Forestar : Q3 FY 2020 Investor Presentation

I N V E S T O R P R E S E N T A T I O N

Q 3 2 0 2 0

FORWARD LOOKING STATEMENTS

This presentation may include "forward‐looking statements" as defined by the Private Securities Litigation Reform Act of 1995. Although Forestar believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Factors that may cause the actual results to be materially different from the future results expressed by the forward‐looking statements include, but are not limited to: the impact of C‐19 on the economy and our business; the effect of D.R. Horton's controlling level of ownership on us and the holders of our securities; our ability to realize the potential benefits of the strategic relationship with D.R. Horton; the effect of our strategic relationship with D.R. Horton on our ability to maintain relationships with our vendors and customers; demand for new housing, which can be affected by a number of factors including the availability of mortgage credit, job growth and fluctuations in interest rates; competitive actions by other companies; accuracy of estimates and other assumptions related to investment in and development of real estate, the expected timing and pricing of land and lot sales and related cost of real estate sales; our ability to comply with our debt covenants, restrictions and limitations; our ability to hire and retain key personnel; changes in governmental policies, laws or regulations and actions or restrictions of regulatory agencies; general economic, market or business conditions where our real estate activities are concentrated; our ability to achieve our strategic initiatives; our ability to obtain future entitlement and development approvals; our ability to obtain or the availability of surety bonds to secure our performance related to construction and development activities and the pricing of bonds; obtaining reimbursements and other payments from governmental districts and other agencies and timing of such payments; the levels of resale housing inventory in our projects and the regions in which they are located; fluctuations in costs and expenses, including impacts from shortages in materials or labor; the opportunities (or lack thereof) that may be presented to us and that we may pursue; the strength of our information technology systems and the risk of cybersecurity breaches; and the conditions of the capital markets and our ability to raise capital to fund expected growth. Additional information about factors that could lead to material changes in performance is contained in Forestar's annual report on Form 10‐K and subsequent quarterly reports on Form 10‐Q, all of which are filed with the Securities and Exchange Commission (SEC).

2

COVID-19

• During the latter part of March, the impacts of the COVID‐19 pandemic (C‐19) and the related widespread reductions in economic activity began to temporarily affect the Company's business operations and demand for its residential lots
• Residential construction is designated as an essential business as part of critical infrastructure in almost all municipalities across the U.S. where Forestar operates
• The Company implemented operational protocols to comply with social distancing and other health and safety standards
• The Company's lot sales pace declined in late March and April as homebuilders slowed their purchases of lots to adjust to lower expected levels of home sales as a result of the pandemic; however, as housing market conditions began to improve in May and June, the Company's lot sales pace has increased
• Even with the improvement in demand in May and June, the Company remains cautious as to the impact C‐19 may have on its operations and on the overall economy in the future
• The extent to which C‐19 impacts Forestar's operational and financial performance will depend on future developments, including the duration and spread of COVID‐19, and the impact on the Company's customers, trade partners and employees, all of which are highly uncertain and cannot be predicted
• The Company believes it is well positioned to effectively operate during changing economic conditions because of its low net leverage and strong liquidity position, its low overhead model and its relationship with D.R. Horton

3

FORESTAR OVERVIEW

• Forestar Group Inc. ("Forestar" or "FOR") is a highly differentiated, national residential lot developer
• • Develop and sell lots for single‐family homes to D.R. Horton and other local, regional and national homebuilders
  • Focused on phased development of short duration, fully‐ entitled lot development projects
  • High turnover, lower risk lot manufacturing strategy with intense focus on returns
• Majority-ownedsubsidiary of D.R. Horton, Inc. ("D.R. Horton" or "DHI"), the nation's largest builder
• • 75% of common shares acquired by DHI in 2017; 65% owned today by DHI
  • One of only two investment grade rated public homebuilders in the U.S.
  • Highly strategic relationship supports and de‐risks Forestar's significant growth ramp
• Effectively navigating current market conditions while positioned to take advantage of long-term opportunity
• • Diversified national footprint with a solid lot position
  • Strong liquidity profile

Operations in 51 markets across 22 states(1)

/		Current FOR markets / states
		Current Snapshot(1)
Owned and Controlled Lot Position	50,700
Owned Lots Under Contract or	29,600
Subject to Right of First Offer to DHI
Revenues	~$820M
Liquidity (2)	~$700M
Equity Market Cap (3)	~$800M

