestar, Guaranty or Temple-Inland or any of their respective Affiliates as of the Relevant Time with respect to such Liability was not acknowledged, fixed or determined due to a dispute or other uncertainty as of the Relevant Time or as a result of the failure of such Liability to have been discovered or asserted as of the Relevant Time (it being understood that the existence of any Action pending, threatened or contemplated or other reserve for accounting purposes as of the Relevant Time with respect to any Liability shall not be sufficient for such Liability to be considered acknowledged, fixed or determined).

          The Parties agree that no Liability relating to, arising out of or resulting from any obligation of any Person to perform the executory portion of any Contract existing as of the Relevant Time shall be deemed to be a Contingent Liability.

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     (26) “Contract” shall mean any agreement, license, contract, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking (whether written or oral and whether express or implied).

     (27) “Conveyancing and Assumption Instruments” shall mean, collectively, the various written Contracts and other documents entered into and to be entered into to effect the Transfer of Assets and the Assumption of Liabilities in the manner contemplated by this Agreement and the Plan of Separation, or otherwise relating to, arising out of or resulting from the transactions contemplated by this Agreement (other than the Tax Matters Agreement, the Employee Matters Agreement and the Transition Services Agreement, each of which shall be in such form and dated as of such date as the applicable Parties thereto shall reasonably agree).

     (28) “CPR” shall have the meaning set forth in Section 9.2.

     (29) “Date of this Agreement” shall mean the last date of execution by the Parties to this Agreement as shown on the signature page(s) hereto.

     (30) “D&O Tail Policies” shall have the meaning set forth in Section 10.2(a).

     (31) “Disclosure Documents” shall mean any registration statement (including any registration statement on Form 10) filed with the Commission prior to the Relevant Time by or on behalf of any Party or any of its Subsidiaries and also includes any information statement, prospectus, offering memorandum, offering circular (including franchise offering circular or any similar disclosure statement) or similar disclosure document, whether or not filed with the Commission or any other Governmental Entity, which offers for sale or registers the transfer or distribution of any security of such Party or any of its Subsidiaries.

     (32) “Dispute Notice” shall have the meaning set forth in Section 9.1(b).

     (33) “Distribution Agent” shall mean Computershare Trust Company, N.A., as distribution agent.

     (34) “Distributions” shall mean, collectively, the Forestar Distribution and the Guaranty Distribution.

     (35) “Effective Time” shall mean 12:01 a.m., Central Standard Time, on the earlier to occur of the Forestar Distribution Date or the Guaranty Distribution Date (it being understood for the avoidance of doubt that, if the Forestar Distribution Date and Guaranty Distribution Date are the same date, then the Effective Time shall be 12:01 a.m., Central Standard Time, on such date).

     (36) “Employee Matters Agreement shall mean the Employee Matters Agreement by and among Temple-Inland, Forestar and Guaranty, dated as of the date hereof and substantially in the form attached as Exhibit B hereto.

     (37) “Excess Payment” shall have the meaning set forth in Section 6.7(b).

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     (38) “Exchange Act” shall mean the Securities Exchange Act of 1934 and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time that reference is made thereto.

     (39) “Exclusive Forestar Contingent Gain” means any Contingent Gain if such Contingent Gain primarily relates to the Real Estate Business, including the matters listed or described on Schedule 1.1(39), or if such Contingent Gain is expressly assigned to Forestar pursuant to this Agreement or any Ancillary Agreement.

     (40) “Exclusive Forestar Contingent Liability” means any Contingent Liability if such Contingent Liability primarily relates to the Real Estate Business, including the matters listed or described on Schedule 1.1(40), or if such Contingent Liability is expressly assigned to Forestar pursuant to this Agreement or any Ancillary Agreement.

     (41) “Exclusive Guaranty Contingent Gain” means any Contingent Gain if such Contingent Gain primarily relates to the Financial Services Business, including the matters listed or described on Schedule 1.1(41), or if such Contingent Gain is expressly assigned to Guaranty pursuant to this Agreement or any Ancillary Agreement.

     (42) “Exclusive Guaranty Contingent Liability” means any Contingent Liability if such Contingent Liability primarily relates to the Financial Services Business, including the matters listed or described on Schedule 1.1(42), or if such Contingent Liability is expressly assigned to Guaranty pursuant to this Agreement or any Ancillary Agreement.

     (43) “Exclusive Temple-Inland Contingent Gain” means any Contingent Gain if such Contingent Gain primarily relates to the Retained Business, including the matters listed or described on Schedule 1.1(43), or if such Contingent Gain is expressly assigned to Temple-Inland pursuant to this Agreement or any Ancillary Agreement.

     (44) “Exclusive Temple-Inland Contingent Liability” means any Contingent Liability if such Contingent Liability primarily relates to the Retained Business, including the matters listed or described on Schedule 1.1(44), or if such Contingent Liability is expressly assigned to Temple-Inland pursuant to this Agreement or any Ancillary Agreement.

     (45) “Fiduciary Tail Policies” shall have the meaning set forth in Section 10.2(b).

     (46) “Final Distribution Date” shall mean the last to occur of the Guaranty Distribution Date or the Forestar Distribution Date; provided, that in the event that Temple-Inland makes a public announcement that its board of directors has determined that the shares of either Guaranty or Forestar shall not be distributed by Temple-Inland to its stockholders, then the “Final Distribution Date” shall be the date of the last Distribution to be made by Temple-Inland to its stockholders as contemplated by the Plan of Separation, as so amended.

     (47) “Financial Services Assets” shall mean:

          (i) the ownership interests (to the extent held by Temple-Inland, Forestar, Guaranty or any of their respective Affiliates immediately prior to the Relevant Time) in each member of the Guaranty Group (other than shares of capital stock to be distributed in the Guaranty Distribution);

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          (ii) all Financial Services Contracts, any rights or claims of Temple-Inland, Forestar, or Guaranty or any of their respective Affiliates, arising thereunder, and any other rights or claims or contingent rights or claims of Temple-Inland, Forestar, Guaranty, or any of their respective Affiliates, primarily relating to or arising from any other Financial Services Asset or the Financial Services Business;

          (iii) all Assets owned, leased or held by Temple-Inland, Forestar, Guaranty or any of their respective Affiliates immediately prior to the Relevant Time that are used primarily in the Financial Services Business, including inventory, accounts receivable, goodwill facilities and equipment;

          (iv) subject to ARTICLE X, any rights of any member of the Guaranty Group under any Financial Services Policies and any Financial Services Shared Policies to the extent related to the Financial Services Business;

          (v) the Assets listed or described on Schedule 1.1(47)(v) and any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by, or Transferred to, any member of the Guaranty Group;

          (vi) any Exclusive Guaranty Contingent Gain;

          (vii) all Guaranty Accounts, and, subject to the provision of Section 2.5, all cash, cash equivalents, and securities on deposit in such accounts immediately prior to the Relevant Time; and

          (viii) any collateral securing any Financial Services Liability or a Liability of a Venture of a member of the Guaranty Group immediately prior to the Relevant Time.

     Notwithstanding the foregoing, the Financial Services Assets shall not in any event include:

               (A) the Assets listed or described on Schedule 1.1(47)(viii)(A); or

               (B) any Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by or Transferred to, any member of the Temple-Inland Group or Forestar Group, including any Exclusive Temple-Inland Contingent Gain or Exclusive Forestar Contingent Gain.

     (48) “Financial Services Business” shall mean:

          (i) the financial services business unit of Temple-Inland, which does business primarily through the Guaranty Group or through any Venture by a member of the Guaranty Group, and includes providing commercial and retail banking and related services and providing insurance and related services;

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          (ii) any other business, operations, or assets where such business was conducted primarily through the use of the Financial Services Assets prior to the Relevant Time; and

          (iii) the businesses and operations of Business Entities acquired or established by or for any member of the Guaranty Group after the Date of this Agreement;

provided, however, the Financial Services Business shall not in any event include (a) the claims management function previously performed by Guaranty Insurance Services Inc. or Sunbelt Insurance Company or (b) any operation, business or asset expressly included in the Real Estate Business or Retained Business pursuant to this Agreement.

     (49) “Financial Services Contracts” shall mean the following Contracts to which Temple-Inland or any of its Affiliates is a party or by which it or any of its Affiliates or any of their respective Assets is bound, except for any such Contract or part thereof (i) that is expressly contemplated not to be Transferred by any member of the Temple-Inland Group or the Forestar Group to Guaranty or any member of the Guaranty Group or (ii) that is expressly contemplated to be Transferred to (or remain with) any member of the Temple-Inland Group or the Forestar Group, in each case, pursuant to any provision of this Agreement or any Ancillary Agreement:

          (i) any Contract entered into in the name of, or expressly on behalf of, any division, business unit or member of the Guaranty Group;

          (ii) any Contract that relates primarily to the Financial Services Business;

          (iii) any Contract representing capital or operating equipment lease obligations of facilities or equipment primarily used by any member of the Guaranty Group;

          (iv) any Contract or part thereof, that is otherwise expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be retained by or Transferred to, any member of the Guaranty Group;

          (v) any guarantee, indemnity, representation or warranty of or in favor of any member of the Guaranty Group; and

          (vi) the Contracts listed or described on Schedule 1.1(49)(vi).

     (50) “Financial Services Liabilities” shall mean:

          (i) the Liabilities listed or described on Schedule 1.1(50)(i) and any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained or Assumed by any member of the Guaranty Group;

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          (ii) any and all Liabilities of Temple-Inland, Forestar, Guaranty or any of their respective Affiliates, primarily relating to, arising out of or resulting from:

               (A) the operation or conduct of the Financial Services Business, as conducted at any time prior to, on or after the Relevant Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Temple-Inland, Forestar, Guaranty or any of their respective Affiliates with respect to the Financial Services Business (whether or not such act or failure to act is or was within such Person’s authority));

               (B) the operation or conduct of any business conducted by any member of the Guaranty Group at any time after the Relevant Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Guaranty, or any of its Affiliates after the Relevant Time (whether or not such act or failure to act is or was within such Person’s authority)); or

               (C) any Financial Services Business or any Financial Services Assets, whether arising before, on or after the Relevant Time;

          (iii) any and all Liabilities to the extent relating to, arising out of or resulting from any terminated, discontinued or divested Business Entity, business, real property, Asset or operation formerly and primarily owned or managed by any member of the Guaranty Group or any Financial Services Business, provided any Liability related to, arising out of or resulting from a business or Assets Transferred to a member of another Group before the Relevant Time is excluded;

          (iv) any and all Liabilities (including under applicable federal and state securities Laws) relating to, arising out of or resulting from:

               (A) Disclosure Documents (including the Guaranty Form 10 and the Guaranty Information Statement), except to the extent specifically enumerated as a Retained Business Liability in Section 1.1(133);

               (B) any Pre-Separation Disclosure, but only to the extent such Liabilities arise out of or result from matters related to businesses, operations, Assets or Liabilities allocated to Guaranty in the Plan of Separation pursuant to this Agreement; or

               (C) any Guaranty Disclosure;

          (v) any and all Liabilities, including those Liabilities listed on Schedule 1.1(50)(v), relating to, arising out of or resulting from any Indebtedness (including debt securities and asset-backed debt) of any member of the Guaranty Group (whether incurred prior to, on or after the Relevant Time);

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          (vi) any and all Liabilities relating to, arising out of or resulting from any Action listed or described on Schedule 1.1(50)(vi);

          (vii) any Exclusive Guaranty Contingent Liability;

          (viii) any and all Liabilities of the guarantor under the guarantees listed or described on Schedule 1.1(50)(viii); and

          (ix) any and all obligations of an insured Person under each Financial Services Policy and each Shared Policy to the extent related to or arising out of the Financial Services Business.

     Notwithstanding anything to the contrary herein, the Financial Services Liabilities shall not include:

               (A) any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained or Assumed by any member of the Forestar Group or the Temple-Inland Group, including any Liabilities set forth on Schedule 1.1(50)(ix)(A);

               (B) any Liabilities related or attributable to, or arising in connection with, the employment, service, termination of employment or termination of service of Guaranty Employees, which shall be exclusively governed by the Employee Matters Agreement;

               (C) any Liabilities related or attributable to, or arising in connection with, Taxes or Tax Returns, which shall be exclusively governed by the Tax Matters Agreement; and

               (D) any Liabilities of the guarantor under the guarantees listed or described on Schedule 1.1(123)(viii) or 1.1(133)(viii).

For the avoidance of doubt, no Liability shall be a Financial Services Liability solely as a result of Guaranty or any other member of the Guaranty Group being named as party to, or in, any Action.

     (51) “Financial Services Policies” shall mean all Policies, current or past, which are owned or maintained by or on behalf of Temple-Inland or any Subsidiary of Temple-Inland, which relate exclusively to the Financial Services Business and which Policies are either maintained by Guaranty or a member of the Guaranty Group or assignable to Guaranty or a member of the Guaranty Group.

     (52) “Financial Services Shared Policies” shall mean all Policies, current or past, which are owned or maintained by or on behalf of Temple-Inland or any Subsidiary of Temple-Inland which relate to the Financial Services Business, other than Financial Services Policies.

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     (53) “Force Majeure” shall mean, with respect to a Party, an event beyond the control of such Party (or any Person acting on its behalf), which by its nature could not have been foreseen by such Party (or such Person), or, if it could have been foreseen, was unavoidable, and includes acts of God, storms, floods, riots, labor unrest, pandemics, nuclear incidents, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities or other national or international calamity or one or more acts of terrorism or failure of energy sources or distribution facilities. Notwithstanding the foregoing, the receipt by a Party of a hostile takeover offer, even if unforeseen or unavoidable, and such Party’s response thereto shall not be deemed an event of Force Majeure.

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

     (55) “Forestar Accounts” shall have the meaning set forth in Section 2.5(a).

     (56) “Forestar Borrowing Amount” shall have the meaning set forth in Section 3.5.

     (57) “Forestar Common Stock” shall have the meaning set forth in the recitals hereto.

     (58) “Forestar Credit Facilities” shall mean the credit facilities and related Contracts to be entered into by one or more members of the Forestar Group on or prior to the Forestar Distribution Date in connection with the Plan of Separation.

     (59) “Forestar Disclosure” shall mean any form, statement, schedule or other material (other than the Disclosure Documents) filed with or furnished to:

(A) the Commission,

(B) any other Governmental Entity, or

(C) holders of any securities of any member of the Forestar Group,

on or after the Relevant Time by or on behalf of any member of the Forestar Group in connection with the registration, sale, or distribution of securities or disclosure related thereto (including periodic disclosure obligations).

     (60) “Forestar Distribution” shall mean the distribution on the Forestar Distribution Date to holders of record of shares of Temple-Inland Common Stock as of the Forestar Distribution Record Date of the Forestar Common Stock owned by Temple-Inland on the basis of one share of Forestar Common Stock for every three outstanding shares of Temple-Inland Common Stock.

     (61) “Forestar Distribution Date” shall mean the date on which Temple-Inland, through the Distribution Agent, distributes all of the issued and outstanding shares of Forestar Common Stock to the holders of Temple-Inland Common Stock.

     (62) “Forestar Distribution Record Date” shall mean such date as may be determined by Temple-Inland’s board of directors (or special committee thereof) as the record date for the Forestar Distribution.

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     (63) “Forestar Employee” shall have the meaning set forth in the Employee Matters Agreement.

     (64) “Forestar Form 10” shall mean the registration statement on Form 10 filed by Forestar with the Commission in connection with the Forestar Distribution.

     (65) “Forestar Group” shall mean Forestar and each Person (other than any member of the Guaranty Group or the Temple-Inland Group) that is a Subsidiary of Forestar immediately at the Relevant Time, and each Person that becomes a Subsidiary of Forestar after the Relevant Time, which shall include those entities identified as such on Schedule 1.1(65).

     (66) “Forestar Indemnitees” shall mean each member of the Forestar Group and each of their Affiliates and each member of the Forestar Group’s and their respective Affiliates’ respective directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing.

     (67) “Forestar Information Statement” shall mean the Information Statement attached as an exhibit to the Forestar Form 10 and sent to the holders of shares of Temple-Inland Common Stock in connection with the Forestar Distribution, including any amendment or supplement thereto.

     (68) “Forestar Percentage” shall mean 15%.

     (69) “Form 10” shall mean the registration statement on Form 10 filed by Forestar or Guaranty, as the case may be, with the Commission in connection with the Forestar Distribution, or the Guaranty Distribution, respectively.

     (70) “Former Forestar Employee” shall have the meaning set forth in the Employee Matters Agreement.

     (71) “Former Guaranty Employee” shall have the meaning set forth in the Employee Matters Agreement.

     (72) “Former Temple-Inland Employee” shall have the meaning set forth in the Employee Matters Agreement.

     (73) “GLBA” shall have the meaning set forth in Section 8.4(e).

     (74) “Governmental Approvals” shall mean any notices or reports to be submitted to, or other filings to be made with, or any consents, registrations, approvals, permits or authorizations to be obtained from, any Governmental Entity.

     (75) “Governmental Entity” shall mean any nation or government, any state, municipality or other political subdivision thereof and any entity, body, agency, commission, department, board, bureau or court, whether domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government; and any official thereof.

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     (76) “Group” shall mean the Temple-Inland Group, the Forestar Group or the Guaranty Group, as the case may be.

     (77) “Guarantee Release” shall have the meaning set forth in Section 2.11(c).

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

     (79) “Guaranty Accounts” shall have the meaning set forth in Section 2.5(a).

     (80) “Guaranty Common Stock” shall have the meaning set forth in the recitals hereto.

     (81) “Guaranty Disclosure” shall mean any form, statement, schedule or other material (other than the Disclosure Documents) filed with or furnished to:

(A) the Commission,

(B) any other Governmental Entity, or

(C) holders of any securities of any member of the Guaranty Group,

on or after the Relevant Time by or on behalf of any member of the Guaranty Group in connection with the registration, sale, or distribution of securities or disclosure related thereto (including periodic disclosure obligations).

     (82) “Guaranty Distribution” shall mean the distribution on the Guaranty Distribution Date to holders of record of shares of Temple-Inland Common Stock as of the Guaranty Distribution Record Date of the Guaranty Common Stock owned by Temple-Inland on the basis of one share of Guaranty Common Stock for every three outstanding shares of Temple-Inland Common Stock.

     (83) “Guaranty Distribution Date” shall mean the date on which Temple-Inland, through the Distribution Agent, distributes all of the issued and outstanding shares of Guaranty Common Stock to the holders of Temple-Inland Common Stock.

     (84) “Guaranty Distribution Record Date” shall mean such date as may be determined by Temple-Inland’s board of directors (or special committee thereof) as the record date for the Guaranty Distribution.

     (85) “Guaranty Employee” shall have the meaning set forth in the Employee Matters Agreement.

     (86) “Guaranty Form 10” shall mean the registration statement on Form 10 filed by Guaranty with the Commission in connection with the Guaranty Distribution.

     (87) “Guaranty Group” shall mean Guaranty and each Person (other than any member of the Temple-Inland Group or the Forestar Group) that is a Subsidiary of Guaranty immediately at the Relevant Time, and each Person that becomes a Subsidiary of Guaranty after the Relevant Time, which shall include those entities identified as such on Schedule 1.1(87).

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     (88) “Guaranty Indemnitees” shall mean each member of the Guaranty Group and each of their Affiliates and each member of the Guaranty Group’s and their respective Affiliates’ respective directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing.

     (89) “Guaranty Information Statement” shall mean the Information Statement attached as an exhibit to the Guaranty Form 10 and sent to the holders of shares of Temple-Inland Common Stock in connection with the Guaranty Distribution, including any amendment or supplement thereto.

     (90) “Guaranty Percentage” shall mean 25%.

     (91) “Indebtedness” shall mean (i) any indebtedness for borrowed money or the deferred purchase price of property as evidenced by a note, bonds or other instruments, (ii) obligations as lessee under capital leases, (iii) obligations secured by any mortgage, pledge, security interest, encumbrance, lien or charge of any kind existing on any Asset owned or held by any Person, whether or not such Person has assumed or become liable for the obligations secured thereby, (iv) any obligation under any interest rate swap agreement, (v) accounts payable, (vi) reimbursement obligations with respect to surety and performance bonds or letters of credit, and (vii) obligations under direct or indirect guarantees of (including obligations, contingent or otherwise, to assure a creditor against loss in respect of) indebtedness or obligations of the kinds referred to in clauses (i), (ii), (iii), (iv), (v) and (vi) above.

     (92) “Indemnifiable Loss” and “Indemnifiable Losses” shall mean any and all damages, losses, deficiencies, Liabilities, obligations, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including internal costs provided for in Section 11.5(c) and the costs and expenses of any and all Actions and demands, assessments, judgments, settlements and compromises relating thereto and the reasonable costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder), excluding special, consequential, indirect, punitive damages (other than special, consequential, indirect and/or punitive damages awarded to any third party against an indemnified party).

     (93) “Indemnifying Party” shall have the meaning set forth in Section 7.5(b).

     (94) “Indemnitee” shall have the meaning set forth in Section 7.5(b).

     (95) “Indemnity Payment” shall have the meaning set forth in Section 7.8(a).

     (96) “Information Statement” shall mean the Information Statement initially attached as an exhibit to the Forestar Form 10 or the Guaranty Form 10, as the case may be, and sent to the holders of Temple-Inland Common Stock in connection with the Distributions, including any amendment or supplement thereto.

     (97) “Insolvent Party” shall have the meaning set forth in Section 6.7(b).

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     (98) “Insurance Administration” shall mean, with respect to each Shared Policy: (i) the accounting for premiums, retrospectively-rated premiums, defense costs, Indemnity Payments, deductibles and retentions, as appropriate, under the terms and conditions of each of the Shared Policies; (ii) the reporting to excess insurance carriers of any losses or claims which may cause the per-occurrence, per claim or aggregate limits of any Shared Policy to be exceeded, and (iii) the distribution of Insurance Proceeds as contemplated by this Agreement.

     (99) “Insurance Proceeds” shall mean those monies (i) received by an insured from an insurance carrier or (ii) paid by an insurance carrier on behalf of an insured, in either case net of any applicable premium adjustment, retrospectively-rated premium, deductible, retention, or cost of reserve paid or held by or for the benefit of such insured.

     (100) “Insured Claims” shall mean those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any of the Shared Policies, whether or not subject to deductibles, co-insurance, uncollectability or retrospectively-rated premium adjustments.

     (101) “Intellectual Property” shall mean all intellectual property and industrial property rights of any kind or nature, including all United States and foreign (i) patents, patent applications, patent disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (ii) Trademarks, (iii) copyrights, whether statutory or common law, registered or unregistered and published or unpublished, (iv) rights of publicity, (v) moral rights and rights of attribution and integrity, (vi) rights in Software, (vii) trade secrets and all other Confidential Information, (viii) rights to personal information, (ix) rights, priorities and privileges arising under applicable Law in the foregoing and in other similar intangible Assets, (x) applications and registrations for the foregoing, and (xi) rights and remedies against past, present, and future infringement, misappropriation, or other violation of the foregoing.

     (102) “Interagency Guidance” shall have the meaning set forth in Section 8.4(e).

     (103) “Intercompany Accounts” shall mean any receivable, payable or loan between any member of one Group, on the one hand, and any member of another Group, on the other hand that exists prior to the Relevant Time and is reflected in the Records of the relevant members of such Groups, except for any such receivable, payable or loan that arises pursuant to this Agreement or any other Ancillary Agreement.

     (104) “Knowing Violation of Law” shall mean (i) in any context other than a criminal action, an intentional act or omission by a Person who is aware that the conduct is a violation of Law, and (ii) in the context of a criminal action, an intentional act or omission by a Person that violates a criminal Law unless that Person had no reasonable cause to believe that the conduct was a violation of criminal Law.

     (105) “Law” shall mean any United States or non-United States federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law and in equity).

     (106) “Liabilities” shall mean any and all debts, liabilities, costs, expenses, interest and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, reserved or unreserved, or determined or determinable of any kind or nature whatsoever, including those arising under or resulting from any Law or Action, whether asserted or unasserted, or order, writ,

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judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity, and those arising under or resulting from any Contract or any fines, damages or equitable relief which may be imposed in connection with any of the foregoing and including all costs and expenses related thereto.

     (107)  “Liable Party” shall have the meaning set forth in Section 2.10(b).

     (108)  “Net Tax Basis” shall have the meaning set forth in Section 7.8(c).

     (109)  “New LLC” shall have the meaning set forth in Exhibit A.

     (110)  “NYSE” shall mean the New York Stock Exchange.

     (111)  “Other Parties’ Auditors” shall have the meaning set forth in Section 5.2(a)(ii).

     (112)  “Other Party Marks” shall have the meaning set forth in Section 5.1(a).

     (113) “Party” and “Parties” shall have the meaning set forth in the preamble hereof.

     (114) “Person” shall mean any natural person, firm, individual, corporation, business trust, joint venture, association, company, limited liability company, partnership or other organization or entity, whether incorporated or unincorporated, or any Governmental Entity.

     (115) “Plan” shall have the meaning set forth in the Employee Matters Agreement.

     (116) “Plan of Separation” shall have the meaning set forth in the recitals hereto.

     (117) “Policies” shall mean insurance policies and insurance Contracts of any kind (other than life and benefits policies or Contracts), including primary, excess and umbrella policies, comprehensive general liability policies, director and officer liability, fiduciary liability, automobile, aircraft, property and casualty, business interruption, workers’ compensation and employee dishonesty insurance policies, bonds and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder.

     (118) “Pre-Separation Disclosure” shall mean any form, statement, schedule or other material (other than the Disclosure Documents) filed with or furnished to:

(A) the Commission,

(B) any other Governmental Entity, or

(C) holders of any securities of Temple-Inland or any of its Affiliates,

prior to the Relevant Time by Temple-Inland, Forestar, Guaranty, or any of their respective Affiliates, in connection with the registration, sale, or distribution of securities or disclosure related thereto (including periodic disclosure obligations).

     (119) “Prime Rate” shall mean the rate per annum publicly announced by Citibank, N.A. (or successor thereto) from time to time as its prime rate in effect at its principal office in New York City. For purposes of this Agreement, any change in the Prime Rate shall be effective on the date such change in the Prime Rate is publicly announced as effective.

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     (120) “Real Estate Assets” shall mean:

          (i) the ownership interests (to the extent held by Temple-Inland, Forestar, Guaranty, or any of their respective Affiliates immediately prior to the Relevant Time) in each member of the Forestar Group other than shares of capital stock to be distributed in the Forestar Distribution;

          (ii) all Real Estate Contracts, any rights or claims of Temple-Inland, Forestar, Guaranty, or any of their respective Affiliates, arising thereunder, and any other rights or claims or contingent rights or claims of Temple-Inland, Forestar, Guaranty, or any of their respective Affiliates, primarily relating to or arising from any other Real Estate Asset or the Real Estate Business;

          (iii) all Assets owned, leased or held by Temple-Inland, Forestar, Guaranty, or any of their respective Affiliates immediately prior to the Relevant Time that are used primarily in the Real Estate Business, including inventory, accounts receivable, goodwill, facilities, and equipment, including all right, title and interest in the service mark “First Land”;

          (iv) subject to ARTICLE X, any rights of any member of the Forestar Group under any Real Estate Policies and any Real Estate Shared Policies, to the extent related to the Real Estate Business;

          (v) the Assets listed or described on Schedule 1.1(120)(v) and any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by, or assigned or Transferred to, any member of the Forestar Group;

          (vi) any Exclusive Forestar Contingent Gain;

          (vii) all Forestar Accounts, and, subject to the provisions of Section 2.5, all cash, cash equivalents, and securities on deposit in such accounts immediately prior to the Relevant Time; and

          (viii) any collateral securing any Real Estate Liability or a Liability of a Venture of a member of the Forestar Group immediately prior to the Relevant Time.

     Notwithstanding the foregoing, the Real Estate Assets shall not in any event include:

               (A) the Assets listed or described on Schedule 1.1(120)(viii)(A); or

               (B) any Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by or Transferred to, any member of the Temple-Inland Group or Forestar Group, including any Exclusive Temple-Inland Contingent Gain or Exclusive Guaranty Contingent Gain.

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     (121) “Real Estate Business” shall mean:

          (i) the real estate business unit of Temple-Inland, which does business primarily through the Forestar Group or through any Venture by a member of the Forestar Group and includes the acquisition, entitlement, development, improvement and sale of real property;

          (ii) any other business, operations, or assets where such business was conducted primarily through the use of the Real Estate Assets prior to the Relevant Time; and

          (iii) the businesses and operations of Business Entities acquired or established by or for any member of the Forestar Group after the Date of this Agreement; provided, however, the Real Estate Business shall not in any event include any operation, business or Asset expressly included in the Financial Services Business or Retained Business pursuant to this Agreement.

     (122) “Real Estate Contracts” shall mean the following Contracts to which Temple-Inland or any of its Affiliates is a party or by which it or any of its Affiliates or any of their respective Assets is bound, except for any such Contract or part thereof (i) that is expressly contemplated not to be Transferred by any member of the Temple-Inland Group or the Guaranty Group to Forestar or (ii) that is expressly contemplated to be Transferred to (or remain with) any member of the Temple-Inland Group or the Guaranty Group, in each case, pursuant to any provision of this Agreement or any Ancillary Agreement:

          (i) any Contract entered into in the name of, or expressly on behalf of, any division, business unit or member of the Forestar Group;

          (ii) any Contract that relates primarily to the Real Estate Business;

          (iii) any Contract representing capital or operating equipment lease obligations of facilities or equipment primarily used by any member of the Forestar Group;

          (iv) any Contract or part thereof that is otherwise expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be retained by, or Transferred to, any member of the Forestar Group;

          (v) any guarantee, indemnity, representation or warranty of any member of the Forestar Group; and

          (vi) the Contracts listed or described on Schedule 1.1(122)(vi).

     (123) “Real Estate Liabilities” shall mean:

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          (i) the Liabilities listed or described on Schedule 1.1(123)(i) and any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained or Assumed by any member of the Forestar Group;

          (ii) any and all Liabilities of Temple-Inland, Forestar, Guaranty, or any of their respective Affiliates, primarily relating to, arising out of or resulting from:

               (A) the operation or conduct of the Real Estate Business, as conducted at any time prior to, on or after the Relevant Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Temple-Inland, Forestar, Guaranty or any of their respective Affiliates with respect to the Real Estate Business (whether or not such act or failure to act is or was within such Person’s authority));

               (B) the operation or conduct of any business conducted by any member of the Forestar Group at any time after the Relevant Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Forestar or any of its Affiliates after the Relevant Time (whether or not such act or failure to act is or was within such Person’s authority)); or

               (C) any Real Estate Business or any Real Estate Assets, whether arising before, on or after the Relevant Time;

          (iii) any and all Liabilities to the extent relating to, arising out of or resulting from any terminated, discontinued or divested Business Entity, business, real property, Asset or operation formerly and primarily owned or managed by, or associated with, any member of the Forestar Group or any Real Estate Business, provided any Liability related to, arising out of or resulting from a business or Assets Transferred to a member of another Group before the Relevant Time is excluded;

          (iv) any and all Liabilities (including under applicable federal and state securities Laws) relating to, arising out of or resulting from:

               (A) Disclosure Documents (including the Forestar Form 10 and the Forestar Information Statement), except to the extent specifically enumerated as a Retained Business Liability in Section 1.1(133);

               (B) Any Pre-Separation Disclosure, but only to the extent such Liabilities arise out of or result from matters related to businesses, operations, Assets or Liabilities allocated to Forestar in the Plan of Separation pursuant to this Agreement; or

               (C) any Forestar Disclosure;

          (v) any and all Liabilities, including those Liabilities listed on Schedule 1.1(123)(v), relating to, arising out of or resulting from any Indebtedness (including debt securities and asset-backed debt) of any member of the Forestar Group (whether incurred prior to, on or after the Relevant Time);

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          (vi) any and all Liabilities relating to, arising out of or resulting from any Action listed or described on Schedule 1.1(123)(vi);

          (vii) any Exclusive Forestar Contingent Liability;

          (viii) any and all Liabilities of the guarantor under the guarantees listed or described on Schedule 1.1(123)(viii); and

          (ix) any and all obligations of an insured Person under each Real Estate Policy and each Shared Policy to the extent related to or arising out of the Real Estate Business.

     Notwithstanding the foregoing, the Real Estate Liabilities shall not in any event include:

               (A) any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained or Assumed by any member of the Guaranty Group or the Temple-Inland Group, including any Liabilities set forth on Schedule 1.1(123)(ix)(A);

               (B) any Liabilities related or attributable to, or arising in connection with, the employment, service, termination of employment or termination of service of Forestar Employees, which shall be exclusively governed by the Employee Matters Agreement;

               (C) any Liabilities related or attributable to, or arising in connection with, Taxes or Tax Returns, which shall be exclusively governed by the Tax Matters Agreement; and

               (D) any Liabilities of the guarantor under the guarantees listed or described on Schedule 1.1(133)(viii) or 1.1(50)(viii).

For the avoidance of doubt, no Liability shall be a Real Estate Liability solely as a result of Forestar or any other member of the Forestar Group being named as party to, or in, any Action.

     (124) “Real Estate Policies” shall mean all Policies, current or past, which are owned or maintained by or on behalf of Temple-Inland or any Subsidiary of Temple-Inland, which relate exclusively to the Real Estate Business and which Policies are either maintained by Forestar or a member of the Forestar Group or assignable to Forestar or a member of the Forestar Group.

     (125) “Real Estate Shared Policies” shall mean all Policies, current or past, which are owned or maintained by or on behalf of Temple-Inland or any Subsidiary of Temple-Inland which relate to the Real Estate Business, other than Real Estate Policies.

     (126) “Records” shall mean any Contracts, documents, books, records or files.

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     (127) “Related Persons” shall have the meaning set forth in Section 7.1(a).

     (128) “Relevant Time” shall mean, 12:01 a.m., Central Standard Time as between (i) Temple-Inland and Forestar, on the Forestar Distribution Date, (ii) Temple-Inland and Guaranty, on the Guaranty Distribution Date, and (iii) Forestar and Guaranty, on the earlier to occur of the Forestar Distribution Date and the Guaranty Distribution Date.

     (129) “Reorganization” shall have the meaning set forth in the recitals hereto.

     (130) “Retained Business” shall mean:

          (i) the corrugated packaging and building products business units of Temple-Inland and any related Ventures;

          (ii) any other business, operations, or Assets where such business was conducted primarily through the use of the Retained Business Assets prior to the Relevant Time; and

          (iii) the businesses and operations of Business Entities acquired or established by or for any member of the Temple-Inland Group after the Date of this Agreement;

provided, however, the Retained Business shall not in any event include any operation, business or Asset expressly included in the Financial Services Business or Real Estate Business pursuant to this Agreement.

     (131) “Retained Business Assets” shall mean:

          (i) the ownership interests (to the extent held by Temple-Inland, Forestar, Guaranty, or any of their respective Affiliates immediately prior to the Relevant Time) in each member of the Temple-Inland Group;

          (ii) all Retained Business Contracts, any rights or claims of Temple-Inland, Forestar, Guaranty, or any of their respective Affiliates, arising thereunder, and any other rights or claims or contingent rights or claims of Temple-Inland, Forestar, Guaranty, or any of their respective Affiliates, primarily relating to or arising from any other Retained Business Asset or the Retained Business;

          (iii) all Assets owned, leased or held by Temple-Inland, Forestar, Guaranty, or any of their respective Affiliates immediately prior to the Relevant Time that are used primarily in the Retained Business, including inventory, accounts receivable, goodwill, facilities, and equipment;

          (iv) subject to ARTICLE X, any rights of any member of the Temple-Inland Group under any Retained Business Policies or Retained Business Shared Policies, to the extent related to the Retained Business;

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          (v) the Assets listed or described on Schedule 1.1(131)(v) and any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by, or assigned or Transferred to, any member of the Temple-Inland Group;

          (vi) any Exclusive Temple-Inland Contingent Gain;

          (vii) all Temple-Inland Accounts, and, subject to the provisions of Schedule 2.5, all cash, cash equivalents, and securities on deposit in such accounts immediately prior to the Relevant Time; and

          (viii) any collateral securing any Retained Business Liability or a Liability of a Venture of a member of the Temple-Inland Group immediately prior to the Relevant Time.

     Notwithstanding the foregoing, the Retained Business Assets shall not include:

               (A) the Assets listed or described on Schedule 1.1(131)(viii)(A); or

               (B) any Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by, or assigned or Transferred to, any member of the Forestar Group or Guaranty Group, including any Exclusive Forestar Contingent Gain or Exclusive Guaranty Contingent Gain.

     (132) “Retained Business Contracts” shall mean the following Contracts to which Temple-Inland or any of its Affiliates is a party or by which it or any of its Affiliates or any of their respective Assets is bound, except for any such Contract or part thereof that is expressly contemplated to be Transferred or assigned to (or remain with) any member of the Forestar Group or Guaranty Group pursuant to any provision of this Agreement or any Ancillary Agreement:

          (i) any Contract entered into in the name of, or expressly on behalf of, any division, business unit or member of the Temple-Inland Group;

          (ii) any Contract that relates primarily to the Retained Business;

          (iii) any Contract representing capital or operating equipment lease obligations of facilities or equipment primarily used by any member of the Temple-Inland Group;

          (iv) any Contract or part thereof that is otherwise expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be retained by or Transferred to, any member of the Temple-Inland Group;

          (v) any guarantee, indemnity, representation or warranty of any member of the Temple-Inland Group; and

          (vi) the Contracts listed or described on Schedule 1.1(132)(vi).

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     (133) “Retained Business Liabilities” shall mean:

          (i) the Liabilities listed or described on Schedule 1.1(133)(i) and any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained or Assumed by any member of the Temple-Inland Group;

          (ii) any and all Liabilities of Temple-Inland, Forestar, Guaranty, or any of their respective Affiliates, primarily relating to, arising out of or resulting from:

               (A) the operation or conduct of the Retained Business, as conducted at any time prior to, on or after the Relevant Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Temple-Inland, Forestar, Guaranty or any of their respective Affiliates with respect to the Retained Business (whether or not such act or failure to act is or was within such Person’s authority));

               (B) the operation or conduct of any business conducted by any member of the Temple-Inland Group at any time after the Relevant Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Temple-Inland or any of its Affiliates after the Relevant Time (whether or not such act or failure to act is or was within such Person’s authority)); or

               (C) any Retained Business or any Retained Business Assets, whether arising before, on or after the Relevant Time;

          (iii) any and all Liabilities to the extent relating to, arising out of or resulting from any terminated, discontinued or divested Business Entity, business, real property, Asset or operation formerly and primarily owned or managed by any member of the Temple-Inland Group or any Retained Business, provided any Liability related to, arising out of or resulting from a business or Assets Transferred to a member of another Group before the Relevant Time is excluded;

          (iv) any and all Liabilities (including under applicable federal and state securities Laws) relating to, arising out of or resulting from:

               (A) the Disclosure Documents (including each of the Forms 10 and each of the Information Statements), but only to the extent such Liability derives from a misstatement or omission contained in the transmittal letter for the Information Statements from Kenneth M. Jastrow II, Chairman and CEO, to the Temple Inland Stockholders and the sections of the Forms 10 and each of the Information Statements entitled “The Spin-off” and “Certain Relationships and Related Party Transactions – Agreements with Temple-Inland and. . .” and the section entitled “Summary,” to the extent such section summarizes the other sections set forth in this paragraph;

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               (B) any Pre-Separation Disclosure, but only to the extent such Liabilities arise out of, or result from, matters related to businesses, operations, Assets or Liabilities allocated to Temple-Inland in the Plan of Separation pursuant to this Agreement; or

               (C) any Temple-Inland Disclosure;

          (v) any and all Liabilities, including those Liabilities listed on Schedule 1.1(133)(v), relating to, arising out of or resulting from any Indebtedness (including debt securities and asset-backed debt) of any member of the Temple-Inland Group (whether incurred prior to, on or after the Effective Time);

          (vi) any and all Liabilities relating to, arising out of or resulting from any Action listed or described on Schedule 1.1(133)(vi);

          (vii) any Exclusive Temple-Inland Contingent Liability;

          (viii) any and all Liabilities of the guarantor under the guarantees listed or described on Schedule 1.1(133)(viii); and

          (ix) any and all obligations of an insured Person under each Retained Business Policy and each Shared Policy to the extent related to or arising out of the Retained Business.

     Notwithstanding the foregoing, the Retained Business Liabilities shall not include:

               (A) any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained or Assumed by any member of the Forestar Group or the Guaranty Group, including any Liabilities set forth on Schedule 1.1(133)(ix)(A);

               (B) any Liabilities related or attributable to, or arising in connection with, the employment, service, termination of employment or termination of service of Temple-Inland Employees, which shall be exclusively governed by the Employee Matters Agreement;

               (C) any Liabilities related or attributable to, or arising in connection with, Taxes or Tax Returns, which shall be exclusively governed by the Tax Matters Agreement; and

               (D) any Liabilities of the guarantor under the guarantees listed or described on Schedule 1.1(50)(viii) or Schedule 1.1(123)(viii). For the avoidance of doubt, no Liability shall be a Retained Business Liability solely as a result of Temple-Inland or any other member of the Temple-Inland Group being named as party to, or in, any Action.

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     (134) “Retained Business Policies” shall mean all Policies, current or past, which are owned or maintained by or on behalf of Temple-Inland or any Subsidiary of Temple-Inland, which relate exclusively to the Retained Business and which Policies are either maintained by Temple-Inland or a member of the Temple-Inland Group or assignable to Temple-Inland or a member of the Temple-Inland Group.

     (135) “Retained Business Shared Policies” shall mean all Policies, current or past, which are owned or maintained by or on behalf of Temple-Inland or any Subsidiary of Temple-Inland which relate to the Retained Business, other than Retained Business Policies.

     (136) “Rules” shall have the meaning set forth in Section 9.2.

     (137) “Schedules” shall mean the schedules referenced in this Agreement and listed in the Table of Contents.

     (138) “Securities Act” shall mean the Securities Act of 1933 and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time that reference is made thereto.

     (139) “Security Interest” shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever, excluding restrictions on transfer under securities Laws.

     (140) “Separated Accounts” shall have the meaning set forth in Section 2.5(a).

     (141) “Separation” shall have the meaning set forth in the recitals hereto.

     (142) “Shared Policies” shall mean all Policies, current or past, which are owned or maintained by or on behalf of Temple-Inland or any of its Subsidiaries which relate to two or more of the Retained Business, the Real Estate Business or the Financial Services Business.

     (143) “Software” shall mean all computer programs (whether in source code, object code, or other form), algorithms, databases, compilations and data, and technology supporting the foregoing, and all documentation, including flowcharts and other logic and design diagrams, technical, functional and other specifications, and user and training materials related to any of the foregoing.

