Exhibit 10.1

Execution Version

SECOND AMENDED AND RESTATED REVOLVING AND TERM CREDIT
AGREEMENT

DATED AS OF SEPTEMBER 14, 2012

AMONG

FORESTAR (USA) REAL ESTATE GROUP INC.,

as Borrower,

FORESTAR GROUP INC.

AND

THE WHOLLY OWNED SUBSIDIARIES

OF BORROWER SIGNATORY HERETO,

as Guarantors,

AND

KEYBANK NATIONAL ASSOCIATION,

as a Lender, Swing Line Lender and Agent

AND

THE OTHER LENDERS WHICH MAY BECOME

PARTIES TO THIS AGREEMENT

AND

KEYBANC CAPITAL MARKETS

as Sole Arranger and Sole Book Runner

TABLE OF CONTENTS

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EXHIBITS AND SCHEDULES

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SECOND AMENDED AND RESTATED

REVOLVING AND TERM CREDIT AGREEMENT

THIS SECOND AMENDED AND RESTATED REVOLVING AND TERM CREDIT AGREEMENT (this “Agreement”) is made the 14th day of September, 2012, by and among FORESTAR (USA) REAL ESTATE GROUP INC., a Delaware corporation, as borrower (“Borrower”), having its principal place of business at 6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746, FORESTAR GROUP INC., a Delaware corporation (“Forestar Group”), and the wholly owned, direct and indirect Subsidiaries of Borrower now or hereafter signatory hereto, as guarantors (collectively with Forestar Group, “Guarantors”), KEYBANK NATIONAL ASSOCIATION, a national banking association (“KeyBank”), as Swing Line Lender, and with the other lending institutions that are or may become parties hereto pursuant to §18 as lenders (“Lenders”), KEYBANK NATIONAL ASSOCIATION, as administrative agent (“Agent”) for itself and the other Lenders, and KEYBANC CAPITAL MARKETS, as sole arranger and sole bookrunner.

RECITALS

WHEREAS, Borrower, Guarantors, Agent and certain of the Lenders previously entered into a Revolving and Term Credit Agreement dated as of December 14, 2007, as amended by that certain First Amendment to Revolving and Term Credit Agreement and Other Loan Documents dated as of March 12, 2008, that certain Second Amendment to Revolving and Term Credit Agreement dated as of July 16, 2009, as amended and restated by that certain Amended and Restated Revolving and Term Credit Agreement dated as of August 6, 2010, as amended by that certain First Amendment to Amended and Restated Revolving and Term Credit Agreement dated as of May 6, 2011, and that certain Second Amendment to Amended and Restated Revolving and Term Credit Agreement dated as of September 30, 2011 (collectively, the “Original Credit Agreement”) pursuant to which the Lenders party thereto extended certain financial accommodations to Borrower;

WHEREAS, Borrower has requested that Lenders continue to make available to it a revolving credit facility and a term loan facility;

WHEREAS, the Revolving Lenders (as hereinafter defined) are willing to make such revolving credit facility available to Borrower, which will include a Swing Line Commitment (as hereinafter defined) and a letter of credit sub-facility, and the Term Lenders (as hereinafter defined) are willing to make such term loan facility available to Borrower, all upon the terms and conditions contained herein;

WHEREAS, in order to make such Loans, Borrower, Agent and Lenders have agreed to amend and restate the Original Credit Agreement in its entirety as set forth herein;

NOW, THEREFORE, in consideration of the recitals herein and the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

§1.          DEFINITIONS AND RULES OF INTERPRETATION

§1.1         Definitions

The following terms shall have the meanings set forth in this §1 or elsewhere in the provisions of this Agreement referred to below:

Acquisition Expenditures.  The amount of any hard and soft costs incurred by any Loan Party, any of their respective Subsidiaries and any of the Joint Ventures in connection with the acquisition of unimproved Real Estate (excluding Oil and Gas Properties), including the purchase price thereof, and reasonable and customary, out-of-pocket transactional costs and expenses paid by any Loan Party in connection with such acquisition, for which such Loan Party shall provide or cause to be provided to Agent, upon Agent’s request from time to time, invoices, settlement statements and other supporting documentation in respect thereof (and which, with respect to any Real Estate included in the Borrowing Base Assets, have otherwise been properly accounted for by such Loan Party in the Borrowing Base Certificates submitted to Agent), but excluding therefrom general administrative and overhead costs and Development Expenditures.

Adjusted Asset Value.  For the Loan Parties, as of any date of determination, the sum of the following, without duplication: (a) the aggregate amount of unrestricted cash and cash equivalents; (b) the Timberland Value; (c) the High Value Timberland Amount; (d) the Raw Entitled Land Value; (e) the Entitled Land Under Development Value; (f) the Non-Appraised Entitled Land Value; (g) the Mineral Business Enterprise Value; (h) the SIDR Reimbursements Value; (i) the Cibolo Resort SIDHT Value; (j) all other Real Estate owned by the Loan Parties, valued at book value without regard to any Indebtedness; (k) all assets held by Joint Ventures, valued at book value without regard to any Indebtedness at the Joint Venture level, provided however, that only the Loan Parties’ respective pro rata share of such Joint Venture assets shall be taken into account for purposes of this definition; and (l) after the Credo Acquisition, the Credo Assets Value.  Notwithstanding anything to the contrary contained in this definition, in the event Borrower requests that Agent order and review an Appraisal of any assets described in clauses (j) or (k) of this definition, then such assets shall be valued at the lower of book value or appraised value as set forth in such Appraisal.

Advance Account.  The account established with Agent pursuant to §5.7.

Advance Rate Costs Value.  As of any date of determination, an amount equal to fifty percent (50%) of Credo Costs as of such date.

Advance Rate Reserves Value.  As of any date of determination, an amount equal to the sum of (i) sixty percent (60%) of the PDP Reserves Value, plus (ii) twenty-five percent (25%) of the PDNP Reserves Value, plus (iii) ten percent (10%) of the PUD Reserves Value; provided, however, that the portion of the Advance Rate Reserves Value accounted for under clauses (ii) and (iii) combined may not exceed twenty-five percent (25%) of the Advance Rate Reserves Value.

Affected Lender.  See §18.8.

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Affiliates.  As applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as applied to any Person, means (a) the possession, directly or indirectly, of the power to vote fifty percent (50%) or more of the stock, shares, voting trust certificates, beneficial interests, partnership interests, member interests or other interests having voting power for the election of directors of such Person or otherwise to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise, or (b) the ownership of (i) a general partnership interest, (ii) a managing member’s interest in a limited liability company or (iii) a limited partnership interest or preferred stock (or other ownership interest) representing fifty percent (50%) or more of the outstanding limited or general partnership interests, preferred stock or other ownership interests of such Person.  In no event shall Agent or any Lender be deemed an Affiliate of any Loan Party.

Agent.  KeyBank, acting as Administrative Agent for itself and the other Lenders, its successors and assigns.

Agent’s Office.  Agent’s office located at 127 Public Square, Cleveland, Ohio 44114, or at such other location as Agent may designate from time to time by notice to Borrower and the other Lenders.

Agent’s Special Counsel. Bryan Cave LLP or such other counsel as may be selected by Agent.

Agreement.  This Second Amended and Restated Revolving and Term Credit Agreement, including the Schedules and Exhibits hereto.

Agreement Regarding Fees.  The fee letter agreement dated as of September 12, 2012, among Agent, Arranger and Borrower regarding certain fees payable by Borrower in connection with this Agreement.

Applicable Approval Percentage.  For purposes of the definitions of Required Lenders and Requisite Class Lenders, the Applicable Approval Percentage shall be either (i) sixty-six and two-thirds percent (66-2/3%) in connection with any amendment, consent or waiver relating to the provisions of §5, §8, §9 or §12 (including applicable definitions), and (ii) in all other cases, fifty percent (50%).

Appraisal.

(A)     With respect to certain Real Estate, an appraisal of the value of certain Real Estate as described herein determined on a fair market value basis, performed by an independent MAI appraiser selected by Agent who is not an employee of Borrower, Agent or a Lender, the form and substance of each such appraisal and the identity of the appraiser to be in accordance with laws and policies (both regulatory and internal) applicable to Lenders and otherwise acceptable to Agent; and

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(B)      With respect to the Cibolo Resort SIDHT and the SIDR Reimbursements, an appraisal of the value of each asset on a fair market value basis, performed by an appraiser selected by Agent who is not an employee of Borrower, Agent or a Lender, the form and substance of each such appraisal and the identity of the appraiser to be in accordance with laws and policies (both regulatory and internal) applicable to Lenders and otherwise acceptable to Agent.

Arranger.  KeyBanc Capital Markets.

Assignment and Assumption Agreement.  See §18.1.

Assignment of Cibolo Resort SIDHT.  The Collateral Assignment of Economic Development Agreement, dated as of even date herewith, from Borrower in favor of Agent, as the same may be amended, restated, supplemented, consolidated or otherwise modified from time to time, pursuant to which there shall be granted to Agent for the benefit of Lenders a security interest in the Cibolo Resort SIDHT, such assignment to be in form and substance satisfactory to Agent.

Assignment of Leases and Rents.  The Second Amended and Restated Assignment of Leases and Rents, dated as of even date herewith, from Borrower in favor of Agent, as the same may be amended, restated, supplemented, consolidated or otherwise modified from time to time, pursuant to which there shall be granted to Agent for the benefit of Lenders a security interest in the interest of Borrower as lessor with respect to all Leases (including Timber leases) of all or any part of the Real Estate owned by Borrower, such assignment to be in form and substance satisfactory to Agent.

Assignment of Mineral Rights Leases.  Collectively, the Second Amended and Restated Assignment of Leases and Rents, dated as of even date herewith, from Forestar Minerals LP, and the Amended and Restated Assignment of Leases and Rents, dated as of even date herewith, from Forestar Oil & Gas LLC, in favor of Agent, and any other assignment of Mineral Rights Leases hereafter entered into from time to time by any other Loan Party (including, without limitation, the Credo Entities) as security for the Obligations, as any and all of the same may be amended, restated, supplemented, consolidated or otherwise modified from time to time, pursuant to which there shall be granted to Agent for the benefit of Lenders a security interest in the interest of Forestar Minerals LP, Forestar Oil & Gas LLC or such other Loan Party, as applicable, with respect to all Mineral Rights Leases, each such assignment to be in form and substance satisfactory to Agent.

Assignment of Rights to Joint Venture Distributions.  The Second Amended and Restated Assignment and Security Agreement regarding Joint Venture Distributions dated as of the Closing Date, executed by and among the Loan Parties that from time to time own Equity Interests in any Majority-Owned Joint Venture, in favor of Agent for the benefit of Agent and Lenders.

Assignment of SIDR Reimbursements.  The Collateral Assignment of Public Improvement Financing Agreement, dated as of even date herewith, from Borrower in favor of Agent, as the same may be amended, restated, supplemented, consolidated or otherwise modified from time to time, pursuant to which there shall be granted to Agent for the benefit of Lenders a

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security interest in the SIDR Reimbursements, such assignment to be in form and substance satisfactory to Agent.

Available Liquidity.  As of any date of determination, an amount equal to the sum of (a) the amount available for drawing under the Revolving Commitment (subject to pro forma compliance with all covenants, including, without limitation, §9.2(b)) plus (b) unrestricted cash plus (c) Cash Equivalents which are not pledged or encumbered and the use of which is not restricted by the terms of any agreement.

Balance Sheet Date.  December 31, 2011.

Base Rate.  The term Base Rate shall mean, for any day, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the greatest of:  (i) the rate of interest established by KeyBank from time to time as its “prime rate” whether or not publicly announced, which interest rate may or may not be the lowest rate charged by it for commercial loans or other extensions of credit; (ii) the Federal Funds Effective Rate in effect from time to time, determined one Business Day in arrears, plus ½ of one percent (0.5%) per annum; or (iii) the then-applicable LIBOR Rate for a one (1) month Interest Period, plus one percent (1.0%) per annum.

Base Rate Loans.  Those Loans bearing interest by reference to the Base Rate.

Base Rate Spread.  The per annum rate of three percent (3%).

Basel III.  See §4.9.

Bond Indebtedness.  Indebtedness in the form of bonds or notes issued by a Loan Party (and any guaranties in respect thereof by Forestar Group or any Subsidiary of Forestar Group) including Convertible Bond Indebtedness.

Borrower.  As defined in the preamble hereto.

Borrower’s Knowledge or Knowledge.  The actual knowledge of the chief executive officer, Principal Financial Officer, chief financial officer (if different from the Principal Financial Officer), general counsel or vice-president-land management of Borrower, after having conducted a reasonable investigation and inquiry thereof; provided, however, the foregoing shall not be deemed to require Borrower to obtain any written environmental site assessment reports.

Borrowing Base.  As of any date of determination, the sum of the following percentages of the Borrowing Base Assets:

(a)                                  forty-five percent (45%) of Timberland Value; plus

(b)                                 thirty-five percent (35%) of High Value Timberland Amount; plus

(c)                                  forty percent (40%) of Raw Entitled Land Value; plus

(d)                                 forty-five percent (45%) of Entitled Land Under Development Value; plus

(e)                                  sixty percent (60%) of Mineral Business Enterprise Value; plus

(f)                                    fifty percent (50%) of SIDR Reimbursements Value; plus

(g)                                 sixty percent (60%) of Cibolo Resort SIDHT Value; plus

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(h)                                 from and after the consummation of the Credo Acquisition, the Credo Borrowing Base Value.

provided, however, that (i) the Borrowing Base shall be reduced by the amounts, if any, by which (A) the portion of the Borrowing Base accounted for by clause (b) of this definition would exceed twenty-five percent (25%) of the Borrowing Base, and (B) the portion of the Borrowing Base accounted for by clause (c) of this definition would exceed twenty-five percent (25%) of the Borrowing Base; (ii) effective upon the issuance of any Permitted Bond Indebtedness, Entitled Land Under Development shall only be included in the Borrowing Base to the extent any Real Estate constituting Entitled Land Under Development is included in the Mortgaged Properties; (iii) if the Cibolo Resort SIDHT Releases are not obtained within sixty (60) days after the Closing Date, the Cibolo Resort SIDHT shall be removed from the Borrowing Base unless and until the Cibolo Resort SIDHT Releases are obtained; (iv) if the Non-Annexation Agreement Estoppel is not obtained within sixty (60) days after the Closing Date, the Cibolo Resort SIDHT and the SIDR Reimbursements shall be removed from the Borrowing Base unless and until the Non-Annexation Agreement Estoppel is obtained; (v) the Borrowing Base shall be reduced by any reserve existing under §5.8(b); and (vi) the Borrowing Base shall be reduced by any reserve existing under §9.3.

Borrowing Base Assets.  Collectively, the Timberland, the High Value Timberland, the Raw Entitled Land, the Entitled Land Under Development, the Mineral Business (exclusive of the Mineral Business conducted by the Credo Entities), the SIDR Reimbursements, the Cibolo Resort SIDHT, and from and after the consummation of the Credo Acquisition, the Credo Assets; provided, however, (i) that effective upon the issuance of any Permitted Bond Indebtedness, any Real Estate constituting Entitled Land Under Development shall only be included in the Borrowing Base Assets to the extent such Real Estate is included in the Mortgaged Properties;  (ii) if the Cibolo Resort SIDHT Releases are not obtained within sixty (60) days after the Closing Date, the Cibolo Resort SIDHT shall be removed from the Borrowing Base unless and until the Cibolo Resort SIDHT Releases are obtained, and (iii) if the Non-Annexation Agreement Estoppel is not obtained within sixty (60) days after the Closing Date, the Cibolo Resort SIDHT and the SIDR Reimbursements shall be removed from the Borrowing Base unless and until the Non-Annexation Agreement Estoppel is obtained.  With respect to Timberland, High Value Timberland, Raw Entitled Land and Entitled Land Under Development, parcels of Real Estate may from time to time move from one classification of Borrowing Base Asset to another upon designation by Borrower on the Borrowing Base Certificate most recently delivered to Agent, but can never be in more than one classification at any point in time.

In addition, from time to time, with approval of the Required Lenders, additional assets may be included in the Borrowing Base Assets, with percentages of the value thereof included in the Borrowing Base similarly subject to the approval of the Required Lenders.

Borrowing Base Certificate.  See §7.4(e).

Business Day.  Any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state of New York, the state of Texas, the state where Agent’s Office is located and, if such day relates to any LIBOR

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Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank Eurodollar market.

Call Option Overlay.  The Convertible Bond Hedge Transactions, the Warrant Transactions and the Capped Call Transactions.

Capitalized Lease.  A lease under which a Person is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP.

Capped Call Transactions.  One or more call options referencing Forestar Group’s common stock purchased by Forestar Group or any Subsidiary of Forestar Group in connection with the issuance of Convertible Bond Indebtedness with a strike or exercise price (howsoever defined) initially equal to the conversion or exchange price (howsoever defined) of the related Convertible Bond Indebtedness (subject to rounding) and limiting the amount deliverable to Forestar Group or such Subsidiary of Forestar Group upon exercise thereof based on a cap or upper strike price (howsoever defined).

Cash Equivalents.  Investments of the type described in §8.3(a) through (f).

CERCLA.  See §6.18.

Change of Control.  A Change of Control shall exist upon the occurrence of any of the following:

(a)           a transaction in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of  Forestar Group ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of Forestar Group, who did not have such power before such transaction;

(b)           Borrower ceases for any reason to be a wholly owned, direct Subsidiary of Forestar Group; or

(c)           A “Change of Control” occurs under the terms of any Permitted Bond Indebtedness except where any such “Change of Control” would not, in and of itself, directly result in a default or event of default under such Permitted Bond Indebtedness.