(1) As of or for the TTM ended 6/30/20 unless otherwise noted

(2) Liquidity defined as unrestricted cash and cash equivalents plus revolving credit facility availability as governed by the borrowing base4

(3) As of 7/22/2020

THE FORESTAR VALUE PROPOSITION

DIFFERENTIATED BUSINESS MODEL DESIGNED TO ADDRESS A MARKET NEED

• Returns focused residential lot development business model
• Higher turnover, lower risk lot manufacturing strategy focused on returns
• Under‐served lot development market with lack of well‐capitalized and/or national participants

LONG-TERM GROWTH OPPORTUNITY

• Opportunity for increased scale within existing markets and entrance into new markets
• Portfolio and platform expansion designed to increase returns and margins
• Roadmap for market share gains through housing and economic cycles

INTENSE FOCUS ON RISK MITIGATION

• Short duration, fully‐entitled projects
• Phased development and largely discretionary cash spend
• Geographic diversification
• Maintain strong liquidity and conservative leverage with balance between debt and equity

HIGHLY STRATEGIC RELATIONSHIP WITH D.R. HORTON ENHANCES BUSINESS MODEL,

GROWTH AND RISK PROFILE

• Strategic alignment with and access to DHI network of markets, experienced team and business relationships
• Instills culture of manufacturing‐like approach and conservative operating strategy
• Built‐in demand for lots - D.R. Horton has a strong appetite for finished lots that continues even during potential downturns
• Supports existing operating platform
• Enhanced access to capital markets

5

FORESTAR INVESTMENT HIGHLIGHTS

Unique Returns‐
Focused Lot		Strategic Relationship		Long‐Term Market		Geographic
Manufacturing		With D.R. Horton		Share Gains		Diversification
Business Model

		Homebuilders'		Proven / Seasoned
Primary Focus on			Management Team		Strong Balance
	Increasing Preference
Attractive Entry‐			With Decades of		Sheet and Liquidity
	for Lots Developed by
Level Segment			Real Estate		Position
	3rd Parties
			Experience

6

UNIQUE LOT MANUFACTURER BUSINESS MODEL

FOR's unique lot manufacturing model is highly differentiated from that of a typical land developer

• Business model designed to achieve scale and consistency, while minimizing risk
• At scale, FOR's high turnover, lower risk "lot manufacturing" strategy is expected to generate returns similar to an efficient, production‐oriented homebuilder

FORESTAR

• Short duration, fully‐entitled lot development projects
• Large scale with national footprint and in‐market depth
• Returns-focused,lower risk inventory model
• Consistent operating results at scale and currently profitable
• Understandable, growth-orientedbusiness model
• Strong liquidity and access to debt and equity capital
• Phased, discretionary land development with known buyer

TYPICAL LAND DEVELOPER

• Long‐term, often complex or unentitled, real estate projects
• Lack of geographic diversification and depth in markets

• Lower return, unpredictable inventory model
• Lack of consistent profitability
• Limited visibility into future growth
• Limited access to and high cost of capital
• Speculative land with undefined buyer

7

BUSINESS OVERVIEW

Forestar Capital Deployment and Cash Generation

	Source land	Place land under	Close acquisition		Lot development
	acquisition	contract and complete	of entitled land		(~70% finished lot cost)
	opportunities		due diligence	(~30% finished lot cost)
	• Forestar, D.R.	• Environmental, market,	• Initial Forestar capital	•	Phased development
	Horton and other	entitlement, planning,	commitment	•	Grading, roads, utilities
	national, regional	engineering and				and landscape /
	and local 3rd party	permitting review				amenities
	homebuilders
ILLUSTRATIVE FORESTAR PROJECT
	Phase I development		Phase II development		Complete lot development
		12	24		36	42
		months	months		months	months

Close on	Achieve first	Recovery of Initial	Complete
acquisition of	lot sales	Cash Investment (2)	lot sales
entitled land	(Phase I)

Deliver finished lots to builders

• D.R. Horton as well as other national, regional and local 3rd party builders

Underwriting

Criteria

• >15% Return on Inventory (1)
• <36 month return of initial investment

(1)	Return on inventory is calculated as pre‐tax income divided by average inventory over the life of a project	8
(2)	Includes land purchase price and development costs for first phase of lots

BENEFITS OF HIGHLY STRATEGIC FOR AND DHI ALIGNMENT

BENEFITS TO FOR

• Enhanced, experienced leadership team

•	Supports Forestar's national platform	STRONG AND
•	Significant built‐in demand for lots	SYMBIOTIC STRATEGIC
•	Improved access to capital markets	RELATIONSHIP