     (144) “Spin Agreements” shall have the meaning set forth in Section 2.12.

     (145) “Subsidiary” shall mean (i) for Temple-Inland, a wholly-owned Affiliate that Temple-Inland controls, (ii) for Guaranty, an Affiliate that Guaranty controls, (iii) for Forestar, a wholly-owned Affiliate that Forestar controls, (iv) for any other Person, a Business Entity that Person controls or in which that Person owns or has the benefit of more than 50% of the

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Business Entity’s equity economic interest. For the purposes of this definition, “control,” when used with respect to a specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by Contract or otherwise. No Party or member of any Group shall be deemed to be an Affiliate of another Party or member of such other Party’s Group by reason of having one or more directors in common.

     (146) “Tax” shall have the meaning set forth in the Tax Matters Agreement.

     (147) “Tax Matters Agreement” shall mean the Tax Matters Agreement, by and among Temple-Inland, Forestar and Guaranty, dated as of the date hereof, and substantially in the form attached as Exhibit C hereto.

     (148) “Tax Return” shall have the meaning set forth in the Tax Matters Agreement.

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

     (150) “Temple-Inland Accounts” shall have the meaning set forth in Section 2.5(a).

     (151) “Temple-Inland Common Stock” shall mean the issued and outstanding shares of common stock, par value $1.00 per share, of Temple-Inland Inc.

     (152) “Temple-Inland Disclosure” shall mean any form, statement, schedule or other material (other than the Disclosure Documents) filed with or furnished to:

(A) the Commission,

(B) any other Governmental Entity, or

(C) holders of any securities of any member of the Temple-Inland Group,

on or after the Relevant Time by or on behalf of any member of the Temple-Inland Group in connection with the registration, sale, or distribution of securities or disclosure related thereto (including periodic disclosure obligations).

     (153) “Temple-Inland Employee” shall have the meaning set forth in the Employee Matters Agreement.

     (154) “Temple-Inland Group” shall mean Temple-Inland and each Person (other than any member of the Forestar Group or the Guaranty Group) that is a Subsidiary of Temple-Inland immediately at the Relevant Time, and each Business Entity that becomes a Subsidiary of Temple-Inland after the Relevant Time.

     (155) “Temple-Inland Indemnitees” shall mean Temple-Inland, each member of the Temple-Inland Group, each of their respective directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing, except the Forestar Indemnitees and the Guaranty Indemnitees.

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     (156) “Temple-Inland Percentage” shall mean 60%.

     (157) “Third Party Claim” shall have the meaning set forth in Section 7.5(b).

     (158) “Texas Courts” shall have the meaning set forth in Section 11.20.

     (159) “Third Party Proceeds” shall have the meaning set forth in Section 7.8(a).

     (160) “Trademarks” shall mean all United States and foreign trademarks, service marks, corporate names, trade names, domain names, logos, slogans, designs, trade dress and other similar identifiers of source or origin, whether registered or unregistered, together with the goodwill connected with the use of and symbolized by any of the foregoing.

     (161) “Transfer” shall have the meaning set forth in Section 2.2(a)(i); and the term “Transferred” shall have its correlative meaning.

     (162) “Transition Services Agreement” shall mean the Master Transition Services Agreement by and among Temple-Inland, Forestar and Guaranty, dated as of the date hereof, and substantially in the form attached as Exhibit D hereto.

     (163) Unallocated Asset” shall mean, without duplication:

          (i) any Asset that accrues prior to the Effective Time that is not a Real Estate Asset, Financial Services Asset or a Retained Business Asset; or

          (ii) with respect to Contingent Gains, any Contingent Gain that is not an Exclusive Temple-Inland Contingent Gain, Exclusive Forestar Contingent Gain or an Exclusive Guaranty Contingent Gain.

     (164) “Unallocated Liability” shall mean, without duplication:

          (i) any and all Liabilities of Forestar, Guaranty or Temple-Inland or any of their respective Affiliates, that accrue prior to the Effective Time that are not a Real Estate Liability, Financial Services Liability or a Retained Business Liability;

          (ii) any and all Contingent Liabilities that are not an Exclusive Temple-Inland Contingent Liability, Exclusive Forestar Contingent Liability or Exclusive Guaranty Contingent Liability; or

          (iii) any and all Liabilities of Temple-Inland, Forestar, Guaranty or any of their respective Affiliates, relating to, arising out of, or resulting from, the matters listed or described on Schedule 1.1(164)(iii).

     (165) “Venture” shall mean a Business Entity, other than an Affiliate, in which a member of the Temple-Inland Group, Guaranty Group or Forestar Group, as applicable, owns more than 20% of the Business Entity’s equity economic interest.

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          Section 1.2 References; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. Unless the context otherwise requires:

          (i) the words “include”, “includes” and “including” when in this Agreement shall be deemed to be followed by the phrase “without limitation”;

          (ii) references in this Agreement to Articles, Sections, Annexes, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement;

          (iii) the words “hereof”, “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement.

          Section 1.3 Agreement Effective; Suspension.

          (a) This Agreement shall be effective as of the Date of this Agreement.

          (b) Notwithstanding Section 1.3(a) above, as between any of the Parties that are Affiliates, the provisions of, and the obligations under, this Agreement shall be suspended as between such Parties until the applicable Relevant Time, other than for Section 2.1 (General), Section 2.2 (Transfer of Assets), Section 2.3 (Assumption and Satisfaction of Liabilities) and Section 2.8 (Conveyancing and Assumption Instruments), each of which will be effective as of the earlier to occur of the Forestar Distribution Date or the Guaranty Distribution Date.

          Section 1.4 Tax Matters. The Tax Matters Agreement will govern each of the Parties respective rights, responsibilities and obligations after the Relevant Time with respect to Taxes, including ordinary course of business Taxes and Taxes, if any, incurred as a result of any failure of either Distribution to qualify as a tax-free distribution for U.S. federal income tax purposes. The Tax Matters Agreement sets forth the respective obligations of each of the Parties with respect to the filing of Tax Returns, the administration of Tax contests, cooperation, access to information and provision of corporate Records with respect to such matters, and certain other matters, and imposes certain restrictions on each of the Parties’ ability to engage in certain actions following the Relevant Time. Except as expressly set forth in this Agreement or any Ancillary Agreement, all matters relating to Taxes in connection with the transactions contemplated by this Agreement shall be governed exclusively by the Tax Matters Agreement.

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          Section 1.5 Employee Matters. The Employee Matters Agreement will govern each of the Parties’ respective rights, responsibilities and obligations after the Relevant Time relating to, arising out of, or resulting from the employment, service, termination of employment or termination of service of Temple-Inland Employees, Guaranty Employees, and Forestar Employees, including with respect to access to information and provision of corporate Records with respect to such matters. Except as expressly set forth in this Agreement or any Ancillary Agreement, all matters relating to the above in connection with the transactions contemplated by this Agreement shall be governed exclusively by the Employee Matters Agreement.

ARTICLE II

THE SEPARATION

          Section 2.1 General. Subject to the terms and conditions of this Agreement, including Section 4.5 (Sole Discretion of Temple-Inland), the Parties shall use, and shall cause their respective Affiliates to use, their respective commercially reasonable efforts to consummate the transactions contemplated hereby, a portion of which have already been implemented prior to the date hereof. It is the intent of the Parties that prior to consummation of the Plan of Separation, Temple-Inland, Forestar, and Guaranty, and each of their respective Affiliates, shall be reorganized, to the extent necessary, such that following the consummation of such Reorganization, subject to Section 2.7 (Transfers Not Effected On or Prior to the Effective Time; Transfers Deemed Effective as of the Effective Time), (i) all of Temple-Inland’s and its Subsidiaries’ right, title and interest in and to the Real Estate Assets will be owned or held by a member of the Forestar Group, the Real Estate Business will be conducted by the members of the Forestar Group and all of the Real Estate Liabilities will be Assumed directly or indirectly by (or retained by) a member of the Forestar Group or a Venture of that member, (ii) all of Temple-Inland’s and its Subsidiaries’ right, title and interest in and to the Financial Services Assets will be owned or held by a member of the Guaranty Group, the Financial Services Business will be conducted by the members of the Guaranty Group and all of the Financial Services Liabilities will be Assumed directly or indirectly by (or retained by) a member of the Guaranty Group or a Venture of that member, and (iii) all of Temple-Inland’s and its Subsidiaries’ right, title and interest in and to the Retained Business Assets will be owned or held by a member of the Temple-Inland Group, the Retained Business will be conducted by the members of the Temple-Inland Group and all of the Retained Business Liabilities will be Assumed directly or indirectly by (or retained by) a member of the Temple-Inland Group or a Venture of that member. Unless expressly stated to the contrary, the Parties do not intend by consummation of the Reorganization to impose any Liability of a Venture upon any Affiliate of such Venture for which such Affiliate was not obligated prior to the Relevant Time unless expressly and specifically identified as a Liability to be Assumed.

          Section 2.2 Transfer of Assets.

          (a) On or prior to the Effective Time and to the extent not already completed (and it being understood that some of such Transfers may occur following the Effective Time and prior to the applicable Relevant Time in accordance with Section 2.7), pursuant to the Conveyancing and Assumption Instruments:

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          (i) Temple-Inland shall, on behalf of itself and the other members of the Temple-Inland Group, as applicable, transfer, contribute, assign, distribute, and convey or cause to be transferred, contributed, assigned, distributed, and conveyed (“Transfer”) to (A) Forestar or another member of the Forestar Group all of its and its Subsidiaries’ right, title and interest in and to the Real Estate Assets, and (B) Guaranty or another member of the Guaranty Group all of its and its Subsidiaries’ right, title and interest in and to the Financial Services Assets;

          (ii) Forestar shall, on behalf of itself and the other members of the Forestar Group, as applicable, Transfer to (A) Temple-Inland or another member of the Temple-Inland Group all of its and its Subsidiaries’ right, title and interest in and to the Retained Business Assets, and (B) Guaranty or another member of the Guaranty Group all of its and its Subsidiaries’ right, title and interest in and to the Financial Services Assets; and

          (iii) Guaranty shall, on behalf of itself and the other members of the Guaranty Group, as applicable, Transfer to (A) Temple-Inland or another member of the Temple-Inland Group all of its and its Subsidiaries’ right, title and interest in and to the Retained Business Assets, and (B) Forestar or another member of the Forestar Group all of its and its Subsidiaries’ right, title and interest in and to the Real Estate Assets.

          (b) Unless otherwise agreed to by the Parties, each of Temple-Inland, Forestar and Guaranty, as applicable, shall be entitled to designate the Business Entity within such Party’s respective Group to which any Assets are to be Transferred pursuant to this Section 2.2 or Section 2.7.

          (c) The Parties shall cooperate and use their commercially reasonable efforts to obtain any required Consents or Governmental Approvals to Transfer any Assets, Contracts, permits and authorizations issued by any Governmental Entity or parts thereof as contemplated by this Agreement.

          Section 2.3 Assumption and Satisfaction of Liabilities. Except as otherwise specifically set forth in any Ancillary Agreement and as provided below for Ventures, from and after the Effective Time, (a) Temple-Inland shall, or shall cause another member of the Temple-Inland Group to, accept, assume (or, as applicable, retain) and perform, discharge and fulfill, in accordance with their respective terms (“Assume”), all of the Retained Business Liabilities and the Temple-Inland Percentage of any Unallocated Liability, (b) Forestar shall, or shall cause another member of the Forestar Group to, Assume all the Real Estate Liabilities and the Forestar Percentage of any Unallocated Liability and (c) Guaranty shall, or shall cause another member of the Guaranty Group to, Assume all the Financial Services Liabilities and the Guaranty Percentage of any Unallocated Liability; in each case, regardless of (i) when or where such Liabilities arose or arise, (ii) whether the facts upon which they are based occurred prior to, on or subsequent to the Effective Time, (iii) where or against whom such Liabilities are asserted or determined or (iv) whether arising from or alleged to arise from negligence, gross negligence, recklessness, violation of Law, willful misconduct, bad faith, fraud or misrepresentation by any member of the Temple-Inland Group, the Forestar Group or the Guaranty Group, as the case may be, or any of their past or present respective directors, officers, employees, agents, Subsidiaries or Affiliates.

Each Venture shall retain its Liabilities and no Affiliate of a Venture shall be responsible for a Liability of a Venture for which it was not previously responsible unless expressly and specifically identified as a Liability to be Assumed in this Agreement or any Ancillary Agreement.

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          Section 2.4 Intercompany Accounts.

          (a) Each Intercompany Account outstanding immediately prior to the Relevant Time, in any general ledger account of Temple-Inland, Forestar, or Guaranty, or any of their respective Affiliates, other than those set forth on Schedule 2.4(b), shall be satisfied and/or settled by the relevant members of the Forestar Group, the Guaranty Group, or the Temple-Inland Group no later than the Relevant Time by (i) forgiveness by the relevant obligor, (ii) one or a related series of distributions of and/or contributions to capital, or (iii) cash payment by the relevant obligor to the relevant obligee, in each case as agreed to by the Parties. To facilitate settlement by the Relevant Time the amount satisfied may include estimated amounts. Any estimates will be trued up and settled by the affected Parties not later than 90 days after the Relevant Time.

          (b) Each Intercompany Account outstanding immediately prior to the Relevant Time under any of the general ledger accounts of Temple-Inland, Forestar, or Guaranty, or any of their respective Affiliates, set forth on Schedule 2.4(b) shall continue to be outstanding after the Relevant Time (unless previously satisfied in accordance with its terms) and thereafter (i) shall be an obligation of the relevant Party (or the relevant member of such Party’s Group), each responsible for fulfilling its (or a member of such Party’s Group’s) obligations in accordance with the terms and conditions applicable to such obligation, and (ii) shall be for each relevant Party (or the relevant member of such Party’s Group) an obligation to a third-party and shall no longer be an Intercompany Account.

          Section 2.5 Bank Accounts; Cash Balances.

          (a) The Parties agree to take, or cause the respective members of their respective Groups to take, at the Relevant Time (or such earlier time as the Parties may agree), all actions necessary to amend all Contracts governing each bank and brokerage account owned by (i) Forestar or any other member of the Forestar Group, (including all Forestar accounts listed or described on Schedule 2.5(a)(i), the “Forestar Accounts”), and (ii) Guaranty or any other member of the Guaranty Group (including all Guaranty accounts listed or described on Schedule 2.5(a)(ii), but excluding the deposit accounts of its bank Subsidiary’s customers, the “Guaranty Accounts” and, together with the Forestar Accounts, the “Separated Accounts”), so that such Separated Accounts, if currently linked (whether by automatic withdrawal, automatic deposit, or any other authorization to transfer funds from or to, hereinafter “linked”) to any bank or brokerage account owned by Temple-Inland or any other member of the Temple-Inland Group, including all Temple-Inland accounts owned by any member of the Temple-Inland Group that is as of the date hereof a direct or indirect Subsidiary of TIN Inc. through its account at JPMorgan Chase Bank (which subset of Temple-Inland accounts are listed or described on Schedule 2.5(b), the “Temple-Inland Accounts”) are de-linked from the Temple-Inland Accounts. From and after the Relevant Time, no Temple-Inland Employee or Former Temple-Inland Employee shall have any authority to access or control any Separated Account, except as provided for through the Transition Services Agreement.

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          (b) The Parties agree to take, or cause the respective members of their respective Groups to take, at the Relevant Time (or such earlier time as the Parties may agree), all actions necessary to amend all Contracts governing the Temple-Inland Accounts so that such Temple-Inland Accounts, if currently linked to a Separated Account, are de-linked from the Separated Accounts. From and after the Relevant Time, no Forestar Employee, Former Forestar Employee, Guaranty Employee, or Former Guaranty Employee shall have any authority to access or control any Temple-Inland Account.

          (c) With respect to any outstanding checks issued by the Parties, or any of their respective Subsidiaries prior to the Relevant Time, such outstanding checks shall be honored following the Relevant Time by the entity or Group owning the account on which the check is drawn.

          (d) As between any two Parties (and the members of their respective Groups) all payments and reimbursements received after the Relevant Time by any Party (or member of its Group) that relate to a Business, Asset or Liability of another Party (or member of its Group), shall be held by such Party in trust for the use and benefit of the Party entitled thereto (at the expense of the Party entitled thereto) and, promptly upon receipt by such Party of any such payment or reimbursement, such Party shall pay over, or shall cause the applicable member of its Group to pay over, to the applicable Party the amount of such payment or reimbursement without right of set-off.

          Section 2.6 Limitation of Liability

          (a) Except as otherwise expressly provided in this Agreement or in the case of any Knowing Violation of Law, fraud or intentional misrepresentation, no Party or any member of such Party’s Group shall have any Liability to any other Party or any member of such other Party’s Group in the event that any information exchanged or provided pursuant to this Agreement (but excluding any such information included in a Disclosure Document) which is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate.

          (b) Except as provided in Section 2.4 (Intercompany Accounts), Section 2.11 (Guarantees), or as set forth in subsection (c) below, no Party or any member of such Party’s Group shall have any Liability to any other Party or any member of such other Party’s Group based upon, arising out of or resulting from any Contract, arrangement, course of dealing or understanding existing on or prior to the Relevant Time (other than this Agreement or any Ancillary Agreement or any Contract entered into in connection herewith or in order to consummate the transactions contemplated hereby or thereby or by the Plan of Separation) and each Party hereby terminates, and shall cause all members in its Group to terminate, any and all Contracts, arrangements, courses of dealing or understandings between it or any members in its Group and the other Party or Parties and members of their respective Groups effective as of the Relevant Time (other than this Agreement or any Ancillary Agreement or any Contract entered

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into in connection herewith or in order to consummate the transactions contemplated hereby or thereby or by the Plan of Separation), unless such Contract, arrangement, course of dealing or understanding is set forth in any Ancillary Agreement or on Schedule 2.6(b), and any such Liability, whether or not in writing, which is not reflected in any Ancillary Agreement or on such Schedule, is hereby irrevocably cancelled, released and waived effective as of the Relevant Time. No such terminated Contract, arrangement, course of dealing or understanding (including any provision thereof which purports to survive termination) shall be of any further force or effect after the Relevant Time.

          (c) The provisions of Section 2.6(b) shall not apply to any of the following Contracts, arrangements, courses of dealing or understandings (or to any of the provisions thereof):

          (i) any Contracts to which any Person other than the Parties and their respective Affiliates is a party (it being understood that to the extent that the rights and obligations of the Parties and the members of their respective Groups under any such Contracts constitute Real Estate Assets or Real Estate Liabilities, Financial Services Assets or Financial Services Liabilities, or Retained Business Assets or Retained Business Liabilities, such Contracts shall be assigned or retained pursuant to this ARTICLE II); and

          (ii) any Contract to which any Venture of Temple-Inland, Forestar or Guaranty, as the case may be, is a Party.

     Section 2.7 Transfers Not Effected On or Prior to the Effective Time; Transfers Deemed Effective as of the Effective Time.

          (a) To the extent that any Transfers contemplated by this ARTICLE II shall not have been consummated on or prior to the Effective Time, the Parties shall use commercially reasonable efforts to effect such Transfers as promptly following the Effective Time as shall be practicable. Nothing herein shall be deemed to require the Transfer of any Assets or the Assumption of any Liabilities that by their terms or operation of Law cannot be Transferred; provided, however, that the Parties shall, and shall cause the respective members of their Groups to, cooperate and use commercially reasonable efforts to seek to obtain any necessary Consents or Governmental Approvals for the Transfer of all Assets and Assumption of all Liabilities contemplated to be Transferred or Assumed pursuant to this ARTICLE II. In the event that any such Transfer of Assets or Assumption of Liabilities has not been consummated from and after the Effective Time (i) the Party (or relevant member in its Group) retaining such Asset shall thereafter hold (or shall cause such member in its Group to hold) such Asset for the use and benefit of the applicable Party (or relevant member in its Group) entitled thereto (at the expense of the Person entitled thereto) and (ii) the Party intended to Assume such Liability shall, or shall cause the applicable member of its Group to, pay or reimburse the Party (or the relevant member of its Group) retaining such Liability for all amounts paid or incurred in connection with the retention of such Liability. In addition, the Party retaining such Asset or Liability (or relevant member of its Group) shall (or shall cause such member in its Group to), insofar as reasonably possible and to the extent permitted by applicable Law, treat such Asset or Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the Party to which such Asset is to be Transferred or by the Party Assuming such

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Liability in order to place such Party, insofar as reasonably possible, in the same position as if such Asset or Liability had been Transferred or Assumed as contemplated hereby and so that all the benefits and burdens relating to such Asset or Liability, including possession, use, risk of loss, potential for gain, and dominion, control and command over such Asset or Liability, are to inure from and after the Effective Time to the relevant member of the Temple-Inland Group, Forestar Group, or the Guaranty Group, as the case may be, entitled to the receipt of such Asset or required to Assume such Liability. In furtherance of the foregoing, the Parties agree that, as of the Effective Time, each Party shall be deemed to have acquired complete and sole beneficial ownership over all of the Assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have Assumed in accordance with the terms of this Agreement all of the Liabilities, and all duties, obligations and responsibilities incident thereto, which such Party is entitled to acquire or required to Assume pursuant to the terms of this Agreement.

          (b) If and when the Consents, Governmental Approvals and/or conditions, the absence or non-satisfaction of which caused the deferral of the Transfer of any Asset or the deferral of the Assumption of any Liability pursuant to Section 2.7(a), are obtained or satisfied, the Transfer, Assumption or novation of the applicable Asset or Liability shall be effected in accordance with and subject to the terms of this Agreement and/or the applicable Ancillary Agreement as promptly as practical after the receipt of such Consents, Governmental Approvals and/or absence or satisfaction of such conditions.

          (c) The Party (or relevant member of its Group) retaining any Asset or Liability due to the deferral of the Transfer of such Asset or the deferral of the Assumption of such Liability pursuant to Section 2.7(a) shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced, or agreed in advance to be reimbursed by the Party or Parties (or relevant member of its Group or their Groups), as the case may be, entitled to such Asset or the Person intended to be subject to such Liability, other than reasonable attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by the Party or Parties (or relevant member of its Group or their Groups) entitled to such Asset or the Person intended to be subject to such Liability.

          (d) On and prior to the 24 month anniversary of the applicable Relevant Time, if any Party determines that it (or any member of its Group) owns any Asset that, although not Transferred pursuant to this Agreement, was allocated by the terms of this Agreement to another Party, or that is agreed by such Party and the other Party in their good faith judgment to be an Asset that more properly belongs to the other Party (other than (for the avoidance of doubt), as between any two Parties, for any Asset acquired from an unaffiliated third party by a Party or member of such Party’s Group following the applicable Relevant Time), then the Party owning such Asset shall Transfer, or shall cause any such Asset to be Transferred, to the applicable Party (or relevant member of its Group) identified as the appropriate transferee and following such Transfer, such Asset shall be a Real Estate Asset, Financial Services Asset or Retained Asset, as the case may be. In connection with such Transfer, the receiving party shall Assume all Liabilities related to such Asset. Following the 24 month anniversary of the applicable Relevant Time, no Party (or relevant member of its Group) shall be obligated to Transfer any newly recognized Asset that would, had such Asset been recognized at the applicable Relevant Time, have been Transferred to the other applicable Party (or relevant member of its Group).

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          (e) After the Relevant Time, each Party (or any member of its Group) may receive mail, packages and other communications properly belonging to another Party (or any member of its Group). Accordingly, at all times after the Relevant Time, each Party authorizes the other applicable Party (or any member of its Group) to receive and open all mail, packages and other communications received by such Party (or any member of its Group) and not unambiguously intended for such first Party, any member of such first Party’s Group or any of their respective officers, directors, employees or other agents, and to the extent that they do not relate to the business of the receiving Party, the receiving Party shall promptly deliver such mail, packages or other communications (or, in case the same relate to both Businesses, copies thereof) to the other applicable Party as provided for in Section 11.6 (Notices). The provisions of this Section 2.7(e) are not intended to, and shall not, be deemed to constitute an authorization by any Party (or any member of its Group) to permit the other to accept service of process on its (or its members’) behalf and no Party (or any member of its Group) is or shall be deemed to be the agent of any other Party (or any member of its Group) for service of process purposes.

          Section 2.8 Conveyancing and Assumption Instruments. In connection with, and in furtherance of, the Transfers of Assets and the acceptance and Assumptions of Liabilities contemplated by this Agreement, the Parties shall execute or cause to be executed, on or prior to the Relevant Time, by the appropriate entities, the Conveyancing and Assumption Instruments necessary to evidence the valid and effective Assumption by the applicable Party (or any member of its Group) of its Assumed Liabilities, and the valid Transfer to the applicable Party (or member of such Party’s Group) of all right, title and interest in and to its accepted Assets, including the Transfer of real property with special warranty deeds, as may be appropriate.

          Section 2.9 Further Assurances.

          (a) In addition to and without limiting the actions specifically provided for elsewhere in this Agreement, including Section 2.7, each of the Parties shall cooperate with each other and use (and will cause the relevant member of its Group to use) commercially reasonable efforts, prior to, on and after the Effective Time, to take, or to cause to be taken, all actions, and to do, or to cause to be done, all things reasonably necessary on its part under applicable Law or contractual obligations to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

          (b) Without limiting the foregoing, each Party shall cooperate with the other Parties, from and after the Effective Time, without any further consideration, to execute and deliver, or use commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of Transfer and title and to make all filings with, and to obtain all Consents and/or Governmental Approvals, any permit, Contract, indenture or other instrument (including any Consents or Governmental Approvals), and to take all such other actions as such Party may reasonably be requested to take by any other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the Transfers of the applicable Assets and the assignment and Assumption of the applicable Liabilities and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each Party will, at the reasonable request of any other Party, take such other actions as may be reasonably necessary to vest in such other Party such title as possessed by the Transferring Party to the Assets allocated to

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such other Party under this Agreement or any of the Ancillary Agreements, free and clear of any Security Interest, if and to the extent it is practicable to do so.

          Section 2.10 Novation of Liabilities.

          (a) With respect to a Liability for which a Party, including its Subsidiaries, is not responsible under this Agreement after the Relevant Time, but for which a Party or one or more of its Subsidiaries continues to be liable to a third party after the Relevant Time, that Party may request the Party responsible under this Agreement for the Liability to take actions after the Relevant Time to relieve the requesting Party from such Liability. Upon any such request, the responsible Party shall use commercially reasonable efforts either:

          (i) to obtain, or cause to be obtained, any Consent, release, transfer, substitutions or novations required for such Liability to become solely the Liability of the responsible Party or one of its respective Subsidiaries; or

          (ii) to obtain an unconditional release from Liability for the requesting Party and/or its relevant Subsidiaries.

     The Responsible Party or Parties are not required by this provision to pay any money or other consideration to relieve the requesting Party from the Liability unless the Requesting Party agrees to reimburse the responsible Party in full upon or prior to the payment.

          (b) If the responsible Party is unable to relieve the requesting Party and any of its relevant Subsidiaries from a Liability in compliance with Section 2.10(a), the Party who Assumed or retained such Liability (the “Liable Party”) shall, or shall cause one of its Subsidiaries, to pay, perform, discharge or otherwise satisfy in full the Liability, unless not permitted to do so by Law or Contract. As required to satisfy the Liability and not otherwise prohibited, the Liable Party may act as an agent or subcontractor for the requesting Party in order to relieve the requesting Party from the Liability. This provision does not relieve the requesting Party from the Liability. This provision does not require the requesting Party to extend, renew or otherwise cause a Contract or other Liability to remain in effect beyond the term in effect as of the Relevant Time. Each other Party shall, without further consideration, promptly pay and remit, or cause to be promptly paid or remitted, to the Liable Party or any of its Subsidiaries responsible for the Liability, all money, rights and other consideration received by the Party or its Subsidiaries in respect of such performance by the Liable Party (unless any such consideration is an Asset of such other Party or one of its Subsidiaries pursuant to this Agreement). If and when any such Consent, release, substitution, amendment or release of the Liability shall be obtained, or such agreement, lease, license or other rights or obligations giving rise to the Liability shall otherwise become assignable or able to be novated, the other Party shall promptly Transfer, or cause to be Transferred, all rights, obligations and other Liabilities thereunder of any of it or its Subsidiaries to the Liable Party or to one of its Subsidiaries if requested to do so without payment of any further consideration, and the Liable Party, or another member of such Liable Party’s Group, without the payment of any further consideration, shall Assume such rights and Liabilities.

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          Section 2.11 Guarantees.

          (a) Forestar shall (with the reasonable cooperation of the other applicable Party and the other members of such other Party’s Group) use its commercially reasonable efforts, if so requested by such other Party, to have any member of the other Party’s Group removed as guarantor of, or obligor for, any Real Estate Liability, including in respect of those guarantees listed or described on Schedule 2.11(a).

          (b) Guaranty shall (with the reasonable cooperation of the other applicable Party and the other members of such Party’s Group) use its commercially reasonable efforts, if so requested by such other Party, to have any member of the other Party’s Group removed as guarantor of, or obligor for, any Financial Services Liability, including in respect of those guarantees listed or described on Schedule 2.11(b).

          (c) Temple-Inland shall (with the reasonable cooperation of the other applicable Party and the other members of such Party’s Group) use its commercially reasonable efforts, if so requested by such other Party, to have any member of the other Party’s Group removed as guarantor of, or obligor for, any Retained Business Liability, including in respect of those guarantees listed or described on Schedule 2.11(c) (each of the releases referred to in clauses (a), (b) and (c) of this Section 2.11, a “Guarantee Release”).

          (d) Until the applicable Party is able to obtain, or to cause to be obtained, any such required removal as set forth in clauses (a), (b), and (c) of this Section 2.11, each of the applicable Parties agree to use their commercially reasonable efforts to not renew or extend the term of, increase its obligations under, or Transfer to a third party, any loan, guarantee, lease, Contract or other obligation for which another Party or member of such Party’s Group is or may be liable unless (i) all obligations of such other Party and the other members of such Party’s Group with respect thereto are thereupon terminated by documentation reasonably satisfactory in form and substance to such other Party or (ii) in the event a Guarantee Release is not obtained and such first Party wishes to extend the term of such guaranteed loan, guarantee, lease, Contract or other obligation, then such first Party shall have the option of extending the term if it gives notice to the guarantor and provides such security as is reasonably satisfactory to the guarantor under such guarantee.

          (e) For the avoidance of doubt, each of the items listed or described on Schedule 2.11(a) are Real Estate Liabilities and, notwithstanding whether the guarantees are removed pursuant to Section 2.11(a), such guarantees shall continue to be Real Estate Liabilities and Forestar shall or shall cause a member of its Group as agent or subcontractor for such guarantor or obligor to pay, perform and discharge fully all the obligations or other Liabilities of such guarantor or obligor thereunder and shall indemnify and hold harmless the other Party’s Indemnitees against any Indemnifiable Loss arising from or relating thereto in accordance with the provisions of ARTICLE VII.

          (f) For the avoidance of doubt, each of the items listed or described on Schedule 2.11(b) are Financial Services Liabilities and, notwithstanding whether the guarantees are removed pursuant to Section 2.11(b), such guarantees shall continue to be Financial Services Liabilities, and Guaranty shall or shall cause a member of its Group as agent or subcontractor for

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such guarantor or obligor to pay, perform and discharge fully all the obligations or other Liabilities of such guarantor or obligor thereunder and shall indemnify and hold harmless the other Party’s Indemnitees against any Indemnifiable Loss arising from or relating thereto in accordance with the provisions of ARTICLE VII.

          (g) For the avoidance of doubt, each of the items listed or described on Schedule 2.11(c) are Retained Business Liabilities and, notwithstanding whether the guarantees are removed pursuant to Section 2.11(c), such guarantees shall continue to be Retained Business Liabilities, and Temple-Inland shall or shall cause a member of its Group as agent or subcontractor for such guarantor or obligor to pay, perform and discharge fully all the obligations or other Liabilities of such guarantor or obligor thereunder and shall indemnify and hold harmless the other Party’s Indemnitees against any Indemnifiable Loss arising from or relating thereto in accordance with the provisions of ARTICLE VII.

          (h) Each of the Parties shall, and shall cause the other members of their respective Groups to, use their commercially reasonable efforts to evaluate or to assist the other Party in evaluating any guarantee required to be so evaluated by Financial Accounting Standards Board Interpretation No. 45.

          Section 2.12 Disclaimers of Representations and Warranties.

          (a) For the purposes of this Section 2.12, this Agreement, the Ancillary Agreements and any real property instruments or other Contracts, affidavits or instruments of any kind executed and delivered under or resulting from this Agreement, any Ancillary Agreement or any transaction contemplated thereby are referred to as the “Spin Agreements” for all purposes. Except as stated in Section 2.12(e), no Party (or any member of such Party’s Group) makes any representation or warranty, expressed or implied, including any implied warranty of fitness for a particular purpose or merchantability or habitability, to any other Party (or to any member of any other Party’s Group or to any other Person interested in the contemplated transactions) in any way as to any matter, including any of the following:

          (i) the Assets, Businesses, or Liabilities Transferred or Assumed;

          (ii) any matter involving the Assets, Businesses or Liabilities;

          (iii) any Consents or Governmental Approvals required in connection with the Spin Agreements;

          (iv) the value, title or freedom from any Security Interests or any other encumbrance or defect in title or right of possession, with respect to Assets of such Party (or member of such Party’s Group);

          (v) the absence of any defenses or right of setoff or freedom from counterclaim with respect to any Action or other Asset, including accounts receivable, of any Party; and

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          (vi) the legal sufficiency of any contribution, distribution, assignment, document, certificate or instrument delivered under any of the Spin Agreements as consideration for the conveyance or transfer of title to any Asset or thing of value.

          (b) Except as stated in Section 2.12(e), all Assets to be retained or Transferred, and the Liabilities to be retained, Assumed, or Transferred in accordance with any Spin Agreement shall be retained, Transferred or Assumed on an “AS IS,” “WHERE IS” basis.

          (c) Except as stated in Section 2.12(e), the respective transferees under any conveyance or Transfer made under any Spin Agreement shall bear the economic and legal risks that (i) any conveyance shall prove to be insufficient to vest in the transferee good title, free and clear of any Security Interest or any other defect or encumbrance upon title or right of possession and (ii) any necessary Consents or Governmental Approvals are not obtained or that any requirements of Laws or judgments are not complied with.

          (d) Except as stated in Section 2.12(e), the Parties acknowledge that any information provided in connection with any of the Spin Agreements is for the Party’s informational purposes only, and no Party makes any representation or warranty, either specifically or implied, whatsoever as to the accuracy or completeness of any information, document or material made available in connection with the Separation or the entering into of this Agreement or the transactions contemplated hereby or thereby. Each Party acknowledges that it has performed its own due diligence and is not relying upon any information provided by any Party in making its determination to enter into this Agreement, except to the extent specifically provided herein to the contrary.

          (e) All disclaimers of representations and warranties contained in this Section 2.12 are limited by and subject to the exclusion of all specific representations and warranties expressly stated in any Spin Agreement insofar as such expressly stated representations or warranties apply to the subject matter of the Spin Agreement in which they are stated and expressly and specifically apply, if at all, to the subject matter of any other Spin Agreement. All such disclaimers do not limit or exclude any indemnity against specific items included in any of the Spin Agreements.

          (f) The Parties intend to bind each member of their respective Groups to the provisions of this Section 2.12 and agree to take all steps necessary to make the disclaimers herein binding upon the members of their respective Groups.

ARTICLE III

CERTAIN ACTIONS PRIOR TO THE DISTRIBUTIONS

          Section 3.1 Temple-Inland Reorganization. The Parties agree to take, or cause the members of their respective Groups to take, prior to their respective Distributions, all actions necessary, subject to the terms of this Agreement, to effectuate the Reorganization of Temple-Inland, Forestar, Guaranty and their respective Affiliates, in order to separate the Real Estate Business, the Financial Services Business and the Retained Business, including the actions set forth in Exhibit A styled “Reorganization Actions.” Notwithstanding anything to the contrary

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herein, in no event shall any Party Transfer or cause to be Transferred any Assets regulated by a Governmental Entity such that the transactions contemplated by this Agreement would require a Governmental Approval, other than the Governmental Approvals listed or described in Schedule 4.6(f).

     Section 3.2 Certificate of Incorporation; Bylaws; Stockholder Rights Agreement.

          (a) On or prior to the Forestar Distribution Date, all necessary actions shall be taken to adopt each of the amended and restated certificate of incorporation and the amended and restated bylaws, and execute and deliver the stockholder rights agreement, each substantially in the forms filed by Forestar with the Commission as exhibits to the Forestar Form 10 or a Current Report on Form 8-K.

          (b) On or prior to the Guaranty Distribution Date, all necessary actions shall be taken to adopt each of the amended and restated certificate of incorporation and the amended and restated bylaws, and execute and deliver the stockholder rights agreement, each substantially in the forms filed by Guaranty with the Commission as exhibits to the Guaranty Form 10 or a Current Report on Form 8-K.

          Section 3.3 Directors.

          (a) On or prior to the Forestar Distribution Date, Temple-Inland shall take all necessary action to cause the board of directors of Forestar to consist of the individuals identified in the Forestar Information Statement as directors of Forestar.

          (b) On or prior to the Guaranty Distribution Date, Temple-Inland shall take all necessary action to cause the board of directors of Guaranty to consist of the individuals identified in the Guaranty Information Statement as directors of Guaranty.

          Section 3.4 Resignations.

          (a) Subject to Section 3.4(b), on or prior to the applicable Relevant Time, (i) Forestar shall cause all Forestar Employees to resign, effective as of the Relevant Time, from all positions as officers or directors of any member of the Guaranty Group or any member of the Temple-Inland Group in which they serve, (ii) Guaranty shall cause all Guaranty Employees to resign, effective as of the Relevant Time, from all positions as officers or directors of any member of the Forestar Group or any member of the Temple-Inland Group in which they serve, and (iii) Temple-Inland shall cause all its employees and any employees of its Affiliates who do not become a Forestar Employee or Guaranty Employee, as the case may be, immediately following the applicable Relevant Time to resign, effective as of the applicable Relevant Time, from all positions as officers or directors of any member of the Forestar Group or the Guaranty Group, as the case may be, in which they serve.

          (b) No Person shall be required by any Party to resign from any position or office with another Party if such Person is disclosed in the applicable Information Statement as the Person who is to hold such position or office following the applicable Distribution.

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          Section 3.5 Forestar Financings. On or prior to the Forestar Distribution Date, Forestar shall enter into a credit facility or facilities (the “Forestar Credit Facilities”) and related Contracts, and shall borrow and draw an aggregate of no less than the amount set forth as the “Forestar Borrowing Amount” on Schedule 3.5 under such facilities and deliver, in immediately available funds, the Forestar Borrowing Amount to Temple-Inland to repay the intercompany debt obligations set forth on Schedule 3.5.

          Section 3.6 Ancillary Agreements. On or prior to the first Distribution, each of Temple-Inland, Forestar and Guaranty shall enter into, and/or (where applicable) shall cause a member or members of their respective Group to enter into, the Ancillary Agreements and any other Contracts in respect of the Distributions reasonably necessary or appropriate in connection with the transactions contemplated hereby and thereby.

ARTICLE IV

THE DISTRIBUTIONS

          Section 4.1 Stock Dividends to Temple-Inland; Distributions.

          (a) On or prior to the Forestar Distribution Date (i) Forestar shall issue to Temple-Inland as a stock dividend such number of shares of Forestar Common Stock, (or Temple-Inland and Forestar shall take or cause to be taken such other appropriate actions to ensure that Temple-Inland has the requisite number of shares of Forestar Common Stock) as will be required so that the total number of shares of Forestar Common Stock held by Temple-Inland immediately prior to the Forestar Distribution is equal to the total number of shares of Forestar Common Stock distributable in the Forestar Distribution and (ii) Temple-Inland will cause the Distribution Agent to distribute all of the outstanding shares of Forestar Common Stock then owned by Temple-Inland to record holders of Temple-Inland Common Stock on the Forestar Distribution Record Date, and to credit the appropriate class and number of such shares of Forestar Common Stock to book entry accounts for each such record holder of Forestar Common Stock. Each record holder of Temple-Inland Common Stock on the Forestar Distribution Record Date will be entitled to receive in the Forestar Distribution one share of Forestar Common Stock for every three shares of Temple-Inland Common Stock held by such stockholder. No action by any such stockholder shall be necessary for such stockholder to receive the applicable number of shares of Forestar Common Stock (and, if applicable, cash in lieu of any fractional shares) such stockholder is entitled to in the Forestar Distribution.

          (b) On or prior to the Guaranty Distribution Date, (i) Guaranty shall issue to Temple-Inland as a stock dividend such number of shares of Guaranty Common Stock,(or Temple-Inland and Guaranty shall take or cause to be taken such other appropriate actions to ensure that Temple-Inland has the requisite number of shares of Guaranty Common Stock) as will be required so that the total number of shares of Guaranty Common Stock held by Temple-Inland immediately prior to the Guaranty Distribution is equal to the total number of shares of Guaranty Common Stock distributable in the Guaranty Distribution and (ii) Temple-Inland will cause the Distribution Agent to distribute all of the outstanding shares of Guaranty Common Stock then owned by Temple-Inland to record holders of Temple-Inland Common Stock on the Guaranty Distribution Record Date, and to credit the appropriate class and number of such shares of

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Guaranty Common Stock to book entry accounts for each such record holder of Guaranty Common Stock. Each record holder of Temple-Inland Common Stock on the Guaranty Distribution Record Date will be entitled to receive in the Guaranty Distribution one share of Guaranty Common Stock for every three shares of Temple-Inland Common Stock held by such stockholder. No action by any such stockholder shall be necessary for such stockholder to receive the applicable number of shares of Guaranty Common Stock (and, if applicable, cash in lieu of any fractional shares) such stockholder is entitled to in the Guaranty Distribution.