Cibolo Resort.  The JW Marriott San Antonio Hill Country Resort & Spa located in the Cibolo Canyons development near San Antonio, Texas.

Cibolo Resort SIDHT.  All amounts payable to Borrower under that certain Economic Development Agreement dated as of January 12, 2006 among Cibolo Canyons Special Improvement District, Borrower, Marriott International, Inc., and Bexar County, Texas, as amended First Amendment to Economic Development Agreement dated October 30, 2006.

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Cibolo Resort SIDHT Releases.  Releases, cancellations or terminations or other agreements satisfactory to Agent in respect of the collateral assignment by Borrower to SA Real Estate, LLLP of its rights to receive the Cibolo Resort SIDHT, and subsequent collateral assignment by SA Real Estate, LLLP of such rights to HSBC Realty Credit Corporation (USA), as Agent for itself and other co-lenders.

Cibolo Resort SIDHT Value.  As of any determination date, the value of the Cibolo Resort SIDHT as determined by the most recent Appraisal thereof.

Class.  With respect to Lenders, the Revolver Lenders and Term Lenders, and with respect to Loans, Revolving Loans and Term Loans.

Closing Date.  The first date on which all of the conditions set forth in §10 and §11 have been satisfied or waived in writing by Agent.

Code.  The Internal Revenue Code of 1986, as amended.

Collateral.  All of the property, rights and interests of Borrower and Guarantors which are or are intended to be subject to the security interests, security title, liens and mortgages created by the Security Documents, including, without limitation, the Mortgaged Property.

Collateral Assignment of Timber Purchase Agreement.  The Second Amended and Restated Collateral Assignment executed by the Borrower in respect of the Timber Purchase Agreement, which Collateral Assignment shall be in form and substance satisfactory to Agent.

Commitment.  With respect to each Lender, the amount set forth on Schedule 1.1 hereto as the amount of such Lender’s Commitment to make or maintain Loans to Borrower, or purchase participations in Swing Line Loans in accordance with §2.1, or purchase participations in Letters of Credit issued by Agent for the account of Borrower in accordance with §2.10, in each case as the same may be changed from time to time in accordance with the terms of this Agreement, including, without limitation, §2.9.

Commitment Percentage.  With respect to each Lender, the percentage set forth on Schedule 1.1 hereto as such Lender’s percentage of the aggregate Commitments of all of Lenders.

Commodity Hedge Agreement.  Any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more commodities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transaction (but not including any Hedge Agreement, the Convertible Bond Hedge Transactions, the Warrant Transactions and the Capped Call Transactions), in each case entered into to hedge or mitigate risks to which the Borrower reasonably believes it has actual exposure.  For avoidance of doubt, obligations and liabilities under Commodity Hedge Agreements shall not be part of the Obligations.

Compliance Certificate.  See §7.4(c).

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Consolidated or combined.  With reference to any term defined herein, that term as applied to the accounts of a Person and its Subsidiaries, determined on a consolidated or combined basis in accordance with GAAP.

Consolidated Tangible Net Worth.  The amount by which Consolidated Total Assets exceeds Consolidated Total Liabilities less, to the extent included in Consolidated Total Assets, the sum of:

(a)           the total book value of all assets of a Person and its Subsidiaries properly classified as intangible assets under GAAP, including such items as good will, the purchase price of acquired assets in excess of the fair market value thereof, trademarks, trade names, service marks, brand names, copyrights, patents and licenses, and rights with respect to the foregoing; provided that goodwill associated with the Credo Acquisition not to exceed $50,000,000 shall not be deducted in determining Consolidated Total Assets; plus

(b)           all amounts representing any write-up in the book value of any assets of a Person and its Subsidiaries resulting from a revaluation thereof subsequent to the Balance Sheet Date; plus

(c)           all amounts representing minority interests which are applicable to third parties.

Consolidated Total Assets.  All assets of a Person and its Subsidiaries determined on a consolidated basis in accordance with GAAP.

Consolidated Total Liabilities.  All liabilities of a Person and its Subsidiaries and their allocable share of liabilities of their respective Subsidiaries determined on a consolidated basis in accordance with GAAP, and all Indebtedness of such Person and its Subsidiaries, whether or not so classified.

Conversion Request.  A notice given by Borrower to Agent of its election to convert or continue a Loan in accordance with §4.1.

Convertible Bond Hedge Transactions.  One or more call options referencing Forestar Group’s common stock purchased by Forestar Group or any Subsidiary of Forestar Group in connection with the issuance of Convertible Bond Indebtedness with a strike or exercise price (howsoever defined) initially equal to the conversion or exchange price (howsoever defined) of the related Convertible Bond Indebtedness (subject to rounding).

Convertible Bond Indebtedness.  Permitted Bond Indebtedness having a feature which entitles the holder thereof to convert all or a portion of such Indebtedness into or by reference to Equity Interests in Forestar Group.

Credo.  Credo Petroleum Corporation, a Delaware corporation.

Credo Acquisition.  The acquisition of Credo effected pursuant to the Credo Merger Agreement.

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Credo Assets.  Collectively, the Credo Patents, the Oil and Gas Properties owned by the Credo Entities and, to the extent not constituting Oil and Gas Properties, the Leases owned by or to which a Credo Entity is a party.

Credo Assets Value.  As of any date of determination, an amount equal to the sum of the amount under column A plus the amount under column B below:

Credo Borrowing Base Value.  As of any date of determination, the sum of (i) the Credo Costs Component and (ii) the Credo Reserves Component.

Credo Closing Conditions.  The following conditions: (i) no Default or Event of Default shall have occurred and be continuing nor shall result from the consummation of the Credo Acquisition; (ii) the representations set forth in §6.13 and §6.21 shall be true and correct in all material respects; (iii) the Security Documents covering the Credo Assets shall have been duly executed and delivered; (iv) the provisions of §7.21 shall have been complied with in regard to the Credo Entities; (v) if Borrower has requested a Loan or Letter of Credit in conjunction with the consummation of the Credo Acquisition, the conditions set forth in §11 shall have been satisfied and (vi) the Title Opinions with respect to the initial Credo Mortgaged Properties shall have been delivered to Agent.

Credo Costs.  As of any date of determination, the sum of $147,494,246.00 plus the amount of capital expenditures related to or in furtherance of the business presently conducted by the Credo Entities made by the Credo Entities after the Credo Acquisition through such date of determination.

Credo Costs Component.  As of any date of determination, an amount equal to the following percentages of the Advance Rate Costs Value as of such date:

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Credo Entities.  Collectively, Credo and the Credo Subsidiaries, any of which may be sometimes referred to individually as a Credo Entity.

Credo Merger Agreement.  That certain Agreement and Plan of Merger dated as of June 3, 2012, among Forestar Group, Longhorn Acquisition Inc. and Credo, as it may be modified or amended.

Credo Mortgaged Property or Credo Mortgaged Properties.  Individually and collectively, the Real Estate of the Credo Entities (including the Credo Reserve Properties) that are subject to a Security Deed from time to time.

Credo Patents.  Those patents described in the Patent Security Agreement.

Credo Reserve Properties.  The Oil and Gas Properties evaluated in the Initial Engineering Report and in each Engineering Report furnished to Agent pursuant to §7.4(k).

Credo Reserves Component.  As of any date of determination, an amount equal to the following percentages of the Advance Rate Reserves Value as of such date:

Credo Subsidiaries.  SECO Energy Corporation, a Nevada corporation, and United Oil Corporation, an Oklahoma corporation, both of which are wholly owned by Credo, and each other Subsidiary of Credo formed or acquired after the Closing Date.

Default.  See §12.1.

Default Rate.  See §4.12.

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Defaulting Lender.  Any Lender that has (a)(i) been adjudicated as or determined by any Governmental Authority having regulatory authority over such Lender or its assets to be insolvent or has a parent company that has been adjudicated as or determined by any Governmental Authority having regulatory authority over such Lender or its assets to be insolvent or (ii) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment, (b) given notice to Agent or Borrower that it will not make, or that it has disaffirmed or repudiated any obligation to make, any Loan hereunder (unless such notice is given by or on behalf of all Lenders), or (c) become and remains a Delinquent Lender under §14.5(c).

Deposit Account Bank.  Each bank or other financial institution at which any Loan Party maintains a deposit account, that has entered into a Deposit Account Control Agreement.

Deposit Account Control Agreement.  Each deposit account control agreement, in form and substance satisfactory to Agent, from time to time executed by a Deposit Account Bank in favor of Agent for the benefit of Agent and Lenders, each applicable Loan Party and Agent.

Development.  A residential community, commercial development, mixed use residential and commercial community or industrial development or any other project or development (excluding, for the avoidance of doubt, Mineral Activity) developed by Borrower or by any Loan Party or Joint Venture.

Development Expenditures.  The amount of any hard and soft costs incurred by any Loan Party or any of the Joint Ventures (but only to the extent of the Loan Parties’ pro rata share of such costs of such Joint Ventures) in connection with the development of the Developments attributable to zoning, permitting, design, site improvement, amenities, and construction of infrastructure in connection with the Developments for which such Loan Party shall provide or cause to be provided to Agent, upon Agent’s request from time to time, invoices, work orders and other supporting documentation with respect thereto, and which, with respect to any Development on Real Estate included in the Borrowing Base Assets (other than Oil and Gas Properties), have otherwise been properly accounted for by such Loan Party in the Borrowing Base Certificates submitted to Agent, including infrastructure costs, but excluding therefrom general administrative and overhead costs, and Acquisition Expenditures.

Direct Competitor.  Any Person principally and directly engaged in the business of real estate entitlement and development or the development or leasing of mineral or wood fiber resources in the United States of America.

Distribution.  With respect to any Person, the declaration or payment of any cash, cash flow, dividend or distribution (whether in the form of cash or property) on or in respect of any shares of any class of capital stock, partnership interest, membership interest or other beneficial interest of such Person; the purchase, redemption, exchange or other retirement for value of any shares of any class of capital stock, partnership interest, membership interest or other beneficial interest of such Person, directly or indirectly through a Subsidiary of such Person or otherwise;

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the return of capital (whether in the form of cash or property) by a Person to its shareholders, partners, members or other beneficial owners as such; or any other distribution on or in respect of any shares of any class of capital stock, partnership interest, membership interest or other beneficial interest of such Person.

Distribution and Separation Agreement.  The Separation and Distribution Agreement dated as of the Spin-off Effective Date, by and among Temple-Inland, Forestar Group and Guaranty Financial Group Inc., executed and delivered in connection with the Spin-off Transaction.

Dodd-Frank.  See §4.9.

Dollars or $.  Dollars in lawful currency of the United States of America.

Domestic Lending Office.  Initially, the office of each Lender designated as such in Schedule 1.1 hereto; thereafter, such other office of such Lender, if any, located within the United States that will be making or maintaining Base Rate Loans.

Drawdown Date.  The date on which any Loan (other than a Swing Line Loan) is made or is to be made, and the date on which any Loan is converted to a Loan of the other Type.

EBITDA.  With respect to any Person for any fiscal period, the sum of (a) Net Income of such Person, plus (b) to the extent the following have been deducted in the calculation of Net Income for such period, (i) interest expense, (ii) federal, state and local income taxes paid or accrued, (iii) depletion, depreciation and amortization expense and (iv) all non-recurring non-cash expenses or charges (excluding any such non-cash item to the extent that it represents an accrual or reserve for potential cash items in any future period or amortization of a prepaid cash item that was paid in a prior period), minus (c) all non-recurring non-cash items increasing Net Income of such Person for such period (excluding any such non-cash item to the extent it represents the reversal of an accrual or reserve for potential cash item in any prior period), all determined without duplication and in accordance with GAAP.  EBITDA for any fiscal period shall be adjusted to give effect, on a pro forma basis and consistent with GAAP, to any acquisition made during such period as if such acquisition was made at the beginning of such period.

Eligible Assignee:  (a) Any Lender or any Affiliate of a Lender; (b) any commercial bank, savings bank, savings and loan association, investment or mutual fund, or similar financial institution which (i) has total assets of $5,000,000,000 or more, (ii) is “well capitalized” within the meaning of such term under the regulations promulgated under the auspices of the Federal Deposit Insurance Corporation Improvement Act of 1991, as amended, (iii) in the sole judgment of Agent, is engaged in the business of lending money and extending credit, and buying loans or participations in loans under credit facilities substantially similar to those extended under this Agreement, and (iv) in the sole judgment of Agent, is operationally and procedurally able to meet the obligations of a Lender hereunder; (c) any insurance company in the business of writing insurance which (i) has total assets of $5,000,000,000 or more (ii) is “best capitalized” within the meaning of such term under the applicable regulations of the National Association of Insurance Commissioners, and (iii) meets the requirements set forth in subclauses (iii) and (iv) of clause (b) above; and (d) any other financial institution having total assets of $5,000,000,000  (including a mutual fund or other fund under management of any investment manager having under its

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management total assets of $5,000,000,000 or more, and any of its Related Funds) which meets the requirement set forth in subclauses (iii) and (iv) of clause (b) above; provided that each Eligible Assignee must (A) be organized under the Laws of the United States of America, any state thereof or the District of Columbia, or, if a commercial bank, be organized under the Laws of the United States of America, any State thereof or the District of Columbia, the Cayman Islands or any country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of such a country, (B) act under the Loan Documents through a branch, agency or funding office located in the United States of America, (C) be exempt from withholding of tax on payments hereunder and deliver the documents related thereto pursuant to the Internal Revenue Code as in effect from time to time, and (D) not be Borrower, a Guarantor or an Affiliate of Borrower or any Guarantor or a Direct Competitor of the Loan Parties.

Employee Benefit Plan.  Any employee benefit plan within the meaning of §3(3) of ERISA maintained or contributed to by Borrower or any ERISA Affiliate, other than a Multiemployer Plan.

Engineering Report.  The Initial Engineering Report and each engineering report delivered pursuant to §7.4(k).

Entitled Land Under Development.  Real Estate (other than Oil and Gas Properties) owned in fee simple absolute by any Loan Party and described in Schedule 8 hereof as of July 31, 2012, together with all other Real Estate acquired thereafter in fee simple absolute or formerly classified as another type of Borrowing Base Asset or was Negative Pledge Property that has been designated for inclusion in the Borrowing Base in accordance with §5.5, in each case for which all material required zoning, utilities and development permits and approvals have been obtained and for which such Loan Party has commenced construction for a Development (all as certified in the Borrowing Base Certificate most recently delivered by Borrower).

Entitled Land Under Development Value.  As of any date of determination, the aggregate value of all Entitled Land Under Development valued on the basis of an “as is”, MAI Appraisal covering at least seventy-five percent (75%) of the remaining Lot portfolio and at least seventy-five percent (75%) of the remaining commercial acreage (both as selected by Agent), with all other Entitled Land Under Development to be valued and included in the Borrowing Base at its book value.  The initial Entitled Land Under Development Value shall be determined based upon an “as is”, MAI Appraisal most recently delivered under the Original Credit Agreement.  All Development Expenditures incurred by the Loan Parties with respect to the development of the Entitled Land Under Development subsequent to the most recent Appraisal shall be added to the Entitled Land Under Development Value, and such amount shall also be reduced by the value of any parcels or Lots sold since the prior Appraisal date, in each case without duplicating any post-closing adjustments resulting from any updated Appraisals.  Entitled Land Under Development Value shall also be increased or decreased, as the case may be, as and to the extent provided in the definition of Non-Appraised Entitled Land Value, without duplication.

Environmental Engineer.  Any firm of independent professional engineers or other scientists generally recognized as expert in the detection, analysis and remediation of Hazardous Substances and related environmental matters and reasonably acceptable to Agent.

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Environmental Laws.  See §6.18(a).

Environmental Reports.  See §6.18

EPA.  See §6.18(b).

Equity Interests.  With respect to any Person, all shares of capital stock, partnership interests, membership interests in a limited liability company or other ownership in participation or equivalent interests (however designated, whether voting or non-voting) of such Person’s equity capital (including any warrants, options or conversion or other purchase rights with respect to the foregoing) whether now outstanding or issued after the Closing Date.

Equity Offering.  The issuance and sale by Forestar Group subsequent to the date of this Agreement of any equity securities of Forestar Group to investors (other than the Warrant Transactions and Convertible Bond Indebtedness).

Equity Plan.  The Forestar Real Estate Group Inc. 2007 Stock Incentive Plan dated November 28, 2007, and any other similar plan for granting of equity interests to employees, directors and eligible consultants or contractors as adopted from time to time by the Forestar Group Board of Directors.

ERISA.  The Employee Retirement Income Security Act of 1974, as amended and in effect from time to time and any rules and regulations promulgated pursuant thereto.

ERISA Affiliate.  Any Person which is treated as a single employer with Borrower under §414 (b) or (c) of the Code.

ERISA Reportable Event.  A reportable event with respect to a Guaranteed Pension Plan within the meaning of §4043 (c) of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived.

Event of Default.  See §12.1.

Excluded Subsidiary.  The Subsidiaries listed on Schedule 11, each SPE Subsidiary and JV Holdco existing on the Closing Date, together with any and all direct or indirect, wholly owned Subsidiaries created or acquired by any Loan Party subsequent to the Closing Date, which additional Subsidiary (i) has assets with a book value less than five percent (5%) of the consolidated book value of Borrower and its Subsidiaries, determined as of the last day of each fiscal quarter of Borrower, or (ii) which is an SPE Subsidiary or a JV Holdco; provided, however, that the Excluded Subsidiaries other than SPE Subsidiaries or JV Holdcos shall not, collectively, have assets whose book value exceeds ten percent (10%) of the consolidated book value of Borrower and its Subsidiaries.

Excluded Taxes.  See §4.4(b).

Extended Letter of Credit.  See §2.10(l).

Extension Effective Date.  See §3.1(b).