• Shared Services from DHI

BENEFITS TO DHI

• Long‐term consistent supplier of finished lots across DHI's national footprint (88 markets in 29 states)
• Integral component of DHI's operational strategy
• Participate in value creation of FOR

Alignment with DHI, the nation's largest builder since 2002, provides support and stability in uncertain economic times

• D.R. Horton has a strong appetite for finished lots that continues even during potential market downturns
• • During the worst years of the last significant housing downturn, D.R. Horton still closed ~17,000 to 20,000 homes annually, the majority of which were built on finished lots purchased from 3rd parties
• DHI is committed to owning no more than a 2 to 3‐year supply of lots and to increasing its mix of optioned lots in inventory
• Most land developers lack the scale and access to capital to be consistent suppliers of lots to DHI across its national footprint
• Master Supply, Stockholder and Shared Services Agreements formalize the business relationship and protect FOR's interests(1)
• DHI plans to maintain a significant ownership position in FOR over the long‐term

Relationship with DHI further strengthens FOR's competitive advantages and DHI's interests are

fully-aligned with shareholders to ensure the profitable expansion of FOR's platform

(1) MSA, Stockholder's Agreement and Shared Services Agreement summaries included in Appendix

9

DHI GROWTH, CONSOLIDATION AND MARKET SHARE GAINS PROVIDE ROADMAP FOR FORESTAR

Total U.S. Single‐Family New Home Sales ('000s)	DHI Homes Closed as a Percentage of
1,400	U.S. Single‐Family New Home Sales	10%
		9%
1,200
		8%
1,000		7%
800		6%
		5%
600		4%
400		3%
		2%
200
		1%
0		0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: Company filings, Census	10
Note: Periods represent full calendar year

LOT DELIVERIES & REVENUE

The Forestar team delivered strong FTYD 6/30/20 growth, with lot deliveries and lot sales revenue increasing 188% and 213%, respectively, from the same period in the prior year

Lot Deliveries		Lot Sales Revenue

6,396

						$538
	4,132				$352
		2,224				$172
1,279
		$95
				FY 2018(1)	FY 2019	FYTD 6/30/19 FYTD 6/30/20
FY 2018(1)	FY 2019	FYTD 6/30/19 FYTD 6/30/20

$ in millions
(1) Effective 1/1/18, FOR changed its fiscal year‐end from 12/31 to 9/30; as presented, FY 2018 reflects the trailing twelve months ended 9/30/18	11
and excludes lots sold to unconsolidated ventures

SIGNIFICANT GROWTH RAMP

Based on today's market conditions, the Company now expects to deliver between 8,700 and 9,000 lots for the full year of fiscal 2020 and to grow its lot deliveries to a range of 10,500 to 11,500 lots in fiscal 2021

Lot Deliveries

10,500 - 11,500

8,700 - 9,000

4,132

1,279

FY 2018(1)

FY 2019

FY 2020e

FY 2021e

$ in millions
(1) Effective 1/1/18, FOR changed its fiscal year‐end from 12/31 to 9/30; as presented, FY 2018 reflects the trailing twelve months ended 9/30/18	12
and excludes lots sold to unconsolidated ventures

LAND AND DEVELOPMENT INVESTMENTS

Although Forestar temporarily restricted its land purchase activity early in the quarter due to COVID-19, the Company returned to more normalized levels of land and development investments as housing market conditions improved in May and June

		Quarter Ended
$260			$271
	$236
				$227
$83	$171		$110
		$114
				$125
		$88
$177			$161
			$122
		$83		$102
6/30/19	9/30/19	12/31/19	3/31/20	6/30/20

Quarter Ended 6/30/20 by Month

$119

$50

$52$56

$40$35$69

$12$21

April 2020

May 2020

June 2020

Land Acquisition		Land Development		Land Acquisition		Land Development

$ in millions

13

LOT POSITION

Forestar is well-positioned to respond to demand for residential lots

			52,300	50,700
		44,500	16,500	12,400
37,400	38,300
12,300
8,600	8,600
20,100
1,900		32,200	35,800	38,300
28,800	29,700
18,200

9/30/18

6/30/19

9/30/19

12/31/19

3/31/20

6/30/20

Owned Controlled

Includes lots that DHI has under contract or the right of first offer to purchase of 29,600, 28,600, 25,600, 23,400, 24,100 and 13,600 at 6/30/20,	14
3/31/20, 12/31/19, 9/30/19, 6/30/19 and 9/30/18, respectively.