          Section 4.2 Fractional Shares. Temple-Inland stockholders holding a number of shares of Temple-Inland Common Stock on the Forestar Distribution Record Date or the Guaranty Distribution Record Date, as applicable, which would entitle such stockholders to receive less than one whole share of Forestar Common Stock or Guaranty Common Stock, as the case may be, in the applicable Distribution, will receive cash in lieu of such fractional shares. Fractional shares of Forestar Common Stock or Guaranty Common Stock will not be distributed in the Distributions nor credited to book-entry accounts. The Distribution Agent shall, as soon as practicable after the Forestar Distribution Date or the Guaranty Distribution Date, as applicable (a) determine the number of whole shares and fractional shares of Forestar Common Stock or Guaranty Common Stock allocable to each holder of record of Temple-Inland Common Stock as of close of business on the Forestar Distribution Record Date or the Guaranty Distribution Record Date, as applicable, (b) aggregate all such fractional shares into whole shares and sell the whole shares obtained thereby in open market transactions as soon as practicable after the applicable Distribution, in each case, at then prevailing trading prices on behalf of holders who would otherwise be entitled to fractional share interests, and (c) distribute to each such holder, or for the benefit of each such beneficial owner, such holder or owner’s ratable share of the net proceeds of such sale, based upon the average gross selling price per share of Forestar Common Stock or Guaranty Common Stock, as the case may be, after making appropriate deductions for any amount required to be withheld for United States federal income tax purposes. Forestar and Guaranty, as the case may be, shall bear the cost of brokerage fees incurred in connection with these sales of fractional shares, which sales shall occur as soon after the applicable Distribution Date as practicable and as determined by the Distribution Agent. None of Temple-Inland, Forestar, Guaranty or the Distribution Agent will guarantee any minimum sale price for the fractional shares of Forestar Common Stock or Guaranty Common Stock. None of Temple-Inland, Forestar or Guaranty will pay any interest on the proceeds from the sale of fractional shares. The Distribution Agent acting on behalf of the applicable Party will have the sole discretion to select the broker-dealers through which to sell the aggregated fractional shares and to determine when, how and at what price to sell such shares. Neither the Distribution Agent nor the broker-dealers through which the aggregated fractional shares are sold will be Affiliates of Temple-Inland, Forestar or Guaranty.

          Section 4.3 Unclaimed Shares or Cash.

          (a) Any Forestar Common Stock or cash in lieu of fractional shares with respect to Forestar Common Stock that 180 days after the Forestar Distribution Date remains unclaimed by holders of Temple-Inland Common Stock on the Forestar Distribution Record Date shall be delivered to Forestar. Forestar shall hold all such Forestar Common Stock and cash for the account of such stockholders and any such stockholder shall look only to Forestar for such Forestar Common Stock and cash, if any, in lieu of fractional share interests, subject in each case

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to applicable escheat or other abandoned property laws. Forestar shall indemnify the Temple-Inland Indemnitees in accordance with ARTICLE VII hereof for all claims relating to such Forestar Common Stock and cash so delivered to Forestar.

          (b) Any Guaranty Common Stock or cash in lieu of fractional shares with respect to Guaranty Common Stock that 180 days after the Guaranty Distribution Date remains unclaimed by holders of Temple-Inland Common Stock on the Guaranty Distribution Record Date shall be delivered to Guaranty. Guaranty shall hold all such Guaranty Common Stock and cash for the account of such stockholders and any such stockholder shall look only to Guaranty for such Guaranty Common Stock and cash, if any, in lieu of fractional share interests, subject in each case to applicable escheat or other abandoned property laws. Guaranty shall indemnify the Temple-Inland Indemnitees in accordance with ARTICLE VII hereof for all claims relating to such Guaranty Common Stock and cash so delivered to Guaranty.

          (c) No interest shall be paid on cash held in lieu of fractional shares under Section 4.3(a) or Section 4.3(b).

          Section 4.4 Actions in Connection with the Distributions.

          (a) Each of Forestar and Guaranty shall file with the Commission such amendments and supplements to their respective Form 10s as Temple-Inland may reasonably request, and such amendments as may be necessary in order to cause the same to become and remain effective as required by Law, including filing such amendments and supplements to their respective Form 10s, Information Statements or a Current Report on Form 8-K as may be required by the Commission or federal, state or foreign securities Laws. Each of Forestar and Guaranty shall mail to the holders of Temple-Inland Common Stock, at such time on or prior to the Forestar Distribution Date or the Guaranty Distribution Date, as applicable, as Temple-Inland shall determine, the Information Statement included in its Form 10 (or as filed as an exhibit to a Current Report on Form 8-K for such Party), as well as any other information concerning Forestar or Guaranty, as applicable, their business, operations and management, the Plan of Separation and such other matters as Temple-Inland shall reasonably determine are necessary and as may be required by Law.

          (b) Each of Forestar and Guaranty shall also cooperate with Temple-Inland in preparing, filing with the Commission and causing to become effective registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the Plan of Separation or other transactions contemplated by this Agreement and the Ancillary Agreements. Promptly after receiving a request from Temple-Inland, to the extent requested, each of Forestar and Guaranty shall prepare and, in accordance with applicable Law, file with the Commission any such documentation that Temple-Inland determines is necessary or desirable to effectuate the applicable Distribution, and Temple-Inland, Forestar and Guaranty shall each use commercially reasonable efforts to obtain all necessary approvals from the Commission with respect thereto as soon as practicable.

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          (c) Promptly after receiving a request from Temple-Inland, each of Forestar and Guaranty shall prepare and file, and shall use commercially reasonable efforts to have approved and made effective, an application for the original listing on the NYSE of the Forestar Common Stock and the Guaranty Common Stock, as applicable, to be distributed in the applicable Distribution, subject to official notice of Distribution.

          (d) Nothing in this Section 4.4 shall be deemed, by itself, to shift Liability for any portion of such Form 10s or Information Statements to Temple-Inland.

          Section 4.5 Sole Discretion of Temple-Inland. Temple-Inland shall, in its sole and absolute discretion, determine each of the Forestar Distribution Date and the Guaranty Distribution Date and all terms of the Distributions, including the form, structure and terms of any transactions and/or offerings to effect each Distribution and the timing of and conditions to the consummation thereof. In addition, Temple-Inland may, in accordance with Section 11.11, at any time and from time to time until the completion each such Distribution, decide to abandon any or each of the Distributions or modify or change the terms of any or each of the Distributions, including by accelerating or delaying the timing of the consummation of all or part of any or each of the Distributions. None of Forestar, Guaranty, any other member of the Forestar Group or the Guaranty Group, any Forestar Employee or Guaranty Employee or any third party shall have any right or claim to require the consummation of the Plan of Separation or any or each of the Distributions, each of which shall be effected at the sole discretion of the board of directors of Temple-Inland.

          Section 4.6 Conditions to the Distributions. Subject to Section 4.5, the following are conditions to the consummation of each of the Distributions. The conditions are for the sole benefit of Temple-Inland and shall not give rise to or create any duty on the part of Temple-Inland or the board of directors of Temple-Inland to waive or not waive any such condition:

          (a) The applicable Form 10 shall have been declared effective by the Commission, with no stop order in effect with respect thereto, and the applicable Information Statement shall have been mailed to the holders of Temple-Inland Common Stock who held Temple-Inland Common Stock as of the Forestar Distribution Record Date and the Guaranty Distribution Record Date, as applicable;

          (b) With respect to the (i) Forestar Distribution, the Forestar Common Stock to be delivered in the Forestar Distribution shall have been approved for listing on the NYSE, subject to official notice of distribution and (ii) Guaranty Distribution, the Guaranty Common Stock to be delivered in the Guaranty Distribution shall have been approved for listing on the NYSE, subject to official notice of distribution;

          (c) Prior to the Forestar Distribution and the Guaranty Distribution, respectively, Temple-Inland shall have obtained a private letter ruling from the Internal Revenue Service in form and substance satisfactory to Temple-Inland (in its sole discretion), and such ruling shall remain in effect as of the applicable Distribution Date, to the effect, among other things, that (i) such Distribution, together with certain related transactions, will qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Code, (ii) no gain or loss will be recognized by (and no amount will otherwise be included in the income of) the stockholders of Temple-Inland upon their receipt of Forestar Common Stock or Guaranty Common Stock, as the

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case may be, pursuant to such Distribution; and (iii) no gain or loss will be recognized by Temple-Inland pursuant to such Distribution;

          (d) Prior to the Forestar Distribution and the Guaranty Distribution, respectively, Temple-Inland shall have obtained an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, its tax counsel, in form and substance satisfactory to Temple-Inland (in its sole discretion), substantially to the effect that, among other things, such Distribution, together with certain related transactions, should qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Code;

          (e) Prior to the Forestar Distribution and the Guaranty Distribution, respectively, Temple-Inland shall have obtained a surplus and solvency opinion(s) from Houlihan Lokey Howard & Zukin Financial Advisors, Inc., in form and substance satisfactory to Temple-Inland (in its sole discretion), substantially to the effect that, among other things: (i) Temple-Inland has adequate surplus under Delaware law to declare the applicable Distribution dividend and (ii) following the applicable Distribution, Temple-Inland, on the one hand, and Forestar or Guaranty, as applicable, on the other hand, will be solvent and adequately capitalized;

          (f) Any material Governmental Approvals and other Consents necessary to consummate the applicable Distribution or any portion thereof shall have been obtained and be in full force and effect, including the regulatory approvals listed or described on Schedule 4.6(f);

          (g) No order, injunction or decree issued by any Governmental Entity of competent jurisdiction or other legal restraint or prohibition preventing the consummation of all or any portion of the applicable Distribution shall be in effect, and no other event outside the control of Temple-Inland shall have occurred or failed to occur that prevents the consummation of all or any portion of the applicable Distribution;

          (h) With respect to the Forestar Distribution, the financing transactions described in the Forestar Information Statement as having occurred prior to the Forestar Distribution Date shall have been consummated on or prior to the Forestar Distribution Date; and

          (i) The board of directors of Temple-Inland shall have approved the applicable Distribution, which approval may be given or withheld at its absolute and sole discretion.

ARTICLE V

CERTAIN COVENANTS

          Section 5.1 Legal Names and Other Parties’ Trademarks.

          (a) Except as otherwise specifically provided in any Ancillary Agreement, as soon as reasonably practicable after the applicable Relevant Time but in any event within six months thereafter, each Party shall cease (and shall cause all of the other members of its Group to cease) (i) making any use of any names or Trademarks that include (A) any of the Trademarks of any other Parties or such other Parties’ Subsidiaries or Affiliates (including, in the case of Forestar and Guaranty, “Temple-Inland” or “Temple-Inland Inc.”) and (B) any names or Trademarks

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related thereto, including any names or Trademarks confusingly similar thereto or dilutive thereof (with respect to each Party, such Trademarks of the other Parties and their Affiliates, the “Other Party Marks”), and (ii) holding themselves out as having any affiliation with any of the other Parties or such Parties’ Subsidiaries or Affiliates; provided, however, that the foregoing shall not prohibit any Party or any member of a Party’s Group from (1) stating in any advertising or any other communication that it is formerly a Temple-Inland affiliate or otherwise describing its historical relationships with Temple-Inland, the other Party and their respective Subsidiaries or (2) making use of any Other Party Mark in a manner that would constitute “fair use” under applicable Law if any unaffiliated third party made such use or would otherwise be legally permissible for any unaffiliated third party without the Consent of the Party owning such Other Party Mark. In furtherance of the foregoing, as soon as practicable but in no event later than six months following the applicable Relevant Time, each Party and the members of each Party’s Group shall, and shall cause each of its Affiliates to remove, strike over or otherwise obliterate all Other Party Marks from all of such Party’s and its Subsidiaries’ and Affiliates’ assets and other materials, including any vehicles, business cards, schedules, stationery, packaging materials, displays, signs, promotional materials, manuals, forms, websites, email, computer software and other materials and systems. Any use by any of the Parties or any of their Subsidiaries or Affiliates of any of the Other Party Marks as permitted in this Section 5.1 is subject to their compliance with the quality control requirements and guidelines in effect for the Other Party Marks as of the Effective Time. No use of the term “Guaranty Bank” shall be made by any Party that violates applicable Law.

          (b) Notwithstanding the foregoing requirements of Section 5.1(a), if any Party or any member of a Party’s Group exercised good faith efforts to comply with Section 5.1(a) but is unable, due to regulatory or other circumstances beyond its control, to effect a legal name change in compliance with applicable Law such that an Other Party Mark remains in such Party’s or its Group member’s corporate name, then the relevant Party or its Group member will not be deemed to be in breach hereof if it continues to exercise good faith efforts to effectuate such name change and does effectuate such name change within 12 months after the applicable Relevant Time, and, in such circumstances, such Party or Group member may continue to include in its assets and other materials references to the Other Party Mark that is in such Party’s or Group member’s corporate name, which includes references to “Forestar,” “Guaranty,” or “Temple-Inland” as applicable, but only to the extent necessary to identify such Party or Group member and only until such Party’s or Group member’s legal name can be changed to remove and eliminate such references.

          (c) Notwithstanding the foregoing requirements of Section 5.1(a), Forestar and Guaranty shall not be required to change any name including the phrase “Temple-Inland” in any third-party contract, lease, indenture or license, or in property records with respect to real or personal property, if an effort to change the name is commercially unreasonable; provided, however, that (i) Forestar and Guaranty on a prospective basis from and after the applicable Relevant Time, shall change the name in any new or amended third-party contract or license or property record and (ii) Forestar and Guaranty shall not advertise or make public any continued use of the “Temple-Inland” name permitted by this Section 5.1(c).

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     Section 5.2 Auditors and Audits; Annual and Quarterly Financial Statements and Accounting.

          (a) Each Party agrees that during the period ending 180 days following the applicable Relevant Time (and with the consent of the other applicable Party, which consent shall not be unreasonably withheld or delayed, during any period of time after such 180-day period reasonably requested by such requesting Party, so long as there is a reasonable business purpose for such request) and in any event solely with respect to the preparation and audit of each of the Party’s financial statements for any of the fiscal years 2003, 2004, 2005, 2006, and 2007, the printing, filing and public dissemination of such financial statements, the audit of each Party’s internal control over financial reporting and such Party’s management’s assessment thereof, and each Party’s management’s assessment of such Party’s disclosure controls and procedures:

          (i) Annual Financial Statements. Each Party shall provide or provide access to the other Parties on a timely basis, all information reasonably required to meet its schedule for the preparation, printing, filing, and public dissemination of its annual financial statements and for management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K promulgated by the Commission and, to the extent applicable to such Party, its auditor’s audit of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the Commission’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder (such assessments and audit being referred to as the “2007 Internal Control Audit and Management Assessments”). Without limiting the generality of the foregoing, each Party will provide all required financial and other information with respect to itself and its Subsidiaries to its auditors in a sufficient and reasonable time and in sufficient detail to permit its auditors to take all steps and perform all reviews necessary to provide sufficient assistance to each other Parties’ auditors with respect to information to be included or contained in such other Parties’ annual financial statements and to permit such other Party’s auditors and management to complete the 2007 Internal Control Audit and Management Assessments.

          (ii) Access to Personnel and Records. Each audited Party shall authorize, and use its commercially reasonable efforts to cause, its respective auditors to make available to each other Parties’ auditors (each such other Parties’ auditors, collectively, the “Other Parties’ Auditors”) both the personnel who performed or are performing the annual audits of such audited Party (each such Party with respect to its own audit, the “Audited Party”) and work papers related to the annual audits of such Audited Party, in all cases within a reasonable time prior to such Audited Party’s auditors’ opinion date, so that the Other Parties’ Auditors are able to perform the procedures they consider necessary to take responsibility for the work of the Audited Party’s auditors as it relates to their auditors’ report on such other Party’s financial statements, all within sufficient time to enable such other Party to meet its timetable for the printing, filing and public dissemination of its annual financial statements. Each Party shall make available to the Other Parties’ Auditors and management its personnel and Records in a reasonable time prior to the Other Parties’ Auditors’ opinion date and other Parties’ management’s assessment date so that the Other Parties’ Auditors and other Parties’ management are able to perform the procedures they consider necessary to conduct the 2007 Internal Control Audit and Management Assessments.

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          (b) Amended Financial Reports. In the event a Party restates any of its financial statements that includes such Party’s audited or unaudited financial statements with respect to any balance sheet date or period of operation as of the end of and for the fiscal years 2005, 2006 and 2007, such Party will deliver to the other Parties a substantially final draft, as soon as the same is prepared, of any report to be filed by such first Party with the Commission that includes such restated audited or unaudited financial statements (the “Amended Financial Report”); provided, however, that such first Party may continue to revise its Amended Financial Report prior to its filing thereof with the Commission, which changes will be delivered to the other Parties as soon as reasonably practicable; provided, further, however, that such first Party’s financial personnel will actively consult with the other Parties’ financial personnel regarding any changes which such first Party may consider making to its Amended Financial Report and related disclosures prior to the anticipated filing of such report with the Commission, with particular focus on any changes which would have an effect upon the other Party’s financial statements or related disclosures. Each Party will reasonably cooperate with, and permit and make any necessary employees available to, the other Parties, in connection with the other Parties’ preparation of any Amended Financial Reports.

          (c) Financials; Outside Auditors. If any Party or member of its respective Group is required, pursuant to Rule 3-09 of Regulation S-X promulgated by the Commission or otherwise, to include in its Exchange Act filings audited financial statements or other information of any other Party or member of the other Party’s Group, the other Party shall use its commercially reasonable efforts (i) to provide such audited financial statements or other information, and (ii) to cause its outside auditors to consent to the inclusion of such audited financial statements or other information in the Party’s Exchange Act filings.

          (d) Third Party Agreements. Nothing in this Section 5.2 shall require any Party to violate any agreement with any third party regarding the confidentiality of confidential and proprietary information relating to that third party or its business; provided, however, that in the event that a Party is required under this Section 5.2 to disclose any such information, such Party shall use commercially reasonable efforts to seek to obtain such third party’s consent to the disclosure of such information.

     Section 5.3 No Restrictions on Post-Closing Competitive Activities; Corporate Opportunities.

          (a) Each of the Parties agrees that this Agreement shall not include any non-competition or other similar restrictive arrangements with respect to the range of business activities that may be conducted by the Parties. Accordingly, each of the Parties acknowledges and agrees that nothing set forth in this Agreement shall be construed to create any explicit or implied restriction or other limitation on (i) the ability of any Party hereto to engage in any business or other activity that competes with the business of any other Party, or (ii) the ability of any Party to engage in any specific line of business or engage in any business activity in any specific geographic area. Except as expressly provided in Section 5.3 hereof or in any Ancillary

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Agreement, Temple-Inland and the Temple-Inland Group shall have the right to, and shall have no duty not to, (i) engage in the same or similar business activities or lines of business as Forestar, Guaranty or their respective Groups, (ii) do business with any client or customer of Forestar, Guaranty or their respective Groups, and (iii) employ or otherwise engage any officer or employee of Forestar, Guaranty or their respective Groups, and neither Temple-Inland nor the Temple-Inland Group nor any officer or director thereof, as an officer or director of Temple-Inland or any member of the Temple-Inland Group, shall be liable to Forestar, Guaranty and their respective Groups or their stockholders for breach of any fiduciary duty by reason of any such activities of Temple-Inland or the Temple-Inland Group or of such Person’s participation therein.

          (b) In the event that Temple-Inland or any other member of the Temple-Inland Group acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both Temple-Inland or any other member of the Temple-Inland Group and Forestar, Guaranty or any other member of their respective Groups, neither Temple-Inland nor any other member of the Temple-Inland Group nor any agent or advisor thereof shall have any duty to communicate or present such corporate opportunity to Forestar, Guaranty or any other member of their respective Groups and shall not be liable to Forestar, Guaranty or any other member of their respective Group or to Forestar or Guaranty’s stockholders for breach of any fiduciary duty as a stockholder of Forestar or Guaranty by reason of the fact that Temple-Inland or any other member of the Temple-Inland Group pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another Person, or does not present such corporate opportunity to Forestar, Guaranty or any other member of their respective Groups.

          (c) In the event that Forestar, Guaranty or any other member of their respective Groups acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both Temple-Inland or any other member of the Temple-Inland Group and Forestar, Guaranty or any other member of their respective Groups, neither Forestar, Guaranty nor any other member of their respective Groups nor any agent or advisor thereof shall have any duty to communicate or present such corporate opportunity to Temple-Inland or any other member of the Temple-Inland Group and shall not be liable to Temple-Inland or any other member of the Temple-Inland Group or to Temple-Inland’s stockholders for breach of any fiduciary duty as a stockholder of Temple-Inland by reason of the fact that Forestar, Guaranty or any other member of their respective Groups pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another Person, or does not present such corporate opportunity to Temple-Inland or any other member of the Temple-Inland Group.

          (d) In the event that Forestar, Guaranty or any other member of their respective Groups acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both Forestar, Guaranty or any other member of their respective Groups, neither Forestar, Guaranty nor any other member of their respective Groups, as applicable, nor any agent or advisor thereof shall have any duty to communicate or present such corporate opportunity to Forestar, Guaranty or any other member of their respective Groups, as applicable, and shall not be liable to Forestar, Guaranty or any other member of their respective Groups or Forestar or Guaranty ‘s stockholders, as applicable, for breach of any fiduciary duty as a stockholder of Forestar or Guaranty, as applicable, by reason of the fact that Forestar, Guaranty or any other member of their respective Groups pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another Person, or does not present such corporate opportunity to Forestar or Guaranty or any other member of their respective Groups.

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          (e) For the purposes of this Section 5.3, “corporate opportunities” of Forestar, Guaranty or any other member of their respective Groups shall include, but not be limited to, business opportunities that Forestar, Guaranty or any other member of their respective Groups are financially able to undertake, that are, by their nature, in a line of business of Forestar, Guaranty or any other member of their respective Groups, including the Real Estate Business and the Financial Services Business, are of practical advantage to them and are ones in which Forestar, Guaranty or any other member of their respective Groups have an interest or a reasonable expectancy, and in which, by embracing the opportunities, the self-interest of Temple-Inland or any other member of the Temple-Inland Group or any of their officers or directors will be brought into conflict with that of Forestar, Guaranty or any other member of their respective Groups, and “corporate opportunities” of Temple-Inland or any other member of the Temple-Inland Group shall include, but not be limited to, business opportunities that Temple-Inland or any other member of the Temple-Inland Group are financially able to undertake, that are, by their nature, in a line of business of Temple-Inland or any other member of the Temple-Inland Group, including the Retained Business, are of practical advantage to them and are ones in which Temple-Inland or any other member of the Temple-Inland Group have an interest or a reasonable expectancy, and in which, by embracing the opportunities, the self-interest of Forestar, Guaranty or any other member of their respective Groups or any of their officers or directors will be brought into conflict with that of Temple-Inland or any other member of the Temple-Inland Group.

ARTICLE VI

CONTINGENT GAINS AND LIABILITIES AND UNALLOCATED ASSETS
AND LIABILITIES

     Section 6.1 Unallocated Assets and Contingent Gains.

          (a) As of the Date of this Agreement, the Parties have identified no Unallocated Assets. There shall be a presumption that any Asset not explicitly addressed in this Agreement or set forth in the Schedules hereto is intended to be a Real Estate Asset, a Financial Services Asset, or a Retained Business Asset. Such presumption may only be overcome by clear and convincing evidence to the contrary. Any dispute as to the proper characterization of an Asset not specifically addressed by this Agreement shall be resolved under Section 6.4.

          (b) To the extent any benefit is received from any Unallocated Asset, that benefit (net of costs to realize the benefit) shall be shared among the Parties in proportion to their Allocated Percentage, respectively, and shall be paid in accordance with Section 6.3.

          (c) As of the Date of this Agreement, all Contingent Gains known to the Parties are identified in Schedules 1.1(39), 1.1(41), and 1.1(43), and such Contingent Gains are either Real Estate Assets, Financial Services Assets or Retained Business Assets, as provided in Section 1.1(121), Section 1.1(47), and Section 1.1(131), respectively.

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          (d) Pursuant to the provisions of Section 6.4, Contingent Gains not specifically addressed by this Agreement shall be referred to the Contingent Claim Committee for determination of whether the Contingent Gain is an Exclusive Forestar Contingent Gain, an Exclusive Guaranty Contingent Gain, an Exclusive Temple-Inland Contingent Gain, or an Unallocated Asset. There shall be a presumption that any Contingent Gain not explicitly addressed by this Agreement or set forth in the Schedules hereto is intended to be either a Real Estate Asset, a Financial Services Asset, or a Retained Business Asset. Such presumption may only be overcome by clear and convincing evidence to the contrary.

          (e) Any Contingent Gain determined by the Contingent Claim Committee to be an Exclusive Forestar Contingent Gain shall be a Real Estate Asset, and shall be administered by Forestar, and Forestar shall have the sole right to any benefit therefrom.

          (f) Any Contingent Gain determined by the Contingent Claim Committee to be an Exclusive Guaranty Contingent Gain shall be a Financial Services Asset, and shall be administered by Guaranty, and Guaranty shall have the sole right to any benefit therefrom.

          (g) Any Contingent Gain determined by the Contingent Claim Committee to be an Exclusive Temple-Inland Contingent Gain shall be a Retained Business Asset, and shall be administered by Temple-Inland, and Temple-Inland shall have the sole right to any benefit therefrom.

          (h) Any Asset or Contingent Gain determined by the Contingent Claim Committee to be an Unallocated Asset shall be administered by Temple-Inland. Temple-Inland shall have sole and exclusive authority to commence, assign, prosecute, settle, manage, control, conduct, waive, forgo, release, discharge, forgive and otherwise determine all matters whatsoever with respect to any Unallocated Asset. As soon as commercially practicable, any Unallocated Asset shall be monetized and the proceeds distributed in accordance with Section 6.1(b). Neither Forestar nor Guaranty shall take, or permit any of their respective Subsidiaries to take, any action (including commencing any claim) that would interfere with such rights and powers of Temple-Inland to determine all matters and take all actions with respect to any Unallocated Asset.

          (i) Temple-Inland shall notify the other Parties in the event that it commences an Action with respect to an Unallocated Asset; provided that the failure to provide such notice shall not give rise to any rights on the part of the other Parties or against Temple-Inland or affect any other provision of this Section 6.1. Each of Forestar and Guaranty acknowledges (A) that Temple-Inland may elect not to pursue any Action regarding any Unallocated Asset for any reason whatsoever (including a different assessment of the merits of any Action, claim or right than the other Parties might have or any business reasons that are in the best interests of Temple-Inland or a member of the Temple-Inland Group, without regard to the best interests of any other Party or its Subsidiaries), and (B) that no member of the Temple-Inland Group shall have any Liability to any Person (including any other Party or its Subsidiaries) as a result of any such determination.

     Section 6.2 Unallocated Liabilities.

          (a) As of the Date of this Agreement, the Parties have listed on Schedule 1.1(165)(iii) all Liabilities known to the Parties that they intend to be Unallocated Liabilities. If a

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Liability is not explicitly addressed in this Agreement or set forth in the Schedules, the Parties shall be presumed to have intended that the Liability be a Real Estate Liability, a Financial Services Liability or a Retained Business Liability. Such presumption may only be overcome by clear and convincing evidence to the contrary.

          (b) Each of the Parties shall be responsible for its Allocated Percentage of any Unallocated Liability.

          (c) As of the Date of this Agreement, the Parties have listed or described on Schedules 1.1(40), 1.1(42)and 1.1(44), all Contingent Liabilities known to them. Each of those Contingent Liabilities is a Real Estate Liability, a Financial Services Liability or a Retained Business Liability pursuant to Section 1.1(124), Section 1.1(49) and Section 1.1(133), respectively. If a Contingent Liability is not explicitly addressed in this Agreement or set forth in the Schedules, there shall be a presumption that the Parties intended the Contingent Liability to be a Real Estate Liability, a Financial Services Liability or a Retained Business Liability. Such presumption may only be overcome by clear and convincing evidence to the contrary.

          (d) After the Effective Time, if a Contingent Liability is identified that is not explicitly addressed in the Agreement or set forth in the Schedules, the Contingent Liability shall be referred to the Contingent Claim Committee to determine responsibility for the Contingent Liability pursuant to the provisions of Section 6.4.

          (e) Except as set forth in Schedule 1.1(164)(iii), Temple-Inland shall assume the defense of, and may seek to settle or compromise, any claim determined by the Contingent Claim Committee pursuant to Section 6.4 to be an Unallocated Liability. The costs and expenses of the defense or liquidation of an Unallocated Liability shall be included in the calculation of the amount of the applicable Unallocated Liability in determining the reimbursement obligations of the other Parties with respect thereto. The Parties shall cooperate in the defense as provided in Section 6.6.

          (f) For each of the matters listed or described on Schedule 1.1(164)(iii), to the extent identifiable, the Schedule states the Party that shall be responsible for administering each Contingent Liability that relates to, arises out of or results from that matter. Additionally, the Schedule states any special procedures to be applied in administering or allocating any Unallocated Liability associated with each matter listed or described on that Schedule.

     Section 6.3 Payments.

          (a) The Party responsible for the administration of an Unallocated Asset or an Unallocated Liability shall be entitled to reimbursement of each other Party’s Allocated Percentage of all costs and expenses incurred in respect of such Unallocated Asset or Unallocated Liability by that Party or a member of its Group. The reimbursable costs and expenses include those costs and expenses incurred in an Action related to an Unallocated Asset or Unallocated Liability and those costs and expenses may be invoiced periodically in advance of a final determination of any such Action. Payment shall be due promptly after the responsible Party submits its invoice for such amount, provided that the Party responsible for administration shall provide reasonable supporting information for an invoice upon a request made within a reasonable time by a Party receiving an invoice.

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          (b) In the case of any Unallocated Asset, Temple-Inland shall be entitled to retain from the amount of money realized from the Unallocated Assets and otherwise payable to the other Party, each other Party’s respective Allocated Percentage of the costs and expenses paid or incurred by or on behalf of any member of the Temple-Inland Group in connection with such Unallocated Assets.

          (c) The term “costs and expenses” as used in reference to those costs and expenses that are to be reimbursed to the Party shall be broadly construed to include all costs and expenses incurred and attributable directly or indirectly to either the recovery or liquidation of an Unallocated Asset or to the defense or liquidation of an Unallocated Liability, including allocated costs of in-house counsel and other personnel, expert witness fees, reproduction expenses and the cost of deposition copies (video, electronic and hardcopy). The term “costs and expenses” shall include any cost or expense paid or incurred by or on behalf of any member of the responsible Party’s Group in respect of any such recovery, defense or liquidation.

          (d) Any amounts billed and properly payable in accordance with this Section 6.3 that are not paid within 45 days of such bill shall bear interest at the lesser of (i) Prime Rate plus 2% per annum or (ii) the maximum contractual rate permitted by Law, from the date of invoice until paid. Adjustments to the interest rate based on the Prime Rate shall be made as of the first Business Day of each week based upon the Prime Rate at the close of the most recent prior Business Day.

     Section 6.4 Procedures to Determine Status of Liability or Asset.

          (a) As of the Effective Time, the Parties will form a Contingent Claim Committee of three persons comprised of the general counsel or chief legal officer of each of the Parties, or their respective delegates, for the purpose of resolving whether:

          (i) any Liability not specifically characterized in this Agreement or its Schedules, whose proper characterization is disputed, is a Real Estate Liability, a Financial Services Liability, a Retained Business Liability, or an Unallocated Liability; or

          (ii) any Asset not specifically characterized in this Agreement or its Schedules, whose proper characterization is disputed, is a Real Estate Asset, a Financial Services Asset, a Retained Business Asset, or an Unallocated Asset.

          (b) If any Party or any of its Subsidiaries shall receive notice or otherwise learn of an Asset that may reasonably be determined to be a Contingent Gain or an Unallocated Asset, or the assertion of a Third Party Claim which may reasonably be determined to be a Contingent Liability or an Unallocated Liability, not specifically characterized in this Agreement or its Schedules, such Party shall give the other Parties and the Contingent Claim Committee written notice thereof promptly (and in any event within 15 days) after such Person becomes aware of such Asset, Liability or Third Party Claim. Thereafter, the Party shall deliver to the Contingent Claim Committee, promptly (and in any event within 10 calendar days) after the Party’s receipt thereof, copies of all notices and documents (including court papers) received by the Party or the member of such Party’s Group relating to the matter.

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          (c) If a dispute shall arise between any of the Parties or among all of the Parties as to the proper characterization of any Asset or Liability (other than one covered under Section 6.4(b)), then any Party may refer that dispute to the Contingent Claim Committee for resolution in the same manner as is set forth for a Third Party Claim or an Asset or Contingent Gain that may be an Unallocated Asset.

          (d) The Contingent Claim Committee’s determination (which shall be made within 30 days of such referral), if unanimous, shall be binding on all of the Parties and their respective successors and assigns. The good faith determination of any two members of the Contingent Claim Committee shall be binding for the characterization of all Assets or Liabilities concerning less than $100,000 (severally, or for related matters, in the aggregate). For all matters referred to the Contingent Claim Committee that concern $100,000 or more (severally, or for related matters, in the aggregate), if the Contingent Claim Committee cannot reach a unanimous determination as to the characterization of an Asset or Liability within 30 days after referral of the issue such matters shall be submitted for arbitration under the procedures set forth in ARTICLE IX of this Agreement; provided, however, that no Dispute Notice or prior negotiations as set forth in Section 9.1 shall be required. The outcome of the arbitration pursuant to ARTICLE IX shall be final and binding on all Parties, their Subsidiaries and their respective successors and assigns.

          (e) In resolving, with respect to any Action not specifically addressed in this Agreement (regardless of whether such matters are currently pending but not set forth or are asserted or filed hereafter), whether

          (i) any Contingent Gain is an Exclusive Temple-Inland Contingent Gain, an Exclusive Forestar Contingent Gain, or an Exclusive Guaranty Contingent Gain or an Unallocated Asset, or

          (ii) any Contingent Liability is an Exclusive Temple-Inland Contingent Liability, an Exclusive Forestar Contingent Liability, an Exclusive Guaranty Contingent Liability, or an Unallocated Liability,

the characterization of Contingent Gains and Contingent Liabilities reflected in Schedules 1.1(39), 1.1(40), 1.1(41), 1.1(42), 1.1(43), and 1.1(44), whereby the Parties have assigned existing claims based on whether the claim principally relates to the Retained Business, the Real Estate Business or the Financial Services Business shall be considered and used as a precedential guide.

          (f) Temple-Inland may commence prosecution or defense of such matters pending decision of the Contingent Claims Committee (or arbitration decision, if applicable), but shall not be obligated to do so. If Temple-Inland commences any such prosecution or defense and subsequently Forestar or Guaranty is determined hereunder to have the exclusive right or obligation to such claim or right, then, upon the request of Forestar or Guaranty, Temple-Inland shall promptly discontinue the prosecution or defense of such matter and transfer the control thereof to Forestar or Guaranty, as applicable. In such event, Forestar or Guaranty will reimburse Temple-Inland for all costs and expenses incurred prior to resolution of such dispute in the prosecution or defense of such claim or right.

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          (g) At any time or from time to time prior to the Effective Time, the General Counsel of Temple-Inland, following consultation with the designated person to be the chief legal officers of Forestar and Guaranty, may amend or supplement any of Schedules 1.1(39), 1.1(41), or 1.1(43).

          Section 6.5 Certain Case Allocation Matters. The Parties agree that if any Action not listed or described on Schedules 1.1(50)(vi), 1.1(123)(vi) or 1.1(133)(vi) involves separate and distinct claims that, if not joined in a single Action, would constitute separate Liabilities of different Parties, they will use their commercially reasonable efforts to segregate such separate and distinct claims so that the Liabilities associated with each such claim (including all costs and expenses incurred after an agreed segregation of the claims) shall be treated as Liabilities of the appropriate Party and so that each Party shall have the rights and obligations with respect to each such claim (including pursuant to this ARTICLE VI as would have been applicable had such claims been commenced as separate Actions). Unless otherwise explicitly provided in this Agreement, (a) all costs and expenses associated with such claims and incurred prior to the agreed segregation of the claims shall be shared in accordance with their Allocated Percentages, and (b) this Section 6.5 shall not apply to any separate and distinct claim that is de minimis or frivolous in nature.

          Section 6.6 Cooperation in Defense and Settlement.

          (a) With respect to any Third Party Claim that implicates two or more Parties in a material fashion due to the allocation of Liabilities, responsibilities for management of defense and related indemnities pursuant to this Agreement or any of the Ancillary Agreements, such Parties agree to use commercially reasonable efforts to cooperate fully and maintain a joint defense (in a manner that will preserve for such Parties the attorney-client privilege, joint defense or other privilege with respect thereto).

          (b) To the extent there are documents, other materials, access to employees or witnesses related to or from a Party that is not responsible for the defense or Liability of a particular Action, such Party shall provide to the other Party or Parties reasonable access to documents, other materials, employees, and shall permit employees, officers and directors to cooperate as witnesses in the defense of such Action.

          (c) Each of Temple-Inland, Forestar and Guaranty agrees that at all times from and after the Effective Time, if an Action currently exists or is commenced by a third party with respect to which a Party (or one of its Subsidiaries) is a named defendant, but the defense of such Action and any recovery in such Action is otherwise not a Liability allocated under this Agreement or any Ancillary Agreement to that Party, then each other Party (or members of its Group) also named in the Action shall use commercially reasonable efforts to cause each named Party (or its Subsidiary) not responsible for the Liability to be dismissed as a defendant from such Action, and the Party (or its Subsidiary) without responsibility for the Liability shall not be required to make any payments or contribution to the other Parties in connection therewith and shall be entitled to the full benefit of any indemnification provided in this Agreement or any Ancillary Agreement.

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          (d) In the case of any Action involving a matter contemplated by Section 6.6(c), (i) if there is a conflict of interest that under applicable rules of professional conduct would preclude legal counsel for one Party or one of its Subsidiaries representing another Party or one of its Subsidiaries or (ii) if any Third Party Claim seeks equitable relief that would restrict or limit the future conduct of the non-responsible Party or one of its Subsidiaries or such Party’s business or operations of a Party or its Subsidiaries or Ventures, then the non-responsible Party shall be entitled to retain, at its expense, separate legal counsel to represent its interest and to participate in the defense, compromise, or settlement of that portion of the Third Party Claim against that Party or one of its Subsidiaries.

          (e) It shall not be a defense to any obligation by any Party to pay any amount in respect of any Unallocated Liability that such Party was not consulted in the defense thereof, that such Party’s views or opinions as to the conduct of such defense were not accepted or adopted, that such Party does not approve of the quality or manner of the defense thereof or that such Unallocated Liability was incurred by reason of a settlement rather than by a judgment or other determination of Liability; provided, however, that none of the Parties shall settle an Unallocated Liability in a manner which would restrict or limit the future conduct of another Party’s business or operations (or any of its Subsidiaries or Ventures) without such other Party’s consent.

          (f) If served with a citation or other writ or process in a proceeding that may involve a matter to be determined by the Contingent Claim Committee, Forestar or Guaranty (or any member of their respective Groups) shall notify the General Counsel of Temple-Inland promptly and shall take such steps as are required to avoid a failure to answer or otherwise appear or respond timely.

          Section 6.7 Responsibility for Third Party Claims; Contribution; Insolvency.

          (a) A Party assigned a Contingent Liability as its exclusive liability shall have the sole responsibility and have full power and authority to manage the defense of the claim, including whether to settle, and shall have sole responsibility, as among each Party’s respective Group, for the costs, expenses, Liabilities and judgments associated with the Action, notwithstanding that any member of the Forestar Group (with respect to an Exclusive Forestar Contingent Liability), any member of the Guaranty Group (with respect to an Exclusive Guaranty Contingent Liability), or any member of the Temple-Inland Group (with respect to an Exclusive Temple-Inland Contingent Liability) may have been named or remained a party defendant to the Action.

          (b) Any Party paying an amount of money in excess of its Allocated Percentage of an Unallocated Liability (“Excess Payment”) shall have a right of contribution to recover the Excess Payment severally from the other Parties, with those Parties contributing to the payment of the Excess Payment amount an amount that equals its unpaid Allocated Percentage of the Unallocated Liability. If a Party against whom a right of contribution matures is insolvent or unable to pay its debts as they come due or is in bankruptcy or any similar insolvency proceeding (“Insolvent Party”), then any solvent member of the Insolvent Party’s Group shall be obligated to

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make the contribution payment due from the Insolvent Party (subject to any limitation imposed by Law). If no member of an Insolvent Party’s Group can pay the Insolvent Party’s Allocated Percentage of an Unallocated Liability in whole or in part, then the other Parties shall pay the unpaid Allocated Percentage in the same proportions that each paying Party’s Allocated Percentage bears to the sum of all paying Parties’ Allocated Percentages.

          (c) If a Party responsible for the management of the recovery of a Contingent Gain or the defense of a Contingent Liability becomes an Insolvent Party, the other Parties acting unanimously shall have the right to designate any member of the Insolvent Party’s Group as the Person responsible for the management of the recovery or defense, provided the Person so designated accepts the designation. If no able member of the Insolvent Party’s Group is willing to accept the designation, then the other Parties acting unanimously may delegate one of them (or a member of their respective Group) to be responsible for the recovery of the Contingent Gain or the defense of a Contingent Liability. Failing any such delegation, then Parties (or members of their Group) named as parties in a proceeding where (i) a Contingent Liability is asserted or (ii) a Contingent Gain is a subject of the proceeding, shall be responsible for defending that Contingent Liability or asserting the right to the Contingent Gain or the amount necessary to liquidate the Contingent Gain. Any Person acting as the substitute Party responsible for a defense or a recovery under this Section 6.7(c) shall have the full right of contribution for the defense of Contingent Liabilities and any indemnity provided in this Agreement or an Ancillary Agreement and the full right of offset of costs and expenses against recoveries of Contingent Gains provided in this Agreement.

ARTICLE VII

RELEASES AND INDEMNIFICATION

          Section 7.1 Release of Pre-Distribution Claims.

          (a) When used in this ARTICLE VII with reference to any or all members of a particular Group or Groups, the term “Related Persons” shall mean the directors, officers, agents or employees of those members when acting in those capacities (including all those Persons who served in any of those capacities at any time prior to the Relevant Time), together with their respective heirs, executors, administrators, successors and assigns. Except (A) as provided in Section 7.1(b), (B) as may be otherwise expressly provided in this Agreement or any Ancillary Agreement and (C) for any matter for which any Person is entitled to indemnification or contribution pursuant to this ARTICLE VII:

          (i) Temple-Inland, for itself and, to the extent of its power and authority, each of its Subsidiaries and their respective Related Persons, does hereby remise, release and forever discharge the members of the Guaranty Group and of the Forestar Group and their respective Related Persons from any and all Liabilities whatsoever, whether at Law or in equity (including any right of contribution), that exist, arise or result (A) from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur on or before the Relevant Time or (B) any conditions existing or alleged to have existed on or before the Relevant Time, including (x) negligent acts or failures to act, even if grossly negligent and (y) acts or failures to act in

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connection with the Plan of Separation and all other activities to implement the Distributions and any of the other transactions contemplated under this Agreement or any of the Ancillary Agreements.

          (ii) Guaranty, for itself and, to the extent of its power and authority, each of its Subsidiaries and their respective Related Persons, does hereby remise, release and forever discharge the members of the Temple-Inland Group and of the Forestar Group and their respective Related Persons from any and all Liabilities whatsoever, whether at Law or in equity (including any right of contribution) that exist, arise or result (A) from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur on or before the Relevant Time, or (B) any conditions existing or alleged to have existed on or before the Relevant Time, including (x) negligent acts or failures to act, even if grossly negligent and (y) acts or failures to act in connection with the Plan of Separation and all other activities to implement the Distributions and any of the other transactions contemplated under this Agreement or any of the Ancillary Agreements.