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Extension Period.  See §3.1(b).

Facility Fee.    See §2.4.

FATCA.  Sections 1471 through 1474 of the Code and any regulations (whether final, temporary or proposed) that are issued thereunder or official government interpretations thereof.

Federal Funds Effective Rate.  For any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by Agent from three (3) Federal funds brokers of recognized standing selected by Agent.  Any change in the Federal Funds Effective Rate shall become effective as of the opening of business on the day on which such change in the Federal Funds Effective Rate becomes effective, without notice or demand of any kind.

First Adjustment Date.  The last day of the calendar month in which the Engineering Report as of December 31, 2013 is delivered to Agent pursuant to §7.4(k), but in no event later than March 31, 2014.

Forestar Form 10.  The Registration Statement on Form 10, filed by Forestar Group on August 10, 2007, as amended on September 26, 2007, October 24, 2007, November 13, 2007, November 29, 2007 and December 10, 2007 (File Number 001-33662), with the SEC, as in effect on the Closing Date.

Forestar Group.  Forestar Group Inc., a Delaware corporation and formerly known as Forestar Real Estate Group Inc.

Funded Debt.  With respect to any Person, all outstanding Indebtedness of such Person, other than (i) Indebtedness described in clause (f) of the definition of Indebtedness herein, and (ii) Indebtedness in respect of Trade Letters of Credit.

GAAP.  Generally accepted accounting principles in the United States, applied on a basis consistent with the principles used in preparing Forestar Group’s audited consolidated financial statements as of the Balance Sheet Date and for the fiscal year then ended, as such principles may be revised as a result of changes in such accounting principles implemented by Forestar Group and its consolidated Subsidiaries subsequent to such date.  If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth herein and Borrower or the Required Lenders shall so request, Agent, Lenders, and Loan Parties shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein.

Governmental Authority.  Any international, foreign, federal, state, county or municipal government, or political subdivision thereof; any governmental, quasi-governmental or regulatory

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agency, authority, board, bureau, commission, department, instrumentality or public body; or any court or administrative tribunal.

Guaranteed Obligations.  See §34.1.

Guaranteed Pension Plan.  Any employee pension benefit plan within the meaning of §3(2) of ERISA maintained or contributed to by Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan.

Guarantors.  Forestar Group, the wholly owned, direct and indirect Subsidiaries of Borrower signatory to this Agreement as guarantors, and all other wholly owned, direct and indirect Subsidiaries of Borrower hereafter created or acquired (whether by acquisition of Equity Interests, merger or otherwise) by Borrower or Forestar Group (other than Excluded Subsidiaries) that execute and deliver a joinder to the Guaranty Agreement pursuant to §7.21.

Guaranty Agreement.  The agreements of Guarantors set forth in §34 of this Agreement and any guaranties of the Obligations (or portions thereof) executed by a Guarantor in favor of Agent, for the benefit of Lenders, after the date hereof, all such guaranties to be in form and substance reasonably satisfactory to Agent as of the date such guaranties are delivered, and as the same may be modified or amended hereafter.

Hazardous Substances.  See §6.18(b).

Hedge Agreement.  Any interest rate cap, collar, floor, forward rate or swap agreement or similar protective agreement regarding the hedging of interest rate risk exposure now or hereafter entered into between Borrower and any Lender with respect to the Loans.

High Value Timberland.  The Real Estate owned in fee simple absolute by a Loan Party and described on Schedule 6 hereof as of July 31, 2012, together with any other Real Estate hereafter acquired in fee simple absolute by any Loan Party or formerly classified as another type of Borrowing Base Asset or was Negative Pledge Property that has been designated for inclusion in the Borrowing Base in accordance with §5.5, in each case for which the applicable Loan Party shall have commenced the entitlement process by submitting, or beginning to prepare, one or more applications for the zoning, utilities, access and subdivision approvals, licenses and permits required in order to commence construction and installation of the infrastructure improvements for a Development, but for which all necessary approvals, licenses and permits have not yet been received, and in the case of such Real Estate owned as of the Closing Date, on which, or on a portion of which, Timber is located or which has otherwise been designated as High Value Timberland (all as certified in the Borrowing Base Certificate most recently delivered by Borrower).

High Value Timberland Amount.  As of any determination date, the value of the High Value Timberland as determined by the most recent evaluations performed by an MAI appraiser covering at least seventy-five percent (75%) of the total acreage of the High Value Timberland (as selected by Agent), with the remainder of the High Value Timberland valued at the average per acre price determined in the evaluations performed by an MAI appraiser.

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Increasing Lender.  See §2.9.

Incurred Interest.  For Forestar Group and its Subsidiaries on a Consolidated basis, for any fiscal period, the aggregate amount of all interest paid, accrued or capitalized during such period, excluding loan fees.

Indebtedness.  With respect to any Person means:  (a) all indebtedness for money borrowed and any obligations evidenced by bonds, debentures, notes or similar debt instruments; (b) all liabilities secured by any mortgage, deed of trust, deed to secure debt, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; (c) all guarantees, endorsements and other contingent obligations whether direct or indirect in respect of indebtedness of others, including any obligation to supply funds to or in any manner to invest directly or indirectly in a Person, to purchase indebtedness, or to assure the owner of indebtedness against loss through an agreement to purchase goods, supplies or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner, through indemnity or otherwise, and the obligation to reimburse the issuer in respect of any letter of credit; (d) any obligation as a lessee or obligor under a Capitalized Lease; (e) all reimbursement obligations with respect to letters of credit or similar instruments issued by a Person; and (f) all indebtedness, obligations or other liabilities under or with respect to (i) interest rate swap, collar, cap or similar agreements providing interest rate protection, including, without limitation, any Hedge Agreement, (ii) any Commodity Hedge Agreement, and (iii) foreign currency exchange agreements.  For avoidance of doubt, Forestar Group’s obligations under the Warrant Transactions shall not constitute Indebtedness.

Indemnified Taxes.  Taxes other than Excluded Taxes.

Indemnity Agreement.  The Second Amended and Restated Indemnity Agreement Regarding Hazardous Materials, made by Forestar Group and Borrower in favor of Agent and Lenders, dated as of even date herewith, pursuant to which such Loan Parties agree to indemnify Agent and Lenders with respect to Hazardous Substances and Environmental Laws, such Indemnity Agreement to be in form and substance satisfactory to Agent, as the same may be amended, restated, consolidated, supplemented or otherwise modified from time to time.

Initial Engineering Report.  See §5.8.

Interest Coverage Ratio.  For any Test Period, the ratio of (i) EBITDA of Forestar Group and its Subsidiaries for such period, calculated on a Consolidated basis in accordance with GAAP, plus (to the extent deducted in the calculation of Net Income) all non-cash compensation expenses to officers, directors and employees of such Persons, to (ii) Incurred Interest for such period.

Interest Payment Date.  With respect to each Loan, the first day of each calendar month during the term of such Loan.

Interest Period.  With respect to each LIBOR Rate Loan, (a) initially, the period commencing on the Drawdown Date of such Loan and ending one (1), two (2), three (3) or six (6), or, if available to all Lenders, nine (9) or twelve (12) months thereafter and (b) thereafter,

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each period commencing on the day following the last day of the immediately preceding Interest Period applicable to such LIBOR Rate Loan and ending on the last day of one of the periods set forth above, as selected by Borrower in a Loan Request or Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:

(i)            the first day of each Interest Period must be a Business Day.

(ii)           if any Interest Period with respect to a LIBOR Rate Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless such Business Day falls in the next calendar month, in which case the Interest Period shall end on the next preceding Business Day;

(iii)          if Borrower shall fail to give notice as provided in §4.1, Borrower shall be deemed to have requested a conversion of the affected LIBOR Rate Loan to a Base Rate Loan on the last day of the then current Interest Period with respect thereto; and

(iv)          no Interest Period relating to any LIBOR Rate Loan shall extend beyond the Maturity Date.

Investments.  With respect to any Person, all shares of capital stock, partnership interests, limited liability company interests or other ownership interests, evidences of Indebtedness and other securities issued by any other Person, all loans, advances, or extensions of credit to, or contributions to the capital of, any other Person, all purchases of the securities or business or integral part of the business of any other Person and commitments to make such purchases and all interests in real property; provided, however, that the term “Investment” shall not include (i) equipment, inventory and other tangible personal property acquired in the ordinary course of business, or (ii) current trade and customer accounts receivable for services rendered in the ordinary course of business and payable in accordance with customary trade terms.  In determining the aggregate amount of Investments outstanding at any particular time:  (a) the amount of any investment represented as a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (b) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (c) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (d) there shall not be deducted or increased in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (b) may be deducted when paid; and (e) there shall not be deducted from, or added to, the aggregate amount of Investments any decrease or increase, respectively, in the value thereof.

Joinder Agreement (Guarantor).  An agreement in the form attached hereto and made a part hereof as Exhibit H, whereby a Person shall become an additional joint and several Guarantor pursuant to §7.21.

Joint Venture.  Any Person (including any Person that would constitute a Subsidiary but for the proviso in the definition of Subsidiary) in which any of the Loan Parties is directly the owner of any Equity Interest, provided that such Equity Interest (taken together with all Equity

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Interests, if any, owned by any other Loan Parties in such Person) constitute less than all of the issued and outstanding Equity Interests of such Person.

JV Holdco.  A Subsidiary of Borrower substantially all of the assets of which are Equity Interests in one or more Joint Ventures.

KeyBank.  KeyBank National Association, a national banking association.

Leases.  Leases, licenses and agreements whether written or oral, relating to the use or occupancy of any Mortgaged Property, Negative Pledge Property or other Real Estate, including, without limitation, hunting leases, Timber leases and Mineral Rights Leases.

Lenders.  KeyBank and the other lending institutions which may become parties to this Agreement, pursuant to §18 hereof, as is defined in the first paragraph of this Agreement, to include Revolving Lenders, Term Lenders and as the context requires, Swing Line Lender.

Letter of Credit.  An irrevocable standby letter of credit issued by Agent (in its capacity as letter of credit issuer) pursuant to §2.10 for the account of any Loan Party in respect of obligations of any Loan Party incurred pursuant to contracts made or performances undertaken or to be undertaken in the ordinary course of its such Loan Party’s business which is payable upon presentation of a sight draft and other documents described in the Letter of Credit, if any, as originally issued pursuant to this Agreement or as amended, modified, extended, renewed or supplemented.

Letter of Credit Fees.  The fees due in connection with the Outstanding Letters of Credit pursuant to §4.3.

Letter of Credit Request.  A written request from Borrower to Agent in the form of Exhibit G attached hereto, requesting the issuance of a Letter of Credit pursuant to §2.10(b).

LIBOR Lending Office.  Initially, the office of each Lender designated as such in Schedule 1.1 hereto; thereafter, such other office of such Lender, if any, that shall be making or maintaining LIBOR Rate Loans.

LIBOR Rate.  As applicable to any LIBOR Rate Loan, the rate per annum as determined on the basis of the offered rates for deposits in Dollars, for a period of time comparable to the Interest Period for such LIBOR Rate Loan which appears on the Reuters Screen LIBOR01 Page as of 11:00 a.m. London time on the day that is two (2) LIBOR Business Days preceding the first day of the Interest Period for such LIBOR Rate Loan; provided, however, if the rate described above does not appear on such service on any applicable interest determination date, the LIBOR Rate shall be the rate (rounded upward, if necessary, to the nearest one hundred-thousandth of a percentage point), determined on the basis of the offered rates for deposits in Dollars for a period of time comparable to the Interest Period for such LIBOR Rate Loan which are offered by four (4) major banks in the London interbank market at approximately 11:00 a.m. London time, on the day that is two (2) LIBOR Business Days preceding the first day of the Interest Period for the LIBOR Rate Loan as selected by Agent.  The principal London office of each of the four (4) major London banks will be requested to provide a quotation of its Dollar deposit offered rate.  If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the

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quotations.  If fewer than two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in Dollars to leading European banks for a period of time comparable to the Interest Period for such LIBOR Rate Loan offered by major banks in New York City at approximately 11:00 a.m. (eastern time), on the day that is two (2) LIBOR Business Days preceding the first day of the Interest Period for the LIBOR Rate Loan.  In the event that Agent is unable to obtain any such quotation as provided above, it will be deemed that the LIBOR Rate for a LIBOR Rate Loan cannot be determined.  In such event, the Loan shall bear interest at the Base Rate.  In the event that the Board of Governors of the Federal Reserve System shall impose a Reserve Percentage with respect to LIBOR deposits of Agent, then for any period during which such Reserve Percentage shall apply, the LIBOR Rate shall be equal to the amount determined above divided by an amount equal to one (1) minus the Reserve Percentage.

LIBOR Rate Loans.  Those Loans bearing interest calculated by reference to the LIBOR Rate.

LIBOR Rate Spread.  The per annum rate of four percent (4%).

Liens.  See §8.2.

Loan or Loans.  Collectively, the aggregate Revolving Loans, Term Loans and Swing Line Loans to be made by Lenders hereunder, as applicable, which Revolving Loans, Term Loans and Swing Line Loans may be, at the request of the applicable Lender, evidenced by the Revolving Loan Notes, the Term Loan Notes and the Swing Line Note, as the case may be.  Amounts drawn under a Letter of Credit shall be converted into Revolving Loans as provided in §2.10.

Loan Documents.  Collectively, this Agreement, the Notes, the Security Documents, the Hedge Agreements, and all other documents, instruments or agreements now or hereafter assumed, executed or delivered by or on behalf of any Loan Party in favor of the Agent or the Lenders in connection with the Loans, as the same may be amended, modified, renewed, extended, consolidated, supplemented or restated from time to time.

Loan Parties.  Collectively, Borrower and the Guarantors, any of which may be sometimes referred to individually as a Loan Party.

Loan Request.  See §2.6.

Lot or Lots.  An individual residential lot located or to be located on Entitled Land Under Development or Non-Appraised Entitled Land and designated on the final subdivision plat, map or filing (or in the case of Entitled Land Under Development or Non-Appraised Entitled Land, an individual lot designated on an approved tentative tract map, preliminary plat map, preliminary subdivision plat or similar plat or map) and including any related community or commercial lot(s) relating to the amenities for that Development.

Majority-Owned Joint Venture.  Any Joint Venture in which any of the Loan Parties is directly the owner of greater than fifty percent (50%) of all the issued and outstanding Equity Interests in such Joint Venture.

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Material Adverse Effect.  A materially adverse effect on (a) the business, assets, liabilities, condition (financial or otherwise), or results of operations of the Loan Parties taken as a whole, (b) the ability of any Loan Party to perform its obligations under the Loan Documents, (c) the validity or enforceability of any of the Loan Documents, or (d) the rights, benefits or interests of Lenders and Agent in and to this Agreement, any other Loan Document or the Collateral.

Maturity Date.  The Revolving Credit Maturity Date or the Term Loan Maturity Date, whichever is applicable.

Merger Documents.  See §6.21(a).

Mineral Activity.  The exploration, extraction, mining, processing, production, storage, transportation or handling of any coal, oil, gas, related liquid hydrocarbons or any other mineral or related marketable substance.

Mineral Business.  The business of Borrower or any of the other Loan Parties in respect of Mineral Activity or otherwise consisting of realizing lease and royalty payments from oil and gas mineral interests.

Mineral Business Enterprise Value.  As of any date of determination, an amount equal to the product of (a)  annualized EBITDA of the Loan Parties from the Mineral Business exclusive of the Mineral Business conducted by the Credo Entities for the most recently completed four (4) fiscal quarters, multiplied by (b) four (4).

Mineral Rights Lease.  Any Lease, joint operating agreement, operating agreement, servitude, joint venture agreement, oil and gas partnership agreement, division order or other agreement pursuant to which any Loan Party (i) grants one or more third-parties the right to conduct Mineral Activity on Real Estate owned or leased by such Loan Party or (ii) has rights, interests, obligations or privileges with respect to Mineral Activity.

Moody’s.  Moody’s Investors Service, Inc.

Mortgaged Property or Mortgaged Properties.  Individually and collectively, the property described on Schedule 3 attached hereto, each by this reference incorporated herein, which has been conveyed as security for the Obligations pursuant to the Security Deeds, and any other property which is added as a Mortgaged Property pursuant to §5.1, §5.5 or §5.8 hereof.  For avoidance of doubt, Mortgaged Properties shall include Oil and Gas Properties subject to a Security Deed.

Mortgaged Property Documents.  See Schedule 2 attached hereto by reference made a part hereof.

Multiemployer Plan.  Any multiemployer plan within the meaning of §3(37) of ERISA to which Borrower or any ERISA Affiliate is making, or is required to make, contributions.

Multifamily Property.  Real Estate containing a residential structure with five or more dwelling units in the same structure.

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Negative Pledge Property or Negative Pledge Properties.  Individually and collectively, any and all Real Estate (including, without limitation, Oil and Gas Properties that constitute Real Estate) owned by any of the Loan Parties other than (i) the Mortgaged Properties and (ii) Real Estate which is subject to a Permitted Lien securing Indebtedness (other than the Obligations) permitted by §8.1.

Net Income.  With respect to Forestar Group and its Subsidiaries for any Test Period, the net income (or deficit) of such Persons, after deduction of all expenses, taxes and other property charges, determined in accordance with GAAP, except that contributions or other transfers of Real Estate to one or more Joint Ventures shall be considered a “sale” with 100% of any resulting “gain on sale” included in Net Income for the fiscal quarter in which such contributions or transfers occurs notwithstanding any requirement for any computation to be made in accordance with GAAP so long as the structure of such Joint Venture has been approved by Agent, such approval not to be unreasonably withheld, conditioned or delayed.

Non-Annexation Agreement.  That certain Amended and Restated Agreement for Services in Lieu of Annexation dated as of January 28, 2005, among the City of San Antonio, certain representatives appointed by the Bexar County Commissioners Court and Borrower, as amended or modified.