DIVERSIFIED FOOTPRINT

Own and control 50,700 lots at 6/30/2020

77% of owned lots are under contract to sell or subject to a right of first offer to DHI

Targeting a 3 to 4 year owned lot inventory

6/30/20

51 Markets

22 States

9/30/18

24 Markets

14 States

• Current FOR markets / states
  DHI states where FOR does not currently operate
  FOR division offices open as of 7/17/20

Lot Position by State and Markets as of 6/30/20

Lot counts are approximate15 Of total lot position at 6/30/2020, 38,300 are owned and 12,400 are controlled through purchase contracts

PRIMARY FOCUS ON ATTRACTIVE ENTRY-LEVEL SEGMENT

• Majority of recent Forestar investments have been focused on lots for homes at affordable / entry‐level price points
• Average Forestar residential lot sale price for the TTM ended 6/30/2020 was ~$85,300(1)
• Compelling demand from entry‐level buyers, but lack of inventory has been a constraint
• D.R. Horton offers homes at all price points, with entry‐level / first‐time buyers representing a majority of closings
• • Entry‐level Express Homes brand has increased from 5% of DHI closings in fiscal 2014 to 35% of closings in fiscal 2019
  • Public homebuilders have shifted towards entry‐ level, with the establishment of numerous entry‐ level brands over past five years

Source: Company filings, Census, John Burns Real Estate Consulting

1. Excludes any impact from change in contract liabilities
2. Based on rolling twelve month average of homes sold as of April 2020
3. Based on homes closed in TTM ended 6/30/20
4. Based on fiscal year‐end closings

$200k ‐ $300k homes average sales price (ASP) represents the largest cohort of homes sold by D.R. Horton and the broader housing market

17%			7%5%
14%	44%	22%
					66%
25%
		Industry(2)			D.R. Horton(3)
Homes ASP:		<$300k		$300k ‐ $400k			$400k ‐ $500k		$500k+

D.R. Horton's Express Homes brand is a top 5 homebuilder by volume today(4)

20,000

15,000

10,000

5,000

0

2015

2016

2017

2018

2019

16

UNIQUELY POSITIONED TO PROVIDE RESIDENTIAL FINISHED LOTS

Builders preference for 'land lighter' models enhances opportunity, and in times of economic uncertainty, homebuilders shift their land strategies to slow raw land purchases and focus on purchasing finished lots

Optioned Land/Lot Position as a				Number of Years of Owned Land
% of Total Owned & Controlled						Based on TTM Closings
	62%	64%										4.4
48%	52%											3.8	3.5	3.5	3.4
						3.0
41%				38%	37%	40%	2.8	2.5
		33%	34%			2.2
									2.0

DHI ‐ HB segment

Average Public HB

DHI ‐ HB segment

Average Public HB

3/31/2016

3/31/2017

3/31/2018

3/31/2019

3/31/2020

3/31/2016

3/31/2017

3/31/2018

3/31/2019

3/31/2020

Source: FactSet and respective Company SEC filings
Notes: Average Public Homebuilder (HB) data represents the land and lot positions of LEN, PHM, TOL, NVR, MTH, MDC, TMHC, TPH, LGIH and KBH
For LEN and KBH, data is as of the periods ended February 28/29	17
For TOL, data is as of the periods ended April 30

SEASONED LEADERS WITH DECADES OF LAND DEVELOPMENT EXPERIENCE

Experienced management team that knows how to navigate through market cycles

DON TOMNITZ	DAN BARTOK	JIM ALLEN
Executive Chairman	CEO	CFO
Formerly President & CEO of DHI for	Joined FOR in December 2017;	Joined FOR in March 2020 with over 35
over a decade and joined FOR in	formerly EVP of Owned Real Estate for	years of operating and financial
October 2017	Wells Fargo, with 40 years experience	experience in multiple industries
	in homebuilding & land development	including manufacturing
	industry

MARK WALKER	NICOLAS APARICIO	IAN CUDE
East Region President	Florida Region President	South Central Region President
With DHI since 2012 and	With DHI since 2011 and	With DHI since 2012 and
joined FOR in February 2019 with	joined FOR in December 2018 with	joined FOR in November 2019 with
18 years of real estate experience	20 years of real estate experience	22 years of real estate experience

Dates with FOR include time with predecessor entities prior to 2008 when FOR became a standalone public company

18

FINANCIAL POSITION AND POLICY

Forestar is well-positioned with its low net leverage of 25.2% and strong liquidity position of ~$700 million