          (iii) Forestar, for itself and, to the extent of its power and authority, each of its Subsidiaries and their respective Related Persons, does hereby remise, release and forever discharge the members of the Temple-Inland Group and of the Guaranty Group and their respective Related Persons from any and all Liabilities whatsoever, whether at Law or in equity (including any right of contribution), that exist, arise or result (A) from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur on or before the Relevant Time, or (B) any conditions existing or alleged to have existed on or before the Relevant Time, including (x) negligent acts or failures to act, even if grossly negligent and (y) acts or failures to act in connection with the Plan of Separation and all other activities to implement the Distributions and any of the other transactions contemplated under this Agreement or any of the Ancillary Agreements.

          (iv) Notwithstanding anything to the contrary in the foregoing subparts (i)-(iii), nothing in this Agreement shall remise, release or discharge any rights or claims that any Party, the members of its Group, or their respective Related Persons may have against any director, officer, agent, representative or employee of any member of that Party’s Group as a result of any Knowing Violation of Law, fraud or intentional misrepresentation by such director, officer, agent or employee of any member of that Party’s Group.

          (b) Nothing contained in Section 7.1(a) shall impair or otherwise affect any right of any Person to enforce this Agreement, any Ancillary Agreement or any agreements, arrangements, commitments or understandings unrelated to the Plan of Separation and explicitly contemplated in this Agreement or any Ancillary Agreement to continue in effect after the Relevant Time. In addition, nothing contained in Section 7.1(a) shall release any Person from:

          (i) any Liability Assumed, Transferred or allocated to a Party or one of its Subsidiaries pursuant to or contemplated by this Agreement or any Ancillary Agreement including (A) with respect to Forestar, any Real Estate Liability, (B) with respect to Guaranty, any Financial Services Liability and (C) with respect to Temple-Inland, any Retained Business Liability;

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          (ii) any Liability for the sale, lease, construction or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of any other Group prior to the Relevant Time;

          (iii) any Liability for unpaid amounts for products or services or refunds owing on products or services due on a value-received basis for work done by a member of one Group at the request or on behalf of a member of another Group;

          (iv) any Liability provided in or resulting from any other Contract or understanding that is entered into after the Relevant Time between any Party or one of its Subsidiaries, on the one hand, and any other Party or Parties or their respective Subsidiaries or Related Persons, on the other hand;

          (v) any Liability with respect to an Unallocated Liability pursuant to Section 6.2;

          (vi) any Liability that any of the Parties may have with respect to indemnification or contribution pursuant to this Agreement or otherwise for claims brought against any of the other Parties, their Subsidiaries, Related Persons or Ventures by a third party, which Liability shall be governed by the provisions of the other sections of this ARTICLE VII and, if applicable, the appropriate provisions of the Ancillary Agreements; or

          (vii) any Liability of Related Persons to any Party, its Subsidiaries, or their respective Related Persons, for goods, services or property received, purchased or leased, or to be received, purchased or released, or due on a value-received basis for work done or to be done or under any Contract made after the Relevant Time.

In addition, nothing contained in Section 7.1(a) shall release one Party from indemnifying any director, officer, agent or employee of another Party or its Subsidiaries, who was a director, officer, agent or employee of the first Party or any of its Affiliates on or prior to the Relevant Time, to the extent such director, officer, agent or employee is or becomes a named defendant in any Action with respect to which he or she was entitled to such indemnification pursuant to obligations existing prior to the Relevant Time. Specifically, if an obligation giving rise to such Action is (A) a Retained Business Liability, Temple-Inland shall indemnify the other relevant Party, its Subsidiaries and Related Persons from such Liability, (B) a Real Estate Liability, Forestar shall indemnify the other relevant Party, its Subsidiaries and Related Persons from such Liability, or (C) a Financial Services Liability, Guaranty shall indemnify the other relevant Party, its Subsidiaries and Related Persons from such Liability, in accordance with the other provisions set forth in this ARTICLE VII.

          (c) Each Party shall not, and shall not permit, to the extent of its power and authority, any Subsidiary or Related Person to make, any claim, demand or offset, or commence any Action asserting any claim, demand or offset, including any claim of contribution or indemnification, against any other Party or any member of any other Party’s Group, or any other Person released pursuant to Section 7.1(a), with respect to any and all Liabilities released pursuant to Section 7.1(a).

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          (d) It is the intent of each Party, by virtue of the provisions of this Section 7.1, to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Relevant Time, whether known or unknown, between or among any Party, its Subsidiaries and their respective Related Persons, on the one hand, and any other Party, its Subsidiaries and their respective Related Persons, on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such Persons on or before the Relevant Time), except as specifically set forth in Sections 7.1(a) and 7.1(b).

          (e) If any Subsidiary of a Party or any of such Party’s Related Persons initiates an Action with respect to claims released by this Section 7.1, the Party with which such Person is associated shall indemnify the other Party against such Action in accordance with the provisions set forth in this ARTICLE VII.

          (f) At any time, at the reasonable request of any other Party, each Party shall cause each member of its respective Group and to the extent practicable each other Person on whose behalf it releases Liabilities pursuant to this Section 7.1 to execute and deliver releases reflecting the provisions hereof.

          Section 7.2 Indemnification by Temple-Inland. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, following the Relevant Time, Temple-Inland shall, and shall cause the other members of the Temple-Inland Group to indemnify, defend and hold harmless the other Parties’ Indemnitees from and against any and all Indemnifiable Losses arising out of, by reason of or otherwise in connection with (i) the Retained Business Liabilities (including, as provided in Section 1.1(133), the Exclusive Temple-Inland Contingent Liabilities) or the Temple-Inland Percentage of any Unallocated Liabilities, (ii) (A) the Retained Business Liabilities identified in Section 1.1(133)(iv) and (B) any misstatement or alleged misstatement of a material fact contained in any document filed with the Commission by any member of the Forestar Group or the Guaranty Group, as applicable, pursuant to the Securities Act or the Exchange Act, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that those Liabilities are caused by any such misstatement or omission or alleged misstatement or omission based upon information that is either furnished to any member of the Forestar Group or the Guaranty Group, as the case may be, by any member of the Temple-Inland Group or incorporated by reference by any member of the Forestar Group or the Guaranty Group, as the case may be, from any filings made by any member of the Temple-Inland Group with the Commission pursuant to the Securities Act or the Exchange Act, and then, with respect to clause (B), only if that statement or omission was made or occurred after the applicable Relevant Time, or (iii) any breach by Temple-Inland or any member of the Temple-Inland Group of any provision of this Agreement or any Ancillary Agreement, unless such Ancillary Agreement expressly provides for separate

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indemnification therein, in which case any such indemnification claims shall be made thereunder. The fact another member of the Temple-Inland Group has Assumed a Liability covered by this indemnification shall not limit or preclude Temple-Inland’s obligation with respect to that Liability under this Agreement.

          Section 7.3 Indemnification by Forestar. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, following the Relevant Time, Forestar shall, and shall cause the other members of the Forestar Group to indemnify, defend and hold harmless the other Parties’ Indemnitees from and against any and all Indemnifiable Losses arising out of, by reason of or otherwise in connection with (i) the Real Estate Liabilities (including, as provided in Section 1.1(123), the Exclusive Forestar Contingent Liabilities) or the Forestar Percentage of any Unallocated Liabilities, (ii) (A) the Real Estate Liabilities identified in Section 1.1(123)(iv) and (B) any misstatement or alleged misstatement of a material fact contained in any document filed with the Commission by any member of the Guaranty Group or the Temple-Inland Group, as applicable, pursuant to the Securities Act or the Exchange Act, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that those Liabilities are caused by any such misstatement or omission or alleged misstatement or omission based upon information that is either furnished to any member of the Guaranty Group or the Temple-Inland Group, as the case may be, by any member of the Forestar Group or incorporated by reference by any member of the Temple-Inland Group or the Guaranty Group, as the case may be, from any filings made by any member of the Forestar Group with the Commission pursuant to the Securities Act or the Exchange Act, and then, with respect to clause (B), only if that statement or omission was made or occurred after the applicable Relevant Time, or (iii) any breach by Forestar or any member of the Forestar Group of any provision of this Agreement or any Ancillary Agreement, unless such Ancillary Agreement expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder. The fact that another member of the Real Estate Group has Assumed a liability covered by this indemnification shall not limit or preclude Forestar’s obligation with respect to that liability under this Agreement.

          Section 7.4 Indemnification by Guaranty. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, Guaranty shall, and shall cause the other members of the Guaranty Group to indemnify, defend and hold harmless the other Parties’ Indemnitees from and against any and all Indemnifiable Losses arising out of, by reason of or otherwise in connection with (i) the Financial Services Liabilities (including, as provided in Section 1.1(50), the Exclusive Guaranty Contingent Liabilities) or the Guaranty Percentage of any Unallocated Liabilities, (ii) (A) the Financial Services Liabilities identified in Section 1.1(50)(iv), and (B) any misstatement or alleged misstatement of a material fact contained in any document filed with the Commission by any member of the Temple-Inland Group or the Forestar Group, as applicable, pursuant to the Securities Act or the Exchange Act, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that those Liabilities are caused by any such

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misstatement or omission or alleged misstatement or omission based upon information that is either furnished to any member of the Temple-Inland Group or the Forestar Group, as the case may be, by any member of the Guaranty Group or incorporated by reference by any member of the Temple-Inland Group or the Forestar Group, as the case may be, from any filings made by any member of the Guaranty Group with the Commission pursuant to the Securities Act or the Exchange Act, and then, with respect to clause (B), only if that statement or omission was made or occurred after the applicable Relevant Time, or (iii) any breach by Guaranty or any member of the Guaranty Group of any provision of this Agreement or any Ancillary Agreement, unless such Ancillary Agreement expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder. The fact that another member of the Financial Services Group has Assumed a Liability covered by this indemnification shall not limit or preclude Guaranty’s obligation with respect to that Liability under the Agreement.

          Section 7.5 Procedures for Indemnification.

          (a) An Indemnitee shall give the Indemnifying Party written notice of any matter that an Indemnitee has determined has given or could give rise to a right of indemnification under this Agreement (other than a Third Party Claim which shall be governed by Section 7.5(b)), within 15 Business Days of such determination, stating the amount of the Indemnifiable Loss claimed, if known, and method of computation thereof, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed by such Indemnitee or arises; provided, however, that the failure to provide such written notice shall not release the Indemnifying Party from any of its obligations except and solely to the extent the Indemnifying Party shall have been actually and materially prejudiced as a result of such failure (except that the Indemnifying Party or Parties shall not be liable for any expenses incurred during the period in which the Indemnitee failed to give such written notice).

          (b) Third Party Claims. If a claim or demand is made against a Temple-Inland Indemnitee, a Guaranty Indemnitee, or a Forestar Indemnitee (each, an “Indemnitee”) by any Person who is not a party to this Agreement or an Affiliate of a Party (a “Third Party Claim”) as to which such Indemnitee is or may be entitled to indemnification pursuant to this Agreement, such Indemnitee shall notify the Party which is or may be required pursuant to this ARTICLE VII or pursuant to any Ancillary Agreement to make such indemnification (the “Indemnifying Party”) in writing, and in reasonable detail, of the Third Party Claim promptly (and in any event within 15 calendar days) after receipt by such Indemnitee of written notice of the Third Party Claim; provided, however, that the failure to provide written notice of any such Third Party Claim pursuant to this sentence shall not release the Indemnifying Party from any of its obligations except and solely to the extent the Indemnifying Party shall have been actually and materially prejudiced as a result of such failure (except that the Indemnifying Party or Parties shall not be liable for any expenses incurred during the period in which the Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within 10 Business Days) after the Indemnitee’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim.

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          (c) Other than in the case of (i) an Unallocated Liability (the defense of which shall be controlled as provided for in ARTICLE VI), (ii) any Liability being managed by a Party in accordance with any Ancillary Agreement or (iii) indemnification by a beneficiary Party of a guarantor Party pursuant to Section 2.11(e), Section 2.11(f) and Section 2.11(g) (the defense of which shall be controlled by the beneficiary Party), an Indemnifying Party shall be entitled (but shall not be required) to assume, control the defense of, and settle any Third Party Claim, at such Indemnifying Party’s own cost and expense and by such Indemnifying Party’s own counsel, that is reasonably acceptable to the applicable Indemnitees, if it gives notice of its intention to do so to the applicable Indemnitees within 30 days of the receipt of such notice from such Indemnitees. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third Party Claim, such Indemnitee shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, at its own expense and, in any event, shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party, at the Indemnifying Party’s expense, all witnesses, pertinent information, materials and information in such Indemnitee’s possession or under such Indemnitee’s control relating thereto as are reasonably required by the Indemnifying Party. In the event of a conflict of interest between the Indemnifying Party and the applicable Indemnitee(s), or in the event that any Third Party Claim seeks equitable relief which would restrict or limit the future conduct of the Indemnitee(s) business or operations, such Indemnitee(s) shall be entitled to retain, at the Indemnifying Party’s expense, separate counsel as required by the applicable rules of professional conduct with respect to such matter (which counsel shall be reasonably acceptable to the Indemnifying Party) and to participate in (but not control) the defense, compromise, or settlement of that portion of the Third Party Claim that seeks equitable relief with respect to the Indemnitee(s).

          (d) Other than in the case of an Unallocated Liability, if an Indemnifying Party elects not to assume responsibility for defending a Third Party Claim, or fails to notify an Indemnitee of its election as provided in Section 7.5(c), such Indemnitee may defend such Third Party Claim at the cost and expense of the Indemnifying Party. If the Indemnitee is conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the Indemnitee in such defense and make available to the Indemnitee, at the Indemnitee’s expense, all witnesses, pertinent information, material and information in such Indemnifying Party’s possession or under such Indemnifying Party’s control relating thereto as are reasonably required by the Indemnitee.

          (e) Unless the Indemnifying Party has failed to assume the defense of the Third Party Claim in accordance with the terms of this Agreement, no Indemnitee may settle or compromise any Third Party Claim that is not an Unallocated Liability (which shall be governed by Section 6.4) without the Consent of the Indemnifying Party, which Consent shall not be unreasonably withheld or delayed. If an Indemnifying Party has failed to assume the defense of the Third Party Claim, it shall not be a defense to any obligation to pay any amount in respect of such Third Party Claim that the Indemnifying Party was not consulted in the defense thereof, that such Indemnifying Party’s views or opinions as to the conduct of such defense were not accepted or adopted, that such Indemnifying Party does not approve of the quality or manner of the defense thereof or that such Third Party Claim was incurred by reason of a settlement rather than by a judgment or other determination of liability.

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          (f) In the case of a Third Party Claim (except for any Third Party Claim that is an Unallocated Liability which, with respect to the subject matter of this Section 7.5(f), shall be governed by Section 6.4), no Indemnifying Party shall Consent to entry of any judgment or enter into any settlement of the Third Party Claim without the Consent (not to be unreasonably withheld) of the Indemnitee if the effect thereof is to permit any injunction, declaratory judgment, other order or other nonmonetary relief to be entered, directly or indirectly, against any Indemnitee; it being understood that in the case of a Third Party Claim that is an Unallocated Liability, such matters are addressed in ARTICLE VI.

          (g) Except as otherwise provided in Section 11.20, absent Knowing Violation of Law, fraud or intentional misrepresentation by an Indemnifying Party, the indemnification provisions of this ARTICLE VII shall be the sole and exclusive remedy of an Indemnitee for any monetary or compensatory damages or losses resulting from any breach of this Agreement (including with respect to monetary or compensatory damages or losses arising out of or relating to, as the case may be, any Real Estate Liability, Financial Services Liability, or Retained Business Liability), and each Indemnitee expressly waives and relinquishes any and all rights, claims or remedies such Person may have with respect to the foregoing other than under this ARTICLE VII against any Indemnifying Party.

          Section 7.6 Indemnification Payments. Indemnification required by this ARTICLE VII shall be made by periodic payments of the amount thereof in a timely fashion during the course of the investigation or defense, as and when bills are received or an Indemnifiable Loss or Liability incurred.

          Section 7.7 Contribution.

          (a) If the indemnification provided for in Section 7.2(ii), Section 7.3(ii) and Section 7.4(ii) is unavailable to, or insufficient to hold harmless an Indemnitee under this Agreement or any Ancillary Agreement in respect of any Liabilities referred to herein or therein, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnitee as a result of such Liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and the Indemnitee in connection with the actions or omissions that resulted in Liabilities as well as any other relevant equitable considerations. With respect to the foregoing, the relative fault of such Indemnifying Party and Indemnitee shall be determined by reference to, among other things, whether the misstatement or alleged misstatement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such Indemnifying Party or Indemnified Party, and the Parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

          (b) The Parties agree that it would not be just and equitable if contribution pursuant to this Section 7.7 were determined by a pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 7.7(a). The amount paid or payable by an Indemnitee as a result of the Liabilities referred to in Section 7.7(a) shall be deemed to include, subject to the limitations set forth above, any legal or other fees or expenses reasonably incurred by such Indemnitee in connection with investigating any claim or defending any Action. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

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     Section 7.8 Indemnification Obligations Net of Insurance Proceeds and Other Amounts on a Net-Tax Basis.

          (a) Any Liability subject to indemnification or contribution pursuant to this ARTICLE VII, including in respect of any Unallocated Liability, will (i) be net of Insurance Proceeds that actually reduce the amount of the Indemnifiable Loss, (ii) be net of any proceeds received by the Indemnitee from any third party for indemnification for such Liability that actually reduce the amount of the Indemnifiable Loss (“Third Party Proceeds”) and (iii) be determined on a Net-Tax Basis. Accordingly, the amount which any Indemnifying Party is required to pay to any Indemnitee pursuant to this ARTICLE VII will be reduced by any Insurance Proceeds or Third Party Proceeds theretofore actually recovered by or on behalf of the Indemnitee in respect of the related Indemnifiable Loss. If an Indemnitee receives a payment required by this Agreement from an Indemnifying Party in respect of any Indemnifiable Loss (an “Indemnity Payment”) and subsequently receives Insurance Proceeds or Third Party Proceeds, then the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or Third Party Proceeds had been received, realized or recovered before the Indemnity Payment was made.

          (b) An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification and contributions provisions hereof, have any subrogation rights with respect thereto. The Indemnitee shall use commercially reasonable efforts to seek to collect or recover any Insurance Proceeds and any Third Party Proceeds to which the Indemnified Party is entitled in connection with any Indemnifiable Loss for which the Indemnified Party seeks contribution or indemnification pursuant to this ARTICLE VII; provided, that the Indemnitee’s inability to collect or recover any such Insurance Proceeds or Third Party Proceeds shall not limit the Indemnifying Party’s obligations hereunder.

          (c) The term “Net-Tax Basis” as used in this ARTICLE VII means that, in determining the amount of the payment necessary to indemnify any party against, or reimburse any party for, Indemnifiable Losses, the amount of such Liabilities will be determined net of any theoretical reduction in Tax realizable (assuming a hypothetical effective tax rate of 40%) by the Indemnitee as the result of sustaining or paying such Indemnifiable Losses after taking into account any Tax incurred on the receipt of Insurance Proceeds, and the amount of such Indemnity Payment will be increased (i.e., “grossed up”) by the amount necessary to satisfy any income or franchise Tax Liabilities that will be incurred by the Indemnitee as a result of its receipt of, or right to receive, such Indemnity Payment (as so increased), so that the Indemnitee is put in the same net after-Tax economic position as if it had not incurred such Liabilities, in each case without taking into account any impact on the Tax basis that an Indemnitee has in its Assets.

          Section 7.9 Additional Matters; Survival of Indemnities.

          (a) The indemnity and contribution agreements contained in this ARTICLE VII shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee; and (ii) the knowledge by the Indemnitee of Indemnifiable Losses for which it might be entitled to indemnification or contribution hereunder.

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          (b) The rights and obligations of each Party and their respective Indemnitees under this ARTICLE VII shall survive the sale or other Transfer by any Party or its respective Subsidiaries of any Assets or Businesses or the assignment by it or its respective Subsidiaries of any and all Liabilities.

ARTICLE VIII

CONFIDENTIALITY; ACCESS TO INFORMATION

          Section 8.1 Provision of Corporate Records. Other than in circumstances in which indemnification is sought pursuant to ARTICLE VII (in which event the provisions of such Article will govern) and without limiting the applicable provisions of ARTICLE VII, and subject to appropriate restrictions for classified, privileged or Confidential Information:

          (a) After the Relevant Time, upon the prior written request by Forestar for specific and identified information which relates to (x) Forestar or the conduct of the Real Estate Business, as the case may be, up to the Relevant Time, or (y) any Ancillary Agreement to which the relevant other Party and Forestar are parties, the other Party shall provide, as soon as reasonably practicable following the receipt of such request, appropriate copies of such information (or the originals thereof if the Party making the request has a reasonable need for such originals) in the possession or control of the other Party or any of its Subsidiaries, but only to the extent such items so relate and are not already in the possession or control of the requesting Party.

          (b) After the Relevant Time, upon the prior written request by Guaranty for specific and identified information which relates to (x) Guaranty or the conduct of the Financial Services Business up to the Relevant Time, or (y) any Ancillary Agreement to which the other Party and Guaranty are parties, the other Party shall provide, as soon as reasonably practicable following the receipt of such request, appropriate copies of such information (or the originals thereof if the Party making the request has a reasonable need for such originals) in the possession or control of the other Party or any of its Subsidiaries, but only to the extent such items so relate and are not already in the possession or control of the requesting Party.

          (c) After the Relevant Time, upon the prior written request by Temple-Inland for specific and identified information which relates to (x) Temple-Inland or the conduct of the Retained Business up to the Relevant Time, or (y) any Ancillary Agreement to which the other Party and Temple-Inland are parties, the other Party shall provide, as soon as reasonably practicable following the receipt of such request, appropriate copies of such information (or the originals thereof if the Party making the request has a reasonable need for such originals) in the possession or control of the other Party or any of its Subsidiaries, but only to the extent such items so relate and are not already in the possession or control of the requesting Party.

          Section 8.2 Access to Information. Other than in circumstances in which indemnification is sought pursuant to ARTICLE VII (in which event the provisions of such Article will govern) and without limiting the applicable provisions of ARTICLE VII, from and after the Relevant Time, each of the Parties shall afford to the other Parties and its authorized accountants, counsel and other designated representatives reasonable access during normal business hours, subject to appropriate restrictions for classified, privileged or Confidential

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Information and to the requirements of any applicable state and/or federal regulation such as a Code of Conduct or Standard of Conduct, to the personnel, properties, and information of such Party and its Subsidiaries insofar as such access is reasonably required by the other Party, and only for the duration such access is required, and relates to (x) such other Party or the conduct of its Business prior to the Relevant Time or (y) any Ancillary Agreement to which each of the Party requesting such access and the Party requested to grant such access are Parties. Nothing in this Section 8.2 shall require any Party to violate any agreement with any third party regarding the confidentiality of confidential and proprietary information relating to that third party or its business; provided, however, that in the event that a Party is required to disclose any such information, such Party shall use commercially reasonable efforts to seek to obtain such third party Consent to the disclosure of such information. Each of the Parties shall inform their respective officers, employees, agents, consultants, advisors, authorized accountants, counsel and other designated representatives who have or have access to the other Party’s Confidential Information of their obligation to hold such information confidential to the same extent as is applicable to the Parties.

          Section 8.3 Witness Services. At all times from and after the Relevant Time, each of the Parties shall use its commercially reasonable efforts to make available to the other Parties, upon reasonable written request, its and its Subsidiaries’ officers, directors, employees, consultants and agents as witnesses to the extent that (i) such Persons may reasonably be required to testify in connection with the prosecution or defense of any Action in which the requesting Party may from time to time be involved (except for claims, demands or Actions between members of each Group) and (ii) there is no conflict in the Action between the requesting Party and the other Party except for the time and effort required in connection with the services of the officers, directors and employees and agents of the other Party.

          Section 8.4 Confidentiality.

          (a) Notwithstanding any termination of this Agreement, for a period of 2 years from the Effective Time, the Parties shall hold, and shall cause each of their respective Subsidiaries to hold, and shall each cause each of their respective officers, employees, agents, consultants and advisors to hold, in strict confidence, and not to disclose or release or use, for any ongoing or future commercial purpose, without the prior written consent of the other Party, any and all Confidential Information concerning any other Party; provided, that the Parties may disclose, or may permit disclosure of, Confidential Information (i) to their respective auditors, attorneys, financial advisors, bankers and other appropriate consultants and advisors who have a need to know such information for auditing and other non-commercial purposes and are informed of their obligation to hold such information confidential to the same extent as is applicable to the Parties and in respect of whose failure to comply with such obligations, the applicable Party will be responsible, (ii) if the Parties or any of their respective Subsidiaries are required or compelled to disclose any such Confidential Information by judicial or administrative process or by other requirements of Law or stock exchange rule, (iii) as required in connection with any legal or other proceeding by one Party against any other Party, or (iv) as necessary in order to permit a Party to prepare and disclose its financial statements, or other required disclosures; provided, further, that each Party (and members of its Group as necessary) may use, or may permit use of, Confidential Information of the other Party in connection with such first Party performing its obligations, or exercising its rights, under this Agreement or any Ancillary Agreement. Notwithstanding the

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foregoing, in the event that any demand or request for disclosure of Confidential Information is made pursuant to clause (ii) above, each Party, as applicable, shall promptly notify the other of the existence of such request or demand and shall provide the other a reasonable opportunity to seek an appropriate protective order or other remedy, which such Parties will cooperate in obtaining. In the event that such appropriate protective order or other remedy is not obtained, the Party whose Confidential Information is required to be disclosed shall or shall cause the other applicable Party or Parties to furnish, or cause to be furnished, only that portion of the Confidential Information that is legally required to be disclosed and shall take commercially reasonable steps to ensure that confidential treatment is accorded such information.

          (b) Notwithstanding anything to the contrary set forth herein, (i) the Parties shall be deemed to have satisfied their obligations hereunder with respect to Confidential Information if they exercise the same degree of care (but no less than a reasonable degree of care) as they take to preserve confidentiality for their own similar information and (ii) confidentiality obligations provided for in any agreement between each Party or its Subsidiaries and their respective employees shall remain in full force and effect. Notwithstanding anything to the contrary set forth herein, Confidential Information of any Party in the possession of and used by any other Party as of the Relevant Time may continue to be used by such Party in possession of the Confidential Information in and only in the operation of the Real Estate Business, the Financial Services Business, or the Retained Business, as the case may be; provided, such Confidential Information may be used only so long as the Confidential Information is maintained in confidence and not disclosed in violation of Section 8.4(a). Such continued right to use may not be transferred (directly or indirectly) to any third party without the prior written Consent of the applicable Party, except pursuant to Section 11.9.

          (c) Each Party acknowledges that it and the other members of its Group may have in their possession confidential or proprietary information of third parties that was received under confidentiality or non-disclosure agreements with such third party prior to the Relevant Time. Such Party will hold, and will cause the other members of its Group and their respective representatives to hold, in strict confidence the confidential and proprietary information of third parties to which they or any other member of their respective Groups has access, in accordance with the terms of any agreements entered into prior to the Relevant Time between one or more members of the such Party’s Group (whether acting through, on behalf of, or in connection with, the separated Businesses) and such third parties.

          (d) Upon the written request of a Party, the other Party shall promptly, (i) deliver to such requesting Party all original Confidential Information (whether written or electronic) concerning such requesting Party and/or its Subsidiaries, and (ii) if specifically requested by such requesting Party, destroy any copies of such Confidential Information (including any extracts therefrom). Upon the written request of such requesting Party, the other Party shall cause one of its duly authorized officers to certify in writing to such requesting Party that the requirements of the preceding sentence have been satisfied in full.

          (e) Each of the Parties shall keep confidential, safeguard and not disclose any “non-public personal information” as defined by the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq., as amended from time to time, and all applicable implementing regulations and agency pronouncements related thereto, as amended from time to time (collectively, the “GLBA”) in

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violation of the GLBA, the Interagency Guidelines Establishing Information Security Standards, the Fair and Accurate Credit Transactions Act, the Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice (the “Interagency Guidance”), or in violation of any other applicable Law.

          Section 8.5 Privileged Matters.

          (a) Pre-Separation Services. The Parties recognize that legal and other professional services that have been and will be provided prior to the Relevant Time have been and will be rendered for the collective benefit of each of the members of each Party’s Group, and that each of the members of each Party’s Group should be deemed to be the client with respect to such pre-Separation services for the purposes of asserting all privileges which may be asserted under applicable Law.

          (b) Post-Separation Services. The Parties recognize that legal and other professional services will be provided following the Relevant Time which will be rendered solely for the benefit of Temple-Inland, Forestar or Guaranty, as the case may be. With respect to such post-Separation services, the Parties agrees as follows:

          (i) Forestar shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the Real Estate Business, whether or not the privileged information is in the possession of or under the control of Temple-Inland, Forestar, or Guaranty. Forestar shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information that relates solely to the subject matter of any claims constituting Real Estate Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated against or by Forestar, whether or not the privileged information is in the possession of or under the control of Temple-Inland, Forestar, or Guaranty;

          (ii) Guaranty shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the Financial Services Business, whether or not the privileged information is in the possession of or under the control of Temple-Inland, Forestar, or Guaranty. Guaranty shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information that relates solely to the subject matter of any claims constituting Guaranty Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated against or by Guaranty, whether or not the privileged information is in the possession of or under the control of Temple-Inland, Forestar, or Guaranty; and

          (iii) Temple-Inland shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the Retained Business, whether or not the privileged information is in the possession of or under the control of Temple-Inland, Forestar, or Guaranty. Temple-Inland shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information that relates solely to the subject

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matter of any claims constituting Retained Business Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated against or by Temple-Inland, whether or not the privileged information is in the possession of or under the control of Temple-Inland, Forestar, or Guaranty.

          (c) The Parties agree that they shall have a shared privilege, with equal right to assert or waive, subject to the restrictions in this Section 8.5, with respect to all privileges not allocated pursuant to the terms of Section 8.5(b). All privileges relating to any claims, proceedings, litigation, disputes, or other matters which involve two or more of the Parties in respect of which such Parties retain any responsibility or Liability under this Agreement, shall be subject to a shared privilege among them.

          (d) No Party may waive any privilege which could be asserted under any applicable Law, and in which any other Party has a shared privilege, without the Consent of the other Party, which shall not be unreasonably withheld or delayed or as provided in subsections (e) or (f) below. Consent shall be in writing, or shall be deemed to be granted unless written objection is made within 30 days after notice upon the other Party requesting such Consent.

          (e) In the event of any litigation or dispute between or among any of the Parties, or any members of their respective Groups, either such Party may waive a privilege in which the other Party or member of such Group has a shared privilege, without obtaining the Consent of the other Party; provided, that such waiver of a shared privilege shall be effective only as to the use of information with respect to the litigation or dispute between the relevant Parties and/or the applicable members of their respective Groups, and shall not operate as a waiver of the shared privilege with respect to third parties.

          (f) If a dispute arises between or among the Parties or their respective Subsidiaries regarding whether a privilege should be waived to protect or advance the interest of any Party, each Party agrees that it shall negotiate in good faith, shall endeavor to minimize any prejudice to the rights of the other Parties, and shall not unreasonably withhold Consent to any request for waiver by another Party. Each Party specifically agrees that it will not withhold Consent to waiver for any purpose except to protect its own legitimate interests.

          (g) Upon receipt by any Party or by any Subsidiary thereof of any subpoena, discovery or other request which arguably calls for the production or disclosure of information subject to a shared privilege or as to which another Party has the sole right hereunder to assert a privilege, or if any Party obtains knowledge that any of its or any of its Subsidiaries’ current or former directors, officers, agents or employees have received any subpoena, discovery or other requests which arguably calls for the production or disclosure of such privileged information, such Party shall promptly notify the other Party or Parties of the existence of the request and shall provide the other Party or Parties a reasonable opportunity to review the information and to assert any rights it or they may have under this Section 8.5 or otherwise to prevent the production or disclosure of such privileged information.

          (h) The transfer of all information pursuant to this Agreement is made in reliance on the agreement of the Parties as set forth in Section 8.4 and Section 8.5, to maintain the confidentiality of privileged information and to assert and maintain all applicable privileges. The

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access to information being granted pursuant to Section 6.6, Section 8.1 and Section 8.2 hereof, the agreement to provide witnesses and individuals pursuant to Section 6.6 and Section 8.3 hereof, the furnishing of notices and documents and other cooperative efforts contemplated by Section 6.6 and Section 8.5 hereof, and the transfer of privileged information between and among the Parties and their respective Subsidiaries pursuant to this Agreement shall not be deemed a waiver of any privilege that has been or may be asserted under this Agreement or otherwise.

          Section 8.6 Reimbursement. Except to the extent otherwise contemplated by this Agreement or any Ancillary Agreement, a Party providing information or access to information to the other Party under this ARTICLE VIII shall be entitled to receive from the recipient, upon the presentation of invoices therefore, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in providing such information or access to such information.

          Section 8.7 Ownership of Information. Any information owned by one Party or any of its Subsidiaries that is provided to a requesting Party pursuant to this ARTICLE VIII shall be deemed to remain the property of the providing Party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such information.

          Section 8.8 Other Agreements. The rights and obligations granted under this ARTICLE VIII are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of information set forth in any Ancillary Agreement.

ARTICLE IX

DISPUTE RESOLUTION

          Section 9.1 Negotiation; Broad Form Arbitration.

          (a) Except as otherwise provided in Section 6.4 with regard to determinations made by the Contingent Claim Committee, any controversy, dispute or claim among any of the Parties or members of their respective Groups arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity, termination or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement or the transactions contemplated hereby, including any claim based on contract, tort, fraud, misrepresentation, statute or constitution (collectively, “Agreement Disputes”) shall be resolved in the manner provided in this ARTICLE IX.

          (b) Except as provided in Section 6.4, each Party involved in an Agreement Dispute (either directly or because a member of its Group is involved) may initiate negotiation of any Agreement Dispute among senior management of the respective Parties by giving the other Party or Parties involved in the Agreement Dispute a written notice of the Agreement Dispute (“Dispute Notice”). The Dispute Notice shall include a statement of the Party’s position, a general summary of the arguments supporting that position, the name and title of the senior executive (which may be its general counsel or chief legal officer), who will represent the party and any other person(s) who will attend settlement meetings.

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          (c) Within 10 days of receipt of the Dispute Notice, each receiving Party shall submit to the other Party or Parties a written response that includes the same information as is required to be contained in the Dispute Notice.

          (d) Any Party involved in the Agreement Dispute may impose a 30-day time limitation on negotiations initiated by a Dispute Notice. The 30-day time limitation shall run from the date that the last Party to be notified receives the Dispute Notice. A Party giving a Dispute Notice may impose a shorter period of time of reasonable duration (not less than 10 days) from receipt of the Dispute Notice to complete negotiations if the Party reasonably believes that delay in initiating arbitration (if available) likely will impair materially its rights, title or Liabilities.

          (e) The giving of the Dispute Notice shall be a condition precedent to initiating arbitration for an Agreement Dispute that is subject to arbitration, except as provided in Section 6.4. Nothing in this Section 9.1 precludes the Parties to an Agreement Dispute extending by written agreement the negotiation period after a Dispute Notice, or obligates a Party to continue negotiations after that Party declares an impasse.

          (f) If the aggregate amount in controversy, dispute or claim (or any series of related controversies, disputes or claims), as set forth both in the Dispute Notice and in any applicable response including any counterclaims, is less than $100,000, the Parties agree that such controversy, dispute or claim shall not be submitted to arbitration pursuant to Section 9.2. If the aggregate amount in controversy, dispute or claim (or any series of related controversies, disputes or claims), as set forth in either the Dispute Notice or any applicable response, is $100,000 or more and the time limitation on negotiation set in the Dispute Notice has expired, the Parties agree that such controversy, dispute or claim may be submitted to arbitration pursuant to Section 9.2. Except as provided in Section 9.1(g), Section 9.4(d), Section 9.7 and Section 11.21, the Parties to the Agreement Dispute shall have no recourse with respect to an Agreement Dispute in any Action, state or federal judicial court, administrative proceeding or under any applicable Law and (ii) the negotiation process and limited right to arbitration that are provided in this ARTICLE IX are the exclusive methods of dispute resolution for all Agreement Disputes that may be instituted by any Party (or any member of its Group).

          (g) If a Party to a Dispute Notice (or a member of its Group) (i) is a party to a judicial, bankruptcy or administrative proceeding initiated by another Person and (ii) must either assert a counterclaim or crossclaim against another Party (or member of its Group) involved in an Agreement Dispute or, under applicable Law, have its rights or claims asserted in Agreement Dispute precluded, Liability under the Agreement Dispute established or a title asserted in the Agreement Dispute not fully adjudicated, then the Party (or member of its Group) in that proceeding so joined in the proceeding may assert the counterclaim or crossclaim against that Party (or member of its Group) if that Party (or member of its Group) is already a party to the proceeding, provided that the amount in controversy under the claim, counterclaim or crossclaim is $100,000 or more. If a Party could otherwise assert the claim, counterclaim or crossclaim but for the fact the other Party or Parties (or members of the respective Groups) are not joined in proceeding, that Party may join each of the other Parties (or members of its respective Group),

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provided that each Party (or member of its respective Group) to be joined is a person to be joined if feasible under the Texas Rules of Civil Procedure, Federal Rules of Civil Procedure or any other rules of civil procedure applicable to the proceeding. No Agreement Dispute that is the subject of a counterclaim or crossclaim permitted under this Section 9.1(g) may be submitted to arbitration unless or until such counterclaim or crossclaim is dismissed without prejudice by a final order or judgment, not subject to appeal. If an Agreement Dispute is the subject of arbitration proceeding under Section 9.2, then the matter of the potentially conflicting proceedings shall be submitted to the arbitral tribunal to resolve the conflict under applicable Law.

          (h) An Agreement Dispute may include any matter for which declaratory relief would be available under the Texas Uniform Declaratory Judgment Act or the Federal Declaratory Judgment Act (collectively, the “DJAs”), but an Agreement Dispute may not include matters that are merely theoretical disputes and are not real and substantial controversies involving a genuine justifiable conflict of tangible interests. If the Agreement Dispute is a matter for which declaratory relief would be available under the DJAs, then the Parties involved in the Agreement Dispute shall make good faith estimates in the Dispute Notice and response(s) thereto of the amount that would be in controversy if the matter were deferred until a breach of contract occurred or other action under another Law accrued that is directly related to the matter for which the declaratory relief is sought. The good faith estimates shall be the amounts in controversy for the purposes of applying the provisions of this ARTICLE IX. All statements of amounts in controversy included in any Dispute Notice or response thereto shall be limited to damages that may be awarded in an arbitration under Section 9.9 herein. Any damages not permitted to be included as amounts in controversy in the Dispute Notice or any response to the Dispute Notice shall be disregarded by the arbitral tribunal for all purposes of this ARTICLE IX.

          (i) If arbitration proceedings are properly initiated pursuant to Section 9.2 within 180 days following receipt of the Dispute Notice, then any applicable statute of limitations, period of repose, or other time limitation for initiating an Action imposed by statute or agreement shall be tolled for the period from the date the Dispute Notice is received until the earlier of (i) the date the notice initiating arbitration for that matter is effective or (ii) a permitted judicial proceeding requesting relief permitted under Section 9.7 is filed in a court of competent jurisdiction or (iii) 181 days following the receipt of the Dispute Notice. Further, no defense of laches or other similar defense under common law or in equity shall be asserted based upon the failure to initiate any proceeding during the period that limitations is tolled under this Section 9.1(b). Nothing in this provision shall prevent tolling of limitations under any statute, administrative rule or other applicable doctrine of Law. Proper referral of an issue to the Contingent Claim Committee under Section 6.4 shall be deemed the giving of Dispute Notice for the purposes of tolling limitations under this Section 9.1(i). If the filing of a lawsuit would toll the running of limitations under a Law that is applicable to an Agreement Dispute, then regardless of whether initiating arbitration proceedings tolls the running of a limitations period under that Law, the Parties agree that such limitations period shall be tolled from the date the arbitration is initiated until an arbitration award is made or the arbitration proceeding is dismissed by the arbitral tribunal. Nothing in ARTICLE IX precludes the parties to an Agreement Dispute extending or tolling the limitations period by written agreement.

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          (j) Nothing said or disclosed, nor any document produced, in the course of any negotiations, conferences and discussions in connection with efforts to settle an Agreement Dispute that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any arbitration, but shall be considered as to have been disclosed for settlement purposes.

          Section 9.2 Arbitration. For any Agreement Dispute that is ripe for arbitration under Section 9.1 or Section 6.4, the Parties agree that upon a Party involved in the Agreement Dispute initiating an arbitration proceeding, such Agreement Dispute shall be determined by arbitration in accordance with the International Institute for Conflict Prevention & Resolution (“CPR”) Rules for Non-Administered Arbitration then in effect, except as modified herein (the “Rules”). Any Party may initiate arbitration of such an Agreement Dispute by giving notice of arbitration in accordance with the Rules. The number of arbitrators shall be one (i) for any Arbitration Dispute referred from the Contingent Claim Committee and (ii) for any other Agreement Dispute in which the aggregate amount in controversy, dispute or claim (or any series of related controversies, disputes or claims) under an Agreement Dispute, as set forth both in the Dispute Notice and in any applicable response, is less than $10,000,000. For all other Agreement Disputes, the number of arbitrators shall be three. The arbitration hearing shall be held and the award shall be issued in the City of Austin, Texas. Individual hearings may be held at any other location to which the parties agree and a telephonic hearing under a procedure determined by the arbitral tribunal.

          Section 9.3 Selection of Arbitrator(s).

          (a) Only licensed attorneys at Law qualified to serve as an arbitrator by experience in the practice of Law and by experience as an arbitrator shall be included on any list of candidates provided by or to the CPR, provided that for issues referred from the Contingent Claim Committee, a certified public accountant qualified to serve as an arbitrator by experience in the practice of public accounting and by experience as an arbitrator also may be included on any list of candidates provided by CPR.

          (b) If one arbitrator is to determine the Agreement Dispute, the Parties shall attempt to agree upon a qualified individual to serve as arbitrator from the list attached as Schedule 9.3(c) (as such schedule may be updated from time to time). If the Parties are unable to agree jointly on an arbitrator within 20 days of the receipt by respondent of the notice of arbitration, then the arbitrator shall be selected and appointed in accordance with Rule 6 of the Rules.