Non-Annexation Agreement Estoppel.  An estoppel certificate or letter, in form and substance satisfactory to Agent, from the City of San Antonio, Texas, with respect to the status of the Non-Annexation Agreement.

Non-Appraised Entitled Land.  The Real Estate (other than Oil and Gas Properties) described on Schedule 9 hereof as of July 31, 2012 and Real Estate acquired thereafter from time to time, in each case consisting of Real Estate owned in fee simple absolute by any Loan Party or a Joint Venture for which all material required zoning, utilities and development permits and approvals have been obtained in connection with a proposed Development, but for which an Appraisal has not been obtained by such Loan Party and provided to Agent.  Once an Appraisal meeting the applicable requirements of this Agreement shall have been obtained and provided to Agent, such Real Estate (if owned by a Loan Party) shall thereafter cease to be Non-Appraised Entitled Land and shall instead be treated under this Agreement and the other Loan Documents as Raw Entitled Land or Entitled Land Under Development, as the case may be.

Non-Appraised Entitled Land Value.  As of any date of determination, the aggregate value of all Non-Appraised Entitled Land valued at current book value.  Non-Appraised Entitled Land Value shall not be included in the Borrowing Base except as follows: with respect to any Non-Appraised Entitled Land acquired and owned by a Loan Party after the Closing Date and for which the Appraisal required to convert such Non-Appraised Entitled Land into Raw Entitled Land or Entitled Land Under Development (as the case may be) shall have not been obtained, the book value of such Non-Appraised Entitled Land shall temporarily be included in the Borrowing Base as part of Raw Entitled Land Value or Entitled Land Under Development Value (depending upon whether such Non-Appraised Entitled Land would qualify as Raw Entitled Land or Entitled Land Under Development if the requisite Appraisal had been obtained) until such time as Appraisals in accordance with §5.2(c) are obtained.  Upon delivery of such Appraisal to Agent, such Non-Appraised Entitled Land shall thereafter cease to be Non-Appraised Entitled Land and

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shall instead be treated under this Agreement and the other Loan Documents as Raw Entitled Land or Entitled Land Under Development, as the case may be.

Non-Consenting Lender.  See §18.8.

Non-Recourse Assets.  Assets (including Real Estate and Oil and Gas Properties other than, in each case, Mortgaged Property), all rights related thereto (including contract rights), the improvements and Leases thereon and the rents and profits thereof and all proceeds of any of the foregoing which are of the type customarily transferred or in respect of which security interests or mortgages are customarily granted in connection with the non-recourse financing of such assets and which, to the extent permitted under this Agreement, are sold, transferred, pledged or otherwise conveyed by the Borrower or a Subsidiary to an SPE Subsidiary or directly to the provider(s) of such financing (or an agent on its or their behalf) in connection with the incurrence of Non-Recourse Indebtedness permitted under §8.1.

Non-Recourse Indebtedness.  Indebtedness of a Person which is secured by Non-Recourse Assets and is not a general obligation of any Loan Party or any of their respective wholly owned Subsidiaries other than the applicable SPE Subsidiary (except for any portion thereof constituting Permitted Recourse Undertakings or Indebtedness otherwise permitted under §8.1(xiii) or except to the extent the obligations of any Loan Party or any such Subsidiary thereunder are limited to the Non-Recourse Assets pledged to secure such Indebtedness), the holder of such Indebtedness having recourse solely to the Non-Recourse Assets securing such Indebtedness or other assets of Persons that are not Loan Parties or wholly owned Subsidiaries of any Loan Party other than the applicable SPE Subsidiary (except in connection with Permitted Recourse Undertakings and Indebtedness otherwise permitted under §8.1(xiii)).

Notes.  See §2.2.

Notice.  See §19.

Obligations.  All indebtedness, obligations and liabilities of Borrower and Guarantors to any of Lenders and Agent, individually or collectively, under this Agreement or any of the other Loan Documents or in respect of any of the Loans or the Notes, or other instruments at any time evidencing any of the foregoing, whether existing on the date of this Agreement or arising or incurred hereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise (including, without limitation, advances made by Agent to protect or preserve the Collateral or the security interests therein), and including interest and fees that accrue after the commencement by or against any Loan Party of any proceeding under the United States Bankruptcy Code or other similar federal or State law, naming such Person as the debtor in such proceeding, regardless of whether or not such interest and fees are allowed claims in such proceeding.  To the extent this definition of “Obligations” is referenced in any Security Document, the definition shall also include any Indebtedness, obligations and liabilities of Borrower under any and all Hedge Agreements.

OFAC Review Process.  That certain review process established by Agent to determine if any potential transferee of any interests or any assignee of any portion of the Loans or any of their members, officers or partners are a party with whom Agent and any Lender are restricted from

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doing business under (i) the regulations of OFAC, including those Persons named on OFAC’s Specially Designated and Blocked Persons list, or (ii) any other statute, executive order or other governmental action or list (including the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism).

Oil and Gas Properties.  All right, title and interest of the Loan Parties in and to oil and gas leases and any oil and gas interests, royalty and overriding royalty interests, production payments, net profits interests, oil and gas fee interests, and other rights therein including any reversionary or carried interests relating to the foregoing, together with any right, title or interest created by or arising under the terms of any unitization, communization and pooling agreements or arrangements, and all property, interests and rights covered thereby, whether arising by contract, by order, or by operation of law, which now or hereafter include all or any part of the foregoing, whether or not constituting Real Estate.

Operating Accounts.  See §5.6.

Organizational Document.  With respect to any Person other than a natural person, its articles or certificate of incorporation, formation or organization, partnership agreement, operating agreement, by-laws and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized Equity Interests.

Outstanding.  With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination.  With respect to issued Letters of Credit, the aggregate undrawn amounts under issued Letters of Credit as of any date of determination.

Patent Security Agreement.  Any Patent, Trademark and License Security Agreement, executed on or after the closing date of the Credo Acquisition by Credo in favor of Agent as the same may be amended, restated, supplemented, consolidated or otherwise modified from time to time, pursuant to which there shall be granted to Agent for the benefit of Lenders a security interest in the Credo Patents, such security agreement to be in form and substance satisfactory to Agent.

Patriot Act Customer Identification Process.  That certain customer identification and review process established by Agent pursuant to the requirements of 31 U.S.C. §5318(1) and 31 C.F.R. §103.121 to verify the identity of all permitted transferees of interests in Borrower and any assignees of a portion of the Loan hereunder.

PBGC.  The Pension Benefit Guaranty Corporation created by §4002 of ERISA and any successor entity or entities having similar responsibilities.

PDNP Reserves Value.  The aggregate value of the Credo Entities’ Proved Development Non-Producing Reserves (Present Worth at 10%) as set forth in the most recent Engineering Report furnished to Agent pursuant to §7.4(k).

PDP Reserves Value.  The aggregate value of the Credo Entities’ Proved Developed Producing Reserves (Present Worth at 10%) as set forth in the most recent Engineering Report

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furnished to Agent pursuant to §7.4(k), or with respect to the requirement set forth in §5.8 as it applies to the initial Credo Mortgaged Properties, the Initial Engineering Report.

Permitted Bond Indebtedness.  The Indebtedness permitted by §8.1(xvi).

Permitted Existing Indebtedness.  Indebtedness of the Loan Parties and their Subsidiaries, or any of them, which is outstanding on the Closing Date and identified on the written disclosure provided to, and approved by, Agent pursuant to §6.29.

Permitted Liens.  Liens, security interests and other encumbrances permitted by §8.2.

Permitted Recourse Undertakings.  Representations, warranties, covenants, environmental indemnities, and “bad acts” or similarly limited guarantees entered into by Borrower or any Subsidiary of Borrower in connection with Non-Recourse Indebtedness which are customary for non-recourse real estate financings.

Permitted Refinancing Indebtedness.  Any Indebtedness of the Loan Parties issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund, Permitted Existing Indebtedness, Indebtedness otherwise permitted by this Agreement or other Permitted Refinancing Indebtedness of such Person, provided, that:

(a)           the principal amount of such Indebtedness (not including accrued or capitalized interest and premiums, fees and expenses) does not exceed the then outstanding principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (except that Permitted Refinancing Indebtedness shall include Indebtedness of Capitol of Texas Insurance Group Inc. relating to the Radisson Hotel in Austin, Texas in a principal amount not to exceed $20,400,000);

(b)           if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is Permitted Existing Indebtedness which is Non-Recourse Indebtedness, the Permitted Refinancing Indebtedness with respect thereto must also be Non-Recourse Indebtedness; and

(c)           no Default or Event of Default has occurred and is continuing or would result from the issuance or origination of such Indebtedness.

Person.  Any individual, corporation, partnership, limited liability company, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof.

Plan Assets.  Assets of any Employee Benefit Plan subject to Part 4, Subtitle A, Title I of ERISA.

Pledge and Security Agreement.  The Second Amended and Restated Pledge and Security Agreement dated as of the Closing Date executed by the Loan Parties for the purpose of pledging and granting a first priority security interest in and to all Equity Interests now or hereafter owned by them in any other Loan Party and (if and to the extent no consent is required at all or the

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necessary consents have been obtained) in any of their respective Majority-Owned Joint Ventures and JV Holdcos.

Pledged Deposit Account.  The main operating account pledged by Borrower to Agent for the benefit of Lenders as Collateral for the Obligations.

Prepayment Fee.  With respect to each prepayment, in whole or in part, of any of the outstanding principal balance of the Term Loans made pursuant to §3.3 prior to the six (6) month anniversary of the Closing Date, an amount equal to the principal amount so prepaid, multiplied by one percent (1%).  No Prepayment Fee will apply to any such prepayment of the Term Loans, or any portion thereof, made on or after the six (6) month anniversary of the Closing Date.

Principal Financial Officer.  The primary officer or the authorized agent of Borrower or Forestar Group, as the case may be, responsible for the preparation and certification of financial statements.

Prior Letter of Credit.  Any letter of credit issued prior to the Closing Date under the Original Credit Agreement for the account of any of the Loan Parties and which will remain outstanding after the Closing Date.

Project Approvals.  See §6.20(a).

PUD Reserves Value.  The aggregate value of the Credo Entities’ Proved Undeveloped Reserves (Present Worth at 10%) as set forth in the most recent Engineering Report furnished to Agent pursuant to §7.4(k).

Raw Entitled Land.  The Real Estate described on Schedule 7 hereof as of July 31, 2012 together with any other Real Estate acquired thereafter or formerly classified as another type of Borrowing Base Asset or was Negative Pledge Property that has been designated for inclusion in the Borrowing Base in accordance with §5.5, in each case consisting of Real Estate owned in fee simple by a Loan Party (i) that is suitable for Development and (ii) for which all major discretionary land-use approvals have been obtained (all as certified in the Borrowing Base Certificate most recently delivered by Borrower).

Raw Entitled Land Value.  As of any date of determination, the aggregate value of all Raw Entitled Land valued on the basis of an “as is”, MAI Appraisal covering at least seventy-five percent (75%) of the remaining Lot portfolio and at least seventy-five percent (75%) of the remaining commercial acreage (both as selected by Agent), with all other Raw Entitled Land to be valued at book value.  The initial Raw Entitled Land Value shall be determined based upon an “as is”, MAI Appraisal most recently delivered under the Original Credit Agreement.  All costs incurred by Borrower and the applicable Guarantors with respect to the development of the Raw Entitled Land subsequent to the Appraisal shall be added to the Raw Entitled Land Value Amount, and such amount shall also be reduced by the value of any parcels or lots sold since the prior Appraisal date, in each case without duplicating any post-closing adjustments resulting from any updated Appraisals. Raw Entitled Land Value shall also be increased or decreased, as the case may be, as and to the extent provided in the definition of Non-Appraised Entitled Land Value, without duplication.

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RCRA.  See §6.18(a).

Real Estate.  All real property or interests in real property at any time owned or leased (as lessee or sublessee) by any Loan Party or their respective Subsidiaries or Joint Ventures including, without limitation, the Mortgaged Properties and the Negative Pledge Properties.

Record.  The grid attached to any Note, or the continuation of such grid, or any other similar record, including computer records, maintained by Agent with respect to any Loan referred to in such Note.

Register.  See §18.2.

Reimbursement Agreement.  The applications made and agreements entered into between Agent and (i) Borrower and (ii) any other Loan Party relating to a Letter of Credit on the form then in use by Agent as its standard form agreement with respect to similar letters of credit.

Related Fund.  With respect to any fund that invests in loans, any other fund that invests in loans that is managed by the same investment advisor as such Lender or by an Affiliate of such Lender or such investment advisor.

Related Parties.   With respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

Release.  See §6.18(c) (iii).

Renewal Date.  See §3.1(b).

Request for Swing Line Loan.  See §2.6(b).

Required Lenders.  As of any date, the Lender or Lenders (not including any Defaulting Lender which shall not be entitled to vote) whose aggregate Commitment Percentage equals or exceeds the Applicable Approval Percentage.  For purposes of this definition, a Revolving Lender (other than Swing Line Lender) shall be deemed to hold a Swing Line Loan or participate in a Letter of Credit to the extent such Lender has acquired a participation therein under the terms of this Agreement and has not failed to perform its obligations in respect of such participation.

Requirements.  Any applicable federal or state law or governmental regulation, or any local ordinance, order or regulation, including but not limited to laws, regulations, or ordinances relating to zoning, building use and occupancy, subdivision control, fire protection, health, sanitation, safety, handicapped access, historic preservation and protection, tidelands, wetlands, flood control and Environmental Laws, including without limitation, the Americans With Disabilities Act or any state laws regarding disability requirements, or any lease, agreement, covenant or instrument to which any Mortgaged Property or Negative Pledge Property, or any Loan Party as the owner of such Real Estate, may be subject.

Requisite Class Lenders.  At any time of determination, (i) for the Revolving Lenders, Revolving Lenders (not including any Defaulting Lender which shall not be entitled to vote) holding at least the Applicable Approval Percentage of the aggregate Revolving Loans (or if there

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are no Revolving Loans Outstanding, of the Revolving Commitment, disregarding the Outstanding Loans or Commitment of any Defaulting Lender, as applicable) and (ii) for the Term Lenders, Term Lenders holding at least the Applicable Approval Percentage of the aggregate Outstanding principal amount of the Term Loans (disregarding the Outstanding Term Loans of any Defaulting Lender).  For purposes of this definition, a Revolving Lender (other than Swing Line Lender) shall be deemed to hold a Swing Line Loan or participate in a Letter of Credit to the extent such Lender has acquired a participation therein under the terms of this Agreement and has not failed to perform its obligations in respect of such participation.

Reserve Percentage.  As of any date, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed on member banks of the Federal Reserve System against “Euro-currency Liabilities” as defined in Regulation D.  The LIBOR Rate for each outstanding LIBOR Rate Loan shall be adjusted automatically as of the effective date of any change in the Reserve Percentage.

Revenues/Capital Expenditures Ratio.  For any Test Period, the ratio of Total Revenues for such period to Total Capital Expenditures for such period.

Revolving Commitment.  With respect to each Revolving Lender, the amount set forth on Schedule 1.1 hereto as the amount of such Lender’s commitment to make or maintain Revolving Loans to Borrower, to purchase participations in Swing Line Loans made by Swing Line Lender pursuant to §2.1(c), or to purchase participations in Letters of Credit issued by Agent for the account of any Loan Party in accordance with §2.10, as the same may be changed from time to time in accordance with the terms of this Agreement, including without limitation, §2.9.

Revolving Commitment Percentage.  With respect to each Revolving Lender, the percentage set forth on Schedule 1.1 hereto as such Revolving Lender’s percentage of the aggregate Revolving Commitments of all Revolving Lenders.

Revolving Credit Maturity Date.  September 14, 2015, or if the Revolving Credit Maturity Date is extended pursuant to §3.1(b), September 14, 2016, or such earlier date on which the Revolving Loans shall become due and payable pursuant to the terms hereof.

Revolving Lenders.  The Lenders having Revolving Commitments, together with their permitted successors and assigns.

Revolving Loan.  Collectively, the amounts advanced from time to time by Revolving Lenders to Borrower under the Revolving Commitments for Revolving Loans, not to exceed $200,000,000 at any time Outstanding; subject, however, to increase in accordance with §2.9.

Revolving Loan Notes.  See §2.2.

Rights Agreement.  The Rights Agreement dated as of December 11, 2007 between Forestar Group and ComputerShare Trust Company, N.A., as Rights Agent thereunder, providing for the issuance to Forestar Group’s stockholders, under the circumstances described therein, of certain rights to acquire shares of Series A junior participating preferred stock of Forestar Group, on the terms and conditions set forth in such agreement.

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S&P.  Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies.

SARA.  See §6.18(a).

SEC.  United States Securities and Exchange Commission.

Security Deeds.  Collectively, each deed of trust, mortgage and/or deed to secure debt from or assumed by any Loan Party, whether now existing or hereinafter entered into, in favor of Agent for the benefit of Lenders (or to trustees named therein acting on behalf of Agent for the benefit of Lenders), as modified, amended or restated from time to time, pursuant to which such Loan Party shall have conveyed or granted a mortgage lien upon or conveyed security title to each Mortgaged Property as security for the Obligations, each such deed of trust, mortgage and deed to secure debt to be in form and substance satisfactory to Agent.

Security Documents.  Collectively, the Security Deeds, the Assignment of Leases and Rents, the Assignment of Mineral Rights Leases, the Collateral Assignment of Timber Purchase Agreement, the Assignment of Rights to Joint Venture Distributions, the Pledge and Security Agreement, the Assignment of SIDR Reimbursements, the Assignment of Cibolo Resort SIDHT, the Indemnity Agreement, the Patent Security Agreement, Deposit Account Control Agreements and any further collateral assignments now or hereafter delivered by a Loan Party to Agent for the benefit of Lenders, including, without limitation, UCC-1 financing statements filed or recorded in connection therewith, as each may be further amended, modified, renewed, consolidated, supplemented or extended, from time to time.

