FORESTAR GROUP INC. (NYSE:FOR) Files An 8-K Entry into a Material Definitive Agreement

The Company must pay Parent a $20,000,000 termination fee if
Parent terminates the Merger Agreement following a change of
recommendation, or failure to reaffirm the recommendation, of
the Merger by the Companys board of directors (the Board), or
if the Company terminates the Merger Agreement to enter into a
definitive agreement with a third party with respect to a
superior proposal, as set forth in, and subject to the
conditions of, the Merger Agreement. Under certain additional
circumstances described in the Merger Agreement, the Company
must also pay Parent a $20,000,000 termination fee if the
Merger Agreement is terminated in certain specified
circumstances while an alternative acquisition proposal to the
Merger has been publicly made or communicated to the Board and
not withdrawn and, within twelve months following such
termination, the Company enters into a definitive agreement
with respect to a business combination transaction of the type
described in the relevant provisions of the Merger Agreement,
or such a transaction is consummated. The Merger Agreement
further provides that, upon termination of the Merger Agreement
(i)in the event the Companys stockholders do not approve the
Merger, (ii)by Parent in certain circumstances involving a
material breach by the Company of any of its representations,
warranties or covenants under the Merger Agreement, or (iii)at
the Outside Date as a result of the failure of the condition to
the Merger that the Company shall have consummated certain
divestiture transactions or received a minimum amount of
proceeds with respect thereto, the Company will be required to
pay to Parent up to $4,000,000 (with respect to clauses (i)and
(ii)) or $3,000,000 (with respect to clause (iii)) for expenses
incurred by Parent (with such payment credited to any
termination fee subsequently paid by the Company). In the event
the Merger Agreement is terminated by the Company in certain
circumstances involving a material breach by Parent or Merger
Sub of any of its representations, warranties or covenants
under the Merger Agreement or if Parent fails to consummate the
closing within two business days of the date the closing should
have occurred under the Merger Agreement, Parent is required to
pay the Company a $40,000,000 termination fee.

The Merger Agreement also specifies that Parent shall have
sufficient cash available to pay the aggregate Per Share Merger
Consideration, as well as other amounts payable by Parent or
Merger Sub. Concurrently with the execution of the Merger
Agreement, Parent has delivered to the Company a guarantee (the
Guarantee) executed by SOF-X U.S. Holdings, L.P. (the
Guarantor) in favor of the Company with respect to certain
obligations of Parent and Merger Sub under the Merger
Agreement. Furthermore, Parent has delivered to the Company an
executed commitment letter from the Guarantor to provide Parent
with equity financing to consummate the transaction.

The foregoing description of the Merger Agreement and the
transactions contemplated thereby does not purport to be
complete and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is attached hereto as
Exhibit2.1 and is incorporated herein by reference. It is not
intended to provide any factual information about the Company,
Parent or their respective subsidiaries and affiliates. The
Merger Agreement contains representations and warranties by
each of the parties to the Merger Agreement, which were made
only for purposes of that agreement and as of specified dates.
The representations, warranties and covenants in the Merger
Agreement were made solely for the benefit of the parties to
the Merger Agreement; are subject to limitations agreed upon by
the contracting parties, including being qualified by
confidential disclosure schedules; may have been made for the
purposes of allocating contractual risk between the parties to
the Merger Agreement instead of establishing these matters as
facts; and are subject to standards of materiality applicable
to the contracting parties that may differ from those
applicable to investors. Investors should not rely on the
representations, warranties and covenants or any descriptions
thereof as characterizations of the actual state of facts or
condition of the Company, Parent or any of their respective
subsidiaries or affiliates. Moreover, information concerning
the subject matter of the representations, warranties and
covenants may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected
in the Companys public disclosures.

Item 3.03. Material Modifications to Rights of Security
Holders.

First Amendment to the Tax Benefits Preservation
Plan

In connection with the Merger Agreement and the transactions
contemplated thereby, the Company and Computershare Trust
Company, N.A. (the Rights Agent), have entered into Amendment
No.1 to Tax Benefits Preservation Plan, dated as of April13,
2017 (the Plan Amendment), with respect to the Tax Benefits
Preservation Plan (as amended from time to time, the Plan) to
provide that (i)none of Parent, Merger Sub or any of their
Affiliates or Associates (as such terms are defined in the
Plan), individually or collectively, shall be an Acquiring
Person (as defined in the Plan) under the Plan solely by reason
of the public announcement or disclosure, approval, adoption,
execution or delivery of the Merger Agreement,