          (c) If three arbitrators are to hear the Agreement Dispute, and if there are only two Parties to the arbitration, each Party shall appoint its arbitrator from the list attached as Schedule 9.3(c) within 20 days of receipt by respondent of a copy of the notice of arbitration. The two party-appointed arbitrators shall have 20 days from the appointment of the second arbitrator to agree on a third arbitrator from the persons named on Schedule 9.3(c) who shall chair the arbitral tribunal. Any arbitrator not timely appointed by the Parties shall be appointed in accordance with Rule 6 of the Rules. If there are more than two parties to the arbitration, all three arbitrators shall be appointed using the screened appointment process provided by Rule 5.4 of the Rules and CPR shall designate the chair from the three arbitrators so appointed. If any appointed arbitrator declines, resigns, becomes incapacitated, or otherwise refuses or fails to serve or to continue to serve as an arbitrator, the Party or arbitrators entitled to appoint such arbitrator shall promptly

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appoint a successor. If a Party objects to an arbitrator, CPR shall decide whether such objection is valid and whether the challenged arbitrator shall be removed. The date that the arbitral tribunal is appointed shall be the date the last arbitrator required to complete the tribunal accepts a valid offer to act as an arbitrator in the matter to be arbitrated.

          Section 9.4 Arbitration Procedures.

          (a) Subject to the provisions of Section 9.4(b), Rule 9 of the Rules shall govern in the arbitration procedure and Rule 12 of the Rules shall govern the submission of evidence and evidentiary hearings. The arbitral tribunal shall initially determine whether to attempt to resolve the dispute based solely on pleadings, sworn statements and other written materials without the need for a live evidentiary hearing. In the event the arbitral tribunal determines to resolve the dispute based solely upon the submission of written materials, and if the arbitral tribunal determines that oral argument is beneficial to its understanding of the issues, oral argument may be conducted based on the written submissions. Any oral argument to be conducted shall be held, if practicable, no later than 150 days following appointment of the arbitral tribunal. In the event the arbitral tribunal determines that live evidentiary hearings are necessary for the proper resolution of the dispute, a live evidentiary hearing shall be conducted. Any live evidentiary hearing to be conducted shall be held, if practicable, no later than 180 days following appointment of the arbitral tribunal.

          (b) Any Party may request oral argument or a live evidentiary hearing and the arbitrators shall consider whether the request states good cause to hear oral argument or to conduct a live evidentiary hearing and act accordingly upon such request. If $10 million or more is in controversy, the request of any Party for oral argument shall be granted. If $20 million or more is in controversy, the request of any Party for a live evidentiary hearing shall be granted.

          (c) Any controversy concerning the jurisdiction of the arbitral tribunal, whether an Agreement Dispute is arbitrable, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation of enforceability of this ARTICLE IX shall be determined by the arbitral tribunal.

          (d) In resolving any Agreement Dispute, the Parties intend and agree that the arbitral tribunal shall apply the substantive Laws of the State of Texas, and, to the extent applicable, federal law, without regard to any choice of law principles thereof that would mandate the application of the Laws of another jurisdiction. The Parties intend that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable, and any award rendered by the arbitral tribunal shall be final and binding on the Parties. The Parties agree to comply and cause the members of their applicable Group to comply with any award made in any such arbitration proceedings and agree to enforcement of or entry of judgment upon such award, in any court of competent jurisdiction over any party or any of its Assets.

          Section 9.5 Discovery.

          (a) Subject to the provisions of this Section 9.5, Rule 11 of the Rules shall apply to discovery in the arbitration procedure, except that the arbitral tribunal, consistent with the expedited nature of arbitration, may permit limited document discovery and no more than three

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depositions per party to the arbitration of no more than eight hours each, provided that if more than $10 million is in controversy, the arbitrators may provide for additional document discovery, limited written interrogatories and depositions upon request.

          (b) At least 30 days prior to any written submission date or live evidentiary hearing, each party to the arbitration shall provide the other parties to the arbitration with copies of all documents on which the producing party may rely in support of a claim or defense or which are relevant to the issues raised in the Agreement Dispute, including any expert reports of experts who may testify. At least three (3) days prior to any hearing, each party to the arbitration shall provide the other parties to the arbitration with a list of all exhibits that the party to the arbitration may offer into evidence in support of its case and a copy of any exhibit not previously produced. Failure to produce timely a document or exhibit without good cause shall be grounds for exclusion of the document or exhibit, provided that a party to the arbitration may introduce documents and exhibits illustrative of testimony as rebuttal exhibits in response to evidence of another party to the arbitration that were not listed as exhibits.

          (c) All discovery, if any, shall, if practicable, be completed within 90 days following the appointment of the arbitral tribunal. The arbitral tribunal shall preside and rule on any discovery disputes including confidentiality and privilege issues. Adherence to formal rules of evidence shall not be required and the arbitral tribunal shall consider any evidence and testimony that the arbitral tribunal determine to be relevant and of a type that a reasonably prudent person would commonly rely upon in the conduct of his affairs, subject to and in accordance with the Rules and procedures that the arbitral tribunal determine to be appropriate.

          Section 9.6 Confidentiality of Proceedings. Without limiting the provisions of the Rules, unless otherwise agreed in writing by or among the relevant Parties or permitted by this Agreement, the relevant Parties shall keep, and shall cause the members of their applicable Group to keep, confidential all matters relating to the arbitration or the award, provided, that such matters may be disclosed (i) to the extent reasonably necessary in any proceeding brought to enforce this agreement to arbitrate or any arbitral award or for entry of a judgment upon the award and (ii) to the extent otherwise required by Law or Governmental Entity. To the extent such matters must be disclosed in such proceedings or otherwise, the Parties shall file all materials under seal to the extent permitted by applicable Law and shall file such motions for orders of the Court as may be required to file materials under seal or shall request confidential treatment of all materials.

          Section 9.7 Pre-Hearing Procedure and Disposition. Nothing contained herein is intended to or shall be construed to prevent any Party, or one of its Subsidiaries from applying to any court of competent jurisdiction in Travis County, Texas, for (i) interim measures or other provisional relief in connection with the subject matter of any Agreement Disputes prior to the appointment of the arbitral tribunal, or (ii) to compel a Party or one of its Subsidiaries to arbitrate any Agreement Dispute or to require witnesses to obey subpoenas issued by the arbitral tribunal or otherwise in aid of arbitration. For this purpose all Parties agree for themselves and for each member of their respective Group to submit to the jurisdiction of any state or federal court sitting in Travis County, Texas with jurisdiction over the subject matter of the dispute. Without prejudice to such provisional remedies as may be available under the jurisdiction of a court, the arbitral tribunal shall have full authority to grant provisional remedies and to direct the Parties to

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an arbitration to request that any court modify or vacate any temporary or preliminary relief issued by such court, and to award damages for the failure of any party to an arbitration to respect the tribunal’s orders to that effect. The Parties agree to accept and honor any orders relating to interim or provisional remedies that are issued by the arbitral tribunal and agree that any such interim order or remedy may be enforced, as necessary, in any federal or state court of competent jurisdiction in Travis County, Texas.

          Section 9.8 Continuity of Service and Performance. During the course of dispute resolution pursuant to the provisions of this ARTICLE IX, the Parties and their respective Subsidiaries will continue to provide all other services and honor all other commitments under this Agreement and each Ancillary Agreement with respect to all matters not subject to such dispute resolution.

          Section 9.9 Awards. The arbitral tribunal shall make an award and issue a reasoned opinion in writing setting forth the basis for such award within 30 days following the final submission of all written materials in support of and in opposition to any claim, or if there is a live evidentiary hearing, within 30 days of such hearing. The arbitral tribunal shall be entitled, if appropriate, to award any remedy in such proceedings that is permitted under this Agreement and applicable Law, including monetary damages, attorney’s fees as provided by Law, specific performance and other forms of legal and equitable relief. The Parties for themselves and their respective Subsidiaries hereby waive any claim to exemplary, punitive, multiple or similar damages in excess of compensatory damages, except as may be expressly required by statute or as necessary to indemnify a Party or one of its Subsidiaries for a Third Party Claim and the arbitral tribunal is not empowered to and shall not award such damages. Any final award must provide that the Person against whom an award is issued shall comply with the order within a specified period of time, not to exceed 30 days.

          Section 9.10 Costs. If any Party (or any of its Subsidiaries) attempts, unsuccessfully, to prevent an Agreement Dispute from being arbitrated, such Party shall reimburse the prevailing party for all costs incurred in compelling arbitration. Except as otherwise may be provided in this Agreement or in any Ancillary Agreement, the arbitral tribunal may apportion the costs of arbitration between or among the Parties in such a manner as the arbitral tribunal deem reasonable, taking into account the facts and circumstances of the case.

          Section 9.11 Adherence to Time Limits. In accepting appointment, an arbitrator shall commit that his or her schedule permits him or her to devote the reasonably necessary time and attention to the arbitration proceedings and to resolving the Agreement Dispute within the time periods set by this Agreement and by the Rules. Any time limits set out in this ARTICLE IX or in the Rules may be modified upon written agreement of the parties to the arbitration and the arbitral tribunal or by order of the arbitral tribunal for good cause shown. Any failure of the arbitral tribunal to comply with such time limits or to render a final award within the time specified shall not impair the validity of the award or cause the award to be void or voidable, nor shall it be a basis for challenge of the validity or enforceability of the award or of the arbitration proceedings.

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          Section 9.12 Exclusive Remedy; Limitation on Actions. The Parties agree that indemnification under Article VII is the exclusive remedy for Indemnifiable Losses incurred by an Indemnitee, except for such indemnification or warranty rights as the Indemnitee may have under an Ancillary Agreement. Notwithstanding any other provision of this Agreement to the contrary, if a Party (including any member of that Party’s Group) does not commence an Action within the applicable period to commence the Action set forth in this Section 9.12 (i) to recover Indemnified Losses under an accrued cause of action or (ii) to the extent available, to recover damages that are not Indemnified Losses or for other relief under any cause of action not within the scope of the indemnification in ARTICLE VII or an Ancillary Agreement, then all Persons against whom such causes of Action must be asserted, if feasible, shall be discharged from liability under that accrued cause of action. No Action shall be commenced (including the dispute resolution procedures set forth in this ARTICLE IX):

          (a) by an Indemnitee against an Indemnifying Party or any of their respective Affiliates more than 12 months after the Indemnitee acquires knowledge of the facts giving rise to its right to indemnification under ARTICLE VII and a claim for indemnification has accrued under applicable Law, and

          (b) by a Party (or member of its Group) against another Party (or member of its Group) asserting any claim arising from breach of any obligation of such other Party (or member of its Group) under this Agreement more than 12 months after such first Party (or member of its Group) acquires knowledge of such breach, provided, however, regardless of such first Party’s (including members of its Group) knowledge of the facts giving rise to its claim based on a breach of this Agreement, no Action shall be commenced by such first Party (or member of its Group) against the other Party (or member of its Group) more than 36 months after the occurrence of the initial event giving rise to such claim for such breach.

ARTICLE X

INSURANCE

          Section 10.1 Policies and Rights Included Within Assets.

          (a) The Real Estate Assets shall include (i) the Real Estate Policies and (ii) any and all rights of any member of the Forestar Group under each of the Real Estate Shared Policies, subject to the terms of such Real Estate Shared Policies and any limitations or obligations of any member of the Forestar Group contemplated by this ARTICLE X. The rights under the Real Estate Shared Policies allocated under this provision specifically include rights of indemnity and the right to be defended by or at the expense of the insurer: (i) with respect to all alleged wrongful acts, claims, suits, actions, proceedings, injuries, losses, Liabilities, damages and expenses incurred or claimed to have been incurred prior to the Forestar Distribution Date by any Person in or in connection with the conduct of the Real Estate Business and (ii) any other claim made against Forestar or any of its Subsidiaries that may arise out of an insured or insurable occurrence or wrongful act covered under one or more of such Real Estate Shared Policies. Nothing in this provision shall be deemed to constitute (or to reflect) an assignment of the Real Estate Shared Policies, or any of them, to any member of the Forestar Group.

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          (b) The Financial Services Assets shall include (i) the Financial Services Policies and (ii) any and all rights of any member of the Guaranty Group under each of the Financial Services Shared Policies, subject to the terms of such Financial Services Shared Policies and any limitations or obligations of any members of the Guaranty Group contemplated by this ARTICLE X. The rights under the Financial Services Shared Policies allocated under this provision specifically include rights of indemnity and the right to be defended by or at the expense of the insurer: (i) with respect to all alleged wrongful acts, claims, suits, actions, proceedings, injuries, losses, Liabilities, damages and expenses incurred or claimed to have been incurred prior to the Guaranty Distribution Date by any Person in or in connection with the conduct of the Financial Services Business and (ii) any other claim made against Guaranty or any of its Subsidiaries that may arise out of an insured or insurable occurrence or wrongful act covered under one or more of such Financial Services Shared Policies. Nothing in this clause shall be deemed to constitute (or to reflect) an assignment of the Financial Services Shared Policies, or any of them, to any member of the Guaranty Group.

          (c) The Retained Assets shall include (i) the Retained Policies and (ii) any and all rights of any member of the Temple-Inland Group under each of the Temple-Inland Shared Policies, subject to the terms of such Temple-Inland Shared Policies and any limitations or obligations of the Temple-Inland Group contemplated by this ARTICLE X. The rights under the Temple-Inland Shared Policies allocated by this provision specifically include rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to all alleged wrongful acts, claims, suits, actions, proceedings, injuries, losses, Liabilities, damages and expenses incurred or claimed to have been incurred prior to the Relevant Time by any Person in or in connection with the conduct of the Retained Business; and (ii) any other claim made against Temple-Inland Group or any of its Subsidiaries that may arise out of an insured or insurable occurrence or wrongful act under one or more of such Temple-Inland Shared Policies.

          Section 10.2 Claims Made Tail Policies.

          (a) Temple-Inland shall secure directors and officers liability insurance policies having total limits of $175 million, consisting of $100 million of traditional A/B/C coverage and $75 million in side A DIC coverage and having an effective date on the Final Distribution Date and ending on a date that is six years after the effective date (“D&O Tail Policies”). The premium for the D&O Tail Policies shall be prepaid for the full six-year term of the D&O Tail Policies. Such D&O Tail Policies (i) shall cover all Persons insured by those policies comprising the Temple-Inland directors and officers liability insurance program that began on September 30, 2007, and (ii) shall have material terms and conditions no less favorable than those contained in the September 30, 2007 policies, except for the policy period, premium and provisions excluding coverage for wrongful acts postdating the Final Distribution Date. Temple-Inland shall provide Forestar and Guaranty with copies of the D&O Tail Policies within a reasonable time after the D&O Tail Policies are issued.

          (b) Temple-Inland shall secure fiduciary liability insurance policies having total limits of $55 million and having an effective date on the Final Distribution Date and ending on a date that is six years after the effective date (“Fiduciary Tail Policies”). The premium for the Fiduciary Tail Policies shall be pre-paid for the full six-year term of the Fiduciary Tail Policies. Such Fiduciary Tail Policies (i) shall cover all Persons insured by those policies comprising the Temple-Inland fiduciary liability insurance program commencing on September 30, 2007, and (ii) shall have material terms and conditions no less favorable than those contained in the September

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30, 2007 policies, except for the policy period, premium and provisions excluding coverage for wrongful acts post-dating the Final Distribution Date. Temple-Inland shall provide Forestar and Guaranty with copies of the Fiduciary Tail Policies within a reasonable time after the Fiduciary Tail Policies are issued.

          (c) With respect to any D&O Tail Policies and any Fiduciary Tail Policies secured under Section 10.2(a) and Section 10.2(b), respectively, the associated premiums incurred shall be apportioned amongst the Parties in the same proportion that each respective Party’s revenue for the fiscal year 2007 bears in proportion to the sum total of all the Parties’ revenue for that period, using methods consistent with prior practices.

          (d) To the extent that Temple-Inland is unable prior to the Final Distribution Date to obtain any of the policies as provided for in paragraphs (a) and (b) of this Section 10.2, then, with respect to claims based on wrongful acts on or before the Final Distribution Date, Temple-Inland shall use commercially reasonable efforts to secure alternative insurance arrangements on applicable stand alone insurance policies for Forestar and Guaranty to provide benefits on terms and conditions (including policy limits) in favor of Forestar and Guaranty and the other Persons to be insured no less favorable than the benefits (including policy limits) that were to be afforded by the policies described in paragraphs (a) and (b) of this Section 10.2. With respect to such alternative insurance arrangements, Temple-Inland, Forestar and Guaranty shall be responsible for the premium and any other costs under their applicable stand alone insurance policies. Temple-Inland shall not under any circumstances purchase any such alternative coverage containing an exclusion for claims based on wrongful acts up to and including the Final Distribution Date to the extent such exclusion would preclude coverage for Forestar, Guaranty and other Persons to be insured under the stand alone policies, if Temple-Inland has obtained substantially similar tail-risk insurance coverage for itself on a stand alone basis without that exclusion.

          (e) With respect to the D&O Tail Policies and Fiduciary Tail Policies, Temple-Inland, Forestar and Guaranty shall be severally responsible for bearing the full amount of any premium adjustments, deposits, cash collateral, deductibles, co-payments and/or any claims, costs and expenses that are not covered under or are required by such insurance policies, to the extent attributable to claims against each or reasonably allocated to each using methods consistent with prior practices.

          Section 10.3 Occurrence Based Policies.

          (a) With respect to the occurrence-based Shared Policies which include workers’ compensation/employer’s liability, automobile liability, aircraft liability, general liability and applicable coverage under the excess/umbrella liability insurance, for claims against any member of the Forestar Group that occur prior to the Forestar Distribution Date, Temple-Inland will continue to provide the Forestar Group with access to such Shared Policies.

          (b) With respect to the occurrence-based Shared Policies which include workers’ compensation/employer’s liability, automobile liability, aircraft liability, general liability and applicable coverage under the excess/umbrella liability insurance, for claims against any member of the Guaranty Group that occur prior to the Guaranty Distribution Date, Temple-Inland will continue to provide the Guaranty Group with access to such Shared Policies.

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          (c) Temple-Inland shall reasonably cooperate with the Forestar Group and the Guaranty Group and take commercially reasonable actions as may be necessary or advisable to assist the Forestar Group and the Guaranty Group in submitting such claims to which such occurrence-based Shared Policies are responsive; provided, that Forestar and Guaranty shall be responsible for any premium adjustments, deductibles, deposits, cash collateral or co-payments legally due and owing or required relating to such claims and Temple-Inland shall not be required to maintain such occurrence-based Shared Policies beyond their current terms.

          Section 10.4 Administration; Other Matters.

          (a) Administration. Except as otherwise provided in Section 10.3 hereof, from and after the Effective Time, Temple-Inland shall be responsible for (i) Insurance Administration of the Shared Policies and (ii) Claims Administration of the Shared Policies with respect to Retained Business Liabilities, Real Estate Liabilities and Financial Services Liabilities; provided, that the retention of such responsibilities by Temple-Inland is in no way intended to limit, inhibit or preclude any right to insurance coverage for any Insured Claim of a named insured under the Shared Policies as contemplated by the terms of this Agreement; and provided, further, that Temple-Inland’s retention of the administrative responsibilities for the Shared Policies shall not relieve the Party (or member of its Group) submitting any Insured Claim of the primary responsibility for reporting such Insured Claim accurately, completely and in a timely manner or of such Party (or member of its Group’s) authority to settle any such Insured Claim within any period permitted or required by the relevant policy. Temple-Inland may discharge its administrative responsibilities under this Section 10.4 by contracting for the provision of services by independent parties. Each of the applicable Parties shall pay any costs relating to defending its respective Insured Claims under Shared Policies to the extent such costs including defense, out-of-pocket expenses, and direct and indirect costs of employees or agents of Temple-Inland related to Claims Administration and Insurance Administration are not covered under such Shared Policies. In the absence of another agreed arrangement for a claim or particular claims, Temple-Inland shall determine and invoice the costs to be paid by Guaranty or by Forestar using commercially reasonable methods consistently applied. Each of the Parties shall be responsible for obtaining or reviewing the appropriateness of releases upon settlement of its respective Insured Claims under Shared Policies.

          (b) Exceeding Policy Limits. Where Retained Liabilities, Real Estate Liabilities, and/or Financial Services Liabilities, as applicable, are specifically covered under the same Shared Policy for periods prior to the Final Distribution Date, or where such Shared Policies cover claims made after the Final Distribution Date with respect to an occurrence or wrongful act wholly prior to the Final Distribution Date, then from and after the Final Distribution Date, a member of the Temple-Inland Group, the Forestar Group and/or the Guaranty Group, as applicable, may claim coverage for Insured Claims under such Shared Policy as and to the extent that such insurance is available up to the full extent of the applicable limits of liability of such Shared Policy (and may receive any Insurance Proceeds with respect thereto as contemplated by Section 10.2, Section 10.3 or Section 10.4(c) hereof), subject to the terms of this Section 10.4. Except as set forth in this Section 10.4, Temple-Inland, Forestar and Guaranty shall not be liable

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to one another for claims not reimbursed by insurers for any reason, including coinsurance provisions, deductibles, quota share deductibles, self-insured retentions, bankruptcy or insolvency of an insurance carrier, Shared Policy limitations or restrictions, any coverage disputes, any failure to timely claim by Temple-Inland, Forestar and Guaranty, or any member of their respective Groups, or any defect in such claim or its processing. It is expressly understood that the foregoing shall not limit any Party’s liability to any Indemnitee for indemnification pursuant to ARTICLE VII.

          (c) Allocation of Insurance Proceeds. Except as otherwise provided in Section 10.3, and where not in conflict with or prohibited by specific insurance policy conditions, Insurance Proceeds received with respect to claims, costs and expenses under the Shared Policies shall be paid to or on behalf of Temple-Inland, which shall thereafter administer the Shared Policies by paying the Insurance Proceeds, as appropriate, to Temple-Inland with respect to Retained Business Liabilities, to Forestar with respect to Real Estate Liabilities and to Guaranty with respect to Financial Services Liabilities. Payment of the allocable portions of indemnity costs of Insurance Proceeds resulting from such Shared Policies will be made by Temple-Inland to the appropriate Party upon receipt from the insurance carrier. In the event that the aggregate limits on any Shared Policies are exceeded by the aggregate of outstanding Insured Claims by members of two or more Groups, the relevant Parties agree to allocate the Insurance Proceeds received for those Insured Claims based upon each relevant Group’s respective percentage of the total of their bona fide claims which were covered under such Shared Policy (their “Allocable Portion of Insurance Proceeds”), and any Party who has received Insurance Proceeds in excess of such Party’s Allocable Portion of Insurance Proceeds shall pay to the other Party or Parties the appropriate amount so that each Party will have received its Allocable Portion of Insurance Proceeds pursuant hereto. Each of the Parties agrees to use commercially reasonable efforts to maximize available coverage under those Shared Policies applicable to it, and to take all commercially reasonable steps to recover from all other responsible parties in respect of an Insured Claim to the extent coverage limits under a Shared Policy have been exceeded or would be exceeded as a result of such Insured Claim.

          (d) Allocation of Aggregate Deductibles. In the event that two or more Groups have members with bona fide claims under any Shared Policy for which an aggregate deductible is payable, the Parties agree that the aggregate amount of the deductible paid shall be borne by the Parties in the same proportion which the Insurance Proceeds received by each such Party bears to the total Insurance Proceeds received under the applicable Shared Policy (their “Allocable Share of the Deductible”), and any Party who has paid more than such Allocable Share of the Deductible shall be entitled to receive from any other Party or Parties an appropriate amount so that each Party has borne its Allocable Share of the Deductible pursuant hereto.

          (e) Effective as of the applicable Distribution Date, the Forestar Group and the Guaranty Group shall be responsible for the full amount of the deductible for workers’ compensation, general liability and automobile liability claims as set forth in Schedule 10.4(c).

          (f) Other. With respect to all other Shared Policies, for claims that occur prior to their respective Distribution Dates, Forestar and Guaranty shall be severally responsible for bearing the full amount of any premium adjustments, deposits, cash collateral, deductible, co-payments and/or any claims, costs and expenses that are not covered under or are required by such insurance policies, to the extent attributable to claims against each or reasonably allocated to each using methods consistent with prior practices.

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          Section 10.5 Agreement for Waiver of Conflict and Shared Defense. In the event that Insured Claims by members of more than one Group exist relating to the same occurrence, the relevant Parties shall jointly defend to the extent permitted by applicable Law and rules of professional responsibility applicable to legal counsel for the defense. Nothing in this Section 10.5 shall be construed to limit or otherwise alter in any way the obligations of the Parties to this Agreement, including those created by this Agreement, by operation of Law or otherwise.

          Section 10.6 Cooperation. The Parties agree to use their commercially reasonable efforts to cooperate with respect to the various insurance matters contemplated by this Agreement.

          Section 10.7 Certain Matters Relating to Temple-Inland’s Organizational Documents. For a period of six years from the Final Distribution Date, the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws of Temple-Inland shall contain provisions no less favorable with respect to indemnification that are set forth in the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws of Temple-Inland immediately after the Effective Time, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the applicable Relevant Time in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the applicable Relevant Time, were directors, officers, employees, fiduciaries or agents of any member of Temple-Inland, Forestar or the Guaranty Group, unless such modification shall be required by Law and then only to the minimum extent required by Law.

ARTICLE XI

MISCELLANEOUS

          Section 11.1 Complete Agreement; Construction. This Agreement, including its Exhibits and Schedules, and the Ancillary Agreements shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments, courses of dealing and writings with respect to such subject matter. In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. In the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any Ancillary Agreement, such Ancillary Agreement shall control; provided, that, subject to Section 2.12(e), with respect to any Conveyancing and Assumption Instrument, this Agreement shall control, unless specifically stated otherwise in such Conveyancing and Assumption Instrument.

          Section 11.2 Ancillary Agreements. This Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements.

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          Section 11.3 Counterparts; Electronic Delivery. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall be considered one and the same agreement, and, except as otherwise expressly provided in Section 1.3, shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Parties. Execution and delivery of this Agreement or any other documents pursuant to this Agreement by facsimile or other electronic means shall be deemed to be, and shall have the same legal effect as, execution by an original signature and delivery in person.

          Section 11.4 Survival of Agreements. Except as otherwise contemplated by this Agreement or any Ancillary Agreement, all covenants and agreements of the Parties contained in this Agreement and each Ancillary Agreement shall survive the Effective Time and remain in full force and effect in accordance with their applicable terms.

          Section 11.5 Expenses.

          (a) Except as otherwise expressly provided (i) in this Agreement (including paragraphs (b), (c) and (d) of this Section 11.5) or (ii) in any Ancillary Agreement, the Parties agree that all out-of-pocket fees and expenses (including the costs to obtain or the economic effect of any Consents) incurred and directly related to the transactions contemplated hereby, including any Liability incurred following the Plan of Separation as a result of the consummation of the Plan of Separation, shall be borne and paid by the Person incurring such cost or Liability.

          (b) Each of the Parties shall be responsible for payment of their respective outside advisors for all work performed, whether in connection with the Plan of Separation or otherwise, prior to, on or after the Effective Time, provided, however, that Temple-Inland shall pay all fees earned, and all costs and expenses incurred, prior to the Final Distribution Date directly related to the Plan of Separation by the entities listed or described on Schedule 11.5(b) and payable to such entities.

          (c) With respect to any expenses incurred pursuant to a request for further assurances granted under Section 2.9, the Parties agree that such expenses incurred prior to and up to the date that is 24 months after the Relevant Time shall be borne and paid by the Party incurring such expense in complying with such request; it being understood that no Party shall be obliged to incur any third-party accounting, consulting, advisor, banking or legal fees, costs or expenses, and the requesting Party shall not be obligated to pay such fees, costs or expenses, unless such fee, cost or expense shall have had the prior written approval of the requesting Party. Notwithstanding the foregoing, following the 24 month anniversary of the Relevant Time, the requesting Party shall be responsible for the other Party’s internal fees, costs and expenses (e.g., salaries of personnel) incurred in complying with such request.

          Section 11.6 Notices All notices, requests, claims, demands and other communications under this Agreement and, to the extent applicable and unless otherwise provided therein, under each of the Ancillary Agreements shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt unless the day of receipt is not a Business Day, in which case it shall be deemed to have been given on the next Business Day) by delivery in person, by overnight courier service, by facsimile with receipt

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confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Party or Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 11.6):

To Temple-Inland:
Temple-Inland Inc.
1300 MoPac Expressway South
Austin, Texas 78746
Attn: General Counsel
Facsimile: (512) 434-8051

To Forestar:
Forestar Real Estate Group Inc.
1300 MoPac Expressway South
Austin, Texas 78746
Attn: General Counsel
Facsimile: (512) 434-5780

To Guaranty:
Guaranty Financial Group Inc.
8333 Douglas Avenue
Dallas, Texas 75225
Attn: General Counsel
Facsimile: (214) 360-1908

          Section 11.7 Waivers and Consents. The failure of any Party to require strict performance by any other Party of any provision in this Agreement will not waive or diminish that Party’s right to demand strict performance thereafter of that or any other provision hereof. Any Consent required or permitted to be given by any Party to another Party or Parties under this Agreement shall be in writing and signed by the Party giving such Consent.

          Section 11.8 Amendments. Subject to the terms of Section 11.11, this Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties.

          Section 11.9 Assignment. Except as otherwise expressly provided for in this Agreement, this Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party without the prior written Consent of the other Parties, and any attempt to assign any rights or obligations arising under this Agreement without such Consent shall be null and void; provided, that a Party may assign this Agreement in connection with a merger transaction in which such Party is not the surviving entity or the sale by such Party of all or substantially all of its Assets, and upon the effectiveness of such assignment the assigning Party shall be released from all of its obligations under this Agreement; provided, that the surviving entity of such

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merger or the transferee of such Assets shall agree in writing, reasonably satisfactory to the other Parties, to be bound by the terms of this Agreement as if named as a “Party” hereto.

          Section 11.10 Successors and Assigns. Subject to Section 11.9, the provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors and permitted transferees and assigns.

          Section 11.11 Certain Termination and Amendment Rights. This Agreement (including ARTICLE VII hereof) may be terminated and each Distribution may be amended, modified or abandoned at any time prior to the earlier of the Forestar Distribution Date or the Guaranty Distribution Date by and in the sole discretion of Temple-Inland without the approval of Forestar or Guaranty or the stockholders of Temple-Inland. In the event of such termination, no Party shall have any Liability of any kind to any other Party or any other Person. After the earlier of the Forestar Distribution Date and Guaranty Distribution Date, this Agreement may not be terminated except by an agreement in writing signed by Temple-Inland, Forestar and Guaranty. Notwithstanding the foregoing, ARTICLE VII shall not be terminated or amended after the Effective Time in a manner adverse to the third party beneficiaries thereof without the Consent of any such Person. Notwithstanding the foregoing, this Agreement may be terminated or amended as among any Parties that remain Affiliates, so long as such amendment does not adversely affect any Party that is no longer an Affiliate, in which case, only with the Consent of such Party.

          Section 11.12 Payment Terms.

          (a) Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount to be paid or reimbursed by any Party (and/or a member of such Party’s Group), on the one hand, to any other Party or Parties (and/or a member of such Party’s or Parties’ Group), on the other hand, under this Agreement shall be paid or reimbursed hereunder within 30 days after presentation of an invoice or a written demand therefore and setting forth, or accompanied by, reasonable documentation or other reasonable explanation supporting such amount.

          (b) Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement shall bear interest at a rate per annum equal to the then effective Prime Rate plus 2% (or the maximum legal rate, whichever is lower), calculated for the actual number of days elapsed, accrued from the date on which such payment was due up to the date of the actual receipt of payment.

          Section 11.13 No Circumvention. The Parties agree not to directly or indirectly take any actions, act in concert with any Person who takes an action, or cause or allow any member of any such Party’s Group to take any actions (including the failure to take a reasonable action) such that the resulting effect is to materially undermine the effectiveness of any of the provisions of this Agreement or any Ancillary Agreement (including adversely affecting the rights or ability of any Party to successfully pursue indemnification, contribution or payment pursuant to ARTICLE VII).

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          Section 11.14 Subsidiaries. Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party on and after the Relevant Time. The Parties acknowledge that certain actions, agreements and obligations that certain of their Affiliates and Subsidiaries may be required to perform in connection with the performance of the Parties’ obligations under this Agreement or any Ancillary Agreement may require Governmental Approval by Governmental Entities under applicable Law, and therefore agree that performance of such actions, agreements and obligations is subject to the receipt of all such necessary Governmental Approvals, which approvals each Party shall, and shall cause the members of its respective Group to, use its commercially reasonable efforts to obtain.

          Section 11.15 Third Party Beneficiaries. Except (i) as provided in ARTICLE VII relating to Indemnitees and for the release under Section 7.1 of any Person provided therein (ii) as provided in Section 10.2 relating to insured persons and Section 10.7 relating to the directors, officers, employees, fiduciaries or agents provided therein and (iii) except as specifically provided in any Ancillary Agreement, this Agreement is solely for the benefit of the Parties and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.

          Section 11.16 Title and Headings. Titles and headings to Sections and Articles are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

          Section 11.17 Exhibits and Schedules. The Exhibits and Schedules attached hereto are incorporated herein by reference and shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.

          Section 11.18 Closing. The closing and consummation of the transactions contemplated by this Agreement to occur prior to or at the Forestar Distribution Date and the Guaranty Distribution Date, as applicable, shall take place at the offices of Temple-Inland, 1300 MoPac Expressway South, Austin, Texas 78746.

          Section 11.19 Governing Law. This Agreement shall be governed by and construed in accordance with the internal Laws, and not the Laws governing conflicts of Laws, of the State of Texas.

          Section 11.20 Consent to Jurisdiction. Subject to the provisions of ARTICLE IX herein, each of the Parties irrevocably submits to the exclusive jurisdiction of (a) the District Court of the State of Texas for Travis County, and (b) the United States District Court for the Western District of Texas, Austin Division (the “Texas Courts”), for the purposes of any suit, Action or other proceeding to compel arbitration or for provisional relief in aid of arbitration in accordance with ARTICLE IX or for provisional relief to prevent irreparable harm, and to the non-exclusive jurisdiction of the Texas Courts for the enforcement of any award issued thereunder. Each of the Parties further agrees that service of any process, summons, notice or document by United States registered mail or receipted courier service to such Party’s respective address set forth in Section 11.6 shall be effective service of process for any Action, suit or

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proceeding in the Texas Courts with respect to any matters to which it has submitted to jurisdiction in this Section 11.20. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any Action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the Texas Courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

          Section 11.21 Specific Performance. The Parties agree that irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled to (i) an injunction or injunctions to enforce specifically the terms and provisions hereof in any arbitration in accordance with ARTICLE IX, (ii) provisional or temporary injunctive relief in accordance therewith in any Texas Court, and (iii) enforcement of any such award of an arbitral tribunal or a Texas Court in any court of the United States, or any other any court or tribunal sitting in any state of the United States or in any foreign country that has jurisdiction, this being in addition to any other remedy or relief to which they may be entitled.

          Section 11.22 Waiver of Jury Trial. Subject to ARTICLE IX and Sections 11.20 and 11.21 herein, each of the Parties hereby waives to the fullest extent permitted by applicable Law any right it may have to a trial by jury with respect to any court proceeding contemplated by Section 11.20 of this Agreement. Each of the Parties hereby (a) certifies that no representative, agent or attorney of the other Party has represented, expressly or otherwise, that such other Party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it has been induced to enter into this Agreement and the transactions contemplated by this Agreement, as applicable, by, among other things, the mutual waivers and certifications in this Section 11.22.

          Section 11.23 Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, and the Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

          Section 11.24 Force Majeure. No Party (or any Person acting on its behalf) shall have any Liability or responsibility for failure to fulfill any obligation (other than a payment obligation) under this Agreement or, unless otherwise expressly provided therein, any Ancillary Agreement, so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure (as defined in Section 1.1(53). A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event: (a) notify the other applicable Parties of the nature and extent of any such Force Majeure condition, and (b) use due diligence to remove any such causes and resume performance under this Agreement as soon as reasonably practicable.

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          Section 11.25 Interpretation. The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.

          Section 11.26 Authorization. Each of the Parties hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such Party, that this Agreement constitutes a legal, valid and binding obligation of each such Party and that the execution, delivery and performance of this Agreement by such Party does not contravene or conflict with any provision of Law or of its charter or bylaws or any material agreement, instrument or order binding on such Party.

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

TEMPLE-INLAND INC.
By Name:	/s/ Doyle R. Simons Doyle R. Simons
Title:	Executive Vice President
Date:	December 11, 2007
FORESTAR REAL ESTATE GROUP INC.
By Name:	/s/ James M. DeCosmo James M. DeCosmo
Title:	President and CEO
Date:	December 11, 2007
GUARANTY FINANCIAL GROUP INC.
By Name:	/s/ Michael D. Calcote Michael D. Calcote
Title:	Executive Vice President and Treasurer
Date:	December 11, 2007

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EX-10.1

Exhibit 10.1

EXECUTION COPY

TAX MATTERS AGREEMENT

by and among

TEMPLE-INLAND INC.,

FORESTAR REAL ESTATE GROUP INC.,

and

GUARANTY FINANCIAL GROUP INC.

Dated as of

December 11, 2007

TAX MATTERS AGREEMENT

     THIS TAX MATTERS AGREEMENT (this “Agreement”) is entered into as of December 11, 2007 by and among Temple-Inland Inc., a Delaware corporation (“Temple-Inland”), Forestar Real Estate Group Inc., a Delaware corporation (“Forestar”), and Guaranty Financial Group Inc., a Delaware Corporation (“Guaranty”); each a “Party” and collectively, the “Parties.”

R E C I T A L S:

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 1. Definitions.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 2. Preparation and Filing of Tax Returns.

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

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

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

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

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

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

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

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

     2.05. Manner of Tax Return Preparation.

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

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

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

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Section 3. Liability for Taxes.

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

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

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

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

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

Section 4. Distribution Taxes and Deconsolidation.

     4.01. Distribution Taxes.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     4.02. Carrybacks.

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

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

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

     4.03. Continuing Covenants.

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

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

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

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

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

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

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

     4.04. Allocation of Tax Assets.

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

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

Section 5. Indemnification.

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

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

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

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

Section 6. Payments.

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

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

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

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

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

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

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

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

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

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

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

Section 7. Tax Proceedings.

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

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

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

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

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Section 8. Miscellaneous.

     8.01. Cooperation and Exchange of Information.

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

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

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

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

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

          (b) Retention of Records.

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

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

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

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

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

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

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

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

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

To Temple-Inland:

Temple-Inland Inc.
1300 Mopac Expressway South, 3^rd Floor
Austin, TX 78746
Attn: General Counsel
Facsimile: ( 512) 434-8051

To Forestar:

Forestar Real Estate Group Inc.
1300 MoPac Expressway South
Austin, Texas 78746
Attn: General Counsel
Facsimile: (512) 434-5780

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To Guaranty:

Guaranty Financial Group Inc.
8333 Douglas Avenue
Dallas, Texas 75225
Attn: General Counsel
Facsimile: (214) 360-1908

     8.07. Changes in Law.

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

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

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

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

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

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

     8.12. Termination, Etc. Notwithstanding anything to the contrary herein, this Agreement (including Section 5 (Indemnification) hereof) may be terminated and abandoned at any time prior to the Forestar Distribution Date or the Guaranty Distribution Date by and in the sole discretion of Temple-Inland without the approval of Forestar, Guaranty, or the stockholders of

25

Temple-Inland. In the event of such termination, no Party shall have any liability to any other Party or any other Person. After the earlier of the Forestar Distribution Date or the Guaranty Distribution Date, this Agreement may not be terminated except by an agreement in writing signed by each of the Parties.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Signature Pages Follow]

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

TEMPLE-INLAND INC.
By:	/s/ Doyle R. Simons
Name:	Doyle R. Simons
Title:	Executive Vice President
FORESTAR REAL ESTATE GROUP INC.
By:	/s/ James M. DeCosmo
Name:	James M. DeCosmo
Title:	President and Chief Executive Officer
GUARANTY FINANCIAL GROUP INC.
By:	/s/ Michael D. Calcote
Name:	Michael D. Calcote
Title:	Executive Vice President and Treasurer

29

EX-10.2

Exhibit 10.2

EXECUTION COPY

MASTER TRANSITION SERVICES AGREEMENT
between
TEMPLE INLAND INC.
and
FORESTAR REAL ESTATE GROUP INC.
and
GUARANTY FINANCIAL GROUP INC.

TABLE OF CONTENTS

RECITATIONS		4
ARTICLE I SERVICES		5
Section 1.1	Initial Services	5
Section 1.2	Company Groups	5
Section 1.3	Omitted Services; Additional Services	5
Section 1.4	Performance of Services	5
Section 1.5	Changes to Services	6
Section 1.6	Use of Third Parties to Provide the Services	6
Section 1.7	Mutual Cooperation	6
Section 1.8	Internal Controls, Record Retention and Operating Policies	6
Section 1.9	Audit Assistance	6
ARTICLE II CHARGES AND BILLING; TAXES		6
Section 2.1	Charges for Transition Services	7
Section 2.2	Procedure	7
Section 3.3	Late Payments	7
Section 2.4	Taxes	7
Section 2.5	Record-Keeping	7
Section 2.6	No Set-Off	7
ARTICLE III TERM AND TERMINATION		7
Section 3.1	Term	7
Section 3.2	Early Termination	7
Section 3.3	Information Transmission	8
Section 3.4	Termination Assistance	8
ARTICLE IV CONFIDENTIALITY		8
Section 4.1	Protection of Information	8

Page 1 of 16

Section 4.2	Exclusion of Certain Information	8
Section 4.3	Non-Public Personal Information	8
Section 4.4	Security Program	9
Section 4.5	Notification of Security Breaches	9
Section 4.6	Operation of a Secure Site	9
ARTICLE V REPRESENTATIONS AND WARRANTIES; COVENANTS		9
Section 5.1	Authorization	9
Section 5.2	Non-Infringement	10
Section 5.3	Compliance with Laws	10
Section 5.4	Disclaimer of Representations and Warranties	10
ARTICLE VI LIMITATIONS OF LIABILITY AND INDEMNITY		10
Section 6.1	Exclusion of Certain Damages	10
Section 6.2	Provider's Indemnification for Third Party Claims	10
Section 6.3	Purchaser's Indemnification for Third Party Claims	10
Section 6.4	Clarification of Indemnification	10
ARTICLE VII DISPUTE RESOLUTION; GOVERNING LAW		10
Section 7.1	Amicable Resolution	10
Section 7.2	Arbitration	10
Section 7.3	Governing Law	11
Section 7.4	Submission to Jurisdiction	11
Section 7.5	Waiver of Jury Trial	11
ARTICLE VIII MISCELLANEOUS		11
Section 8.1	Survival	11
Section 8.2	Title to Intellectual Property	11
Section 8.3	Force Majeure	11
Section 8.4	Independent Contractors	12
Section 8.5	Subrogation	12
Section 8.6	Entire Agreement; Incorporation of Schedules and Exhibits	12
Section 8.7	Amendments and Waivers	12
Section 8.8	No Implied Waivers; Cumulative Remedies; Writing Required	12
Section 8.9	No Third Party Beneficiaries	12

Page 2 of 16

Section 8.10	Assignment; Binding Agreement	12
Section 8.11	Responsible Parties	12
Section 8.12	Notices	12
Section 8.13	Severability	13
Section 8.14	Construction	13
Section 8.15	Counterparts	13
Section 8.16	Delivery by Facsimile and Other Electronic Means	13
SIGNATURE PAGE		15
EXHIBIT A — SCHEDULES		16-89
EXHIBIT B — GLOSSARY		90
EXHIBIT C — DISPUTE RESOLUTION		92
EXHIBIT D — NOTICE OF EARLY TERMINATION		94

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MASTER TRANSITION SERVICES AGREEMENT

Temple-Inland Inc. (“Temple-Inland”), Forestar Real Estate Group Inc. (“Forestar”) and Guaranty Financial Group Inc. (“Financial Services”) make this Master Transition Services Agreement (“Agreement”) in consideration of the mutual promises and agreements contained in this Agreement.