SIDR Reimbursements.  All amounts payable to Borrower under that certain Ad Valorem Tax and Non Resort Sales and Use Tax Public Improvement Financing Agreement dated as of January 12, 2006 among Cibolo Canyons Special Improvement District, Borrower and Bexar County, Texas, as amended by First Amendment to Ad Valorem Tax and Non Resort Sales and Use Tax Public Improvement Financing Agreement dated effective as of October 30, 2006, and as assigned to Borrower by Marriott International, Inc. pursuant to that certain Master Assignment and Assumption Agreement dated as of June 13, 2007 among Borrower, SA Real Estate, LLLP and Marriott International, Inc.

SIDR Reimbursements Value.  As of any determination date, the value of the SIDR Reimbursements as determined by the most recent Appraisal thereof.

SPE Subsidiary.  A bankruptcy remote or other special purpose Subsidiary which engages in no material business other than, issuing or incurring Non-Recourse Indebtedness (and in the case of Capitol of Texas Insurance Group Inc., issuing surety bonds and letters of credit in an aggregate amount of up to $10,000,000 outstanding and issued at any time and acting as a Guarantor hereunder) and, in connection therewith, owning Non-Recourse Assets and pledging or transferring interests therein, including, without limitation, a Subsidiary formed for the purpose of constructing, acquiring, owning, developing and/or financing Non-Recourse Assets as Multifamily Properties.  A Subsidiary whose only material assets are Equity Interests in SPE Subsidiaries shall be considered an SPE Subsidiary for purposes hereof.

Spin-off Effective Date.  The date on which the Spin-off Transaction was completed which was December 28, 2007.

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Spin-off Tax Sharing Agreement.  The Tax Sharing Agreement dated as of the Spin-off Effective Date, between Temple-Inland and Forestar Group.

Spin-off Transaction.  The transfer of certain assets and liabilities of Temple-Inland and certain of its Affiliates to the Loan Parties as contemplated by Temple-Inland’s distribution of all of its shares of Forestar Group to Temple-Inland’s stockholders as contemplated by the Distribution and Separation Agreement and as described in the Forestar Form 10, the making of the initial Loans under the Original Credit Agreement, repayment of intercompany indebtedness and the related transactions contemplated by the parties thereto in connection with each thereof.

Standby Letters of Credit.  All Letters of Credit issued by the Agent for the account of any Loan Party pursuant to the terms set forth in this Agreement other than Trade Letters of Credit.

State.  A state of the United States of America, or the District of Columbia.

Subsequent Lender.  See §2.9

Subsidiary.  Any corporation, association, partnership, limited liability company, trust or other business or legal entity of which the designated parent shall at any time own, directly or indirectly through a Person or Persons, a greater than fifty percent (50%) ownership interest; provided that, unless otherwise expressly provided herein, no Joint Venture shall be considered a Subsidiary for purposes hereof.

Survey.  With respect to each Mortgaged Property (other than Oil and Gas Properties) and each Negative Pledge Property, an instrument survey of such Mortgaged Property or such Negative Pledge Property from time to time obtained by or otherwise in the possession of Borrower or any Guarantor, whether a “boundary-only” or “as-built” survey.

Swing Line Commitment.  Swing Line Lender’s obligation to make Swing Line Loans pursuant to §2.1(c) in an amount up to, but not exceeding, $25,000,000, at any time Outstanding.

Swing Line Lender.  KeyBank, together with its respective successors and assigns.

Swing Line Loan.  A loan made by Swing Line Lender to Borrower pursuant to §2.1(c).

Swing Line Note.  The promissory note of Borrower payable to the order of Swing Line Lender in a face principal amount equal to the amount of the Swing Line Commitment as originally in effect and otherwise duly completed, substantially in the form of Exhibit “A-3”.

Taxes.  See §4.4(b).

TEMCO Investment.  See §8.3(u).

Temple-Inland.  Temple-Inland Inc., a Delaware corporation.

Temple Inland Agreements shall mean the Distribution and Separation Agreement, the Timber Purchase Agreement and the Spin-off Tax Sharing Agreement.

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Term Commitment.  With respect to each Term Lender, the amount set forth on Schedule 1.1 hereto as the amount of such Lender’s commitment to make or maintain Term Loans to Borrower on the Closing Date, as the same may be changed from time to time in accordance with the terms of this Agreement, including, without limitation, §2.9.

Term Commitment Percentage.  With respect to each Term Lender, the percentage set forth on Schedule 1.1 hereto as such Term Lender’s percentage of the Outstanding Term Loans.

Term Lenders.  Each Lender having a Term Commitment or making a Term Loan to Borrower pursuant to this Agreement, together with their successors and permitted assigns.

Term Loan.  Collectively, the Loans made or continued to Borrower under §2.1(b) on the Closing Date or thereafter pursuant to §2.1(b) under the Term Commitments, not to exceed $200,000,000 in the aggregate; subject, however, to increase in accordance with §2.9.

Term Loan Maturity Date.  September  14, 2017, or such earlier date on which the Term Loan shall become due and payable pursuant to the terms hereof.

Term Loan Notes.  See §2.2.

Test Period.  See §9.1(a).

Timber.  Any trees of any age, species, or condition, whether standing, lying, growing or to be grown, alive or dead and now or hereafter at any time located on the Timberland.

Timber Purchase Agreement.  That certain Timber Purchase Agreement, dated December 1, 2007, between TIN Inc. and Borrower, as amended, extended, renewed, restated or otherwise modified from time to time in accordance with §7.14(e).

Timberland.  The Real Estate (other than Oil and Gas Properties) owned in fee simple absolute by any Loan Party and described on Schedule 5 hereof, together with any other Real Estate (other than High Value Timberland, Raw Entitled Land or Entitled Land Under Development) hereafter acquired in fee simple absolute by  any Loan Party on which, or on a portion of which, Timber is located.

Timberland Value.  Except for High Value Timberland, an amount equal to the per acre amount for Timberland determined in the most recent valuation update pursuant to §5.2(b) multiplied by the number of acres to which such valuation applied.

Title Evidence.  With respect to each Credo Mortgaged Property, either (i) an attorney’s opinion of title (including updates and supplements) in the possession of Credo or obtained by Borrower; or (ii) title abstracts, title files and other title information in the possession of Credo or obtained by Borrower, in either case, constituting evidence satisfactory to Agent of the status of title (including, without limitation, the absence of Liens other than Permitted Liens) to such Credo Mortgaged Property.

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Title Policy.  With respect to each parcel of Mortgaged Property, any policy or owner’s title insurance issued to Borrower or the applicable Guarantor, from time to time obtained by or otherwise in the possession of Borrower or any Guarantor.

Total Capital Expenditures.  For the relevant period, the aggregate amount of all Development Expenditures and Acquisition Expenditures incurred by Borrower (for Borrower and its consolidated Joint Ventures) and its Subsidiaries (but excluding those of the Credo Entities), plus (without duplication) such parties’ pro rata share of all such expenditures incurred by unconsolidated Joint Ventures.

Total Funded Debt.  As of any date of determination, an amount equal to the sum of (i) one hundred percent (100%) of all Funded Debt of any Loan Party, plus (ii) any Loan Party’s pro rata share of the Funded Debt of their respective Joint Ventures, plus (iii) to the extent not covered under clause (ii) (and without duplication of amounts thereunder) any amount of the Funded Debt of any Joint Ventures for which any Loan Party is liable.

Total Leverage Ratio.  As of any date of determination, the ratio of Total Funded Debt to Adjusted Asset Value, expressed as a percentage.

Total Proven Reserves Value.  As of the date of determination, the sum of (i) PDP Reserves Value, plus (ii) PDNP Reserves Value, and plus (iii) PUD Reserves Value.

Total Revenues.  For the relevant period, the aggregate amount of all gross revenues derived from the operations of Forestar Group and its Subsidiaries (but excluding the revenues of the Credo Entities), plus their pro rata share of operating revenues from unconsolidated Joint Ventures; provided that any “gain on sale” resulting from the contributions or other transfers of Real Estate to one or more Joint Ventures shall be considered revenues derived from the operations of Forestar Group and its Subsidiaries for the fiscal quarter in which such contributions or transfers occur so long as the structure of such Joint Venture has been approved by Agent, such approval not to be unreasonably withheld, conditioned or delayed.

Trade Letters of Credit.  All trade or documentary Letters of Credit issued by Agent for the account of any Loan Party pursuant to the terms set forth in this Agreement, in connection with the purchase by any Loan Party of goods or services in the ordinary course of business.

Type.  As to any Loan, its nature as a Base Rate Loan or a LIBOR Rate Loan.

Unused Amount.  See §2.4.

Voting Interests.  Stock, partnership, membership or similar ownership interests of any class or classes (however designated), the holders of which are at the time entitled, as such holders, (a) to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, partnership, limited liability company, trust or other business entity involved, or (b) to control, manage, or conduct the business of the corporation, partnership, limited liability company, association, trust or other business entity involved.

Warrant Transactions.  One or more call options referencing Forestar Group’s common stock written by Forestar Group substantially contemporaneously with the purchase by Forestar

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Group of Convertible Bond Hedge Transactions and having an initial strike or exercise price (howsoever defined) greater than the strike or exercise price (howsoever defined) of such Convertible Bond Hedge Transactions.

§1.2         Rules of Interpretation.

(a)           A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement.

(b)           The singular includes the plural and the plural includes the singular.

(c)           A reference to any law includes any amendment or modification to such law.

(d)           A reference to any Person includes its permitted successors and permitted assigns.

(e)           Accounting terms not otherwise defined herein have the meanings assigned to them by GAAP applied on a consistent basis by the accounting entity to which they refer.

(f)            The words “include”, “includes” and “including” are not limiting.

(g)           The words “approval” and “approved” as the context so determines, means an approval in writing given to the party seeking approval after full and fair disclosure to the party giving approval of all material facts necessary in order to determine whether approval should be granted.

(h)           All terms not specifically defined herein or by GAAP, which terms are defined in the Uniform Commercial Code as in effect in the State of New York, have the meanings assigned to them therein.

(i)            Reference to a particular “§”, refers to that section of this Agreement unless otherwise indicated.

(j)            The words “herein”, “hereof”, “hereunder” and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement.

(k)           All references in this Agreement to “Cleveland time” shall refer to prevailing time in Cleveland, Ohio.

§2.          LOANS AND LETTERS OF CREDIT

§2.1         Commitment to Lend.

(a)           Revolving Loans.  Subject to the terms and conditions set forth in this Agreement, each of the Revolving Lenders severally agrees to lend to Borrower, and Borrower may borrow (and repay and reborrow) from time to time between the Closing Date and the

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Revolving Credit Maturity Date upon notice by Borrower to Agent given in accordance with §2.6, such sums as are requested by Borrower for the purposes set forth in §2.8 up to a maximum aggregate principal amount outstanding (after giving effect to all amounts requested) at any one time equal to the lesser of (a) such Lender’s Revolving Commitment, and (b) such Lender’s Revolving Commitment Percentage of (i) the Borrowing Base less (ii) the aggregate principal amount of Term Loans Outstanding or being funded on such date of determination; provided, that, in all events no Default or Event of Default shall have occurred and be continuing, or shall result therefrom; and provided, further, that the Outstanding principal amount of the Revolving Loans and Swing Line Loans (after giving effect to all amounts requested), plus the Outstanding Letters of Credit, shall not at any time exceed the aggregate Revolving Commitments of all Revolving Lenders or cause a violation of the covenant set forth in §9.2(b).  The Revolving Loans shall be made pro rata in accordance with each Revolving Lender’s Revolving Commitment Percentage.  Each request for a Revolving Loan hereunder shall constitute a representation and warranty by Borrower that all of the conditions set forth in §10 and §11, as applicable, have been satisfied on the date of such request.  No Revolving Lender shall have any obligation to make Revolving Loans to Borrower in an aggregate principal amount outstanding which, together with such Lender’s participation interest in Swing Line Loans and Outstanding Letters of Credit, exceeds such Lender’s Revolving Commitment.

(b)           Term Loans.  Subject to the terms and conditions set forth in this Agreement, each of the Term Lenders severally agrees to lend to Borrower, and Borrower will borrow on the Closing Date and, if Borrower elects as provided hereinbelow, on such later date or dates as hereinafter provided, an amount equal to such Lender’s Term Commitment; provided, that, in all events no Default or Event of Default shall have occurred and be continuing on the date of any such borrowing; and provided, further, that the outstanding principal amount of the Term Loans (after giving effect to all amounts requested), shall not at any time exceed the aggregate Term Commitments of all Term Lenders or cause a violation of the covenant set forth in §9.2(b).  At Borrower’s election, up to $70,000,000 of the Term Loans may be advanced during the ninety (90) days after the Closing Date rather than on the Closing Date. The Term Loans shall be made pro rata in accordance with each Term Lender’s Term Commitment Percentage.  Borrower’s request for the Term Loans hereunder shall constitute a representation and warranty by Borrower that all of the conditions set forth in §10 and §11, as applicable, have been satisfied on the date of such request.  No Term Lender shall have any obligation to make Term Loans to Borrower in a principal amount of more than the principal face amount of such Lender’s Term Commitment.  Notwithstanding the foregoing, Borrower acknowledges that the “Term Loans” outstanding under the Original Credit Agreement on the Closing Date will continue to remain outstanding as Term Loans hereunder in accordance with and subject to the respective Term Commitments of the Term Lenders hereunder and will not be re-borrowed by Borrower.

(c)           Swing Line Loans.  (i)  Subject to the terms and conditions hereof, from time to time from the Closing Date to but excluding the fifth (5th) day prior to the Revolving Credit Maturity Date, Swing Line Lender agrees to make Swing Line Loans to Borrower in an aggregate principal amount at any one time Outstanding up to, but not exceeding Swing Line Commitment; provided, that in all events no Default or Event of Default shall have occurred and be continuing; and provided, further, that the sum of (A) the Outstanding principal amount of the Revolving Loans and the Swing Line Loans (after giving effect to the Swing Line Loan being

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requested), plus (B) the Outstanding Letters of Credit shall not exceed the aggregate Revolving Commitments of the Revolving Lenders or cause a violation of the covenant set forth in §9.2(b).  If at any time the aggregate principal amount of the Swing Line Loans Outstanding at such time exceeds the Swing Line Commitment in effect at such time, Borrower shall promptly pay Agent for the account of Swing Line Lender the amount of such excess.  Subject to the terms and conditions of this Agreement, Borrower may borrow, repay and reborrow Swing Line Loans hereunder.

(ii)           Swing Line Loans shall bear interest at a per annum rate equal to the rate of interest borne by Base Rate Loans.  Interest payable on Swing Line Loans is solely for the account of Swing Line Lender, subject to the participation rights of each Revolving Lender that has fully funded its participation interest in such Swing Line Loans pursuant to §2.1(c)(v).  All accrued and unpaid interest on Swing Line Loans shall be payable by Borrower on the dates and in the manner provided in §3 with respect to interest on Base Rate Loans (except as Swing Line Lender and Borrower may otherwise agree in writing in connection with any particular Swing Line Loan).

(iii)          Each Swing Line Loan shall be in the minimum amount of $1,000,000 and integral multiples of $100,000 or such other minimum amounts agreed to by Swing Line Lender and Borrower from time to time.  Any voluntary prepayment of a Swing Line Loan must be in integral multiples of $100,000 or the aggregate principal amount of all outstanding Swing Line Loans (or such other minimum amounts upon which Swing Line Lender and Borrower may agree in writing) and in connection with any such prepayment, Borrower must give Swing Line Lender prior written notice thereof no later than 10:00 a.m. (Cleveland time) on the date of such prepayment.

(iv)          Borrower agrees to repay each Swing Line Loan within five (5) days after the date such Swing Line Loan was made; provided, that the proceeds of a Swing Line Loan may not be used to repay a Swing Line Loan.  Notwithstanding the foregoing, Borrower shall repay the entire outstanding principal amount of, and all accrued but unpaid interest on, the Swing Line Loans on the Revolving Credit Maturity Date (or such earlier date as Swing Line Lender and Borrower may agree in writing).  In lieu of demanding repayment of any outstanding Swing Line Loan from Borrower, Swing Line Lender may, on behalf of Borrower (which hereby irrevocably directs Swing Line Lender to act on its behalf for such purpose), request a borrowing of Base Rate Loans from the Revolving Lenders in an amount equal to the principal balance of such Swing Line Loan, provided that the proposed advance of a Base Rate Loan meets all other requirements for such Advance in this Loan Agreement.  The amount limitations of §2.6(a) shall not apply to any borrowing of Base Rate Loans made pursuant to this subsection.  Swing Line Lender shall give notice to Agent of any such borrowing of Base Rate Loans not later than 12:00 noon (Cleveland time) on the proposed date of such borrowing and Agent shall give prompt notice of such borrowing to the Revolving Lenders.  No later than 2:00 p.m. (Cleveland time) on such date, each Revolving Lender will make available to Agent at the Agent’s Head Office for the account of Swing Line Lender, in immediately available funds, the proceeds of the Base Rate Loan to be made by such Revolving Lender and, to the extent of such Base Rate Loan, such Revolving Lender’s participation in the Swing Line Loan so repaid shall be deemed to be funded by such Base Rate Loan.  Agent shall pay the proceeds of such Base Rate Loans to Swing Line Lender, which shall apply such proceeds to repay such Swing Line Loan.