FINANCIAL POSITION AS OF 3/31/20

• $356M unrestricted cash and cash equivalents
• $380M unsecured revolving credit facility
• ~$700M total liquidity(1)
• $350M 8.0% senior notes due 2024
• $300M 5.0% senior notes due 2028
• $846M stockholders' equity
• 25.2% net debt to total capital(2)

DISCIPLINED FINANCIAL POLICY

• Strict lot development investment underwriting:
• • ≥ 15% return on inventory (ROI)(3)
  • ≤ 36-month cash recovery of phase 1 investment
• Net debt to capital(2) of ≤ 40%
• Maintain strong liquidity
• Balanced financing plan including both debt and equity

(1)	Liquidity defined as unrestricted cash balance plus revolving credit facility availability as governed by the borrowing base
(2)	Net debt to capital is calculated as debt net of unrestricted cash divided by debt net of unrestricted cash plus stockholders' equity	19
(3)	ROI is calculated as pre‐tax income divided by average inventory over the life of a project

Q3 FY 2020 AND FYTD 2020 HIGHLIGHTS

• Operating highlights
• • Residential lots sold increased 75% to 2,023 lots compared to 1,158 lots in the same quarter of fiscal 2019
  • 50,700 lots at 6/30/20, of which 38,300 were owned and 12,400 were controlled through purchase contracts
  • • 29,600, or 77%, of owned lots were under contract to sell or subject to a right of first offer to D.R. Horton

 Financial highlights

Three months ended 6/30/20		Nine months ended 6/30/20

$178M	102%	$584M	204%
Revenues	YoY Revenue Growth	Revenues	YoY Revenue Growth
$11M	6%	$33M	6%
SG&A Expense	SG&A Margin	SG&A Expense	SG&A Margin
$10M	6%	$46M	8%
Pre-Tax Income	Pre-Tax Margin	Pre-Tax Income	Pre-Tax Margin
$10M	$0.21	$37M	$0.76
Net Income	Net Income per Share	Net Income	Net Income per Share

20

FORESTAR INVESTMENT HIGHLIGHTS

Unique Returns‐
Focused Lot		Strategic Relationship		Long Term Market		Geographic
Manufacturing		With D.R. Horton		Share Gains		Diversification
Business Model

		Homebuilders'		Proven / Seasoned
Primary Focus on			Management Team		Strong Balance
	Increasing Preference
Attractive Entry‐			With Decades of		Sheet and Liquidity
	for Lots Developed by
Level Segment			Real Estate		Position
	3rd Parties
			Experience

21

APPENDIX

22

INCOME STATEMENT

		3 MONTHS ENDED		9 MONTHS ENDED
		6/30/2020		6/30/2019		6/30/2020		6/30/2019
Residential lots sold:		2,023		1,158		6,396		2,224
Development projects		1,556		723		4,234		1,597
Lot banking projects		467		435		2,162		627
Average sales price per lot(1)	$	79,900	$	77,400	$	83,800	$	78,800
Revenues(2)	$	177.9	$	88.2	$	584.3	$	192.0
Gross profit		20.8		12.9		74.0		42.4
Selling, general and administrative expense		11.2		7.9		32.8		19.8
Loss (gain) on sale of assets		‐		(1.5)		(0.1)		(2.4)
Equity in (loss) earnings of unconsolidated ventures		0.1		‐		(0.6)		(0.5)
Interest and other income		(0.8)		(1.9)		(4.2)		(4.1)
Income before income taxes		10.3		8.4		46.1		29.6
Income tax expense		0.2		1.5		8.9		6.0
Net income		10.1		6.9		37.2		23.6
Net income (loss) attributable to noncontrolling interests		‐		‐		0.7		3.3
Net income attributable to Forestar Group Inc.	$	10.1	$	6.9	$	36.5	$	20.3
Net income per diluted share	$	0.21	$	0.16	$	0.76	$	0.48

• in millions except per share data Unaudited

(1)	Excludes any impact from change in contract liabilities or deferred revenue	23
(2)	Revenues include $13.5 million and $0.6 million in tract sales and other revenue for three months ended June 30, 2020 and 2019, respectively, and

$46.4 million and $20.4 million in tract sales and other revenue for the nine months ended June 30, 2020 and 2019, respectively.