RECITATIONS

A. On the Effective Date, Temple-Inland will distribute to its shareholders pro rata all of the outstanding stock of Forestar (the “Forestar Distribution”) and all of the outstanding stock of Financial Services (the “Financial Services Distribution” and, collectively with the Forestar Distribution, the “Distributions”), both corporations that Temple-Inland currently owns and controls.

B. Incident to the Distributions, each of the Companies have been required to plan to disaggregate various shared services and certain common uses of facilities and equipment. In order to facilitate separation of the Companies on the Effective Date, the Companies have agreed that certain shared services and certain common uses of facilities and equipment should continue for a transitional period after the Effective Date (together such shared services and common uses are referred to as the “Transition Services”).

C. The Provider of the Transition Services and each Purchaser of Transition Services shall agree in a separate Schedule to this Agreement (“Schedule”) upon the scope, scale and description of each particular Transition Service to be provided, how long the Transition Service will be provided, early termination provisions, the price for the Transition Service expressed either as a fixed unit price or as a fixed periodic price, payment terms and such special terms and conditions as may be applicable to the particular Transition Service. Each of the Transition Services so scheduled shall be provided under the terms and conditions set forth in this Agreement as supplemented or expressly modified by the applicable Schedule. The form of the Schedules shall be substantially as set forth in Exhibit A.

D. All the capitalized terms used in this Agreement shall have the meaning either given those terms or incorporated by reference in the Glossary attached as Exhibit B.

Page 4 of 16

ARTICLE I

SERVICES

Section 1.1 Initial Services. Commencing on the Effective Date, the Company designated as the Provider on each Schedule to this Agreement, shall provide to the Company or Companies designated as the Purchaser on the Schedule, the services set forth on that Schedule (“Initial Services”) under the terms and upon the conditions set forth in this Agreement, including the applicable Schedule.

Section 1.2 Company Groups. A Company may designate one of its Affiliates as the Provider on a Schedule. A Company may designate one of its Affiliates as the Purchaser on a Schedule. Any Company’s Affiliate that provides Transition Services and any Company’s Affiliate that purchases Transition Services shall be bound by the terms of this Agreement and the applicable Schedule under which the Transition Services are provided. Unless otherwise specifically provided in the applicable Schedule, the Affiliate designated either as a Provider or a Purchaser and the Company designating them shall be jointly and severally liable for all obligations under this Agreement with respect to the Transition Service provided under the applicable Schedule. As requested by the other parties to a Schedule, the applicable Company shall cause each of its Affiliates designated as a Purchaser or a Provider in that Schedule to execute the Schedule to evidence that the member is legally obligated by that Schedule and terms of this Agreement, but a signature by a member so designated is not required to bind that member.

Section 1.3 Omitted Services; Additional Services. If during the Term of this Agreement any of the Companies identifies a service that reasonably should have been included in the Transition Services, but was inadvertently omitted (“Omitted Services”), then that Company may request the Company that would have been the Provider of such Omitted Services to furnish the Transition Services. The Company requested to provide the Omitted Services shall do so if commercially feasible to provide the Transition Services under the terms of this Agreement for a fixed unit fee or fixed periodic fee set by the potential Provider in an amount reasonably estimated to cover the cost of providing the Transition Services and other commercially reasonable terms covered in a Schedule. If the Company requesting the Omitted Services accepts the terms for provision of the Omitted Services offered by the potential Provider, those Companies shall enter into a Schedule that will become part of this Agreement. Companies may also add additional services (“Additional Services”) that are not Omitted Services by entering into a Schedule that is made part of this Agreement provided that Additional Services entered under this Agreement must terminate no later than the end of the term of this Agreement.

Section 1.4 Performance of Services. Provider shall perform its duties and discharge its obligations under this Agreement in a commercially reasonable manner based upon its current practices in providing analogous services for itself or its Affiliates (or prior practices in the absence of a current practice) and in accordance with any service levels and performance obligations specified in the applicable Schedule. This obligation is subject to and upon the following conditions:

(a) No Provider shall be required to perform any Transition Service in a manner that would constitute a violation of applicable law.

(b) No Provider shall be required to perform any Transition Service for the benefit of any Third Party.

(c) Except as set forth otherwise in an applicable Schedule, no Provider shall be obligated to (i) hire or train additional employees, (ii) purchase, lease or license any additional equipment or software or (iii) pay any cost related to the transfer or conversion of Information to Purchaser upon termination of the Transition Services.

(d) Except as set forth otherwise in an applicable Schedule, Provider shall be solely responsible for maintaining during the applicable Service Period equipment, software, licenses, personnel, facilities and other resources reasonably necessary for Provider’s provision of the Transition Services for which it is responsible that are substantially equivalent to those resources that were available to the Provider at the Effective Date.

Section 1.5 Changes to Services. Except as provided in Section 1.9 below, Provider may make changes from time to time in the manner of performing the Transition Services, if:

Page 5 of 16

(a) Provider is making similar changes in performing analogous services for itself or its Affiliates;

(b) Provider furnishes to Purchaser substantially the same notice (in content and timing) and right of consultation as Provider shall furnish to its Affiliates respecting such changes, provided that if there is no such notice or right of consultation, then Provider shall give a commercially reasonable notice and right of consultation to Purchaser;

(c) changes shall not result in any material degradation of the Transition Services and after the applicable changes, the Transition Services shall meet the standards imposed by this Agreement.

Section 1.6 Use of Third Parties to Provide the Services. Provider may discharge its duties and perform its obligations under this Agreement through agents, subcontractors or independent contractors.

Section 1.7 Mutual Cooperation. Purchaser and Provider shall cooperate with each other in connection with the performance of the Transition Services, including producing on a timely basis all Information that is reasonably requested with respect to the performance of the Transition Services.

Section 1.8 Internal Controls, Record Retention and Operating Policies. Provider shall maintain and comply with the internal controls, record retention policies and other operating policies and procedures that were in place prior to the Effective Date with respect to each Transition Service or as otherwise implemented by the Parties to comply with internal standards and procedures or applicable law. If a Purchaser under a Schedule requires a change to the internal controls or compliance policies or requires the implementation of additional internal controls or compliance policies related to a Transition Service in order to comply with changes to applicable law or internal standards and procedures, the Provider shall change or add to the internal controls or compliance policies related to the Transition Service as requested by the Purchaser. In connection with a Provider changing or adding to internal controls or compliance policies as required by the foregoing, the Purchaser shall pay for any additional costs for the Transition Service associated with the implementation or maintenance of the applicable change or addition; provided, however, that if (i) such change or addition is required for the compliance of both the Purchaser and the Provider with a law or policy applicable to both, or (ii) both the Purchaser and the Provider will benefit from such change or addition, the Parties shall negotiate in good faith an equitable sharing of the costs associated with such change or addition.

Section 1.9 Audit Assistance. Provider and Purchaser shall cooperate with the other in providing such Information as may be required and access for audits by independent certified public accountants, internal auditors, regulators, or other persons with the right of audit. A Party acting as a Purchaser hereunder may request its third party auditor to perform a SAS 70 Type II audit or other audit or review of such Provider’s internal controls and operating environment related to the Transition Services upon reasonable advance notice, and the Provider shall perform such an audit or review or assist Purchaser or Purchaser’s third party auditor in connection with such an audit or review, in each case at the Purchaser’s expense. At the conclusion of such audit or review, the Provider shall implement such reasonable changes to the Transition Services or operating environment to correct deficiencies identified in the audit report to ensure compliance with applicable law or that are otherwise necessary for Provider to comply with Purchaser’s internal policies in connection with the Transition Services. The Parties shall share the costs to implement all such changes equally. The Company being audited shall be responsible for all incremental costs incurred by other Companies in providing such Information or assistance.

ARTICLE II

CHARGES AND BILLING; TAXES

Section 2.1 Charges for Transition Services. The charges for the Transition Services shall be established in monthly units and shall be (a) as set forth in the applicable Schedules, or (b) determined in accordance with the charging methodology as set forth in the applicable Schedules (the “Charges”). Provider shall invoice Purchaser for the Charges in the manner and at the time provided in the applicable Schedule. Charges shall be good faith advance estimates of Provider’s cost of providing the Transition Services and shall not be corrected retroactively for actual costs. Provider may change the Charges for future billing at any time to cover a change in the cost of providing the Transition Service. Provider will give Purchaser thirty (30) days notice of any such change in Charges. Annually within 30 days after the anniversary date of this Agreement, Provider and Purchaser shall review the Charges and make any adjustments to those Charges going forward to reflect changes in the cost of providing the Transition

Page 6 of 16

Services during the preceding year. Changes for any time period covered as an extension of service beyond the originally scheduled end date shall be at market value instead of cost. The market value pricing will be determined by the Provider and will be equal and equitable in light of market conditions for services of a like kind and duration. There will not be any charges for the time period between the Effective Date and January 1, 2008. The Parties intend that the Charges will be fair, reasonable and arms length pricing and in compliance with the affiliate transaction requirements promulgated from time to time by the regulatory entities having authority over financial services, including Office of Thrift Supervision (OTS) Regulations 12 C.F.R. 563.41 and 563.42 and Sections 23A and 23B of the Federal Reserve Act.

Section 2.2 Procedure. Purchaser shall pay to Provider the Charges as invoiced by Provider, in the manner and at the time provided in the applicable Schedule. All amounts due and payable under this Agreement shall be invoiced and paid in U.S. dollars.

Section 2.3 Late Payments. Charges not paid when due in accordance with the provisions of the applicable Schedule shall bear interest at a rate per annum equal to the lesser of Prime Rate plus two percent (2%) from such date due until the date paid, or the maximum contractual rate permitted by law.

Section 2.4 Taxes. Purchaser shall pay any and all Transfer Taxes incurred in connection with the applicable Provider’s provision of the Transition Services.

Section 2.5 Record-Keeping. Provider shall maintain complete and accurate records of any invoices and supporting documentation for all amounts billed to, and payments made by, the Purchaser under this Agreement, subject to Provider’s usual record retention policies. Provider shall provide to Purchaser or its designee documentation and other information relating to each invoice as may be reasonably requested by Purchaser to verify that Provider’s charges are accurate, complete, and valid in accordance with this Agreement.

Section 2.6 No Set-Off. Purchaser’s obligation to make any required payments under this Agreement shall not be subject to any unilateral right of offset, set-off, deduction or counterclaim, however arising.

ARTICLE III

TERM AND TERMINATION

Section 3.1 Term. Unless otherwise terminated pursuant to Section 3.2, this Agreement will terminate with respect to any Transition Service at the close of business on the last day of the Service Period for such Transition Service designated in the applicable Schedule. Notwithstanding the foregoing, Purchaser may elect to extend the Service Period for any Transition Service in accordance with the terms for extension provided in the applicable Schedule, if any are expressly provided. Except as provided in Section 8.1, this Agreement will terminate at the close of business on the last day of the last Service Period in effect (the “Term”).

Section 3.2 Early Termination. (a) Purchaser shall have the right at any time during the Term of this Agreement to terminate its obligation to purchase any Transition Service for future months, upon the giving of an advance written notice to Provider of (i) not less than the notice period set forth in the applicable Schedule or, (ii) if the applicable Schedule does not set forth a number of days, not less than thirty (30) days. If Purchaser terminates a Transition Service prior to the expiration of the Service Period for such Transition Service, the fees for any remaining months of the Service Period for associated Transition Services shall be decreased to account for the Transition Services that are terminated and any prepaid monthly Charges shall be refunded to Purchaser. Upon early termination of Transition Services under this section, Purchaser shall pay Provider a termination fee in a reasonable amount set by Provider to reimburse the Provider for any unreimbursed costs that directly result from the early termination and to recover any incurred fees or expenses being amortized over the Service Period.

     (b) In addition, Purchaser shall have the right at any time during the Term of this Agreement to terminate its obligations to purchase any Transition Service if Provider materially breaches a provision with respect to any particular Transition Service and, if curable, does not cure such breach within thirty (30) days after being given notice of such breach. Upon termination for breach, Purchaser shall not be obligated to pay a termination fee and any prepaid charges shall be prorated and the unused portion refunded to Purchaser.

     (c) Provider shall have the right at any time during the Term of this Agreement to terminate its obligation to provide any Transition Service if Purchaser materially breaches a provision with respect to any particular Transition

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Service and, if curable, does not cure such breach within 30 days after being given notice of such breach. Failure to timely pay money shall be a material breach.

     (d) Provider shall also have the right at any time during the Term of this Agreement to terminate its obligations to provide any Transition Service if there is a change in control of Purchaser. For this section, “Change in Control” means transfer of a majority of Purchaser’s outstanding voting stock to a Person not a Party to this Agreement.

     (e) Provider shall also have the right to terminate its obligations to provide any Transition Service on thirty (30) days written notice if conditions change to render the provision of the Transition Service commercially unreasonable.

     (f) Written notice of any Early Termination shall be provided in the form attached to this Agreement as Exhibit D.

Section 3.3 Information Transmission. On or prior to the last day of each relevant Service Period, the Provider shall use commercially reasonable efforts to support any transfer of Information concerning the relevant Transition Services to the applicable Purchaser. If requested by the Purchaser, the Provider shall deliver to the applicable Purchaser, within such time periods as Provider and Purchaser may reasonably agree, all Information received, generated or computed for the benefit of such Purchaser during the Service Period, in electronic and/or hard copy form; provided that (a) the Provider shall not have any obligation to provide or cause to provide Information in any non-standard format, and (b) the Provider shall be reimbursed for its reasonable out-of-pocket costs for providing Information in any format other than its standard format, unless otherwise expressly provided in the applicable Schedule.

Section 3.4 Termination Assistance. Upon termination or expiration of this Agreement, each Provider shall have an obligation that survives such termination to provide to the Purchaser, or Purchaser’s designees, services as necessary to effect an orderly and smooth transition of the Transition Services to the Purchaser or a successor service provider and such other cooperation as reasonably requested by the Purchaser in connection with such termination or expiration. Any particular termination and expiration assistance services may be detailed in an applicable Schedule and shall include, at a minimum, any knowledge transfer, training of Purchaser’s or its designee’s personnel, transfer of data and other materials related to the Transition Services and any information and assistance reasonably necessary or desirable or reasonably requested by the Purchaser to ensure an orderly and smooth transition of the Transition Services to Purchaser or a successor service provider.

ARTICLE IV

CONFIDENTIALITY

Section 4.1 Protection of Information. Provider and Purchaser may share Information that is confidential or subject to privacy laws in the course of Provider performing Transition Services. Provider and Purchaser shall each protect and maintain the confidentiality of all Information provided to it by the other Party that is either designated as “confidential” by clearly so marking on or in the transmittal in a manner that may be easily observed, is required to be kept confidential under law, or contains financial or proprietary data (“Confidential Information”). Provider and Purchaser shall each use, as applicable, (a) in the absence of a policy or procedure used to provide substantially the same service before the Effective Date, the same internal policies and controls to protect and maintain the other’s Confidential Information as are used to protect their own Confidential information or (b) those policies and procedures that were in effect prior to the Effective Date and used by the Provider in providing substantially the same service to Purchaser. Provider and Purchaser shall use the other’s Confidential Information only as required for the purposes of this Agreement and shall return upon request, subject to the limitations of Section 3.3, or destroy Confidential Information that is no longer needed to render Transition Services in accordance with the receiving Party’s retention policies.

Section 4.2 Exclusion of Certain Information. The provisions of Section 4.1 do not apply to Information that (i) was, is or becomes generally available to the public other than as a result of a breach of this Section 4.1 or any applicable confidentiality agreement by the receiving Party or its representatives; (ii) was or is developed by the receiving Party independently of and without reference to any Confidential Information of the disclosing Party; or (iii) was, is or

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becomes available to the receiving Party on a non-confidential basis from a Third Party not bound by a confidentiality agreement.

Section 4.3 Non-Public Personal Information. Non-Public Personal Information means all “non-public personal information” as defined by the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq., as amended from time to time, and all applicable implementing regulations and agency pronouncements related thereto, as amended from time to time (collectively, the “GLBA”). Provider agrees to keep confidential, safeguard and not disclose any Non-Public Personal Information in violation of the GLBA, the Interagency Guidelines Establishing Information Security Standards, the Fair and Accurate Credit Transactions Act, the Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice (the “Interagency Guidance”), or in violation of any other applicable law. Provider warrants that its policies, business practices and methodologies are, to the extent required, or forseeably required, in compliance with any and all relevant portions of applicable law.

Section 4.4 Security Program. Provider will maintain reasonable security policies, procedures, and systems to protect Non-Public Personal Information it receives, stores, uses or transmits. Provider will maintain a comprehensive, written security program (“Security Program”) that is designed to: (a) ensure the security and confidentiality of Non-Public Personal Information; (b) restrict the use of Non-Public Personal Information to the purpose for which it is given to Provider; (c) protect against anticipated threats or hazards to the security or integrity of Non-Public Personal Information; and (d) otherwise comply with applicable law and meet the objectives of 12 C.F.R. Part 570, Appendix B, the Interagency Guidelines Establishing Standards for Safeguarding Customer Information. The Security Program will include administrative, technical, and physical safeguards that are commensurate with the scope of Provider activities and the sensitivity of Non-Public Personal Confidential Information. The Security Program will include, as appropriate, and without limitation: access controls on electronic systems that are used to maintain, access or transmit Non-Public Personal Information; adjustments to security programs due to technology changes; access restrictions at physical locations containing Non-Public Personal Information; encryption of electronic Confidential Information, as further set forth herein; dual control procedures; testing and monitoring of electronic systems; and procedures to detect actual and attempted attacks on or intrusions into the electronic systems containing or processing Non-Public Personal Information. Provider will promptly provide a copy of its Security Program to Purchaser upon its request. Upon request, Provider also will provide reasonable evidence that Provider maintains adequate security controls in accordance with the requirements herein.

Section 4.5 Notification of Security Breaches. Provider will comply with all applicable law relating to security breaches, including, but not limited to, Texas and California law and the Interagency Guidance. Provider will respond immediately to remedy any known security breaches or service disruptions and, in the event of any threatened or actual disclosure, loss or breach in the security of Information, Provider will immediately notify Purchaser of any threatened or actual disclosure, loss or breach, and the actions that Provider is taking to prevent any further disclosure, loss or breach.

Section 4.6 Operation of a Secure Site. Provider will undertake reasonable measures to ensure the security, confidentiality, and integrity of all Non-Public Personal Information transmitted through or stored on Provider’s server(s), including, without limitation: (a) providing at a minimum, 128-bit SSL encrypted session when collecting or utilizing Non-Public Personal Information; (b) firewall protection; (c) maintenance of independent archival and backup copies of all of Non-Public Personal Information and ensuring that all back-up tapes that contain any Non-Public Personal Information are no less than 128-bit encrypted; (d) protecting from any network attack and other malicious or disabling entry, data, work, code or program; (e) performing periodic information security risk assessments to identify and assess risks arising from any third party connection to the Provider’s information system and implementing any appropriate mitigating security controls; and (f) ensuring that Non-Public Personal Information is stored on a database that is separate from all web server(s) and on a host that is secured on Provider’s internal network or a non-Internet facing network. Provider will ensure that all user identifications and passwords and Confidential Information received and transmitted via the Internet is, at a minimum, 128-bit SSL encrypted. All stored passwords will be encrypted pursuant to these same encryption standards. Provider will use industry standard encryption algorithms to meet its encryption requirements hereunder.

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ARTICLE V

REPRESENTATIONS AND WARRANTIES; COVENANTS

Section 5.1 Authorization. Each Company represents and warrants: (a) that this Agreement has been validly executed and delivered by such Company and that the provisions set forth in this Agreement constitute legal, valid, and binding obligations of such Company and any of its Affiliates designated by Company as a Provider or Purchaser, enforceable against such Company and each such Affiliate in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other laws affecting creditors’ rights generally, and with regard to equitable remedies, to the discretion of the court before which proceedings to obtain such remedies may be pending; and (b) that such Company has all requisite corporate power and authority to enter into this Agreement, including requisite authorizations from each Affiliate that may be designated as a Provider or Purchaser.

Section 5.2 Non-Infringement. Provider shall perform Transition Services under this Agreement in a manner that does not and shall not infringe, or constitute an infringement or misappropriation of, any intellectual property rights of any Third Party.

Section 5.3 Compliance with Laws. Each Party shall perform Transition Services under this Agreement in a manner that complies in all material respects with all applicable laws.

Section 5.4 Disclaimer of Representations and Warranties. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, PURCHASER ACKNOWLEDGES AND AGREES THAT ALL TRANSITION SERVICES AND ANY GOODS DELIVERED INCIDENT THERETO ARE PROVIDED ON AN “AS-IS” “WHERE-IS” BASIS AND THAT PROVIDER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE TRANSITION SERVICES AND PROVIDER HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTIES WITH RESPECT TO THE TRANSITION SERVICES, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

ARTICLE VI

LIMITATIONS OF LIABILITY AND INDEMNITY

Section 6.1 Exclusion of Certain Damages. IN NO EVENT SHALL ANY PROVIDER OR PURCHASER, ITS AFFILIATES OR ITS DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS BE LIABLE TO THE OTHER PARTY FOR INDIRECT, SPECIAL, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THE PERFORMANCE OF TRANSITION SERVICES, EVEN IF THAT PROVIDER OR PURCHASER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND EACH PROVIDER OR PURCHASER HEREBY WAIVES ON BEHALF OF ITSELF AND THE MEMBERS OF ITS GROUP ANY CLAIM FOR SUCH DAMAGES, INCLUDING ANY CLAIM FOR LOST PROFITS, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE.

Section 6.2 Provider’s Indemnification for Third Party Claims. Provider shall indemnify, defend and hold harmless Purchaser and its directors, officers and employees, and each of the successors and assigns of any of the foregoing from and against any and all claims of Third Parties relating to, arising out of or resulting from Provider’s gross negligence or willful misconduct in the performance of its obligations hereunder, or breach of this Agreement, other than to the extent such Third Party claims are attributable to the gross negligence, negligence, willful misconduct or breach of this Agreement by any Person so indemnified by Provider.

Section 6.3 Purchaser’s Indemnification for Third Party Claims. Purchaser shall indemnify, defend and hold harmless Provider and its directors, officers and employees, and each of the successors and assigns of any of the foregoing from and against any and all claims of Third Parties relating to, arising out of or resulting from Purchaser’s gross negligence or willful misconduct in the performance of its obligations hereunder, or breach of this Agreement, other than to the extent such Third Party claims are attributable to the gross negligence, negligence, willful misconduct or breach of this Agreement by any Person so indemnified by Purchaser.

Section 6.4 Clarification of Indemnification. As used in Sections 6.2 and 6.3, without limitation, “willful misconduct” includes any felony where scienter is an element, any intentional tort or any common law fraud.

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ARTICLE VII

DISPUTE RESOLUTION; GOVERNING LAW

Section 7.1 Amicable Resolution. In accordance with Exhibit C, each Company and each Provider and Purchaser shall seek to resolve in an amicable manner all disputes and disagreements connected with their respective rights and obligations under this Agreement, including involving such senior management as may be required to reach resolution of any dispute.

Section 7.2 Arbitration. Subject to Section 7.1, and except for suits seeking injunctive relief or specific performance, in the event of any dispute, controversy or claim arising under or in connection with this Agreement (including any dispute, controversy or claim relating to the breach, termination or validity of this Agreement), Provider and Purchaser agree to submit any such dispute, controversy or claim to binding arbitration in accordance with Exhibit C.

Section 7.3 Governing Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the law of the State of Texas and applicable federal law, without giving effect to any conflict of law principle.

Section 7.4 Submission to Jurisdiction. SUBJECT TO SECTION 7.2, EACH OF THE PARTIES IRREVOCABLY SUBMITS (FOR ITSELF AND IN RESPECT OF ITS PROPERTY) TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN AUSTIN, TEXAS, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT; PROVIDED THAT THE PARTIES MAY BRING ACTIONS OR PROCEEDINGS AGAINST EACH OTHER IN OTHER JURISDICTIONS TO THE EXTENT NECESSARY TO IMPLEAD THE OTHER PARTY IN ANY ACTION COMMENCED BY A THIRD PARTY THAT IS RELATED TO THIS AGREEMENT. EACH PARTY ALSO AGREES NOT TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY OTHER COURT OR IN OTHER JURISDICTIONS UNLESS SUCH ACTIONS OR PROCEEDINGS ARE NECESSARY TO IMPLEAD THE OTHER PARTY IN ANY ACTION COMMENCED BY A THIRD PARTY THAT IS RELATED TO THIS AGREEMENT. EACH OF THE PARTIES WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY, OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY OTHER PARTY WITH RESPECT THERETO. ANY PARTY MAY MAKE SERVICE ON ANY OTHER PARTY BY SENDING OR DELIVERING A COPY OF THE PROCESS TO THE PARTY TO BE SERVED AT THE ADDRESS AND IN THE MANNER PROVIDED FOR THE GIVING OF NOTICES IN SECTION 8.12. NOTHING IN THIS SECTION 7.4, HOWEVER, SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AT EQUITY. EACH PARTY AGREES THAT A FINAL NONAPPEALABLE JUDGMENT IN ANY ACTION OR PROCEEDING SO BROUGHT SHALL BE CONCLUSIVE AND MAY BE ENFORCED BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW OR AT EQUITY.

Section 7.5 Waiver of Jury Trial. AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 Survival. Sections 1.9, Article 2, Sections 3.3 and 3.4, and Articles 4-7, shall survive any expiration or termination of this Agreement and of each Schedule made under this Agreement.

Section 8.2 Title to Intellectual Property. Each Purchaser acknowledges that it will acquire no right, title or interest (including any license rights or rights of use) in any intellectual property that is owned or licensed by any Provider, by reason of the provision of the Transition Services provided hereunder. No Purchaser will remove or alter any copyright, trademark, confidentiality or other proprietary notices that appear on any intellectual property owned or licensed by any Provider, and each Purchaser shall reproduce any such notices on any and all copies thereof. No

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Purchaser will attempt to decompile, translate, reverse engineer or make excessive copies of any intellectual property owned or licensed by any Provider, and each Purchaser shall promptly notify such Provider of any such attempt, regardless of whether by Purchaser or any Third Party, of which Purchaser becomes aware.

Section 8.3 Force Majeure. No Party shall be held liable or responsible to another Party or be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from events beyond the reasonable control of the non-performing Party, including fires, floods, earthquakes, embargoes, shortages, epidemics, pandemics, quarantines, war, acts of war (whether war be declared or not), terrorist acts, insurrections, riots, civil commotion, strikes, lockouts or other labor disturbances (whether involving the workforce of the non-performing Party or of any other Person), acts of God or acts, omissions or delays in acting by any governmental authority. The suspension of performance shall be of no greater scope and no longer duration than is necessary and the non-performing Party shall use commercially reasonable efforts to remedy its inability to perform.

Section 8.4 Independent Contractors. The Parties each acknowledge that they are separate entities, each of which has entered into this Agreement for independent business reasons. The relationships of the Parties hereunder are those of independent contractors and nothing contained herein shall be deemed to create a joint venture, employer/employee, partnership or any other relationship.

Section 8.5 Subrogation. If any liability arises from the performance of any Transition Services under this Agreement by a Third Party contractor, the Purchaser with respect to such Transition Services shall be subrogated to such rights, if any, as the Provider may have against such third party contractor.

Section 8.6 Entire Agreement; Incorporation of Schedules and Exhibits. This Agreement (including all Schedules and Exhibits) constitutes the entire agreement among the Parties with respect to the subject matter hereof and thereof and supersedes all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter. All Schedules and Exhibits referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.

Section 8.7 Amendments and Waivers. This Agreement may be amended and any provision of this Agreement may be waived, provided that any such amendment or waiver shall be binding upon a Party only if such amendment or waiver is set forth in a writing executed by such Party. No course of dealing between or among any Persons having any interest in this Agreement shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any party hereto under or by reason of this Agreement.

Section 8.8 No Implied Waivers; Cumulative Remedies; Writing Required. No delay or failure in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy. The rights and remedies hereunder are cumulative and not exclusive of any rights or remedies that any Party hereto would otherwise have. Any waiver, permit, consent or approval of any kind or character of any breach or default under this Agreement or any such waiver of any provision of this Agreement must satisfy the conditions set forth in Section 8.7 and shall be effective only to the extent in such writing specifically set forth.

Section 8.9 No Third Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer on any Person other than the Parties, and their respective successors and permitted assigns, any rights or remedies of any nature whatsoever under or by virtue of this Agreement.

Section 8.10 Assignment; Binding Agreement. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the Parties without the prior written consent of the other Parties, and any instrument purporting to make such an assignment without prior written consent shall be void; provided, however, either Party may assign this Agreement to a successor entity in conjunction with a merger effected solely for the purpose of changing such Party’s state of incorporation. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.

Section 8.11 Responsible Parties. Each Party shall be responsible for its Affiliates compliance with the terms and conditions of this Agreement.

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Section 8.12 Notices. All notices, demands and other communications given under this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested), telecopied (and confirmed by telecopy answer back), or sent by reputable overnight courier service (charges prepaid) to the recipient at the address indicated below or such other address or to the attention of such other Person as the recipient Party shall have specified by prior written notice to the sending Party. Any notice, demand or other communication under this Agreement shall be deemed to have been given when so personally delivered or so telecopied and confirmed (if telecopied before 5:00 p.m. Central Time on a business day, or if sent, one business day after deposit with an overnight courier, or, if mailed, five business days after deposit in the U.S. mail.

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TEMPLE-INLAND INC.
Attn: Morris Davis, General Counsel
1300 South Mopac Expressway
Austin, TX 78746
Fax: (512) 434-8051

FORESTAR REAL ESTATE GROUP INC.
Attn: David Grimm, General Counsel
1300 South Mopac Expressway
Austin, TX 78746
Fax: (512) 434-5780

GUARANTY FINANCIAL GROUP INC.
Attn: Scott Almy, General Counsel
8333 Douglas Avenue
Dallas, TX 75225
Fax: (214) 360-1908

The Parties may, in their discretion, agree to accept notices and other communications hereunder by electronic communications pursuant to procedures agreed to, provided that approval of such procedures may be limited to particular notices or communications. Unless the Parties agree otherwise, notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

Section 8.13 Severability. The Parties agree that (i) the provisions of this Agreement shall be severable in the event that for any reason whatsoever any of the provisions hereof are invalid, void or otherwise unenforceable, (ii) any such invalid, void or otherwise unenforceable provisions shall be replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable, and (iii) the remaining provisions shall remain valid and enforceable to the fullest extent permitted by applicable law.

Section 8.14 Construction. The descriptive headings herein are inserted for convenience of reference only and are not intended to be a substantive part of or to affect the meaning or interpretation of this Agreement. Whenever required by the context, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns, pronouns, and verbs shall include the plural and vice versa. Reference to any agreement, document, or instrument means such agreement, document, or instrument as amended or otherwise modified from time to time in accordance with the terms thereof, and if applicable hereof. The use of the words “include” or “including” in this Agreement shall be by way of example rather than by limitation. The use of the words “or,” “either” or “any” shall not be exclusive. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. The Parties agree that prior drafts of this Agreement shall be deemed not to provide any evidence as to the meaning of any provision hereof or the intent of the Parties hereto with respect hereto. In case of ambiguity or conflict between the terms and conditions of the body of this Agreement and the terms and conditions of a Schedule to this Agreement, the terms and conditions of the Schedule shall control.

Section 8.15 Counterparts. This Agreement may be executed in multiple counterparts (any one of which need not contain the signatures of more than one Party), each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

Section 8.16 Delivery by Facsimile and Other Electronic Means. This Agreement, and any amendments hereto, to the extent signed and delivered by means of a facsimile machine or other electronic transmission, shall be treated in

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all manner and respects as an original contract and shall be considered to have the same binding legal effects as if it were the original signed version thereof delivered in person. At the request of any Party, each other Party shall re-execute original forms thereof and deliver them to all other Parties. No Party shall raise the use of a facsimile machine or other electronic means to deliver a signature or the fact that any signature was transmitted or communicated through the use of facsimile machine or other electronic means as a defense to the formation of a contract and each such Party forever waives any such defense.

[SIGNATURE PAGE FOLLOWS]

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SIGNED: To be effective as of the Effective Date on this 11th day of December, 2007.

TEMPLE-INLAND INC.
	/s/ Doyle R. Simons
Name:	Doyle R. Simons
Title:	Executive Vice President

FORESTAR REAL ESTATE GROUP INC.
	/s/ James M. DeCosmo
Name:	James M. DeCosmo
Title:	President and Chief Executive Officer

GUARANTY FINANCIAL GROUP INC.
	/s/ Michael D. Calcote
Name:	Michael D. Calcote
Title:	Executive Vice President and Treasurer

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EX-10.3

Exhibit 10.3

EXECUTION COPY

EMPLOYEE MATTERS AGREEMENT

by and among

TEMPLE-INLAND INC.,

GUARANTY FINANCIAL GROUP INC.

and

FORESTAR REAL ESTATE GROUP INC.

Dated as of

December 11, 2007

INDEX OF DEFINED TERMS

TERM	SECTION IN WHICH DEFINED
Agreement	Preamble
Forestar	Preamble
Forestar 401(k) Plan	4.1(a)
Forestar Option Conversion Value	7.1(b)(ii)
Forestar Ratio	7.1(b)(ii)
Forestar Stock Plan	2.4
Forestar Welfare Plans	5.1(a)
Guaranty	Preamble
Guaranty Option Conversion Value	7.1(a)(ii)
Guaranty Ratio	7.1(a)(ii)
Guaranty Savings Plan	4.1(b)
Guaranty Stock Plan	2.4
Guaranty Welfare Plans	5.1(a)
Parties	Preamble
Post-Forestar Temple-Inland Option	7.1(b)(i)
Post-Guaranty Temple-Inland Option	7.1(a)(i)
Pre-Forestar Temple-Inland Option Price	7.1(b)(ii)
Pre-Guaranty Temple-Inland Option Price	7.1(a)(ii)
Separation Agreement	Recitals
Service Crediting Date	2.3(b)(i)
Temple-Inland	Preamble
Temple-Inland Welfare Plans	5.1(a)
Texas Courts	11.11

EMPLOYEE MATTERS AGREEMENT

     EMPLOYEE MATTERS AGREEMENT (this “Agreement”), dated as of December 11, 2007, by and among Temple-Inland Inc., a Delaware corporation (“Temple-Inland”), Forestar Real Estate Group Inc., a Delaware corporation (“Forestar”), and Guaranty Financial Group Inc., a Delaware corporation (“Guaranty”). Each of Temple-Inland, Forestar and Guaranty is herein referred to as a “Party” and collectively, as the “Parties”.

R E C I T A L S:

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

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

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

     WHEREAS, pursuant to the Separation Agreement, Temple-Inland, Forestar and Guaranty have agreed to enter into this Agreement for the purpose of allocating Assets, Liabilities and responsibilities with respect to certain employee compensation and benefit plans and programs between and among them.

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

ARTICLE I

DEFINITIONS AND INTERPRETATION

     Section 1.1 Definitions. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Separation Agreement and the following terms shall have the following meanings:

     “Benefit Plan” shall mean, with respect to an entity, each plan, program, arrangement, agreement or commitment that is an employment, change in control/severance, consulting,

non-competition or deferred compensation agreement, or an executive compensation, incentive bonus or other bonus, employee pension, profit-sharing, savings, retirement, supplemental retirement, stock option, stock purchase, stock appreciation rights, restricted stock, other equity-based compensation, severance pay, salary continuation, life, health, hospitalization, sick leave, vacation pay, disability or accident insurance plan, corporate-owned or key-man life insurance or other employee benefit plan, program, arrangement, agreement or commitment, including any “employee benefit plan” (as defined in Section 3(3) of ERISA), sponsored or maintained by such entity (or to which such entity contributes or is required to contribute).

     “COBRA” shall mean the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code Section 4980B and Sections 601 through 608 of ERISA, together with all regulations and proposed regulations promulgated thereunder.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

     “ERISA Affiliate” shall mean with respect to any Person, each business or entity which is a member of a “controlled group of corporations,” under “common control” or a member of an “affiliated service group” with such Person within the meaning of Sections 414(b), (c) or (m) of the Code, or required to be aggregated with such Person under Section 414(o) of the Code, or under “common control” with such Person within the meaning of Section 4001(a)(14) of ERISA.

     “Forestar Benefit Plan” shall mean any Benefit Plan sponsored, maintained or contributed to by any member of the Forestar Group or any ERISA Affiliate thereof immediately following the Forestar Distribution Date, including the Forestar 401(k) Plan and the Forestar Welfare Plans.

     “Forestar Employee” shall mean an active employee or an employee on vacation or on approved leave of absence (including maternity, paternity, family, sick leave, salary continuation, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, and leave under the Family Medical Leave Act and other approved leaves) who, on the Forestar Distribution Date, is employed by or will be employed by Forestar or any member of the Forestar Group.

     “Forestar Option” shall mean an option to purchase shares of Forestar Common Stock as of the Forestar Distribution Date, which shall be issued pursuant to the Forestar Stock Plan as part of the adjustment to Temple-Inland Options in connection with the Forestar Distribution.

     “Forestar Participant” shall mean any individual who, immediately following the Forestar Distribution Date, is a Forestar Employee, a Former Forestar Employee, or a beneficiary, dependent or alternate payee of any of the foregoing.

     “Forestar Performance Share” shall mean a unit representing a general unsecured promise to deliver the cash equivalent of a share of Forestar Common Stock and dividend equivalents, if applicable, upon the satisfaction of a performance or service based vesting requirement, which unit is issued pursuant to a Temple-Inland Stock Plan as part of the adjustment to Temple-Inland Performance Shares in connection with the Forestar Distribution.

2

     “Forestar Restricted Share” shall mean a share of Forestar Common Stock that is subject to forfeiture based on the extent of attainment of a vesting requirement, which share is issued as part of the adjustment to Temple-Inland Restricted Shares in connection with the Forestar Distribution.

     “Forestar Restricted Stock Unit” shall mean a unit issued by Forestar or one of its Affiliates representing a general unsecured promise by Forestar or one of its Affiliates to deliver a share of Forestar Common Stock or dividend equivalents, if applicable (or the cash equivalent of either), upon the satisfaction of a service based vesting requirement, which unit is issued pursuant to the Forestar Stock Plan as part of the adjustment to Temple-Inland Restricted Stock Units in connection with the Forestar Distribution.

     “Forestar Service Plans” shall mean, collectively, the Forestar 401(k) Plan and the severance and health and welfare plans maintained by a member of the Forestar Group to the extent eligibility for or level of benefits thereunder is dependent upon length of service, including the Forestar vacation, health and welfare, sick leave, salary continuation and retiree medical, dental and life programs, if any.

     “Former Forestar Employee” shall mean, as of the Distribution Date, any individual who, before the Forestar Distribution Date, terminated employment with Forestar or its predecessors or any member of the Forestar Group and did not commence employment with a member of the Guaranty Group or the Temple-Inland Group.

     “Former Guaranty Employee” shall mean, as of the Distribution Date, any individual who, before the Guaranty Distribution Date, terminated employment with Guaranty or its predecessors or any member of the Guaranty Group and did not commence employment with a member of the Forestar Group or the Temple-Inland Group.

     “Former Temple-Inland Employee” shall mean, as of the Final Distribution Date, any individual who, before the Final Distribution Date, terminated employment with Temple-Inland or its predecessors or any member of the Temple-Inland Group and did not commence employment with a member of the Forestar Group or the Guaranty Group; provided, that, in the event that Temple-Inland makes a public announcement that its Board of Directors has determined that the shares of Guaranty or Forestar shall not be distributed by Temple-Inland to its stockholders, “Former Temple-Inland Employee” shall also include each individual who would have been a Former Guaranty Employee or Former Forestar Employee, respectively, had such distribution occurred.

     “Guaranty Benefit Plan” shall mean any Benefit Plan sponsored, maintained or contributed to by any member of the Guaranty Group or any ERISA Affiliate thereof immediately following the Guaranty Distribution Date, including the Guaranty Savings Plan and the Guaranty Welfare Plans.

     “Guaranty Employee” shall mean an active employee or an employee on vacation or on approved leave of absence (including maternity, paternity, family, sick leave, salary continuation, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, and leave under the Family Medical Leave Act and other approved leaves) who, on the Guaranty Distribution Date, is employed by or will be employed by Guaranty or any member of the Guaranty Group.

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     “Guaranty Option” shall mean an option to purchase shares of Guaranty Common Stock as of the Guaranty Distribution Date, which shall be issued pursuant to the Guaranty Stock Plan as part of the adjustment to Temple-Inland Options in connection with the Guaranty Distribution.

     “Guaranty Participant” shall mean any individual who, immediately following the Guaranty Distribution Date, is a Guaranty Employee, a Former Guaranty Employee, or a beneficiary, dependent or alternate payee of any of the foregoing.

     “Guaranty Performance Share” shall mean a unit representing a general unsecured promise to deliver the cash equivalent of a share of Guaranty Common Stock and dividend equivalents, if applicable, upon the satisfaction of a performance or service based vesting requirement, which unit is issued pursuant to a Temple-Inland Stock Plan as part of the adjustment to Temple-Inland Performance Shares in connection with the Guaranty Distribution.