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(v)           At the time each Swing Line Loan is made, each Revolving Lender shall automatically (and without any further notice or action) be deemed to have purchased from Swing Line Lender, without recourse or warranty, an undivided interest and participation to the extent of such Lender’s Revolving Commitment Percentage in such Swing Line Loan.  If the Revolving Lenders are prohibited from making Revolving Loans required to be made under this subsection for any reason, including without limitation, the occurrence of any Default or Event of Default described in §12.1.(h) or §12.1.(i), upon notice from Agent or Swing Line Lender, each Revolving Lender severally agrees to pay to Agent for the account of Swing Line Lender in respect of such participation the amount of such Lender’s Revolving Commitment Percentage of each outstanding Swing Line Loan.  If such amount is not in fact made available to Agent by any Revolving Lender, Swing Line Lender shall be entitled to recover such amount on demand from such Revolving Lender, together with accrued interest thereon for each day from the date of demand thereof, at the Federal Funds Effective Rate.  If such Revolving Lender does not pay such amount forthwith upon demand therefor by Agent or Swing Line Lender, and until such time as such Revolving Lender makes the required payment, Swing Line Lender shall be deemed to continue to have outstanding Swing Line Loans in the amount of such unpaid participation obligation for all purposes of the Loan Documents (other than those provisions requiring the other Revolving Lenders to purchase a participation therein).  Further, such Revolving Lender shall be deemed to have assigned any and all payments made of principal and interest on its Revolving Loans, and any other amounts due such Revolving Lender hereunder, to Swing Line Lender to fund Swing Line Loans in the amount of the participation in Swing Line Loans that such Revolving Lender failed to purchase pursuant to this Section until such amount has been purchased (as a result of such assignment or otherwise).

(vi)          A Revolving Lender’s obligation to make payments in respect of a participation in a Swing Line Loan shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including without limitation, (i) any claim of setoff, counterclaim, recoupment, defense or other right which such Revolving Lender or any other Person may have or claim against Agent, Swing Line Lender or any other Person whatsoever, (ii) the occurrence or continuation of a Default or Event of Default (including without limitation, any of the Defaults or Events of Default described in §12.1.(h) or §12.1.(i)) or the termination of any Lender’s Revolving Commitment, (iii) the existence (or alleged existence) of an event or condition which has had or could have a Material Adverse Effect, (iv) any breach of any Loan Document by Agent, any Lender or any Loan Party or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.

§2.2         Notes.

If requested by a Lender, the Revolving Loans of such Lender shall be evidenced by separate revolving promissory notes of Borrower in favor of the Revolving Lenders in substantially the form of Exhibit A-1 (“Revolving Loan Notes”), the Term Loans of such Lender shall be evidenced by separate term promissory notes of Borrower in favor of the Term Lenders in substantially the form of Exhibit A-2 hereto (“Term Loan Notes”), and the Swing Line Loans of such Lender shall be evidenced by the Swing Line Note in substantially the form of Exhibit A-3 hereto (“Swing Line Note”), each initially dated as of even date with this Agreement and completed with appropriate insertions (collectively, the Revolving Loan Notes, the Term Loan Notes, the Swing Line Note, any substitute or replacement notes therefor and any new Revolving

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Loan Notes or Term Loan Notes issued in connection with the increase of the Revolving Commitment or the Term Commitment, or both, pursuant to §2.9 of this Agreement, the “Notes”).  A Revolving Loan Note shall be payable to each Revolving Lender in the principal face amount equal to such Lender’s Revolving Commitment, or, if less, the outstanding amount of all Revolving Loans made by such Lender, plus interest accrued thereon, as set forth below.  A Term Loan Note shall be payable to each Lender in the principal face amount equal to such Lender’s Term Commitment, or, if less, the outstanding amount of all Term Loans made by such Lender, plus interest accrued thereon, as set forth below.  The Swing Line Note shall be payable to the Swing Line Lender in the principal face amount equal to the Swing Line Commitment, or, if less, the Outstanding amount of all Swing Line Loans made by Swing Line Lender, plus interest accrued thereon, as set forth in §2.1(c)(ii).  Each such Note shall be issued by Borrower to the applicable Lender and shall be duly executed and delivered by an authorized officer of Borrower.  Borrower irrevocably authorizes Agent to make or cause to be made, at or about the time of the Drawdown Date of any Loan or the time of receipt of any payment of principal thereof, an appropriate notation on Agent’s Record reflecting the making of such Loan or the receipt of such payment.  The Outstanding amount of the Loans set forth on Agent’s Record shall be prima facie evidence of the principal amount thereof owing and unpaid to each Lender, but the failure to record, or any error in so recording, any such amount on Agent’s Record shall not limit or otherwise affect the obligations of Borrower, hereunder or under any Note to make payments of principal of or interest on any Note when due.

§2.3         Interest on Loans.

(a)           Each LIBOR Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto or the date on which such LIBOR Rate Loan is converted to a Base Rate Loan at a rate per annum equal to the sum of (A) the LIBOR Rate, plus (B) the LIBOR Rate Spread.

(b)           Each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the date on which such Base Rate Loan is repaid or converted to a LIBOR Rate Loan at a rate per annum equal to the sum of (A) the Base Rate, plus (B) the Base Rate Spread.

(c)           Borrower promises to pay interest on the Loans in arrears on each Interest Payment Date with respect thereto.

(d)           Base Rate Loans and LIBOR Rate Loans may be converted to Loans of the other Type as provided in §4.1.

§2.4         Unused Facility Fee.

Borrower agrees to pay to Agent for the account of the Revolving Lenders in accordance with their respective Revolving Commitment Percentages an unused facility fee (the “Facility Fee”) calculated at one of the following rates per annum on the average daily amount by which the aggregate Revolving Commitments from time to time exceed the sum of the Outstanding Revolving Loans, the Outstanding Swing Line Loans and the Outstanding Letters of Credit during each fiscal quarter or portion thereof (such excess, the “Unused Amount”) commencing on the Closing Date and ending on the Revolving Credit Maturity Date:

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The Facility Fee shall be payable quarterly in arrears on the first day of each fiscal quarter of Borrower for the immediately preceding fiscal quarter, with a final payment due and payable on the Revolving Credit Maturity Date.  Any payment due under this Section shall be prorated for any partial fiscal quarter.  The Facility Fee shall be fully earned when due and non-refundable when paid.

§2.5         Reduction and Termination of Revolving Commitment.

Borrower shall have the right at any time and from time to time upon five (5) Business Days’ prior written notice to Agent to reduce by $1,000,000 or an integral multiple of $1,000,000 in excess thereof (provided that in no event shall the Revolving Commitments be reduced in such manner to an amount less than $75,000,000 unless all Obligations are being repaid or prepaid and this Agreement is terminated) or to terminate entirely the unborrowed portion of the Revolving Commitments, whereupon the Revolving Commitments of Revolving Lenders shall be reduced pro rata in accordance with their respective Revolving Commitment Percentages of the amount specified in such notice or, as the case may be, terminated, any such termination or reduction to be without penalty except as otherwise set forth in §4.8; provided, however, that no such termination or reduction shall be permitted if, after giving effect thereto, the sum of Outstanding Revolving Loans, Outstanding Swing Line Loans and Outstanding Letters of Credit would exceed the Revolving Commitments of all Revolving Lenders as so terminated or reduced.  Promptly after receiving any notice from Borrower delivered pursuant to this §2.5, Agent will notify Lenders of the substance thereof.  Upon the effective date of any such reduction or termination, Borrower shall pay to Agent for the respective accounts of Lenders the full amount of any facility fee under §2.4 then accrued on the amount of the reduction.  No reduction or termination of the Commitment may be reinstated.

§2.6         Requests for Loans.

(a)           Borrower shall give to Agent written notice in the form of Exhibit D-1 hereto (or telephonic notice confirmed in writing in the form of Exhibit D-1 hereto) of each Loan (other than a Swing Line Loan) requested hereunder (a “Loan Request”) by 12:00 noon (Cleveland time) on the Business Day prior to the proposed Drawdown Date with respect to Base Rate Loans and three (3) Business Days prior to the proposed Drawdown Date with respect to LIBOR Rate Loans.  Each such notice shall specify with respect to the requested Loan the proposed principal amount of such Loan, the Type of Loan, the initial Interest Period (if applicable) for such Loan and the Drawdown Date.  Each such notice shall also contain a statement that the conditions to borrowing set forth in §11 hereof have been satisfied.  Promptly upon receipt of any such notice, Agent shall notify each of Lenders thereof.  Each such Loan Request shall be irrevocable and binding on Borrower and shall obligate Borrower to accept the Loan requested from Lenders on the proposed Drawdown Date.  Subject to §2.1(c)(iv), each Loan Request shall be (a) for a Base Rate Loan in a minimum aggregate amount of $1,000,000 or an integral multiple of $100,000 in excess thereof; or (b) for a LIBOR Rate Loan in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in excess thereof; provided,

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however, that there shall be no more than eight (8) LIBOR Rate Loans outstanding at any one time.

(b)           Borrower shall give to Agent and Swing Line Lender written notice in the form of Exhibit D-2 hereto (or telephonic notice confirmed in writing in the form of Exhibit D-2 hereto) of each Swing Line Loan requested hereunder (a “Request for Swing Line Loan”) by 1:00 p.m. (Cleveland time) on the Business Day of the proposed borrowing of a Swing Line Loan.  On the date of the requested Swing Line Loan and subject to satisfaction of the applicable conditions set forth in §11 for all borrowings, Swing Line Lender will make the proceeds of such Swing Line Loan available to Borrower in Dollars, in immediately available funds, at the account specified by Borrower in its Request for Swing Line Loan not later than 3:00 p.m. (Cleveland time) on such date.  Each such Request for Swing Line Loan shall also contain a statement that the conditions to borrowing set forth in §11 hereof have been satisfied.

§2.7         Funds for Loans.

(a)           Not later than 2:00 p.m. (Cleveland time) on the proposed Drawdown Date of any Loans other than Swing Line Loans, each of Lenders will make available to Agent, at Agent’s Office, in immediately available funds, the amount of such Lender’s Commitment Percentage of the amount of the requested Loans which may be disbursed pursuant to §2.1.  Upon receipt from each Lender of such amount, and upon receipt of the documents required by §10 (in the case of Loans to be made on the Closing Date only) and §11 and the satisfaction of the other conditions set forth therein, to the extent applicable, Agent will make available to Borrower the aggregate amount of such Loans made available to Agent by the Lenders by crediting such amount to the account of Borrower maintained at Agent’s Head Office.  The failure or refusal of any Lender to make available to Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Loans shall not relieve any other Lender from its several obligation hereunder to make available to Agent the amount of such other Lender’s Commitment Percentage of any requested Loans, including any additional  Loans that may be requested subject to the terms and conditions hereof to provide funds to replace those not advanced by the Lender so failing or refusing.  In the event of any such failure or refusal, the Lenders not so failing or refusing shall be entitled to a priority secured position as against the Lender or Lenders so failing or refusing to make available to Borrower the amount of its or their Commitment Percentage for such Loans as provided in §12.4.

(b)           Unless Agent shall have been notified by any Lender prior to the applicable Drawdown Date that such Lender will not make available to Agent such Lender’s Commitment Percentage of a proposed Loan, Agent may in its discretion assume that such Lender has made such Loan available to Agent in accordance with the provisions of this Agreement and Agent may, if it chooses, in reliance upon such assumption make such Loan available to Borrower, and such Lender shall be liable to Agent for the amount of such advance.  If such Lender does not pay such corresponding amount upon Agent’s demand therefor, Agent will promptly notify Borrower, and Borrower shall promptly pay such corresponding amount to Agent.  Agent shall also be entitled to recover from the Lender or Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by Agent to Borrower to the date such corresponding amount is recovered by Agent at a

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per annum rate equal to (i) from Borrower at the applicable rate for such Loan or (ii) from a Lender at the Federal Funds Effective Rate.

§2.8         Use of Proceeds.

Borrower will use the proceeds of the Loans solely (i) to pay closing costs and expenses in connection with this Agreement and the other Loan Documents; (ii) to refinance existing Indebtedness under the Original Credit Agreement; (iii) to fund the Credo Acquisition, (iv) to fund Borrower’s working capital and general corporate needs which include, without limitation, the construction and sale of Lots, Mineral Activities, the acquisition and development of real estate and the making of other Investments and the making of Distributions, in each case as permitted by this Agreement; and (v) for such other purposes as may be approved in writing from time to time by the Required Lenders.

§2.9         Increase in Commitments.

At any time prior to the third anniversary of the Closing Date, Agent may, at the request of Borrower, increase, from time to time, but not more than four (4) times in the aggregate, the total Revolving Commitments or the total Term Commitments, or both, by (i) admitting additional Lenders hereunder (each a “Subsequent Lender”), and/or (ii) increasing the Revolving Commitment of any Revolving Lender and/or the Term Commitment of any Term Lender, as the case may be (each an “Increasing Lender”), subject to the following conditions:

(a)           each Subsequent Lender shall meet the conditions for assignee under §18.1;

(b)           if requested by the applicable Lender, Borrower executes new Revolving Loan Notes or Term Loan Notes, or both, as applicable, payable to the order of each Subsequent Lender, or a new or replacement Revolving Loan Note or Term Loan Note (or both, as applicable) payable to the order of each Increasing Lender;

(c)           each Subsequent Lender executes and delivers to Agent a signature page to this Agreement evidencing its agreement to be bound as a Lender hereunder and each Increasing Lender executes and delivers to Agent an acknowledgement of its increased Revolving Commitment and/or Term Commitment;

(d)           Borrower and Agent shall have executed modifications of the Security Documents and other Loan Documents to reflect the increase in the Revolving Commitments or the Term Commitments (or both, as applicable) and Borrower shall have paid to Agent any and all documentary stamp tax, non-recurring intangible tax or other taxes imposed in connection with the recording of such modifications of the Security Documents or increase in (i) the Revolving Loan amount or Revolving Commitment (whichever is the basis for computing such tax), or (ii) the Term Loan amount or Term Commitment (whichever is the basis for computing such tax), or (iii) both (i) and (ii), if applicable;

(e)           the allocation of the increased Commitments by Borrower as between the Revolving Commitments and the Term Commitments shall be subject to Agent’s consent (not to be unreasonably withheld or delayed);

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(f)            after giving effect to the admission of any Subsequent Lender or the increase in the Revolving Commitment or the Term Commitment (or both, as the case may be) of any Increasing Lender, the sum of all Revolving Commitments and all Term Commitments and (without duplication) Outstanding Term Loans does not exceed $500,000,000;

(g)           each increase in the Revolving Commitments or the Term Commitments (as applicable) shall be in the amount of at least $10,000,000, or a greater integral multiple of $5,000,000;

(h)           no increase in the Revolving Commitments or the Term Commitments (or both, as applicable) of any existing Lender shall be effective without the written consent of such Lender;

(i)            all of the representations and warranties of Borrower in the Loan Documents shall be true and correct in all material respects as of the effective date of the increase in the total Commitment (or if such representations and warranties by their terms relate solely to an earlier date, then as of such earlier date);

(j)            no Default or Event of Default exists or would result therefrom;

(k)           no Lender, including, but not limited to KeyBank, shall be an Increasing Lender without the written consent of such Lender; and

(l)            Borrower shall have executed such other modifications and documents and made such other deliveries as Agent may reasonably require to evidence and effectuate such new or increased Commitments and shall pay or reimburse Agent and Agent’s Special Counsel for all reasonable fees (including any fees specified in the Agreement Regarding Fees), expenses and costs in connection with the foregoing and Borrower shall also pay such Loan fees and placement fees, if any, as may be agreed for such increase in the Revolving Commitments or the Term Commitments (or both, as applicable).

After adding the Revolving Commitment or the Term Commitment (or both, as applicable) of any Increasing Lender or Subsequent Lender, Agent shall promptly provide each Lender and Borrower with a new Schedule 1.1 to this Agreement (and each Lender acknowledges that its Commitment Percentage under Schedule 1.1 and allocated portion of the Outstanding Revolving Loans, Swing Line Loans and Letters of Credit on the one hand, or the Outstanding Term Loans on the other (or both, as applicable), will change in accordance with its pro rata share of the increased Revolving Commitments or Term Commitments (or both, as applicable).  Unless and until the total Revolving Commitments and/or Term Commitments have been increased in accordance with this §2.9, Borrower shall not be permitted any disbursement beyond the amount of the Commitments in effect immediately prior to such proposed increase.

§2.10       Letters of Credit.

(a)           Issuance of Letters of Credit.  Subject to the terms and conditions set forth in this Agreement, at any time and from time to time from the Closing Date through the day that is thirty (30) days prior to the Revolving Credit Maturity Date, Agent shall issue such Letters of Credit as Borrower may request upon the delivery of a Letter of Credit Request to Agent,

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provided that (i) no Default or Event of Default shall have occurred and be continuing, (ii) upon issuance of such Letter of Credit, the Outstanding Letters of Credit shall not exceed $100,000,000, (iii) upon the issuance of such Letter of Credit, the amount of all Outstanding Letters of Credit, Swing Line Loans and Revolving Loans shall not exceed the aggregate Revolving Commitments of all Revolving Lenders, (iv) the conditions set forth in §10 and §11, as applicable, shall have been satisfied, (v) upon the issuance of such Letter of Credit, the amount of all Outstanding Letters of Credit and Outstanding Loans shall not result in a violation of the covenant set forth in §9.2(b), (vi) in no event shall any amount drawn under a Letter of Credit be available for reinstatement or a subsequent drawing under such Letter of Credit, and (vii) the term of any Letter of Credit shall not exceed the Revolving Credit Maturity Date.  The foregoing requirements shall not limit the ability of Borrower to obtain Letters of Credit in face amounts that are not rounded to the nearest $1,000 or other amount.  Each Letter of Credit shall be issued pursuant to a Reimbursement Agreement; provided that to the extent any of the terms of the Reimbursement Agreement are contrary to the terms of this Agreement, the terms of this Agreement shall control.  Each Revolving Lender acknowledges and agrees that, if and to the extent Agent agrees to reimburse or otherwise indemnify the issuer of any Prior Letter of Credit for draws thereunder or other obligations of a Loan Party arising in connection therewith, such Revolving Lender shall be deemed to have purchased a participation in such reimbursement or indemnification obligation of Agent in an amount equal to its Revolving Commitment Percentage of the amount of each such Prior Letter of Credit (if any).  The Outstanding amount under any Letter of Credit shall reduce on a dollar for dollar basis the amount available to be drawn under the Revolving Commitments as a Revolving Loan.