the consummation of the Merger or the consummation of any of
the other transactions contemplated by the Merger Agreement
(each an Exempt Event), (ii)neither a Stock Acquisition Date
nor a Distribution Date (each term as defined in the Plan)
shall occur solely as a result of an Exempt Event, (iii)none of
Parent, Merger Sub, or any of their Affiliates or Associates,
individually or collectively, shall be deemed the Beneficial
Owner of or shall be deemed to have beneficial ownership of or
to beneficially own (as such terms are defined in the Plan) any
shares of the Company Common Stock solely as a result of an
Exempt Event, (iv)an Exempt Event shall not be, be deemed to
be, or result in a Section11(a)(ii)Event or a Section13 Event
(as such terms are defined in the Plan), and (v)the definition
of Expiration Date has been amended to mean the earliest of
(1)the Final Expiration Date (as defined in the Plan), (2)the
time at which the Rights (as defined in the Plan) are redeemed
or exchanged as provided in Section23 and Section24 of the
Plan, (3)the time at which the Board determines that the Plan
is no longer necessary or desirable for the preservation of Tax
Benefits (as defined in the Plan), (4)the close of business on
the first day of a taxable year of the Company to which the
Board determines that no Tax Benefits, once realized, as
applicable, may be carried forward, and (5)immediately prior to
the effective time of the Merger (but only if the Merger does
occur).

The foregoing description of the Plan Amendment does not
purport to be complete and is subject to, and qualified in its
entirety by, the full text of the Plan Amendment, a copy of
which is attached hereto as Exhibit4.1 and is incorporated
herein by reference.

Item 5.02. Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.

On February23, 2017, the Company announced that David M. Grimm,
Chief Administrative Officer, Executive Vice President, General
Counsel and Secretary, would retire effective March31, 2017,
after 25 years of service to the Company and its predecessors.
The Company and Mr.Grimm agreed to delay his departure to
better facilitate the transition of his duties. On April13,
2017, the Company and Mr.Grimm entered into a Separation
Agreement and Release (the Separation Agreement) to which
Mr.Grimms employment with the Company will terminate effective
April14, 2017.

to the Separation Agreement, Mr.Grimm has provided a release of
claims against the Company and agreed to certain other
restrictive covenants and cooperation undertakings and, to
further facilitate transitional matters, he also agreed to
provide consulting services to the Company on an as-needed
basis during the 90-day period following his departure (or if
earlier, upon consummation of the Merger or any other change in
control of the Company that is effected to a transaction
agreement executed not more than 90 days following his
departure) in consideration for a monthly consulting fee of
$25,000 (pro-rated as applicable for any partial month of
service). In connection with this departure, the Company agreed
(i)to provide Mr.Grimm a lump-sum cash payment of $550,000,
(ii)to reimburse him for medical continuation costs for one
year and for the cost of converting his Company-provided life
and ADD insurance to a personal policy (provided that such
reimbursement obligations will cease to the extent he acquires
other employer-provided coverage), and (iii)to reimburse
outplacement expenses of up to $25,000 to the extent incurred
not more than six months following his departure (such payments
and benefits, the Separation Benefits). Moreover, upon
consummation of the Merger (or any other change in control of
the Company that is effected to a transaction agreement
executed not more than 90 days following his departure), the
Company will provide to Mr.Grimm the payments and benefits that
would have been provided to him (based on his compensation
levels in effect upon his departure) to the Change in
Control/Severance Agreement between him, the Company and
Temple-Inland Inc. dated July15, 2007 if he had experienced a
qualifying termination of employment thereunder immediately
following consummation of the Merger or other change in control
transaction, in any event less the Separation Benefits already
provided to him.

The foregoing description of the Separation Agreement is a
summary of its terms only and is qualified in its entirety by
the full text of the Separation Agreement, a copy of which is
attached hereto as Exhibit10.1 and is incorporated herein by
reference.

Item 5.03. Amendments to Articles of Incorporation or
Bylaws; Change in Fiscal Year.

Sixth Amendment to the Amended and Restated
Bylaws

On April13, 2017, the Board of Directors of the Company
approved an amendment to the Companys Amended and Restated
Bylaws (as amended, the Bylaws) effective as of that date (the
Bylaw Amendment). The Bylaw Amendment added a new ArticleXIV,
Forum for Adjudication of Certain Disputes, which provides
that, unless the Company consents in writing to the selection
of an alternative forum, the Court of Chancery of the State of
Delaware will be the sole and exclusive forum for (i)derivative
actions, (ii)actions for breach of fiduciary duties owed by
directors, officers, stockholders, employees, or agents of the
Company, or any action asserting a claim for aiding and
abetting any such breach of fiduciary duty, (iii)actions
arising under any provision of the General Corporation Law of
Delaware, the Companys Certificate of Incorporation, or the
Companys Bylaws, and (iv)actions governed by the internal
affairs doctrine. Any person or entity holding, purchasing or
otherwise acquiring any interest in shares of capital stock of
the Company is deemed to have notice of and consented to the
provisions of the Bylaw Amendment.