     “Guaranty Restricted Share” shall mean a share of Guaranty Common Stock that is subject to forfeiture based on the extent of attainment of a vesting requirement, which share is issued as part of the adjustment to Temple-Inland Restricted Shares in connection with the Guaranty Distribution.

     “Guaranty Restricted Stock Unit” shall mean a unit issued by Guaranty or one of its Affiliates representing a general unsecured promise by Guaranty or one of its Affiliates to deliver a share of Guaranty Common Stock or dividend equivalents, if applicable (or the cash equivalent of either), upon the satisfaction of a service based vesting requirement, which unit is issued pursuant to the Guaranty Stock Plan as part of the adjustment to Temple-Inland Restricted Stock Units in connection with the Guaranty Distribution.

     “Guaranty Service Plans” shall mean, collectively, the Guaranty Savings Plan and the severance and health and welfare plans maintained by a member of the Guaranty Group to the extent eligibility for or level of benefits thereunder is dependent upon length of service, including the Guaranty vacation, health and welfare, sick leave, salary continuation and retiree medical, dental and life programs, if any.

     “HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996, as amended.

     “Initial Forestar Stock Price” shall mean, unless otherwise determined by the Management Development and Executive Compensation Committee of the Temple-Inland Board of Directors in its sole discretion in order to effect an equitable adjustment of a Temple-Inland Option in connection with the Forestar Distribution, the closing per share trading price of Forestar Common Stock on a when issued basis on the Forestar Distribution Date or, if none, the opening per share trading price of Forestar Common Stock on the first date following the Forestar Distribution Date on which there is trading.

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     “Initial Guaranty Stock Price” shall mean, unless otherwise determined by the Management Development and Executive Compensation Committee of the Temple-Inland Board of Directors in its sole discretion in order to effect an equitable adjustment of a Temple-Inland Option in connection with the Guaranty Distribution, the closing per share trading price of Guaranty Common Stock on a when issued basis on the Guaranty Distribution Date or, if none, the opening per share trading price of Guaranty Common Stock on the first date following the Guaranty Distribution Date on which there is trading.

     “Participating Company” shall mean Temple-Inland or any Person (other than an individual) participating in a Temple-Inland Benefit Plan.

     “Post-Forestar Temple-Inland Stock Price” shall mean, unless otherwise determined by the Management Development and Executive Compensation Committee of the Temple-Inland Board of Directors in its sole discretion in order to effect an equitable adjustment of a Temple-Inland Option in connection with the Forestar Distribution, the closing per share trading price of Temple-Inland Common Stock on an ex-distribution basis on the Forestar Distribution Date or, if none, the regular way closing per share trading price of Temple-Inland Common Stock on the Forestar Distribution Date (or, if there is no trading on the Forestar Distribution Date, on the first following date on which there is trading) less the Initial Forestar Stock Price and, if the Guaranty Distribution and Forestar Distribution occur on the same date, also less the Initial Guaranty Stock Price.

     “Post-Guaranty Temple-Inland Stock Price” shall mean, unless otherwise determined by the Management Development and Executive Compensation Committee of the Temple-Inland Board of Directors in its sole discretion in order to effect an equitable adjustment of a Temple-Inland Option in connection with the Guaranty Distribution, the closing per share trading price of Temple-Inland Common Stock on an ex-distribution basis on the Guaranty Distribution Date or, if none, the regular way closing per share trading price of Temple-Inland Common Stock on the Guaranty Distribution Date (or, if there is no trading on the Guaranty Distribution Date, on the first following date on which there is trading) less the Initial Guaranty Stock Price and, if the Guaranty Distribution and Forestar Distribution occur on the same date, also less the Initial Forestar Stock Price.

     “Temple-Inland Benefit Plan” shall mean any Benefit Plan sponsored, maintained or contributed to by any member of the Temple-Inland Group or any ERISA Affiliate thereof immediately following the Final Distribution Date (and, notwithstanding any contribution requirements imposed on Temple-Inland pursuant to Section 4.2, exclusive of the Guaranty Savings Plan).

     “Temple-Inland Employee” shall mean an active employee or an employee on vacation or on approved leave of absence (including maternity, paternity, family, sick leave, salary continuation, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, and leave under the Family Medical Leave Act and other approved leaves) who, on the Final Distribution Date, is employed by or will be employed by Temple-Inland or any member of the Temple-Inland Group; provided, that, in the event that

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Temple-Inland makes a public announcement that its Board of Directors has determined that the shares of Guaranty or Forestar shall not be distributed by Temple-Inland to its stockholders, “Temple-Inland Employee” shall also include each individual who would have been a Guaranty Employee or Forestar Employee, respectively, had such distribution occurred.

     “Temple-Inland Option” shall mean an option to purchase shares of Temple-Inland Common Stock granted pursuant to one of the Temple-Inland Stock Plans.

     “Temple-Inland Participant” shall mean any individual who, immediately following the Final Distribution Date, is a Temple-Inland Employee, a Former Temple-Inland Employee or a beneficiary, dependent or alternate payee of any of the foregoing.

     “Temple-Inland Performance Share” shall mean a share of phantom stock granted by Temple-Inland or one of its Affiliates pursuant to one of the Temple-Inland Stock Plans representing a general unsecured promise by Temple-Inland or one of its Affiliates to deliver a share of Temple-Inland Common Stock or dividend equivalents, if applicable (or the cash equivalent of either), upon the satisfaction of a performance based vesting requirement and including phantom stock units and bonus phantom shares granted by Temple-Inland effective August 9, 2007, in substitution for phantom stock awards previously granted by Temple-Inland in 2006 or 2007.

     “Temple-Inland Restricted Share” shall mean a share of Temple-Inland Common Stock granted by Temple-Inland or one of its Affiliates pursuant to one of the Temple-Inland Stock Plans that is subject to forfeiture based on the extent of attainment of a vesting requirement.

     “Temple-Inland Restricted Stock Unit” shall mean a unit granted by Temple-Inland or one of its Affiliates pursuant to one of the Temple-Inland Stock Plans representing a general unsecured promise by Temple-Inland or one of its Affiliates to deliver a share of Temple-Inland Common Stock or dividend equivalents, if applicable (or the cash equivalent of either), upon the satisfaction of a vesting requirement (other than performance based vesting requirements) and exclusive of restricted stock units granted by Temple-Inland effective August 9, 2007, in substitution for equity incentive awards previously granted by Temple-Inland in 2006 or 2007.

     “Temple-Inland Retirement Plan” shall mean the Temple-Inland Retirement Plan.

     “Temple-Inland Savings Plan” shall mean the Temple-Inland Savings Plan (formerly known as the Temple-Inland Salaried Savings Plan and/or the Temple-Inland Non-Salaried Savings Plan).

     “Temple-Inland Service Plans” shall mean, collectively, the Temple-Inland Retirement Plan, the Temple-Inland Savings Plan, and the severance and health and welfare benefit plans maintained by a member of the Temple-Inland Group to the extent eligibility for or level of benefits thereunder is dependent upon length of service, including the Temple-Inland vacation, health and welfare, sick leave, salary continuation and retiree medical, dental and life programs, if any.

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     “Temple-Inland Stock Plans” shall mean, collectively, the Temple-Inland Inc. 1993 Stock Option Plan, Temple-Inland Inc. 1997 Stock Option Plan, Temple-Inland Inc. 2001 Stock Incentive Plan, Temple-Inland Inc. 2003 Stock Incentive Plan, Temple-Inland Inc. Stock Deferral and Payment Plan and Temple-Inland Inc. Directors Fee Deferral Plan.

     1.2 References; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. Unless the context otherwise requires, the words “include”, “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation”. Unless the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Unless the context otherwise requires, the words “hereof”, “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement.

ARTICLE II

GENERAL PRINCIPLES

     Section 2.1 Assumption and Retention of Liabilities; Related Assets.

          (a) As of the Final Distribution Date, except as otherwise expressly provided for in this Agreement, Temple-Inland shall, or shall cause one or more members of the Temple-Inland Group to, assume or retain, as applicable, and pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all Temple-Inland Benefit Plans, (ii) all Liabilities (excluding Liabilities incurred under a Benefit Plan except as otherwise provided in this Agreement) with respect to the employment, service, termination of employment or termination of service of all Temple-Inland Employees, Former Temple-Inland Employees, Guaranty Employees, Former Guaranty Employees, Forestar Employees and Former Forestar Employees and their dependents and beneficiaries (and any alternate payees in respect thereof) and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker or in any other employment, non-employment, or retainer arrangement, or relationship with any member of the Temple-Inland Group, Guaranty Group or Forestar Group), in each case to the extent arising in connection with or as a result of employment with or the performance of services for any member of the Temple-Inland Group, and (iii) any other Liabilities or obligations expressly assigned to Temple-Inland or any of its Affiliates under this Agreement. For purposes of clarification, the Liabilities assumed or retained by the Temple-Inland Group as provided for in this Section 2.1(a) are intended to be Retained Business Liabilities as such term is defined in the Separation Agreement.

          (b) As of the Relevant Time, except as otherwise expressly provided for in this Agreement, Guaranty shall, or shall cause one or more members of the Guaranty Group to, assume or retain, as applicable, and pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all Guaranty Benefit Plans, (ii) all Liabilities (excluding Liabilities incurred

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under a Benefit Plan except as otherwise provided in this Agreement) with respect to the employment, service, termination of employment or termination of service of all Temple-Inland Employees, Former Temple-Inland Employees, Guaranty Employees, Former Guaranty Employees, Forestar Employees and Former Forestar Employees and their dependents and beneficiaries (and any alternate payees in respect thereof) and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker or in any other employment, non-employment, or retainer arrangement, or relationship with any member of the Temple-Inland Group, Guaranty Group or Forestar Group), in each case to the extent arising in connection with or as a result of employment with or the performance of services for any member of the Guaranty Group, and (iii) any other Liabilities or obligations expressly assigned to Guaranty or any of its Affiliates under this Agreement. For purposes of clarification, the Liabilities assumed or retained by the Guaranty Group as provided for in this Section 2.1(b) are intended to be Financial Services Liabilities as such term is defined in the Separation Agreement.

          (c) As of the Relevant Time, except as otherwise expressly provided for in this Agreement, Forestar shall, or shall cause one or more members of the Forestar Group to, assume or retain, as applicable, and pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all Forestar Benefit Plans, (ii) all Liabilities (excluding Liabilities incurred under a Benefit Plan except as otherwise provided in this Agreement) with respect to the employment, service, termination of employment or termination of service of all Temple-Inland Employees, Former Temple-Inland Employees, Guaranty Employees, Former Guaranty Employees, Forestar Employees and Former Forestar Employees and their dependents and beneficiaries (and any alternate payees in respect thereof) and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker or in any other employment, non-employment, or retainer arrangement, or relationship with any member of the Temple-Inland Group, Guaranty Group or Forestar Group), in each case to the extent arising in connection with or as a result of employment with or the performance of services for any member of the Forestar Group, and (iii) any other Liabilities or obligations expressly assigned to Forestar or any of its Affiliates under this Agreement. For purposes of clarification, the Liabilities assumed or retained by the Forestar Group as provided for in this Section 2.1(c) are intended to be Real Estate Liabilities as such term is defined in the Separation Agreement.

          (d) From time to time after the Relevant Time, the Parties shall promptly reimburse one another, upon reasonable request of the Party requesting reimbursement and the presentation by such Party of such substantiating documentation as the other Party shall reasonably request, for the cost of any obligations or Liabilities satisfied or assumed by the Party requesting reimbursement or its Affiliates that are, or that have been made pursuant to this Agreement, the responsibility of the other Party or any of its Affiliates. Any such request for reimbursement must be made not later than the first anniversary of the Relevant Time.

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          (e) Temple-Inland shall retain responsibility for all employee-related regulatory filings for reporting periods ending at or prior to the Relevant Time except for Equal Employment Opportunity Commission EEO-1 reports and affirmative action program (AAP) reports and responses to Office of Federal Contract Compliance Programs (OFCCP) submissions, for which Temple-Inland will provide data and information (to the extent permitted by applicable Laws and consistent with Section 10.1) to Guaranty or Forestar, as the case may be, who will be responsible for making such filings in respect of Guaranty Employees and Former Guaranty Employees, on the one hand, and Forestar Employees and Former Forestar Employees on the other hand, respectively.

     Section 2.2 Participation in Temple-Inland Benefit Plans. Except as otherwise expressly provided for in this Agreement or as otherwise expressly agreed to in writing between or among the affected Parties, (i) effective as of the Relevant Time, Guaranty, Forestar and each member of the Guaranty Group and Forestar Group shall cease to be a Participating Company in any Temple-Inland Benefit Plan, and (ii) each Guaranty Participant, Forestar Participant and any other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or nonpayroll worker of any member of the Guaranty Group or Forestar Group or in any other employment, non-employment, or retainer arrangement, or relationship with any member of the Guaranty Group or Forestar Group), effective as of the Relevant Time, shall cease to participate in, be covered by, accrue benefits under, be eligible to contribute to or have any rights under any Temple-Inland Benefit Plan (except to the extent of obligations that accrued before the Relevant Time, including benefits accrued as of the Relevant Time under the Temple-Inland Retirement Plan, and that are not otherwise addressed herein), and Temple-Inland, Guaranty and Forestar shall take all necessary action to effectuate each such cessation.

     Section 2.3 Service Recognition.

          (a) Pre-Distribution Service Credit. Guaranty shall give each Guaranty Participant, and Forestar shall give each Forestar Participant, full credit for purposes of eligibility, vesting, determination of level of benefits, and, to the extent applicable, benefit accruals under any Guaranty Benefit Plan or Forestar Benefit Plan, respectively, for such Guaranty Participant’s or Forestar Participant’s service, respectively, with any member of the Temple-Inland Group prior to the Guaranty Distribution Date or Forestar Distribution Date, respectively, to the same extent such service was recognized by the applicable Temple-Inland Benefit Plans immediately prior to the Guaranty Distribution Date or Forestar Distribution Date; provided, that, such service shall not be recognized to the extent that such recognition would result in the duplication of benefits.

          (b) Post-Distribution Reciprocal Service Crediting. Each of Temple-Inland, Guaranty and Forestar (acting directly or through their respective Affiliates) shall cause each of the Temple-Inland Service Plans, Guaranty Service Plans and Forestar Service Plans, respectively, to provide the following service crediting rules effective as of the Relevant Time:

     (i) If a Temple-Inland Employee, Guaranty Employee or Forestar Employee, respectively, who participates in any of the Temple-Inland Service Plans, Guaranty Service Plans or Forestar Service Plans, respectively, directly transfers employment among any of the Temple-Inland Group, Guaranty Group or Forestar Group prior to the first anniversary

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of the Distribution Date (the “Service Crediting Date”), then such employee’s service with the group employing the employee immediately before the transfer shall be recognized for purposes of eligibility, vesting and level of benefits under the appropriate Temple-Inland Service Plans, Guaranty Service Plans and Forestar Service Plans, in each case to the same extent as such employee’s service was recognized under the corresponding service plans immediately before the transfer; provided, that, such service shall not be recognized to the extent that such recognition would result in the duplication of benefits.

     (ii) If a Temple-Inland Employee, Guaranty Employee or Forestar Employee, respectively, who participates in any of the Temple-Inland Service Plans, Guaranty Service Plans or Forestar Service Plans, respectively, either transfers employment among any of the Temple-Inland Group, Guaranty Group or Forestar Group on or after the Service Crediting Date or does not directly transfer employment among such group members, then, except to the extent required by applicable Law, such employee’s service with the group employing the employee immediately before the transfer shall not be recognized for any purpose under the service plans of the post-transfer employer.

     Section 2.4 Approval by Temple-Inland As Sole Stockholder. Effective as of the Relevant Time, Guaranty shall have adopted the Guaranty Financial Group Inc. 2007 Stock Incentive Plan (the “Guaranty Stock Plan”) and Forestar shall have adopted the Forestar Real Estate Group Inc. 2007 Stock Incentive Plan (the “Forestar Stock Plan”), each of which shall permit the issuance of long-term incentive awards that have material terms and conditions substantially similar to those long-term incentive awards issued under the relevant Temple-Inland Stock Plans in respect of which Guaranty long-term incentive awards and Forestar long-term incentive awards, respectively, will be issued in connection with the Guaranty Distribution and Forestar Distribution. The Guaranty Stock Plan and Forestar Stock Plan shall be approved prior to the Relevant Time by Temple-Inland as the sole stockholder of Guaranty and Forestar, respectively.

ARTICLE III

QUALIFIED DEFINED BENEFIT PLAN

     Section 3.1 Retention of Liabilities. Following the Relevant Time, Temple-Inland (acting directly or through its Affiliates) shall retain, and neither Guaranty nor Forestar (nor any of their respective Affiliates) shall have any obligation whatsoever with regard to, all obligations and Liabilities under, or with respect to, the Temple-Inland Retirement Plan. No assets shall be transferred from the Temple-Inland Retirement Plan to either Forestar or Guaranty or any benefit plan maintained by either of them. For purposes of clarification, the Liabilities retained by Temple-Inland as provided for in this Section 3.1 are intended to be Retained Business Liabilities as such term is defined in the Separation Agreement.

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ARTICLE IV

QUALIFIED DEFINED CONTRIBUTION PLAN

     Section 4.1 Forestar 401(k) Plan.

          (a) Establishment of the Forestar 401(k) Plan. Effective as of the Forestar Distribution Date, Forestar shall, or shall have caused one of its Affiliates to, establish a defined contribution plan and trust for the benefit of Forestar Participants (the “Forestar 401(k) Plan”). Forestar shall be responsible for taking all necessary, reasonable and appropriate action to establish, maintain and administer the Forestar 401(k) Plan so that it is qualified under Section 401(a) of the Code and that the related trust thereunder is exempt from Federal income tax under Section 501(a) of the Code. Forestar (acting directly or through its Affiliates) shall be responsible for any and all Liabilities and other obligations with respect to the Forestar 401(k) Plan.

          (b) Transfer of Savings Plan Assets. Not later than ninety (90) days following the Forestar Distribution Date (or such later time as mutually agreed by Temple-Inland and Forestar), Temple-Inland shall cause the accounts (including any outstanding loan balances) in the Temple-Inland Savings Plan attributable to Forestar Participants and all of the Assets in the Temple-Inland Savings Plan related thereto, in each case exclusive of accounts and Assets attributable to Temple-Inland Common Stock, Forestar Common Stock, and Guaranty Common Stock, to be transferred in-kind to the Forestar 401(k) Plan, and Forestar shall cause the Forestar 401(k) Plan to accept such transfer of accounts and underlying Assets and, effective as of the date of such transfer, to assume and to fully perform, pay and discharge, all obligations of the Temple-Inland Savings Plan relating to the accounts of Forestar Participants (to the extent the Assets related to those accounts are actually transferred from the Temple-Inland Savings Plan to the Forestar 401(k) Plan). Not later than ninety (90) days following the Forestar Distribution Date (or such later time as mutually agreed by Forestar and Guaranty), Guaranty shall cause the accounts (including any outstanding loan balances) in the Temple-Inland Savings and Retirement Plan (to be renamed the Guaranty Financial Group Inc. Savings and Retirement Plan (the “Guaranty Savings Plan”)) attributable to Forestar Participants and all of the Assets in the Guaranty Savings Plan related thereto, in each case exclusive of accounts and Assets attributable to Temple-Inland Common Stock, Forestar Common Stock, and Guaranty Common Stock, to be transferred in-kind to the Forestar 401(k) Plan, and Forestar shall cause the Forestar 401(k) Plan to accept such transfer of accounts and underlying Assets and, effective as of the date of such transfer, to assume and to fully perform, pay and discharge, all obligations of the Guaranty Savings Plan relating to the accounts of Forestar Participants (to the extent the Assets related to those accounts are actually transferred from the Guaranty Savings Plan to the Forestar 401(k) Plan). Temple-Inland and Guaranty shall cause the Temple-Inland Savings Plan and Guaranty Savings Plan, respectively, to provide that Forestar Participants shall continue to participate in the Temple-Inland Savings Plan and Guaranty Savings Plan, as the case may be, in respect of their accounts thereunder attributable to investments in Temple-Inland Common Stock, Forestar Common Stock, and Guaranty Common Stock under such plans and that they may divest any holdings of Temple-Inland Common Stock, Forestar Common Stock, and Guaranty Common Stock in their respective accounts under such plans into any of the other investment alternatives made available under such plans from time to time; provided, that, Temple-Inland and Guaranty may in their discretion provide that Forestar Participants shall not be permitted to reinvest any such divested amounts in Temple-Inland Common Stock, Forestar Common Stock, or Guaranty Common Stock and provide that Temple-Inland Common Stock, Forestar Common Stock, and Guaranty Common Stock shall no longer be offered as an investment alternative under such plans.

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Subsequent to the transfer of the accounts and related Assets described in the preceding provisions of this Section 4.1(b) and as soon as practicable following the time when either a Forestar Participant fully divests of his or her holdings of Temple-Inland Common Stock, Forestar Common Stock and Guaranty Common Stock under the Temple-Inland Savings Plan or Guaranty Savings Plan, respectively, or (in the case of the Temple-Inland Savings Plan) Forestar Common Stock and Guaranty Common Stock or (in the case of the Guaranty Savings Plan) Temple-Inland Common Stock and Forestar Common Stock are no longer offered as an investment alternative under the Temple-Inland Savings Plan or Guaranty Savings Plan, respectively, Temple-Inland and Guaranty, as the case may be, shall cause the accounts in the Temple-Inland Savings Plan or the Guaranty Savings Plan, as the case may be, attributable to Forestar Participants and all of the Assets in the Temple-Inland Savings Plan and Guaranty Savings Plan related thereto to be transferred to the Forestar 401(k) Plan (in-kind or in the form of liquid assets, as determined by Temple-Inland and Guaranty, respectively, in their discretion), and Forestar shall cause the Forestar 401(k) Plan to accept such transfer of accounts and underlying Assets and, effective as of the date of such transfer, to assume and to fully perform, pay and discharge, all obligations of the Temple-Inland Savings Plan and Guaranty Savings Plan, as the case may be, relating to the accounts of Forestar Participants (to the extent the Assets related to those accounts are actually transferred from the Temple-Inland Savings Plan and Guaranty Savings Plan to the Forestar 401(k) Plan). Any transfer of Assets pursuant to this Section 4.1(b) shall be conducted in accordance with Section 414(l) of the Code, Treasury Regulation Section 1.414(1)-1, and Section 208 of ERISA.

          (c) Continuation of Elections. As of the Forestar Distribution Date, Forestar (acting directly or through its Affiliates) shall cause the Forestar 401(k) Plan to recognize and maintain all Temple-Inland Savings Plan and Guaranty Savings Plan elections, including, but not limited to, deferral, investment, and payment form elections, dividend elections, beneficiary designations, and the rights of alternate payees under qualified domestic relations orders with respect to Forestar Participants, to the extent such election or designation is available under the Forestar 401(k) Plan.

          (d) Form 5310-A. No later than thirty (30) days prior to the date of any transfer of Assets and Liabilities pursuant to Section 4.1(b), Temple-Inland, Guaranty and Forestar (each acting directly or through their respective Affiliates) shall, to the extent necessary, file Internal Revenue Service Form 5310-A regarding the transfer of Assets and Liabilities from the Temple-Inland Savings Plan and Guaranty Savings Plan, respectively, to the Forestar 401(k) Plan as described in this Section 4.1.

          (e) Contributions as of the Distribution Date. All contributions payable to the Temple-Inland Savings Plan with respect to employee deferrals and contributions, matching contributions and other contributions for Forestar Participants through the Forestar Distribution Date, determined in accordance with the terms and provisions of the Temple-Inland Savings Plan, ERISA and the Code, shall be paid by Temple-Inland to the Temple-Inland Savings Plan prior to the date of the Asset transfer described in subsection (b), above.

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     Section 4.2 Guaranty Savings Plan. Effective as of the Relevant Time, Guaranty shall assume sponsorship of the Guaranty Savings Plan, adopt a trust for such plan, and retain any and all Liabilities and other obligations with respect to the Guaranty Savings Plan in accordance with its terms at the Guaranty Distribution Date as they may be amended from time to time. All contributions payable to the Temple-Inland Savings and Retirement Plan with respect to employee deferrals and contributions, matching contributions and other contributions for Guaranty Participants through the Guaranty Distribution Date, determined in accordance with the terms and provisions of the Temple-Inland Savings and Retirement Plan, ERISA and the Code, shall be paid by Temple-Inland to the Guaranty Savings Plan within two weeks or as soon as administratively practicable following the Guaranty Distribution Date. Temple-Inland shall retain responsibility for the preparation of all regulatory filings in respect of the Guaranty Savings Plan for plan years ending prior to January 1, 2008, including preparing the Form 5500 for the Temple-Inland Savings and Retirement Plan for the 2007 plan year (including responsibility for causing the completion of any required discrimination testing and plan audits), and Temple-Inland shall cause the timely filing of an extension for filing such Form 5500 until October 15, 2008.

     Section 4.3 Temple-Inland/Guaranty Savings Plan Transfers. Temple-Inland and Guaranty will cooperate and use commercially reasonable efforts to provide for transfers of accounts (and related Assets and Liabilities) between the Temple-Inland Savings Plan and Guaranty Savings Plan in respect of Temple-Inland Employees who transfer employment to Guaranty and Guaranty Employees who transfer employment to Temple-Inland in connection with the Guaranty Distribution.

ARTICLE V

HEALTH AND WELFARE PLANS

     Section 5.1 Health And Welfare Plans Maintained By Temple-Inland Prior To The Distribution Date.

          (a) Establishment of Welfare Plans. Temple-Inland or one or more of its Affiliates maintain health and welfare plans (the “Temple-Inland Welfare Plans”) for the benefit of eligible Temple-Inland Participants, Guaranty Participants and Forestar Participants. Effective as of the Guaranty Distribution Date, Guaranty shall, or shall cause a Guaranty Affiliate to, adopt, for the benefit of eligible Guaranty Participants, health and welfare plans (collectively, the “Guaranty Welfare Plans”). Effective as of the Forestar Distribution Date, Forestar shall, or shall cause a Forestar Affiliate to, adopt, for the benefit of eligible Forestar Participants, health and welfare plans (collectively, the “Forestar Welfare Plans”).

          (b) Terms of Participation in Guaranty/Forestar Welfare Plans. Guaranty and Forestar (acting directly or through their respective Affiliates) shall use commercially reasonable efforts to cause all Guaranty Welfare Plans and Forestar Welfare Plans, respectively, to (i) waive all limitations as to preexisting conditions, exclusions, and service conditions with respect to participation and coverage requirements applicable to Guaranty Participants and Forestar Participants, respectively, other than limitations that were in effect with respect to Guaranty Participants and Forestar Participants as of the Relevant Time under the Temple-Inland Welfare Plans, and (ii) waive any waiting period limitation or evidence of insurability requirement that would otherwise be applicable to a Guaranty Participant or Forestar Participant, respectively, following the Relevant Time to the extent such Guaranty Participant or Forestar Participant had satisfied any similar limitation under the analogous Temple-Inland Welfare Plan.

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          (c) Reimbursement Account Plan. Temple-Inland shall retain the Liability for administering and paying, under the Temple-Inland Dependent Care Spending Account Plan and the Temple-Inland Health Care Spending Account Plan, all reimbursement claims of Temple-Inland Participants, Guaranty Participants and Forestar Participants with respect to calendar year 2007, whether arising at, before or after the Relevant Time.

          (d) Employees on Leave. Notwithstanding any other provision of this Agreement to the contrary, Guaranty and Forestar shall assume Liability for payment of any salary continuation, short term disability or health and welfare coverage with respect to Guaranty Employees and Former Guaranty Employees and Forestar Employees and Former Forestar Employees, respectively, and Temple-Inland shall have no further responsibility for such disabled employees or employees on approved leave after the Relevant Time.

          (e) COBRA and HIPAA. Effective as of the Guaranty Distribution Date, Temple-Inland shall retain responsibility for compliance with the health care continuation coverage requirements of COBRA with respect to Guaranty Participants who, as of the day prior to the Guaranty Distribution Date, were covered under a Temple-Inland Welfare Plan pursuant to COBRA. Effective as of the Forestar Distribution Date, Temple-Inland shall retain responsibility for compliance with the health care continuation coverage requirements of COBRA with respect to Forestar Participants who, as of the day prior to the Forestar Distribution Date, were covered under a Temple-Inland Welfare Plan pursuant to COBRA. Temple-Inland (acting directly or through its Affiliates) shall be responsible for administering compliance with any certificate of creditable coverage requirements of HIPAA or Medicare applicable to the Temple-Inland Welfare Plans with respect to Guaranty Participants and Forestar Participants. The Parties hereto agree that neither the Guaranty Distribution nor the Forestar Distribution nor any transfers of employment that occur as of the Guaranty Distribution Date or Forestar Distribution Date, respectively, shall constitute a COBRA qualifying event for purposes of COBRA; provided, that, in all events, Guaranty or Forestar (acting directly or through their respective Affiliates) shall assume, or shall have caused the Guaranty Welfare Plans or Forestar Welfare Plans, respectively, to assume, responsibility for compliance with the health care continuation coverage requirements of COBRA with respect to those Temple-Inland Employees whose employment is transferred directly from the Temple-Inland Group to the Guaranty Group or Forestar Group, respectively, as of the Guaranty Distribution Date or Forestar Distribution Date, respectively, to the extent such individual was, as of the day prior to such transfer of employment, covered under a Temple-Inland Welfare Plan.

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          (f) Liabilities.

               (i) Insured Benefits. With respect to employee welfare and fringe benefits that are provided through the purchase of insurance, Temple-Inland shall timely pay all premiums in respect of coverage of Guaranty Participants and Forestar Participants in respect of the period before the Guaranty Distribution Date and Forestar Distribution Date, respectively, and Guaranty and Forestar, respectively, shall cause Temple-Inland not to have any liability in respect of any and all claims of Guaranty Participants and Forestar Participations that are incurred under the Guaranty Welfare Plans and Forestar Welfare Plans on or after the Guaranty Distribution Date and Forestar Distribution Date, respectively.

               (ii) Self-Insured Benefits. With respect to employee welfare and fringe benefits that are provided on a self-insured basis, (A) Temple-Inland (acting directly or through its Affiliates) shall fully perform, pay and discharge, under the Temple-Inland Welfare Plans, all claims of Guaranty Participants and Forestar Participants that are incurred but not paid prior to the Guaranty Distribution Date and Forestar Distribution Date, respectively (and Temple-Inland shall retain any reserve in respect of such claims that may exist as of the respective Distribution Date), (B) Guaranty (acting directly or through its Affiliates) shall fully perform, pay and discharge, under the Guaranty Welfare Plans, from and after the Guaranty Distribution Date, all claims of Guaranty Participants that are incurred on or after the Guaranty Distribution Date, and (C) Forestar (acting directly or through its Affiliates) shall fully perform, pay and discharge, under the Forestar Welfare Plans, from and after the Forestar Distribution Date, all claims of Forestar Participants that are incurred on or after the Forestar Distribution Date.

               (iii) Incurred Claim Definition. For purposes of this Section 5.1(f), a claim or Liability is deemed to be incurred (A) with respect to medical, dental, vision and/or prescription drug benefits, upon the rendering of health services giving rise to such claim or Liability; (B) with respect to life insurance, accidental death and dismemberment and business travel accident insurance, upon the occurrence of the event giving rise to such claim or Liability; and (C) with respect to disability benefits, upon the date of an individual’s disability, as determined by the disability benefit insurance carrier or claim administrator, giving rise to such claim or Liability.

               (iv) Claim Experience. Notwithstanding the foregoing, the Parties (acting directly or through their Affiliates) shall take any action necessary to ensure that any claims experience under the Temple-Inland Welfare Plans attributable to Guaranty Participants and Forestar Participants shall be available to the Guaranty Welfare Plans and Forestar Welfare Plans, respectively.

     Section 5.2 Time-Off Benefits. Guaranty and Forestar shall credit each Guaranty Participant and Forestar Participant, respectively, with the amount of accrued but unused vacation time, sick time and other time-off benefits as such Guaranty Participant and Forestar Participant had with the Temple-Inland Group as of the Relevant Time. Notwithstanding the above, neither Guaranty nor Forestar shall be required to credit any Guaranty Participant or Forestar Participant with any accrual to the extent that a benefit attributable to such accrual is provided by the Temple-Inland Group.

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ARTICLE VI

NONQUALIFIED RETIREMENT PLANS

     Section 6.1 Temple-Inland Retained Nonqualified Plans.

          (a) In General. Except as provided in subsection (b), below, Temple-Inland (acting directly or through its Affiliates) shall retain, and neither Guaranty nor Forestar shall have any obligation whatsoever with regard to, all obligations and Liabilities under, or with respect to, the Temple-Inland Supplemental Executive Retirement Plan or the Temple-Inland Inc. Stock Deferral and Payment Plan. Subject to any applicable employee consents, on or about January 2, 2008 (and in any event as soon as practicable following the Relevant Time but in no event before 2008), Temple-Inland shall pay to any Guaranty Employee or Guaranty Former Employee and to any Forestar Employee or Former Forestar Employee any amounts accrued by such employees under the foregoing plans.

          (b) Certain Stock Accounts. With respect to any amounts credited under the Temple-Inland Inc. Stock Deferral and Payment Plan that are payable in shares of Temple-Inland Common Stock, each share of Temple-Inland Common Stock credited under such plan immediately before the Relevant Time shall, at the Relevant Time, be treated in the same manner as described in Section 7.3 in respect of Temple-Inland Restricted Stock Units (such that each such credited share of Temple-Inland Common Stock shall be deemed to represent Guaranty Common Stock and Forestar Common Stock as well, as the case may be). Upon entitlement to payment under the plan, Temple-Inland shall be solely responsible for the settlement of all shares payable in the form of Temple-Inland Common Stock, Guaranty shall be solely responsible for the settlement of all shares payable in the form of Guaranty Common Stock, and Forestar shall be solely responsible for the settlement of all shares payable in the form of Forestar Common Stock, in each case regardless of the person entitled to payment.

     Section 6.2 Guaranty Retained Nonqualified Plans. Following the Guaranty Distribution Date, Guaranty (acting directly or through its Affiliates) shall retain, and Temple-Inland shall have no obligation whatsoever with regard to, all obligations and Liabilities under, or with respect to, the Supplemental Benefits Plan of Temple-Inland Financial Services Inc. and the Excess Benefits Plan of Temple-Inland Financial Services Inc. Subject to any applicable employee consents, on or before February 29, 2008 (and in any event as soon as practicable following the Relevant Time but in no event before 2008), Guaranty shall pay to any Temple-Inland Employee or Temple-Inland Former Employee and to any Forestar Employee or Former Forestar Employee any amounts accrued by such employees under the foregoing plans.

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ARTICLE VII

LONG-TERM INCENTIVE AWARDS

     Section 7.1 Treatment of Outstanding Temple-Inland Options.

          (a) Guaranty Distribution.

               (i) Each Temple-Inland Option that is outstanding immediately prior to the Guaranty Distribution Date shall, as of the Guaranty Distribution Date, be converted into a Guaranty Option and an adjusted Temple-Inland Option (a “Post-Guaranty Temple-Inland Option”) in accordance with the succeeding paragraphs of this Section 7.1(a).

               (ii) The number of shares subject to the Guaranty Option shall be equal to the number of shares of Guaranty Common Stock to which the option holder would be entitled in the Guaranty Distribution had the shares subject to the Temple-Inland Option represented outstanding shares of Temple-Inland Common Stock as of the Guaranty Distribution Record Date, the resulting number of shares subject to the Guaranty Option being rounded down to the nearest whole share. The number of shares subject to the Temple-Inland Option shall not change. The per share exercise price of the Post-Guaranty Temple-Inland Option shall be equal to the product of (1) the per share exercise price of the Temple-Inland Option immediately prior to the Guaranty Distribution Date (the “Pre-Guaranty Temple-Inland Option Price”) multiplied by (2) a fraction, the numerator of which shall be the Post-Guaranty Temple-Inland Stock Price and the denominator of which shall be the sum of (i) the Post-Guaranty Temple-Inland Stock Price, (ii) the quotient determined by dividing the Initial Guaranty Stock Price by the Guaranty Ratio (as defined below) (such quotient, the “Guaranty Option Conversion Value”), and (iii) if the Guaranty Distribution and Forestar Distribution occur on the same date, the Forestar Option Conversion Value (as defined below), which product shall be rounded up to the nearest whole cent. The per share exercise price of the Guaranty Option shall be equal to the product of (1) the Pre-Guaranty Temple-Inland Option Price multiplied by (2) a fraction, the numerator of which shall be the Initial Guaranty Stock Price and the denominator of which shall be the sum of (i) the Post-Guaranty Temple-Inland Stock Price, (ii) the Guaranty Option Conversion Value, and (iii) if the Guaranty Distribution and Forestar Distribution occur on the same date, the Forestar Option Conversion Value, which product shall be rounded up to the nearest whole cent. For purposes of this paragraph (b), “Guaranty Ratio” shall mean the amount determined by dividing (x) the number one (1) by (y) the number of shares of Guaranty Common Stock distributed in respect of each share of Temple-Inland Common Stock in the Guaranty Distribution.

               (iii) Prior to the Guaranty Distribution Date, Temple-Inland shall take all actions necessary to provide that, effective as of the Guaranty Distribution Date, for purposes of the Post-Guaranty Temple-Inland Options (including in determining exercisability and the post-termination exercise period), a Guaranty Employee’s continuous service with the Guaranty Group or Forestar Group following the Guaranty Distribution Date shall be deemed continued service with Temple-Inland. Guaranty shall issue each Guaranty Option under the Guaranty Stock Plan with terms such that, except as otherwise provided herein, the terms and conditions applicable to the Guaranty Options shall be substantially similar to the terms and conditions applicable to the corresponding Temple-Inland Option, including the terms and conditions relating to vesting and the post-termination exercise period and available methods of exercise (with shares of Guaranty Common Stock distributed as part of the Guaranty Distribution to the holder of the Temple-Inland Option in respect of shares of Temple-Inland Common Stock held by such holder for at least six months treated as if they also had been held by the holder for at least six months for option exercise purposes) and satisfaction of applicable tax withholding and including a provision to the effect that,

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for purposes of the Guaranty Options, continuous service with the Temple-Inland Group, Guaranty Group or Forestar Group from and after the Relevant Time shall be deemed to constitute service with Guaranty.

               (iv) Except as otherwise provided herein, the Guaranty Options and the Post-Guaranty Temple-Inland Options shall remain subject to the terms and conditions of the underlying Temple-Inland Option as in effect immediately prior to the Guaranty Distribution Date (taking into account changes in the identity of the employer, including for purposes of determining whether a change in control has occurred).

               (v) Upon the exercise of a Guaranty Option, regardless of the holder thereof, the exercise price shall be paid to (or otherwise satisfied to the satisfaction of) Guaranty in accordance with the terms of the Guaranty Option, and Guaranty shall be solely responsible for the issuance of Guaranty Common Stock, for ensuring the collection of the employee portion of all applicable withholding tax on behalf of the employing entity of such holder, and for ensuring the remittance of such withholding taxes to the employing entity of such holder. Upon the exercise of a Post-Guaranty Temple-Inland Option, regardless of the holder thereof, the exercise price shall be paid to (or otherwise satisfied to the satisfaction of) Temple-Inland in accordance with the terms of the Post-Guaranty Temple-Inland Option, and Temple-Inland shall be solely responsible for the issuance of Temple-Inland Common Stock, for ensuring the collection of the employee portion of all applicable withholding tax on behalf of the employing entity of such holder and for ensuring the remittance of such withholding taxes to the employing entity of such holder. Upon the exercise of a Guaranty Option or Post-Guaranty Temple-Inland Option, regardless of the holder thereof, the most recent employer of the holder of the option at the time of exercise (or his decedent, as applicable) shall be responsible for the satisfaction of all tax reporting requirements in respect of such exercise, shall be responsible for remitting the appropriate withholding amounts to the appropriate taxing authorities, and shall be entitled to the benefit of any tax deduction in respect of the exercise of all such options (regardless of whether they are Guaranty Options or Post-Guaranty Temple-Inland Options).

          (b) Forestar Distribution.

               (i) Each Temple-Inland Option that is outstanding immediately prior to the Forestar Distribution Date shall, as of the Forestar Distribution Date, be converted into a Forestar Option and an adjusted Post-Guaranty Temple-Inland Option (a “Post-Forestar Temple-Inland Option”) in accordance with the succeeding paragraphs of this Section 7.1(b).

               (ii) The number of shares subject to the Forestar Option shall be equal to the number of shares of Forestar Common Stock to which the option holder would be entitled in the Forestar Distribution had the shares subject to the Post-Guaranty Temple-Inland Option represented outstanding shares of Temple-Inland Common Stock as of the Forestar Distribution Record Date, the resulting number of shares subject to the Forestar Option being rounded down to the nearest whole share. The number of shares subject to the Temple-Inland Option shall not change. The per share exercise price of the Post-Forestar Temple-Inland Option shall be equal to the product of (1) the per share exercise price of the Post-Guaranty Temple-Inland Option immediately prior to the Forestar Distribution Date (the “Pre-Forestar Temple-Inland Option

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Price,” which shall be deemed to equal the Pre-Guaranty Temple-Inland Option Price if the Forestar Distribution and the Guaranty Distribution occur on the same date) multiplied by (2) a fraction, the numerator of which shall be the Post-Forestar Temple-Inland Stock Price and the denominator of which shall be the sum of (i) the Post-Forestar Temple-Inland Stock Price, (ii) the quotient determined by dividing the Initial Forestar Stock Price by the Forestar Ratio (as defined below) (such quotient, the “Forestar Option Conversion Value”), and (iii) if the Forestar Distribution and Guaranty Distribution occur on the same date, the Guaranty Option Conversion Value, which product shall be rounded up to the nearest whole cent. The per share exercise price of the Forestar Option shall be equal to the product of (1) the Pre-Forestar Temple-Inland Option Price multiplied by (2) a fraction, the numerator of which shall be the Initial Forestar Stock Price and the denominator of which shall be the sum of (i) the Post-Forestar Temple-Inland Stock Price, (ii) Forestar Option Conversion Value, and (iii) if the Forestar Distribution and Guaranty Distribution occur on the same date, the Guaranty Option Conversion Value, which product shall be rounded up to the nearest whole cent. For purposes of this paragraph (b), “Forestar Ratio” shall mean the amount determined by dividing (x) the number one (1) by (y) the number of shares of Forestar Common Stock distributed in respect of each share of Temple-Inland Common Stock in the Forestar Distribution.