(b)           Letter of Credit Requests.  Each Letter of Credit Request shall be submitted by Borrower to Agent at least five (5) Business Days prior to the date upon which the requested Letter of Credit is to be issued.  Each Letter of Credit Request shall be executed by an authorized officer of Borrower.  Agent shall be entitled to conclusively rely on such Person’s authority to request a Letter of Credit on behalf of Borrower.  Agent shall have no duty to verify the authenticity of any signature appearing on a Letter of Credit Request.  Each such Letter of Credit Request shall contain (i) a statement as to whether such Letter of Credit is a Standby Letter of Credit or a Trade Letter of Credit, and (ii) a certification that the conditions to the issuance of such Letter of Credit set forth in §11 hereof have been satisfied.  Borrower shall further deliver to Agent such additional applications and documents as Agent reasonably may require, in conformity with the then standard practices of its letter of credit department, in connection with the issuance of such Letter of Credit.  Following the receipt of a Letter of Credit Request, Agent shall promptly notify each of the Revolving Lenders of the Letter of Credit Request.  Borrower assumes all risks with respect to the use of the Letters of Credit, under §2.10(i).

(c)           Agent Approval.  Subject to the conditions set forth in this Agreement, Agent if it reasonably approves of the Letter of Credit Request, shall issue the Letter of Credit on or before five (5) Business Days following receipt of the documents required in §2.10(b), or at such later date as Borrower may direct in writing.  Each Letter of Credit shall be in form and substance satisfactory to Agent in its sole discretion.

(d)           Lender Participation.  Upon the issuance of a Letter of Credit, each Revolving Lender shall be deemed to have purchased a participation therein from Agent in an amount equal to its Revolving Commitment Percentage of the amount of such Letter of Credit.

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(e)           Amounts Drawn Considered Loans.  If and to the extent that any amounts are drawn upon any Letter of Credit, the amounts so drawn shall, unless reimbursed by Borrower on the date such draw is honored by Agent, from the date of payment thereof by Agent, be considered Revolving Loans for all purposes hereunder, bearing interest as provided in §2.3.  All such Revolving Loans shall initially be Base Rate Loans.  Revolving Lenders shall be required to make such Revolving Loans regardless of whether all of the conditions to disbursement set forth in §11 have been satisfied.

(f)            Bankruptcy.  If after the issuance of a Letter of Credit by Agent, but prior to the funding of any portion thereof by Agent or a Lender, one of the events described in §12.1(g), (h) or (i) shall have occurred, each Lender will immediately transfer to Agent in immediately available funds an amount equal to such Lender’s Revolving Commitment Percentage of the Outstanding Letters of Credit, such amount to be held by Agent as security for the payment of the Letters of Credit.

(g)           Repayment to Lenders.  Whenever at any time after Agent has received from any Revolving Lender such Revolving Lender’s payment of funds under a Letter of Credit and thereafter Agent receives any payment on account thereof, then Agent will distribute to such Revolving Lender its participating interest in such amount (appropriately adjusted in the case of interest payments to reflect the period of time during which such Revolving Lender’s participating interest was outstanding and funded); provided, however, that in the event that such payment received by Agent is required to be returned, such Revolving Lender will return to Agent any portion thereof previously distributed by Agent to it.

(h)           Funds for Draws.  Upon the receipt by Agent of any draw or other presentation for payment of a Letter of Credit and the payment of any amount under a Letter of Credit, Agent shall, without notice to or the consent of Borrower, direct Revolving Lenders to fund to Agent in accordance with §2.7 on or before 2:00 p.m. (Cleveland time) on the next Business Day their respective Revolving Commitment Percentages of the amount so paid by Agent.  The proceeds of such funding shall be paid to Agent to reimburse Agent for the payment made by it under the Letter of Credit.  The provisions of §2.7 shall apply to any Revolving Lender or Lenders failing or refusing to fund its Revolving Commitment Percentage of any such draw.

(i)            Risks.  The Obligations of the Loan Parties to Agent and Revolving Lenders under this Agreement in connection with the issuance of a Letter of Credit shall be absolute, unconditional and irrevocable, and shall be paid and performed strictly in accordance with the terms of this Agreement, notwithstanding any of the following circumstances:  (i) any improper use which may be made of any Letter of Credit or any improper acts or omissions of any beneficiary or transferee of any Letter of Credit in connection therewith; (ii) the existence of any claim, set-off, defense or any right which any Loan Party may have at any time against any beneficiary or any transferee of any Letter of Credit (or persons or entities for whom any such beneficiary or any such transferee may be acting) or Revolving Lenders (other than the defense of payment to Revolving Lenders in accordance with the terms of this Agreement) or any other person, whether in connection with any Letter of Credit, this Agreement, any other Loan Document, or any unrelated transaction; (iii) any statement or any other documents presented to Agent under any Letter of Credit proving to be insufficient, forged, fraudulent or invalid in any

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respect or any statement therein being untrue or inaccurate in any respect whatsoever; (iv) any breach of any agreement between any Loan Party and any beneficiary or transferee of any Letter of Credit; (v) any irregularity in the transaction with respect to which any Letter of Credit is issued, including any fraud by the beneficiary or any transferee of such Letter of Credit; and (vi) payment by Agent under any Letter of Credit against presentation of a sight draft or a certificate which does not comply with the terms of such Letter of Credit in any non-material respect; provided, that Borrower shall not be precluded from asserting any claim for damages suffered by any Loan Party to the extent caused by the bad faith, willful misconduct or gross negligence of Agent in determining whether a request presented under any Letter of Credit issued by it complied on its face with the terms of such Letter of Credit.

(j)            Non-Renewal; Cash Collateral.  Agent may, at its option, during the existence of a Default or Event of Default, elect not to renew any Letter of Credit by giving written notice of non-renewal to Borrower at least thirty (30) days prior to the expiration date of such Letter of Credit.  Agent may, in its discretion at any time and from time to time while there exists any Event of Default, make a Revolving Loan in an amount equal to all or any portion of the Outstanding Letters of Credit hereunder (including fee amounts due), and hold the proceeds thereof in an interest bearing account as collateral security for such Obligations (and such account shall be subject to Agent’s right to setoff against such amounts under §13 hereof), provided that Agent shall promptly notify Borrower of such action and the application of the proceeds thereof and further provided that all interest earned on proceeds so held shall be applied as and when available to reduce any Obligations outstanding hereunder or, if there are no Obligations outstanding, such interest shall be paid over to Borrower.

(k)           Subsequent Issuance.  The issuance of any supplement, modification, amendment, renewal or extension to or of any Letter of Credit shall be treated in all respects the same as the issuance of a new Letter of Credit.

(l)            Extended Letters of Credit; Cash Collateral.  Notwithstanding the contrary provisions of §2.10(a), Letters of Credit may be issued with expiry dates later than the scheduled Revolving Credit Maturity Date upon the terms and conditions set forth in this §2.10(l) (any such Letter of Credit, an “Extended Letter of Credit”).  No Extended Letter of Credit shall have an expiry date later than one (1) year after the scheduled Revolving Credit Maturity Date.  From the date that is five (5) days prior to the scheduled Revolving Credit Maturity Date and at all times thereafter when any Extended Letters of Credit are Outstanding, Borrower shall maintain cash collateral in a special purpose interest bearing collateral account in the name of Borrower, but subject to the sole dominion and control of Agent, in an amount not less than one hundred five percent (105%) of the aggregate Extended Letters of Credit then Outstanding.

§3.          REPAYMENT AND PREPAYMENT OF THE LOANS

§3.1         Stated Maturity; Extension Option.

(a)           Maturity Date.  Borrower promises to pay on the applicable Maturity Date, and there shall become absolutely due and payable on such Maturity Date, the entire Outstanding principal amount of all Loans subject to such Maturity Date outstanding on such date, together with any and all accrued and unpaid interest thereon.

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(b)           Extension Option.  At any time after the first anniversary of the Closing Date, the Borrower shall have the option to extend the Revolving Credit Maturity Date for a one (1) year period (the “Extension Period”) by giving Agent written Notice of such election to extend not more than 45 days prior to the proposed date that such extension is to become effective (the “Extension Effective Date”), which date of effectiveness shall be not later than the original Revolving Credit Maturity Date, provided that (i) no Default or Event of Default exists either on the date such notice is given or on the Extension Effective Date, (ii) each of the representations and warranties made by Borrower or the other Loan Parties in this Agreement or the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true in all material respects as of the date they were made, as of the date notice of extension is given and as of the Extension Effective Date (except to the extent of changes resulting from transactions permitted by the Loan Documents, it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date), (iii) the Loan Parties execute and deliver such amendments or modifications to the Security Deeds as Agent may require in order to evidence such extension and to maintain the effectiveness and priority of the Security Deeds, together with payment of all mortgage, recording, intangible, documentary stamp or other similar taxes and charges which Agent determines to be payable as a result of such extension and the recording of such amendments or modifications, and affidavits or other information which Agent determines to be necessary in connection therewith, and (iv) Borrower shall have paid to Agent on the Extension Effective Date, for the account of the Revolving Lenders in accordance with their respective percentage of the aggregate Revolving Commitments of all Revolving Lenders, an extension fee equal to twenty-five one hundredths of one percent (0.25%) of the aggregate Revolving Commitments of the Revolving Lenders as of the Extension Effective Date.

§3.2         Mandatory Prepayments.

(a)           Loans Exceed Commitments, Borrowing Base or Commitment to Value Ratio.  If at any time (i) the sum of the aggregate Outstanding principal amount of the Revolving Loans (including Swing Line Loans) plus the amount of Outstanding Letters of Credit exceeds the aggregate Revolving Commitments, (ii) the aggregate Outstanding principal amount of the Term Loans exceeds the aggregate Term Commitments required under §3.2(a) or §3.2(b), (iii) the aggregate Outstanding principal balance of the Loans (including Swing Line Loans), plus the amount of Outstanding Letters of Credit, exceeds the Borrowing Base, or (iv) the sum of the Outstanding principal balance of the Loans (including Swing Line Loans) plus the Outstanding Letters of Credit exceeds the aggregate Commitments permitted in order to comply with the covenant set forth in §9.3, then Borrower shall pay within five (5) days of written demand from Agent the amount of such excess to Agent for the respective accounts of Lenders, as applicable, for application for the Revolving Loans or Term Loans, as applicable, as provided in §3.4, together with any additional amounts payable pursuant to §4.8; provided however that until such time as Borrower has paid such amount to Agent for the respective accounts of the appropriate Lenders pursuant to the preceding clause, Revolving Lenders shall have no obligation to make additional funds available to Borrower pursuant to this Agreement.  For the avoidance of doubt, the Term Commitment shall be a reference to the Outstanding principal amount of the Term Loans notwithstanding that no Term Lender has any remaining commitment to make Term Loans.

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(b)           Prepayment from Permitted Bond Indebtedness.  The Term Loans shall be subject to mandatory prepayment within ten (10) days after Borrower’s receipt of the net cash proceeds from the issuance of Permitted Bond Indebtedness as provided in §8.1(xvi)(c).

§3.3         Optional Prepayments.

Borrower shall have the right, at its election, to prepay the outstanding amount of the Loans, as a whole or in part, at any time without penalty or premium, provided that if any full or partial prepayment of the outstanding amount of any LIBOR Rate Loans is made on a date that is not the last day of the Interest Period relating thereto, such payment shall be accompanied by the amount payable pursuant to §4.8.  Borrower shall give Agent, no later than 10:00 a.m., Cleveland time, at least three (3) Business Days prior written notice of any prepayment pursuant to this §3.3, in each case specifying the proposed date of payment of Loans, the principal amount of the Term Loans to be prepaid (if any), the principal amount of the Revolving Loans to be prepaid (if any), and the date on which such prepayment is to be made.  Notice of prepayment, once given, shall be irrevocable, and such amount shall become due and payable on the specified prepayment date.  Contemporaneously with each optional prepayment, in whole or in part, of the Outstanding principal of the Term Loans prior to the date which is six (6) months after the Closing Date, Borrower shall pay the Prepayment Fee to Agent for the account of Term Lenders.

§3.4         Partial Prepayments.

Each partial prepayment of the Loans under §3.3 shall be in the minimum amount of $1,000,000 or an integral multiple of $100,000 in excess thereof (unless the applicable Loan is being prepaid in full or unless the Loan is being prepaid in part pursuant to §5.3), and each partial prepayment of the Loans under §3.2 and §3.3 shall be accompanied by the payment of accrued interest on the principal prepaid to the date of payment and, after payment of such interest, shall be applied, in the absence of instruction by Borrower, first to the principal of Revolving Loans or Term Loans (as applicable) that are Base Rate Loans, and then to the Revolving Loans or Term Loans (as applicable) that are LIBOR Rate Loans; provided, however, that no such partial prepayment shall reduce the aggregate principal amount of the Loans to an amount that is less than $10,000,000.

§3.5         Effect of Prepayments.

Amounts of the Revolving Loans and Swing Line Loans prepaid prior to the Revolving Credit Maturity Date may be reborrowed as and to the extent provided in §2.  Except as otherwise expressly provided herein, all payments shall be applied, (a) first to any fees or other charges then due and payable hereunder or under the other Loan Documents (other than amounts payable under any Hedge Agreements), (b) next to any Default Rate interest accrued and outstanding, (c) next to any interest accrued and outstanding on Swing Line Loans, (d) next to any interest accrued and outstanding on Base Rate Loans, (e) next to any interest accrued, outstanding, and payable on any LIBOR Rate Loans, (f) next to any Outstanding principal on any Swing Line Loans, (g) next to any Outstanding principal on any Revolving Loans that are Base Rate Loans, (h) next to any Outstanding principal on any Revolving Loans that are LIBOR Rate Loans, (i) next to any Outstanding principal on any Term Loans that are Base Rate Loans, and (j) next to any Outstanding principal on any Term Loans that are LIBOR Rate Loans.  Amounts applied

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pursuant to clauses (d) and (e) of this Section shall be applied ratably and without preference or priority as between Revolving Loans and Term Loans.

§4.          CERTAIN GENERAL PROVISIONS

§4.1         Conversion Options; Number of LIBOR Contracts.

(a)           Borrower may elect from time to time to convert any of the outstanding Loans to a Loan of another Type and such Loan shall thereafter bear interest as a Base Rate Loan or a LIBOR Rate Loan, as applicable; provided that (i) with respect to any such conversion of a LIBOR Rate Loan to a Base Rate Loan, Borrower shall give Agent at least three (3) Business Days’ prior written notice of such election, and such conversion shall only be made on the last day of the Interest Period with respect to such LIBOR Rate Loan; (ii) with respect to any such conversion of a Base Rate Loan to a LIBOR Rate Loan, Borrower shall give Agent at least three (3) LIBOR Business Days’ prior written notice of such election and the Interest Period requested for such Loan; the principal amount of the Loan so converted shall be in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in excess thereof; and (iii) no Loan may be converted into a LIBOR Rate Loan when any Event of Default has occurred and is continuing.  All or any part of the outstanding Loans of any Type may be converted as provided herein, provided that no partial conversion shall result in a Base Rate Loan in an aggregate principal amount of less than $1,000,000 or a LIBOR Rate Loan in an aggregate principal amount of less than $2,000,000 and that the aggregate principal amount of each Loan shall be an integral multiple of $100,000.  On the date on which such conversion is being made, each Lender shall take, to the extent it deems it necessary to do so, such action as is necessary to transfer its Commitment Percentage of such Loans to its Domestic Lending Office or its LIBOR Lending Office, as the case may be.  Each Conversion Request relating to the conversion of a Base Rate Loan to a LIBOR Rate Loan shall be irrevocable by Borrower.

(b)           Any Loan may be continued as such Type upon the expiration of an Interest Period with respect thereto by compliance by Borrower with the terms of §4.1; provided that no LIBOR Rate Loan may be continued as such when any Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the Interest Period relating thereto ending during the continuance of any Default or Event of Default.

(c)           In the event that Borrower does not notify Agent of its election hereunder with respect to any Loan, such Loan shall be automatically converted to a Base Rate Loan at the end of the applicable Interest Period.

(d)           There shall be no more than eight (8) LIBOR Rate Loans outstanding at any one time.

§4.2         Certain Fees.

Borrower agrees to pay to KeyBank certain fees for services rendered or to be rendered in connection with the Loans as provided in the Agreement Regarding Fees.  All such fees shall be fully earned when due and non-refundable when paid.

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§4.3         Letter of Credit Fees.

Borrower shall pay to Agent Agent’s customary issuance fee, not to exceed $400.00 per Letter of Credit, and a Letter of Credit Fee with respect to each Letter of Credit issued under this Agreement.  The Letter of Credit Fee with respect to all Letters of Credit shall be equal to four percent (4.0%) per annum on the average of the amount of the Letters of Credit Outstanding for any given month.  All Letter of Credit Fees shall be paid monthly in arrears on the first day of each calendar month.  Upon receipt of the Letter of Credit Fee, Agent shall deduct and retain one-eighth of one percent (0.125%) per annum of the Outstanding Letters of Credit as a fee due to Agent and shall remit to each Revolving Lender a portion of the remaining Letter of Credit Fee equal to each such Revolving Lender’s Commitment Percentage of the remaining Letter of Credit Fee.