The foregoing description of the Bylaw Amendment does not
purport to be complete and is qualified in its entirety by
reference to the full text of the Bylaw Amendment, a copy of
which is attached hereto as Exhibit3.1 and is incorporated
herein by reference.

Item 8.01. Other Events.

On April13, 2017, the Company issued a press release announcing
the entry into the Merger Agreement. The full text of the press
release is attached hereto as Exhibit99.1 and is incorporated
herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Cautionary Statement Regarding Forward Looking
Statements

This document includes forward-looking statements within the
meaning of the securities laws. The words will, expect,
believe, future and similar expressions are intended to
identify information that is not historical in nature.

This document contains forward-looking statements relating to
the proposed transaction between Forestar and Starwood. All
statements, other than historical facts, including statements
regarding the expected timing of the closing of the
transaction; the ability of the parties to complete the
transaction considering the various closing conditions; the
competitive ability and position of Starwood following
completion of the proposed transaction; and any assumptions
underlying any of the foregoing, are forward-looking
statements. Such statements are based upon current plans,
estimates and expectations that are subject to risks,
uncertainties and assumptions. Should one or more of these
risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those indicated or anticipated by such forward-looking
statements. The inclusion of such statements should not be
regarded as a representation that such plans, estimates or
expectations will be achieved. You should not place undue
reliance on such statements.

Important factors that could cause actual results to differ
materially from such plans, estimates or expectations include,
among others, that (1)one or more closing conditions to the
transaction may not be satisfied or waived, on a timely basis
or at all, including that the required approval by the
shareholders of Forestar may not be obtained; (2)there may be a
material adverse change of Forestar or the business of Forestar
may suffer as a result of uncertainty surrounding the
transaction; (3)the transaction may involve unexpected costs,
liabilities or delays; (4)legal proceedings may be initiated
related to the transaction; (5)changes in economic conditions,
political conditions, changes in federal or state laws or
regulation may occur; and (6)other risk factors as detailed
from time to time in Forestars reports filed with the
Securities and Exchange Commission (the SEC), including
Forestars Annual Report on Form10-K for the year ended
December31, 2016 which is available on the SECs Web site
(www.sec.gov). There can be no assurance that the merger will
be completed, or if it is completed, that it will close within
the anticipated time period or that the expected benefits of
the merger will be realized.

Neither Forestar nor Starwood undertakes any obligation to
update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or
to reflect the occurrence of unanticipated events.

Additional Information and Where to Find It

In connection with the proposed merger transaction, Forestar
intends to file relevant materials with the SEC, including a
preliminary proxy statement on Schedule 14A. Following the
filing of the definitive proxy statement with the SEC, Forestar
will mail the definitive proxy statement and a proxy card to
each stockholder entitled to vote at the special meeting
relating to the proposed merger. INVESTORS ARE URGED TO READ
THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL
CONTAIN IMPORTANT INFORMATION. Investors will be able to obtain
the proxy statement, as well as other filings containing
information about Forestar, free of charge, from the SECs Web
site (www.sec.gov). Investors may also obtain Forestars SEC
filings in connection with the transaction, free of charge,
from Forestars Web site (www.forestargroup.com) under the link
Investor Relations and then under the link Financial and SEC
Reporting and then under the tab SEC Filings, or by directing a
request to Forestar, Charles D. Jehl, Chief Financial Officer.

Participants in the Merger Solicitation

The directors, executive officers and employees of Forestar and
other persons may be deemed to be participants in the
solicitation of proxies in respect of the transaction.
Information regarding Forestars directors and executive
officers is available in its definitive proxy statement for its
2017 annual meeting of stockholders filed with the SEC on
March28, 2017. This document can be obtained free of charge
from the sources indicated above. Other information regarding
the interests of the participants in the proxy solicitation
will be included in the proxy statement when it becomes
available. This communication shall not constitute an offer to
sell or the solicitation of an offer to sell or the
solicitation of an offer to buy any securities, nor shall there
be any sale of securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any
such jurisdiction. No offer of securities shall be made except
by means of a prospectus meeting the requirements of Section10
of the Securities Act of 1933, as amended.