          (iii) Prior to the Forestar Distribution Date, Temple-Inland shall take all actions necessary to provide that, effective as of the Forestar Distribution Date, for purposes of the Post-Forestar Temple-Inland Options (including in determining exercisability and the post-termination exercise period), a Forestar Employee’s continuous service with the Forestar Group or Guaranty Group following the Forestar Distribution Date shall be deemed continued service with Temple-Inland. Forestar shall issue each Forestar Option under the Forestar Stock Plan with terms such that, except as otherwise provided herein, the terms and conditions applicable to the Forestar Options shall be substantially similar to the terms and conditions applicable to the corresponding Temple-Inland Option, including the terms and conditions relating to vesting and the post-termination exercise period and available methods of exercise (with shares of Forestar Common Stock distributed as part of the Forestar Distribution to the holder of the Temple-Inland Option in respect of shares of Temple-Inland Common Stock held by such holder for at least six months treated as if they also had been held by the holder for at least six months for option exercise purposes) and satisfaction of applicable tax withholding and including a provision to the effect that, for purposes of the Forestar Options, continuous service with the Temple-Inland Group, Guaranty Group or Forestar Group from and after the Relevant Time shall be deemed to constitute service with Forestar.

          (iv) Except as otherwise provided herein, the Forestar Options and the Post-Forestar Temple-Inland Options shall remain subject to the terms and conditions of the underlying Temple-Inland Option as in effect immediately prior to the Forestar Distribution Date (taking into account changes in the identity of the employer, including for purposes of determining whether a change in control has occurred).

          (v) Upon the exercise of a Forestar Option, regardless of the holder thereof, the exercise price shall be paid to (or otherwise satisfied to the satisfaction of) Forestar in accordance with the terms of the Forestar Option, and Forestar shall be solely responsible for the issuance of Forestar Common Stock, for ensuring the collection of the employee portion of all

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applicable withholding tax on behalf of the employing entity of such holder, and for ensuring the remittance of such withholding taxes to the employing entity of such holder. Upon the exercise of a Post-Forestar Temple-Inland Option, regardless of the holder thereof, the exercise price shall be paid to (or otherwise satisfied to the satisfaction of) Temple-Inland in accordance with the terms of the Post-Forestar Temple-Inland Option, and Temple-Inland shall be solely responsible for the issuance of Temple-Inland Common Stock, for ensuring the collection of the employee portion of all applicable withholding tax on behalf of the employing entity of such holder and for ensuring the remittance of such withholding taxes to the employing entity of such holder. Upon the exercise of a Forestar Option or Post-Forestar Temple-Inland Option, regardless of the holder thereof, the most recent employer of the holder of the option at the time of exercise (or his decedent, as applicable) shall be responsible for the satisfaction of all tax reporting requirements in respect of such exercise, shall be responsible for remitting the appropriate withholding amounts to the appropriate taxing authorities, and shall be entitled to the benefit of any tax deduction in respect of the exercise of all such options (regardless of whether they are Forestar Options or Post-Forestar Temple-Inland Options).

          (c) Special Ordering Rule. To the extent that the Forestar Distribution Date occurs before the Guaranty Distribution Date, all references to Guaranty in subsections (a) and (b), above, shall be deemed to be references to Forestar, and all references to Forestar in subsections (a) and (b), above, shall be deemed to be references to Guaranty.

     Section 7.2 Treatment of Outstanding Temple-Inland Restricted Shares.

          (a) Each holder as of the Guaranty Distribution Record Date of Temple-Inland Restricted Shares that remain outstanding immediately prior to the Guaranty Distribution Date shall receive, upon the Guaranty Distribution being made, such number of Guaranty Restricted Shares as equals the number of shares of Guaranty Common Stock to which all other holders of shares of Temple-Inland Common Stock shall be entitled to receive upon the Guaranty Distribution being made. Each holder as of the Forestar Distribution Record Date of Temple-Inland Restricted Shares that remain outstanding immediately prior to the Forestar Distribution Date shall receive, upon the Forestar Distribution being made, such number of Forestar Restricted Shares as equals the number of shares of Forestar Common Stock to which all other holders of shares of Temple-Inland Common Stock shall be entitled to receive upon the Forestar Distribution being made.  The Temple-Inland Restricted Shares outstanding following the Guaranty Distribution or Forestar Distribution or both having been made are hereinafter referred to as “adjusted Temple-Inland Restricted Shares.” The Guaranty Restricted Shares, Forestar Restricted Shares and the adjusted Temple-Inland Restricted Shares shall be subject to the succeeding paragraphs of this Section 7.2.

          (b) All Guaranty Restricted Shares, Forestar Restricted Shares and adjusted Temple-Inland Restricted Shares shall become vested upon the date the Temple-Inland Restricted Shares would have otherwise vested in accordance with the existing vesting schedule.

          (c) Prior to the Guaranty Distribution Date and Forestar Distribution Date, respectively, Temple-Inland shall take all steps necessary to provide that, effective as of the Guaranty Distribution Date and Forestar Distribution Date, respectively, for purposes of continued

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vesting of the adjusted Temple-Inland Restricted Shares, a Guaranty Employee’s continuous service with the Guaranty Group or Forestar Group following the Guaranty Distribution Date shall be deemed continued service with Temple-Inland and a Forestar Employee’s continuous service with the Forestar Group or Guaranty Group following the Forestar Distribution Date shall be deemed continued service with Temple-Inland. Except as otherwise provided herein, the terms and conditions applicable to the Guaranty Restricted Shares and Forestar Restricted Shares, respectively, shall be substantially similar to the terms and conditions applicable to the corresponding Temple-Inland Restricted Shares (taking into account changes in the identity of the employer, including for purposes of determining whether a change in control has occurred), including a provision to the effect that, for purposes of the Guaranty Restricted Shares and Forestar Restricted Shares, continuous service of a Temple-Inland Employee, Guaranty Employee or Forestar Employee with any member of the Temple-Inland Group, Guaranty Group or Forestar Group shall be deemed to constitute service with Guaranty and Forestar, respectively; provided, that, nothing in this Section 7.2(c) shall require the payment or crediting of dividends to holders of Temple-Inland Common Stock, Guaranty Common Stock or Forestar Common Stock; and further provided, that, to the extent that dividends are paid to holders of Temple-Inland Common Stock, Guaranty Common Stock or Forestar Common Stock, respectively, after the Guaranty Distribution Date or Forestar Distribution Date, respectively, and before the settlement of Guaranty Restricted Shares, Forestar Restricted Shares, or the underlying Temple-Inland Restricted Shares, respectively, the employer of the holder of such Guaranty Restricted Shares, Forestar Restricted Shares and Temple-Inland Restricted Shares shall pay compensation to such holder in the same manner as compensation was paid prior to the Guaranty Distribution Date or Forestar Distribution Date, respectively, in respect of the underlying Temple-Inland Restricted Shares, and the other Parties shall have no obligation to make payment in respect of such dividends.

          (d) Upon the vesting of the Guaranty Restricted Shares, Guaranty shall be solely responsible for the settlement of all Guaranty Restricted Shares, regardless of the holder thereof, and for ensuring the satisfaction of the employee portion of all applicable tax withholding requirements on behalf of the employing entity of such holder and for ensuring the remittance of such withholding taxes to the employing entity of such holder. Upon the vesting of the Forestar Restricted Shares, Forestar shall be solely responsible for the settlement of all Forestar Restricted Shares, regardless of the holder thereof, and for ensuring the satisfaction of the employee portion of all applicable tax withholding requirements on behalf of the employing entity of such holder and for ensuring the remittance of such withholding taxes to the employing entity of such holder. Upon the vesting of the Temple-Inland Restricted Shares, Temple-Inland shall be solely responsible for the settlement of all Temple-Inland Restricted Shares, regardless of the holder thereof, and for ensuring the satisfaction of the employee portion of all applicable tax withholding requirements on behalf of the employing entity of such holder and for ensuring the remittance of such withholding taxes to the employing entity of such holder. Upon the vesting of Temple-Inland Restricted Shares, Guaranty Restricted Shares or Forestar Restricted Shares, the employer of the holder of the respective shares (or, in the case of vesting upon death, the employer of the decedent at the time of death) shall be responsible for the satisfaction of all tax reporting requirements in respect of such vesting, shall be responsible for remitting the appropriate withholding amounts to the appropriate taxing authorities and shall be entitled to the benefit of any tax deduction in respect of the vesting of all such restricted shares (regardless of whether the restricted share is a Temple-Inland Restricted Share, Guaranty Restricted Share or Forestar Restricted Share).

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     Section 7.3 Treatment of Outstanding Temple-Inland Restricted Stock Units.

          (a) Each Temple-Inland Restricted Stock Unit that is outstanding immediately prior to the Guaranty Distribution Date shall be converted, as of the Guaranty Distribution Date, into a Guaranty Restricted Stock Unit and an adjusted Temple-Inland Restricted Stock Unit (including a ratable portion of any accumulated dividend equivalents) in accordance with the succeeding paragraphs of this Section 7.3. Each Temple-Inland Restricted Stock Unit that is outstanding immediately prior to the Forestar Distribution Date shall be converted, as of the Forestar Distribution Date, into a Forestar Restricted Stock Unit and an adjusted Temple-Inland Restricted Stock Unit (including a ratable portion of any accumulated dividend equivalents) in accordance with the succeeding paragraphs of this Section 7.3.

          (b) The number of Guaranty Restricted Stock Units and Forestar Restricted Stock Units shall be equal, respectively, to the number of shares of Guaranty Common Stock and Forestar Common Stock to which the holder of Temple-Inland Restricted Stock Units would be entitled in the Guaranty Distribution and Forestar Distribution had the Temple-Inland Restricted Stock Units represented actual shares of Temple-Inland Common Stock as of the Guaranty Distribution Record Date and Forestar Distribution Record Date, respectively, the resulting number of Guaranty Restricted Stock Units and Forestar Restricted Stock Units, respectively, being rounded down to the nearest whole unit. All Guaranty Restricted Stock Units, Forestar Restricted Stock Units and adjusted Temple-Inland Restricted Stock Units shall become vested upon the date the Temple-Inland Restricted Stock Units would have otherwise vested in accordance with the existing vesting schedule.

          (c) Prior to the Guaranty Distribution Date and Forestar Distribution Date, respectively, Temple-Inland take all actions necessary to provide that, effective as of the respective Distribution Date, for purposes of continued vesting of the adjusted Temple-Inland Restricted Stock Units, a Guaranty Employee’s continuous service with the Guaranty Group or Forestar Group following the Guaranty Distribution Date shall be deemed continued service with Temple-Inland, and a Forestar Employee’s continuous service with the Forestar Group or Guaranty Group following the Forestar Distribution Date shall be deemed continued service with Temple-Inland. Except as otherwise provided herein, the terms and conditions applicable to the Guaranty Restricted Stock Units and Forestar Restricted Stock Units, respectively, shall be substantially similar to the terms and conditions applicable to the corresponding Temple-Inland Restricted Stock Unit (taking into account changes in the identity of the employer, including for purposes of determining whether a change in control has occurred), including a provision to the effect that, for purposes of the Guaranty Restricted Stock Units and Forestar Restricted Stock Units, continuous service of a Temple-Inland Employee, Guaranty Employee or Forestar Employee with any member of the Temple-Inland Group, Guaranty Group or Forestar Group shall be deemed to constitute service with Guaranty and Forestar, respectively; provided, that, nothing in this Section 7.3(c) shall require the payment or crediting of dividends to holders of Temple-Inland Common Stock, Guaranty Common Stock or Forestar Common Stock; and further provided, that, to the extent that dividends are paid to holders of Temple-Inland Common Stock, Guaranty Common Stock or Forestar Common Stock, respectively, after the Guaranty Distribution Date or Forestar Distribution Date, respectively, and before the settlement of Guaranty Restricted

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Stock Units, Forestar Restricted Stock Units, or the underlying Temple-Inland Restricted Stock Units, respectively, the employer of the holder of such Guaranty Restricted Stock Units, Forestar Restricted Stock Units and Temple-Inland Restricted Stock Units shall pay compensation to such holder in the same manner as compensation was paid prior to the Guaranty Distribution Date or Forestar Distribution Date, respectively, in respect of the underlying Temple-Inland Restricted Stock Units, and the other Parties shall have no obligation to make payment in respect of such dividends.

          (d) Upon the vesting of the Temple-Inland Restricted Stock Units, Guaranty Restricted Stock Units or Forestar Restricted Stock Units that are to be settled in cash, the employer of the holder of the respective unit (or, in the case of vesting upon death, the employer of the decedent at the time of death) shall be solely responsible for the settlement of the unit (including any attributable accrued but unpaid dividend equivalents), regardless of whether the unit is a Temple-Inland Restricted Stock Unit, Guaranty Restricted Stock Unit, or Forestar Restricted Stock Unit, and for ensuring the satisfaction of all applicable tax reporting and withholding requirements in respect of such settlement and for ensuring the remittance of such withholding taxes, and the employer of the holder of the respective unit (or, in the case of vesting upon death, the employer of the decedent at the time of death) shall be entitled to the benefit of any tax deduction in respect of the settlement of all such restricted stock units (regardless of whether the restricted stock unit is a Temple-Inland Restricted Stock Unit, Guaranty Restricted Stock Unit or Forestar Restricted Stock Unit). Upon the vesting of the Temple-Inland Restricted Stock Units that are settled in shares of Temple-Inland Common Stock, Temple-Inland shall be solely responsible for the settlement of all Temple-Inland Restricted Stock Units, regardless of the holder thereof, and for ensuring the satisfaction of the employee portion of all applicable tax withholding requirements on behalf of the employing entity of such holder and for ensuring the remittance of such withholding taxes to the employing entity of such holder. Upon the vesting of the Guaranty Restricted Stock Units that are settled in shares of Guaranty Common Stock, Guaranty shall be solely responsible for the settlement of all Guaranty Restricted Stock Units, regardless of the holder thereof, and for ensuring the satisfaction of the employee portion of all applicable tax withholding requirements on behalf of the employing entity of such holder and for ensuring the remittance of such withholding taxes to the employing entity of such holder. Upon the vesting of the Forestar Restricted Stock Units that are settled in shares of Forestar Common Stock, Forestar shall be solely responsible for the settlement of all Forestar Restricted Stock Units, regardless of the holder thereof, and for ensuring the satisfaction of the employee portion of all applicable tax withholding requirements on behalf of the employing entity of such holder and for ensuring the remittance of such withholding taxes to the employing entity of such holder. Upon the vesting of Temple-Inland Restricted Stock Units, Guaranty Restricted Stock Units or Forestar Restricted Stock Units that are settled in shares of Temple-Inland Common Stock, Guaranty Common Stock, or Forestar Common Stock, as the case may be, the employer of the holder of the respective unit (or, in the case of vesting upon death, the employer of the decedent at the time of death) shall be responsible for the satisfaction of all tax reporting requirements in respect of such settlement, shall be responsible for remitting the appropriate withholding amounts to the appropriate taxing authorities and shall be entitled to the benefit of any tax deduction in respect of the settlement of all such restricted stock units (regardless of whether the restricted stock unit is a Temple-Inland Restricted Stock Unit, Guaranty Restricted Stock Unit, or Forestar Restricted Stock Unit).

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     Section 7.4 Treatment of Outstanding Temple-Inland Performance Shares.

          (a) Each Temple-Inland Performance Share that is outstanding immediately prior to the Guaranty Distribution Date shall represent, as of the Guaranty Distribution Date, a Guaranty Performance Share and an adjusted Temple-Inland Performance Share (including a ratable portion of any accumulated dividend equivalents) in accordance with the succeeding paragraphs of this Section 7.4. Each Temple-Inland Performance Share that is outstanding immediately prior to the Forestar Distribution Date shall represent, as of the Forestar Distribution Date, a Forestar Performance Share and an adjusted Temple-Inland Performance Share (including a ratable portion of any accumulated dividend equivalents) in accordance with the succeeding paragraphs of this Section 7.4.

          (b) The number of Guaranty Performance Shares and Forestar Performance Shares shall be equal, respectively, to the number of shares of Guaranty Common Stock and Forestar Common Stock to which the holder of Temple-Inland Performance Shares would be entitled in the Guaranty Distribution and Forestar Distribution had the Temple-Inland Performance Shares represented actual shares of Temple-Inland Common Stock as of the Guaranty Distribution Record Date and Forestar Distribution Record Date, respectively, the resulting number of Guaranty Performance Shares and Forestar Performance Shares being rounded down to the nearest whole unit.

          (c) Prior to the Guaranty Distribution Date and Forestar Distribution Date, respectively, Temple-Inland shall take all steps necessary to provide that, for purposes of continued vesting of the adjusted Temple-Inland Performance Shares, a Guaranty Employee’s continuous service with the Guaranty Group or Forestar Group following the Guaranty Distribution Date shall be deemed continued service with Temple-Inland, and a Forestar Employee’s continuous service with the Forestar Group or Guaranty Group following the Forestar Distribution Date shall be deemed continued service with Temple-Inland. For purposes of the Guaranty Performance Shares and Forestar Performance Shares, continuous service of a Temple-Inland Employee, Guaranty Employee or Forestar Employee with any member of the Temple-Inland Group, Guaranty Group or Forestar Group shall be deemed to constitute service with Guaranty and Forestar, respectively.

          (d) Upon the vesting of the Temple-Inland Performance Shares, Guaranty Performance Shares or Forestar Performance Shares, Temple-Inland shall be solely responsible for the settlement of all such performance shares, regardless of the holder thereof, and for ensuring the satisfaction of the employee portion of all applicable tax withholding requirements on behalf of the employing entity of such holder and for ensuring the remittance of such withholding taxes to the employing entity of such holder. Guaranty and Forestar, respectively, shall promptly reimburse Temple-Inland for the amount paid in respect of any Guaranty Performance Share or Forestar Performance Share and the related employee portion of any applicable tax withholding requirements. The employer of the holder of the respective performance share shall be responsible for the satisfaction of all tax reporting requirements in respect of the settlement of the performance share, shall be responsible for remitting the appropriate withholding amounts to the appropriate taxing authorities and shall be entitled to the benefit of any tax deduction in respect of the settlement of the performance share (regardless of whether the performance share is a

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Temple-Inland Performance Share, Guaranty Performance Share, or Forestar Performance Share). To the extent that dividends are paid to holders of Temple-Inland Common Stock, Guaranty Common Stock or Forestar Common Stock, respectively, after the Guaranty Distribution Date or Forestar Distribution Date, respectively, and before the settlement of Guaranty Performance Shares, Forestar Performance Shares, or the underlying Temple-Inland Performance Shares, respectively, the employer of the holder of such Guaranty Performance Shares, Forestar Performance Shares and Temple-Inland Performance Shares shall pay compensation to such holder in the same manner as compensation was paid prior to the Guaranty Distribution Date or Forestar Distribution Date, respectively, in respect of the underlying Temple-Inland Performance Shares, and the other Parties shall have no obligation to make payment in respect of such dividends.

     Section 7.5 Cooperation and Special Award Terms. Each of the Parties shall establish an appropriate administration system in order to handle in an orderly manner exercises of Temple-Inland Options, Guaranty Options and Forestar Options and the settlement of Temple-Inland Restricted Shares, Temple-Inland Restricted Stock Units, Temple-Inland Performance Shares, Guaranty Restricted Shares, Guaranty Restricted Stock Units, Guaranty Performance Shares, Forestar Restricted Shares, Forestar Restricted Stock Units and Forestar Performance Shares. Each of the Parties will work together to unify and consolidate all indicative data and payroll and employment information on regular timetables and make certain that each applicable entity’s data and records in respect of such awards are correct and updated on a timely basis. The foregoing shall include employment status and information required for tax withholding/remittance, compliance with trading windows and compliance with the requirements of the Exchange Act and other applicable Laws. Each of the parties shall honor the terms of any agreement entered into before the Relevant Time with any employee of another party insofar as such agreement provides for accelerated vesting or the extension of the term of any Temple-Inland Options, Guaranty Options, Forestar Options, Temple-Inland Restricted Shares, Temple-Inland Restricted Stock Units, Temple-Inland Performance Shares, Guaranty Restricted Shares, Guaranty Restricted Stock Units, Guaranty Performance Shares, Forestar Restricted Shares, Forestar Restricted Stock Units or Forestar Performance Shares.

     Section 7.6 Section 16 Approval. By approving the adoption of this Employee Matters Agreement, the respective boards of directors of Temple-Inland, Guaranty and Forestar intend to exempt from the short swing profit recovery provisions of Section 16(b) of the Exchange Act, by reason of the application of Rule 16b-3 thereunder, all acquisitions and dispositions of equity incentive awards as described in Article VII in respect of all Temple-Inland Options, Temple-Inland Restricted Shares, Temple-Inland Restricted Stock Units and Temple-Inland Performance Shares held as of the date hereof (or subsequently acquired) by directors and executive officers of Temple-Inland, as reflected in the Express Options database record maintained in respect of Temple-Inland, and the respective boards of directors of Guaranty and Forestar also intend to expressly approve, in respect of any Guaranty Option or Forestar Option, the use of any method for the payment of an exercise price and the satisfaction of any applicable tax withholding (specifically including the actual or constructive tendering of shares in payment of an exercise price and the withholding of option shares from delivery in satisfaction of applicable tax withholding requirements) to the extent such method is permitted under the underlying Temple-Inland Option.

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     Section 7.7 SEC Registration. The Parties mutually agree to use commercially reasonable efforts to maintain effective registration statements with the SEC with respect to the long-term incentive awards described in this Article VII, to the extent any such registration statement is required by applicable Law.

     Section 7.8 Savings Clause. The Parties hereby acknowledge that the provisions of this Article VII are intended to achieve certain tax, legal and accounting objectives as set forth in the Separation Agreement and, in the event such objectives are not achieved, the Parties agree to negotiate in good faith regarding such other actions that may be necessary or appropriate to achieve such objectives.

ARTICLE VIII

ADDITIONAL COMPENSATION MATTERS

     Section 8.1 Workers’ Compensation Liabilities. All workers’ compensation Liabilities relating to, arising out of, or resulting from any claim by a Temple-Inland Employee, Former Temple-Inland Employee, Guaranty Employee, Former Guaranty Employee, Forestar Employee or Former Forestar Employee that results from an accident, incident or event occurring, or from an occupational disease which becomes manifest, at, before or after the Relevant Time shall be retained or assumed by Temple-Inland (in respect of Temple-Inland Employees and Former Temple-Inland Employees), Guaranty (in respect of Guaranty Employees or Former Guaranty Employees) or Forestar (in respect of Forestar Employees or Former Forestar Employees), as the case may be.

     Section 8.2 Sections 162(m)/409A. Notwithstanding anything in this Agreement to the contrary (including the treatment of supplemental and deferred compensation plans, outstanding long-term incentive awards and annual incentive awards as described herein), the Parties agree to negotiate in good faith regarding the need for any treatment different from that otherwise provided herein to ensure that (i) a federal income Tax deduction for the payment of such supplemental or deferred compensation or long-term incentive award, annual incentive award or other compensation is not limited by reason of Section 162(m) of the Code, and (ii) the treatment of such supplemental or deferred compensation or long-term incentive award, annual incentive award or other compensation does not cause the imposition of a tax under Section 409A of the Code.

     Section 8.3 Director Programs.

          (a) Director Fees. Except as provided in subsection (b), below, Temple-Inland shall retain responsibility for the payment of any fees payable in respect of service on the Temple-Inland Board of Directors that are payable but not yet paid as of the Final Distribution Date, and neither Guaranty nor Forestar shall have any responsibility for any such payments (to an individual who is a member of the Guaranty Board of Directors or Forestar Board of Directors as of the Relevant Time or otherwise).

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          (b) Certain Director Fees. With respect to any fees payable under the Temple-Inland Directors Fee Deferral Plan that are payable in shares of Temple-Inland Common Stock upon Termination of Service, as defined in such plan, each share of Temple-Inland Common Stock credited under such plan immediately before the Relevant Time shall, at the Relevant Time, be treated in the same manner as described in Section 7.3 in respect of Temple-Inland Restricted Stock Units (such that each such credited share of Temple-Inland Common Stock shall be deemed to represent Guaranty Common Stock and Forestar Common Stock as well, as the case may be). Upon entitlement to payment under the plan, Temple-Inland shall be solely responsible for the settlement of all shares payable in the form of Temple-Inland Common Stock, Guaranty shall be solely responsible for the settlement of all shares payable in the form of Guaranty Common Stock, and Forestar shall be solely responsible for the settlement of all shares payable in the form of Forestar Common Stock, in each case regardless of the person entitled to payment.

     Section 8.4 Certain Payroll, Bonus and Supplemental Plan Matters.

          (a) Payroll of Transferring Employees.

               (i) Temple-Inland to Guaranty/Forestar. In the case of an individual who transfers employment at the Relevant Time from Temple-Inland to either Guaranty or Forestar, Guaranty and Forestar, as the case may be, shall be responsible for paying the entire payroll amount due such individual for the first payroll cycle ending after the Relevant Time and for satisfying all applicable tax reporting and withholding requirements in respect of such payment; provided, that, Temple-Inland shall reimburse Guaranty and Forestar for the gross amount of the payroll payment (i.e., including any applicable deductions) and for all tax withholdings remitted in respect of such portion of the payroll period ending before the Relevant Time. Temple-Inland shall be entitled to the benefit of any tax deduction in respect of its payment for the portion of the payroll period ending before the Relevant Time.

               (ii) Guaranty/Forestar to Temple-Inland. In the case of an individual who transfers employment at the Relevant Time from Guaranty or Forestar to Temple-Inland, Temple-Inland shall be responsible for paying the entire payroll amount due such individual for the first payroll cycle ending after the Relevant Time and for satisfying all applicable tax reporting and withholding requirements in respect of such payment; provided, that, Guaranty and Forestar, as the case may be, shall reimburse Temple-Inland for the gross amount of the payroll payment (i.e., including any applicable deductions) and for all tax withholdings remitted in respect of such portion of the payroll period ending before the Relevant Time. Temple-Inland shall be entitled to the benefit of any tax deduction in respect of its payment for the portion of the payroll period ending before the Relevant Time; provided, that, Temple-Inland shall allocate such deduction to the Guaranty or Forestar segment of its operations, as the case may be.

          (b) Certain Bonus Payments.

               (i) In General. Except to the extent otherwise provided in Section 8.4(b)(ii) or 8.4(b)(iii), all bonuses in respect of 2007 shall be paid to Temple-Inland Employees, Guaranty Employees and Forestar Employees by each of Temple-Inland, Guaranty and Forestar, respectively, at the time such bonuses are normally paid (i.e., in December 2007 in respect of

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Guaranty Employees and in February 2008 in respect of Temple-Inland and Forestar Employees) in accordance with the bonus pools determined by the Management Development and Executive Compensation Committee of the Temple-Inland Board of Directors in November 2007 for each of Temple-Inland, Guaranty and Forestar.

               (ii) Certain Bonus Amounts. Not later than February 29, 2008, the Management Development and Executive Compensation Committee of the Temple-Inland Board of Directors shall make and communicate to Guaranty and Forestar a determination of the amount of Tier I bonuses that Temple-Inland would have paid in respect of 2007 to the Guaranty Employees and Forestar Employees, respectively, but for the foregoing provisions of this Section 8.4. Guaranty and Forestar, as the case may be, shall be responsible for paying the entire amount of such bonuses to their respective employees on or before March 15, 2008 and for satisfying all applicable tax reporting and withholding requirements in respect of such bonuses and shall be entitled to the benefit of any tax deduction for the amount paid.

               (iii) Partial Year Employees. In the case of an individual who for some part of 2007 was an employee of two or more of Temple-Inland, Guaranty and Forestar, the original employer who established the potential 2007 bonus for such individual shall inform any subsequent employer of the actual amount of bonus the original employer would have paid, and the employer of such individual at the Relevant Time (for purposes of this Section 8.4(b)(iii), the “paying employer”) shall pay any bonus payable for 2007 in such amount as the paying employer in its discretion shall determine; provided, that, (A) the prior employer or employers shall reimburse the paying employer in an amount equal to the bonus amount the original employer determined it would have paid for the entire year (together with any applicable withholdings), (B) the prior employer or employers shall be entitled to the benefit of any tax deduction in respect of the amount reimbursed, and (C) the paying employer shall be entitled to the benefit of any tax deduction for the amount actually paid in excess of such reimbursement. The paying employer shall be responsible for satisfying all applicable tax reporting and withholding requirements in respect of the bonus payment.

          (c) Certain Supplemental Plan Payments.

               (i) TIFS SERP. Guaranty shall, in accordance with Section 6.2 and the terms of the Temple-Inland Financial Services Supplemental Benefits Plan and Temple-Inland Financial Services Excess Benefits Plan, pay to Temple-Inland Employees and Forestar Employees in 2008 all amounts to be paid to such employees by Guaranty under such plans, shall be responsible for satisfying all applicable tax reporting and withholding requirements in respect of such payments made at any time during 2008, and shall be entitled to the benefit of any tax deduction for such payments made at any time during 2008.

               (ii) Temple-Inland SERP. Temple-Inland shall, in accordance with Section 6.1 and the terms of the Temple-Inland Inc. Supplemental Executive Retirement Plan, pay to Guaranty Employees, Former Guaranty Employees, Forestar Employees, and Former Forestar Employees in 2008 all amounts to be paid to such employees by Temple-Inland under such plan, shall be responsible for satisfying all applicable tax reporting and withholding requirements in respect of such payments made at any time during 2008, and shall be entitled to the benefit of any tax deduction for such payments made at any time during 2008.

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          (d) Forms W-2. Temple-Inland shall retain Form W-2 and other payroll reporting obligations for the 2007 calendar year for all Guaranty Employees, Former Guaranty Employees, Forestar Employees and Former Forestar Employees. Each Party shall bear the expense of, and W-2 and other payroll reporting obligations for, all compensation payable to or on behalf of its employees, contractors, and former employees and contractors in years subsequent to 2007 (including compensation relative to relocations or relocation subsidies initiated prior to 2008) except as otherwise set forth herein.

ARTICLE IX

INDEMNIFICATION

     Section 9.1 General Indemnification. Any claim for indemnification under this Agreement shall be governed by, and be subject to, the provisions of Article VII of the Separation Agreement, which provisions are hereby incorporated by reference into this Agreement and any references to “Agreement” in such Article VII as incorporated herein shall be deemed to be references to this Agreement.

ARTICLE X

GENERAL AND ADMINISTRATIVE

     Section 10.1 Sharing Of Information. Temple-Inland, Guaranty and Forestar (acting directly or through their respective Affiliates) shall provide to each other and their respective agents and vendors all Information as the other may reasonably request to enable the requesting Party to administer efficiently and accurately each of its Benefit Plans, to timely and accurately comply with and report under Section 14 of the Exchange Act, and to determine the scope of, as well as fulfill, its obligations under this Agreement. Such information shall, to the extent reasonably practicable, be provided in the format and at the times and places requested, but in no event shall the Party providing such information be obligated to incur any out-of-pocket expenses not reimbursed by the Party making such request or make such information available outside of its normal business hours and premises. Any information shared or exchanged pursuant to this Agreement shall be subject to the confidentiality requirements set forth in the Separation Agreement. The Parties also hereby agree to enter into any business associate agreements that may be required for the sharing of any Information pursuant to this Agreement to comply with the requirements of HIPAA.

     Section 10.2 Reasonable Efforts/Cooperation. Each of the Parties hereto will use its commercially reasonable efforts to promptly take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws and regulations to consummate the transactions contemplated by this Agreement, including adopting plans or plan amendments. Each of the Parties hereto shall cooperate fully on any issue relating to the transactions contemplated by this Agreement for which the other Party seeks a determination letter or private letter ruling from the Internal Revenue Service, an advisory opinion from the Department of Labor or any other filing, consent or approval with respect to or by a Governmental Entity.

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     Section 10.3 Employer Rights. Nothing in this Agreement shall prohibit any Party or any of their respective Affiliates from amending, modifying or terminating any of their respective Benefit Plans at any time within their sole discretion.

     Section 10.4 Effect on Employment. Except as expressly provided in this Agreement, the occurrence of neither the Guaranty Distribution nor the Forestar Distribution alone shall cause any employee to be deemed to have incurred a termination of employment which entitles such individual to the commencement of benefits under any of the Temple-Inland Benefit Plans (provided that Guaranty Participants and Forestar Participants may become eligible for a distribution from the Temple-Inland Retirement Plan in accordance with the terms of such plan). Furthermore, nothing in this Agreement is intended to confer upon any employee or former employee of Temple-Inland, Guaranty, Forestar or any of their respective Affiliates any right to continued employment, or any recall or similar rights to an individual on layoff or any type of approved leave.

     Section 10.5 Consent Of Third Parties. If any provision of this Agreement is dependent on the Consent of any third party and such consent is withheld, the Parties hereto shall use their reasonable best efforts to implement the applicable provisions of this Agreement to the fullest extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, the Parties hereto shall negotiate in good faith to implement the provision (as applicable) in a mutually satisfactory manner.

     Section 10.6 Access To Employees. Following the Effective Time, Temple-Inland, Guaranty and Forestar shall, or shall cause each of their respective Affiliates to, make available to each other those of their employees who may reasonably be needed in order to defend or prosecute any legal or administrative action (other than a legal action between or among any of the Parties) to which any employee, director or Benefit Plan of the Temple-Inland Group, Guaranty Group or Forestar Group is a party and which relates to their respective Benefit Plans prior to the Relevant Time. The Party to whom an employee is made available in accordance with this Section 10.6 shall pay or reimburse the other Party for all reasonable expenses which may be incurred by such employee in connection therewith, including all reasonable travel, lodging, and meal expenses, but excluding any amount for such employee’s time spent in connection herewith.

     Section 10.7 Beneficiary Designation/Release Of Information/Right To Reimbursement. To the extent permitted by applicable Law and except as otherwise provided for in this Agreement, all beneficiary designations, authorizations for the release of Information and rights to reimbursement made by or relating to Guaranty Participants or Forestar Participants under Temple-Inland Benefit Plans shall be transferred to and be in full force and effect under the corresponding Guaranty Benefit Plans and Forestar Benefit Plans until such beneficiary designations, authorizations or rights are replaced or revoked by, or no longer apply, to the relevant Guaranty Participant or Forestar Participant.

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ARTICLE XI

MISCELLANEOUS

     Section 11.1 Effect If Certain Events Do Not Occur. Notwithstanding anything in this Agreement to the contrary, if the Separation Agreement is terminated prior to the Effective Time, then all actions and events that are, under this Agreement, to be taken or occur effective prior to, as of or following the Effective Time, or otherwise in connection with the Separation, shall not be taken or occur except to the extent specifically agreed to in writing by Temple-Inland on the one hand and Guaranty or Forestar on the other hand and no Party shall have any Liability or further obligation to any other Party under this Agreement.

     Section 11.2 Relationship Of Parties. Nothing in this Agreement shall be deemed or construed by the Parties or any third party as creating the relationship of principal and agent, partnership or joint venture between or among the Parties, it being understood and agreed that no provision contained herein, and no act of the Parties, shall be deemed to create any relationship between or among the Parties other than the relationship set forth herein.

     Section 11.3 Subsidiaries. Each of the Parties shall cause to be performed all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such Party or by any entity that becomes a Subsidiary or Affiliate of such Party on and after the Relevant Time. The Parties acknowledge that certain actions, agreements and obligations that certain of their Affiliates and Subsidiaries may be required to perform in connection with the performance of the Parties obligations under this Agreement may require Governmental Approval by Governmental Entities under applicable Law, and therefore agree that performance of such actions, agreements and obligations is subject to the receipt of all such necessary Governmental Approvals, which approvals each Party shall, and shall cause the members of its respective Group to, use its commercially reasonable efforts to obtain.

     Section 11.4 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt unless the day of receipt is not a Business Day, in which case it shall be deemed to have been given on the next Business Day) by delivery in person, by overnight courier service, by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Party or Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 11.4):

To Temple-Inland:

Temple-Inland Inc.
1300 MoPac Expressway South, 3^rd Floor
Austin, Texas 78746
Attn: General Counsel
Facsimile: (512) 434-8051

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To Forestar:

Forestar Real Estate Group Inc.
1300 MoPac Expressway South
Austin, Texas 78746
Attn: General Counsel
Facsimile: (512) 434-5780

To Guaranty:

Guaranty Financial Group Inc.
8333 Douglas Avenue
Dallas, Texas 75225
Attn: General Counsel
Facsimile: (214) 360-1908

     Section 11.5 Entire Agreement. This Agreement, the Separation Agreement, and each other Ancillary Agreement, including any annexes, schedules and exhibits thereto, as well as any other agreements and documents referred to herein and therein, shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.

     Section 11.6 Waivers. The failure of any Party to require strict performance by any other Party of any provision in this Agreement will not waive or diminish that Party’s right to demand strict performance thereafter of that or any other provision hereof.

     Section 11.7 Amendments. Subject to the terms of Section 11.8 of this Agreement, this Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties.

     Section 11.8 Termination. This Agreement (including Article IX (Indemnification) hereof) may be terminated and each Distribution may be amended, modified or abandoned at any time prior to the Forestar Distribution Date or the Guaranty Distribution Date by and in the sole discretion of Temple-Inland without the approval of Forestar or Guaranty or the stockholders of Temple-Inland and it shall be deemed terminated if and when the Separation Agreement is terminated. In the event of such termination, no Party shall have any Liability of any kind to any other Party or any other Person. After the earlier of the Forestar Distribution Date and Guaranty Distribution Date, this Agreement may not be terminated except by an agreement in writing signed by Temple-Inland, Forestar and Guaranty. Notwithstanding the foregoing, this Agreement may be terminated or amended as among any Parties that remain Affiliates, so long as such amendment does not adversely affect any Party that is no longer an Affiliate, in which case, only with the Consent of such Party.

     Section 11.9 Governing Law. This Agreement shall be governed by and construed in accordance with the internal Laws, and not the Laws governing conflicts of Laws, of the State of Texas.

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     Section 11.10 Dispute Resolution. Any controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity, termination or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement or the transactions contemplated hereby, including any claim based on contract, tort, statute or constitution (but excluding any controversy, dispute or claim arising out of any Contract relating to the use or lease of real property if any third party is a necessary party to such controversy, dispute or claim) (collectively, “Agreement Dispute”), shall be governed by, and be subject to, the provisions of Article IX of the Separation Agreement, which provisions (and related defined terms) are hereby incorporated by reference into this Agreement and any references to “Agreement” in such Article IX as incorporated herein shall be deemed to be references to this Agreement; provided, however, any references to “Agreement” or “Agreement Disputes” in such Article IX as incorporated herein shall be deemed to be references to this Agreement and Agreement Disputes as defined in this Agreement.

     Section 11.11 Consent to Jurisdiction. Subject to the provisions of Article IX of the Separation Agreement, each of the Parties irrevocably submits to the exclusive jurisdiction of (a) the District Court of the State of Texas for Travis County, and (b) the United States District Court for the Western District of Texas (the “Texas Courts”), for the purposes of any suit, action or other proceeding to compel arbitration or for provisional relief in aid of arbitration in accordance with Article IX of the Separation Agreement or for provisional relief to prevent irreparable harm, and to the non-exclusive jurisdiction of the Texas Courts for the enforcement of any award issued thereunder. Each of the Parties further agrees that service of any process, summons, notice or document by United States registered mail or receipted courier service to such Party’s respective address set forth in Section 11.4 of this Agreement shall be effective service of process for any action, suit or proceeding in the Texas Courts with respect to any matters to which it has submitted to jurisdiction in this Section 11.11. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any such action, suit or proceeding in the Texas Courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

     Section 11.12 Titles and Headings. Titles and headings to Sections and Articles herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

     Section 11.13 Counterparts. This Agreement may be executed in more than one counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Parties. Execution of this Agreement or any other documents pursuant to this Agreement by facsimile or other electronic copy of a signature shall be deemed to be, and shall have the same effect as, executed by an original signature.

     Section 11.14 Assignment. Except as otherwise expressly provided for in this Agreement, this Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party without the prior written consent of the other Parties, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be null and void; provided,

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that, a Party may assign this Agreement in connection with a merger transaction in which such Party is not the surviving entity or the sale by such Party of all or substantially all of its Assets, and upon the effectiveness of such assignment the assigning Party shall be released from all of its obligations under this Agreement provided that the surviving entity of such merger or the transferee of such Assets shall agree in writing, reasonably satisfactory to the other Parties, to be bound by the terms of this Agreement as if named as a “Party” hereto.

     Section 11.15 Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

     Section 11.16 Successors and Assigns. The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors and permitted transferees and assigns.

     Section 11.17 Specific Performance. The Parties agree that irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled to (i) an injunction or injunctions to enforce specifically the terms and provisions hereof in any arbitration in accordance with Section 11.10 of this Agreement, (ii) provisional or temporary injunctive relief in accordance therewith in any Texas Court, and (iii) enforcement of any such award of an arbitral tribunal or a Texas Court in any court of the United States, or any other any court or tribunal sitting in any state of the United States or in any foreign country that has jurisdiction, this being in addition to any other remedy or relief to which they may be entitled.

     Section 11.18 Waiver of Jury Trial. Subject to Sections 11.9, 11.10 and 11.11 of this Agreement, each of the Parties hereby waives to the fullest extent permitted by applicable Law any right it may have to a trial by jury with respect to any court proceeding contemplated by Section 11.11 of this Agreement. Each of the Parties hereby (a) certifies that no representative, agent or attorney of the other Party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it has been induced to enter into this Agreement and the transactions contemplated by this Agreement, as applicable, by, among other things, the mutual waivers and certifications in this Section 11.18.

     Section 11.19 Force Majeure. No Party (or any Person acting on its behalf) shall have any liability or responsibility for failure to fulfill any obligation (other than a payment obligation) under this Agreement so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event: (a) notify the other Party of the nature and extent of any such Force Majeure condition and (b) use due diligence to remove any such causes and resume performance under this Agreement as soon as reasonably practicable.

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     Section 11.20 Authorization. Each of the Parties hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such Party, that this Agreement constitutes a legal, valid and binding obligation of each such Party and that the execution, delivery and performance of this Agreement by such Party does not contravene or conflict with any provision of law or of its charter or bylaws or any material agreement, instrument or order binding on such Party.

     Section 11.21 No Third-Party Beneficiaries. Except as otherwise expressly provided in this Agreement, this Agreement is solely for the benefit of the Parties and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.

     Section 11.22 Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

[Remainder of this page intentionally left blank.]

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

TEMPLE-INLAND INC.
By:	/s/ Doyle R. Simons
Name:	Doyle R. Simons
Title:	Executive Vice President

GUARANTY FINANCIAL GROUP INC.
By:	/s/ Michael D. Calcote
Name:	Michael D. Calcote
Title:	Executive Vice President and Treasurer

FORESTAR REAL ESTATE GROUP INC.
By:	/s/ James M. DeCosmo
Name:	James M. DeCosmo
Title:	President and Chief Executive Officer