BALANCE SHEET

Cash and cash equivalents(1)		6/30/2020		9/30/2019		6/30/2019
$	355.6	$	382.8	$	223.2
Real estate		1,287.1		1,028.9		1,049.5
Investment in unconsolidated ventures		5.5		7.3		7.3
Other assets		37.2		19.3		24.2
Deferred income taxes, net		0.0		17.4		21.0
Total assets	$	1,685.4	$	1,455.7	$	1,325.2
Debt	$	640.6	$	460.5	$	458.9
Earnest money on sales contracts		98.9		89.9		84.8
Other liabilities		99.0		96.4		86.2
Shareholders' equity		846.3		808.3		694.7
Noncontrolling interests		0.6		0.6		0.6
Total equity		846.9		808.9		695.3
Total liabilities and equity	$	1,685.4	$	1,455.7	$	1,325.2
Net debt to total capital(2)		25.2%		8.8%		25.3%
Debt to total capital(2)		43.1%		36.3%		39.8%

$ in millions except per share data
Unaudited
(1) Cash and cash equivalents presented above includes $0, $0, and $0.2 million of restricted cash for the periods ended 6/30/20, 9/30/19 and 6/30/19,
respectively.
(2) Debt to capital is calculated as debt divided by stockholders' equity plus debt; net debt to capital is calculated as debt net of unrestricted cash divided	24
by debt net of unrestricted cash plus stockholders' equity

FOR & DHI RELATIONSHIP OVERVIEW

Stockholder's

Agreement

Capital Markets

Supports growth by providing

public debt and equity

LAND SOURCING AND LOT SALES STRUCTURE PER THE MSA(1)

Project sourced by	DHI Right of First Offer (ROFO) Structure
	• ROFO on 100% of lots
	• ROFO on 50% of lots in 1st phase
	• ROFO on 50% of lots in any subsequent phase, in which
	DHI purchased 25%+ of lots in previous phase
3rd Party Homebuilder	• No DHI ROFO on lots

Shared Services

Agreement

DHI holds majority stake of ~65% in FOR

as of 6/30/2020

Master Supply

Agreement ("MSA")

(1) Lots are sold to DHI and other builders at market pricing

25

MASTER SUPPLY AGREEMENT (MSA)

• Establishes business relationship between DHI and FOR as both companies identify residential real estate opportunities
• Provides DHI the right of first offer (ROFO) to purchase up to 100% of the lots from DHI sourced projects at market prices
• Provides DHI the ROFO to purchase up to 50% of the lots in the first phase of a Forestar sourced project and 50% of the lots in any subsequent phase in which DHI purchases at least 25% of the lots in the previous phase
• DHI has no ROFO rights on third‐party builder sourced development opportunities provided to FOR
• Continues until the earlier of (i) the date which DHI owns less than 15% of voting shares of FOR or (ii) June 29, 2037; however, FOR may terminate the MSA at any time when DHI owns less than 25% of the voting stock of Forestar

26

STOCKHOLDER'S AGREEMENT

• DHI has the right to nominate FOR's board members commensurate with DHI's equity ownership
• • DHI nominated four of FOR's five board members
  • FOR Board of Directors must include at least three independent directors (currently has four)
• Established an investment committee to approve new lot development and banking projects
• As long as DHI owns at least 35% of FOR's outstanding voting shares, FOR must obtain DHI consent in order to:
• • Issue equity
  • Incur, assume, refinance or guarantee debt that would increase FOR's gross leverage to greater than 40%
  • Select, terminate, remove or change compensation arrangements for the Executive Chairman, CEO, CFO and other key senior management
  • Make an acquisition or investment greater than $20 million
• As long as DHI owns at least 20% of FOR's outstanding equity:
• • DHI has the right to designate individuals to FOR's Board based on DHI's ownership percentage
  • DHI has the right to designate the Executive Chairman of FOR

27

SHARED SERVICES AGREEMENT

• Shared Services Agreement between FOR and DHI defines the terms under which DHI may provide administrative, compliance, operational and procurement services to FOR
• Scope and cost of services provided to FOR are mutually agreed upon by FOR and DHI management teams and are adjusted periodically as necessary
• Services provided currently include:
• • Accounting, Finance and Treasury
  • Tax
  • Human Resources, Payroll and Benefits
  • Legal: Securities, Corporate Governance, Litigation and Risk Management
  • Internal Audit
  • Information Technology
  • Investor and Public Relations
• FOR also contracts with DHI for lot development services in projects owned by FOR in geographic markets where FOR has not yet established development teams and capabilities
• • FOR pays DHI a fixed fee for each lot developed, which is mutually agreed upon for each project

28