§4.4         Funds for Payments.

(a)           All payments of principal, interest, facility fees, Letter of Credit Fees, Agent’s fees, closing fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to Agent, for the respective accounts of Lenders and Agent, as the case may be, at Agent’s Office, no later than 1:00 p.m. (Cleveland time) on the day when due, in each case in lawful money of the United States in immediately available funds.

(b)           Unless otherwise required by law, any and all payments by Borrower to or for the account of any Lender hereunder or under any other Loan Document shall be made without setoff or counterclaim and free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges and withholdings (collectively, “Taxes”) and all liabilities with respect thereto, excluding:  (i) Taxes imposed on or measured by the net income (including branch profits or similar Taxes) of, and gross receipts, franchise or similar taxes imposed on, any Lender or Agent by the jurisdiction (or subdivision thereof) under the laws of which such Lender or Agent is organized or in which its principal executive office is located or in which its applicable lending office is located or in which it is otherwise doing business, (ii) in the case of each Lender or Agent, any United States withholding tax imposed on such payments, but other than in the case of an assignee pursuant to the election by the Borrower under §4.9, only to the extent that such Lender or Agent is subject to United States withholding tax at the time such Lender or Agent first becomes a party to this Agreement or changes its applicable lending office, (iii) any backup withholding tax imposed by the United States of America (or any state or locality thereof) on a Lender or Agent, (iv) any Taxes imposed as the result of the failure of a recipient of such payment to comply with §4.4(c) or §18.11, and (v) any Taxes imposed by FATCA (all such excluded Taxes being hereinafter referred to as “Excluded Taxes”).  If the Borrower shall be required by law to deduct any Indemnified Taxes from or in respect of any sum payable hereunder or under any other Loan Document to any Lender or Agent, (A) the sum payable shall be increased as necessary so that after making all such required deductions (including deductions applicable to additional sums payable under this §4.4(b)) such Lender receives an amount equal to the sum it would have received had no such deductions for Indemnified Taxes been required, (B) Borrower shall make such deductions, (C) Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (D) Borrower shall furnish to Agent, for delivery to such Lender, the original or a certified copy of a receipt evidencing payment thereof.

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(c)           Each Lender organized under the laws of a jurisdiction outside the United States, if requested in writing by Borrower (but only so long as such Lender remains lawfully able to do so), shall provide Borrower with such duly executed form(s) or statement(s) which may, from time to time, be prescribed by law and, which, pursuant to applicable provisions of  (i) an income tax treaty between the United States and the country of residence of such Lender, (ii) the Code, or (iii) any applicable rules or regulations in effect under (i) or (ii) above, indicates the withholding status of such Lender; provided that nothing herein (including without limitation the failure or inability to provide such form or statement) shall relieve Borrower of its obligations under §4.4(b).  In the event that Borrower shall have delivered the certificates or vouchers described above for any payments made by Borrower and such Lender receives a refund of any taxes paid by Borrower pursuant to §4.4(b), such Lender will pay to Borrower the amount of such refund promptly upon receipt thereof; provided that if at any time thereafter such Lender is required to return such refund, Borrower shall promptly repay to such Lender the amount of such refund.

(d)           Each Lender that is organized under the laws of a jurisdiction other than the United States shall comply with any certification, documentation, information or other reporting necessary to establish an exemption from withholding under FATCA and shall provide any other documentation reasonably requested by Borrower or Agent sufficient for Agent and Borrower to comply with their obligations under FATCA and to determine that such Lender has complied with such applicable reporting requirements.

(e)           Each Lender and Agent that is a United States person (within the meaning of Section 7701(a)(30) of the Code) shall, upon the request of Borrower, provide a duly executed IRS Form W-9 to Borrower certifying that such Lender is exempt from backup withholding.

§4.5         Computations.

All computations of interest on the Loans and of other fees to the extent applicable shall be based on a 360-day year (or, in the case of interest on Base Rate Loans, a 365/366-day year) and paid for the actual number of days elapsed.  Except as otherwise provided in the definition of the term “Interest Period” with respect to LIBOR Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension.  The outstanding amount of the Loans as reflected on the records of Agent from time to time shall be considered prima facie evidence of such amount.

§4.6         Inability to Determine LIBOR Rate.

In the event that at any time Agent shall determine in the exercise of its good faith business judgment that adequate and reasonable methods do not exist for ascertaining the LIBOR Rate, Agent shall forthwith give notice of such determination (which shall be conclusive and binding on Borrower and Lenders) to Borrower and Lenders.  In such event (a) any Loan Request with respect to LIBOR Rate Loans shall be automatically withdrawn and shall be deemed a request for Base Rate Loans and (b) each LIBOR Rate Loan will automatically become a Base Rate Loan at the end of the current Interest Period, and the obligations of Lenders to make LIBOR Rate Loans shall be suspended until Agent determines that the circumstances giving rise to such suspension no longer exist, whereupon Agent shall so notify Borrower and Lenders.

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§4.7         Illegality.

Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or the interpretation or application thereof shall make it unlawful, or any central bank or other Governmental Authority having jurisdiction over a Lender or its LIBOR Lending Office shall assert that it is unlawful, for any Lender to make or maintain LIBOR Rate Loans, such Lender shall forthwith give notice of such circumstances to Agent and Borrower and thereupon (a) the commitment of Lenders to make LIBOR Rate Loans or convert Loans of another type to LIBOR Rate Loans shall forthwith be suspended and (b) the LIBOR Rate Loans then outstanding shall be converted automatically to Base Rate Loans.

§4.8         Additional Interest.

If any LIBOR Rate Loan or any portion thereof is repaid or is converted to a Base Rate Loan for any reason on a date which is prior to the last day of the Interest Period applicable to such LIBOR Rate Loan, or if repayment of the Loans has been accelerated as provided in §12.1, Borrower will pay to Agent upon demand for the account of Lenders in accordance with their respective Commitment Percentages, in addition to any amounts of interest otherwise payable hereunder, any amounts required to compensate Lenders for any losses, costs or expenses (but not loss of profit) which may reasonably be incurred as a result of such payment or conversion, including, without limitation, an amount equal to daily interest for the unexpired portion of such Interest Period on the LIBOR Rate Loan or portion thereof so repaid or converted at a per annum rate equal to the excess, if any, of (a) the interest rate calculated on the basis of the LIBOR Rate applicable to such LIBOR Rate Loan (excluding any spread over such LIBOR Rate) minus (b) the yield obtainable by Agent upon the purchase of debt securities customarily issued by the Treasury of the United States of America which have a maturity date most closely approximating the last day of such Interest Period (it being understood that the purchase of such securities shall not be required in order for such amounts to be payable and that a Lender shall not be obligated or required to have actually obtained funds at the LIBOR Rate or to have actually reinvested such amount as described above).

§4.9         Additional Costs, Etc.

Subject to §4.4, if any present or future applicable law, or any amendment or modification of present applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and legally binding interpretations thereof by any competent court or by any governmental or other regulatory body or official with appropriate jurisdiction charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Lender or Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law) and including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines and directives under or issued in connection therewith (collectively, “Dodd-Frank”) and all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III (collectively, “Basel III”), shall:

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(a)           subject any Lender or Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Loan Documents, such Lender’s Commitment, a Letter of Credit or the Loans (other than Excluded Taxes), or

(b)           materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Lender of the principal of or the interest on any Loans or any other amounts payable to any Lender under this Agreement or the other Loan Documents, or

(c)           impose or increase or render applicable any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or Loans or Letters of Credit by, or commitments of an office of any Lender, or

(d)           impose on any Lender or Agent any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans, such Lender’s Commitment, a Letter of Credit or any class of loans or commitments of which any of the Loans or Letters of Credit or such Lender’s Commitment forms a part, and the result of any of the foregoing is

(i)            to increase the cost to any Lender of making, funding, issuing, renewing, extending or maintaining any of the Loans or Letters of Credit or such Lender’s Commitment, or

(ii)           to reduce the amount of principal, interest or other amount payable to such Lender or Agent hereunder on account of such Lender’s Commitment or any of the Loans or Letters of Credit, or

(iii)          to require such Lender or Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender or Agent from Borrower hereunder;

then, and in each such case, Borrower will, within fifteen (15) days of demand made by such Lender or (as the case may be) Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Lender or Agent such additional amounts as such Lender or Agent shall determine in good faith to be sufficient to compensate such Lender or Agent for such additional cost, reduction, payment or foregone interest or other sum.  Each Lender and Agent in determining such amounts may use any reasonable averaging and attribution methods, generally applied by such Lender or Agent.  Notwithstanding the foregoing, Borrower shall have the right, in lieu of making the payment referred to in this §4.9, to prepay the Loans of the applicable Lender within fifteen (15) days of such demand and avoid the payment of the amounts otherwise due under this §4.9 or to cause the applicable Lender to assign its Loans and Commitments in accordance with §18.8, provided, however, that Borrower shall be required to pay together with such prepayment of the Loan all other costs, damages and expenses otherwise due under this Agreement as a result of such prepayment.

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§4.10       Capital Adequacy.

If after the date hereof any Lender determines that (a) the adoption of or change in any law, rule, regulation, guideline, directive or request (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by any Governmental Authority, central bank or comparable agency charged with the administration thereof, and for purposes hereof, Dodd-Frank and Basel III shall each be deemed a change described herein regardless of the date enacted, adopted or issued, or (b) compliance by such Lender or its parent bank holding company with any guideline, request or directive of any such entity regarding capital adequacy or any amendment or change in interpretation of any existing guideline, request or directive (whether or not having the force of law), has the effect of reducing the return on such Lender’s or such holding company’s capital as a consequence of such Lender’s commitment to make Loans hereunder to a level below that which such Lender or holding company could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s or such holding company’s then existing policies with respect to capital adequacy and assuming the full utilization of such entity’s capital) by any amount deemed by such Lender to be material, then such Lender may notify Borrower thereof.  Borrower agrees to pay to such Lender the amount of such reduction in the return on capital as and when such reduction is determined, upon presentation by such Lender of a statement of the amount setting for the Lender’s calculation thereof.  In determining such amount, such Lender may use any reasonable averaging and attribution methods.  Notwithstanding the foregoing, Borrower shall have the right, in lieu of making the payment referred to in this §4.10, to prepay the Loans of the applicable Lender within fifteen (15) days of such demand and avoid the payment of the amounts otherwise due under this §4.10 or to cause the applicable Lender to assign its Loans and Commitments in accordance with §18.8, provided, however, that Borrower shall be required to pay together with such prepayment of the Loan all other fees, costs, damages and expenses otherwise due under this Agreement as a result of such prepayment.

§4.11       Indemnity by Borrower.

Borrower agrees to indemnify each Lender and to hold each Lender harmless from and against any loss, cost or expense that such Lender may sustain or incur as a consequence of (a) default by Borrower in payment of the principal amount of or any interest on any LIBOR Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain its LIBOR Rate Loans, or (b) default by Borrower in making a borrowing or conversion after Borrower has given (or is deemed to have given) a Conversion Request, or (c) default by Borrower in making the payments or performing their obligations under §§4.8, 4.9, 4.10 or 4.12.

§4.12       Interest on Overdue Amounts; Late Charge.

Following the occurrence and during the continuance of any Event of Default, and regardless of whether or not Lenders shall have accelerated the maturity of the Loans, at the election of the Required Lenders, all Loans shall bear interest payable on demand at a rate per annum equal to two percent (2%) above the rate that would otherwise be applicable at such time (the “Default Rate”), until such amount shall be paid in full (after as well as before judgment), or if such rate shall exceed the maximum rate permitted by law, then at the maximum rate permitted

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by law.  In addition, Borrower shall pay Agent, for the account of the applicable Lenders, a late charge equal to five percent (5%) of any amount of interest and/or principal payable on the Loans or any other amounts payable hereunder or under the Loan Documents, which is not paid within ten (10) days of the date when due.  Such late charge is and shall be deemed to be a charge to compensate Agent and Lenders for administrative services and costs incurred in connection with the related delinquent payment and shall under no circumstances constitute or be deemed to be a charge for the use of money.

§4.13       Certificate.

A certificate setting forth any amounts payable pursuant to §4.8, §4.9, §4.10, §4.11 or §4.12 and a reasonably detailed explanation and calculation of such amounts which are due, submitted by any Lender or Agent to Borrower, shall be conclusive in the absence of manifest error.

§4.14       Limitation on Interest.

Notwithstanding anything in this Agreement to the contrary, all agreements between Borrower and Lenders and Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by Lenders exceed the maximum amount permissible under applicable law.  If, from any circumstance whatsoever, interest would otherwise be payable to Lenders in excess of the maximum lawful amount, the interest payable to Lenders shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance Lenders shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to Borrower.  All interest paid or agreed to be paid to Lenders shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law.  This section shall control all agreements between Borrower and Lenders and Agent.

§5.          COLLATERAL SECURITY; RELEASES

§5.1         Collateral.

The Obligations shall be secured by (i) a perfected first priority lien or security title and security interest to be held by Agent for the benefit of Lenders in the Mortgaged Properties and certain personal property of Loan Parties related to the Mortgaged Properties, pursuant to the terms of the Security Deeds, (ii) a perfected first priority security interest to be held by Agent for the benefit of Lenders in the Leases pursuant to the Security Deeds and the Assignment of Leases and Rents, in the Mineral Rights Leases pursuant to the Assignment of Mineral Rights Leases, and in the Timber Purchase Agreement pursuant to the Collateral Assignment of Timber Purchase Agreement, (iii) after the effectiveness of the Credo Acquisition, a perfected first priority security

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interest to be held by Agent for the benefit of Lenders in the Credo Patents pursuant to the Patent Security Agreement, (iv) a perfected first priority security interest to be held by Agent for the benefit of Lenders in the Pledged Deposit Account and all monies, instruments and investments from time to time held therein, (v) a perfected first priority pledge of and security interest in all issued and outstanding Equity Interests held by any Loan Party in another Loan Party or in any Majority-Owned Joint Venture pursuant to the Pledge and Security Agreement, provided that in the event a pledge of or security interest in such Equity Interests in any Majority-Owned Joint Venture pursuant to the Pledge and Security Agreement is not permitted under the Organization Documents of the applicable Majority-Owned Joint Venture or pursuant to any other agreement, then such security interest shall be limited to an assignment of such Loan Party’s rights to any distributions made or to be made by such Majority-Owned Joint Venture in favor of Agent for the benefit of Lenders pursuant to the Assignment of Rights to Joint Venture Distributions, provided that in the event a pledge of or security interest in such rights to distributions is not permitted under the Organizational Documents of the applicable Majority-Owned Joint Venture or pursuant to any other agreement, neither such Equity Interests nor any rights to any distributions shall be included as Collateral, (vi) a perfected first priority security interest to be held by Agent for the benefit of Lenders in the SIDR Reimbursements pursuant to the Assignment of SIDR Reimbursements, (vii) a perfected first priority security interest to be held by Agent for the benefit of Lenders in the Cibolo Resort SIDHT pursuant to the Assignment of Cibolo Resort SIDHT, and (viii) such additional collateral, if any, as the Loan Parties may agree to grant and Agent for the benefit of Lenders from time to time may accept as security for the Obligations; provided, however, that the parties hereto acknowledge and agree that the Credo Mortgaged Properties, the Leases (including Mineral Rights Leases) of the Credo Entities, the Credo Patents and the Equity Interests in the Credo Entities shall not become Collateral unless and until the Credo Acquisition is consummated; it being understood that all security interests described in this §5.1 shall be subject to Permitted Liens.  The Loan Parties agree that all existing and thereafter acquired Timberland and High Value Timberland shall be included in the Mortgaged Properties except for Real Estate distributed as part of the TEMCO Investment and as otherwise agreed by Agent.  Effective upon the issuance of any Permitted Bond Indebtedness, any Real Estate constituting Entitled Land Under Development must be included in the Mortgaged Properties in order to be included in the Borrowing Base Assets.

§5.2         Appraisals; Evaluations; Adjusted Value.

(a)           Agent on behalf of Lenders shall require evaluations of the High Value Timberland performed by MAI appraisers, selected and engaged by Agent, which will be ordered by Agent and reviewed and approved by Agent from time to time, each of said evaluations to cover a minimum of seventy-five percent (75%), by acreage, of the High Value Timberland (as selected by Agent) in order to determine the current High Value Timberland Amount.  Such evaluations shall set forth the specific Appraised Value of the High Value Timberland.  On an annual basis, Borrower shall cause the value of such properties to be re-evaluated.  Borrower agrees to pay to Agent on demand all reasonable out-of-pocket costs of all such evaluations and re-evaluations.  Notwithstanding anything to the contrary contained in this paragraph, however, so long as no Event of Default shall have occurred and be continuing and regulatory requirements of any Lender generally applicable to real estate loans of the category made under this Agreement as reasonably interpreted by such Lender shall not require such evaluations more frequently than

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annually, Borrower shall not be required to pay for such evaluations more often than once in any period of twelve (12) consecutive months.

(b)           Agent on behalf of Lenders shall require annual updates of the evaluation with respect to the Timberland performed by any third-party consultant selected and engaged by Agent, which will be ordered by Agent and reviewed and approved by Agent from time to time in order to determine the current Timberland Value, and Borrower shall pay to Agent on demand all reasonable out-of-pocket costs of all such evaluation updates; provided, however, that so long as no Event of Default shall have occurred and be continuing and regulatory requirements of any Lender generally applicable to real estate loans of the category made under this Agreement as reasonably interpreted by such Lender shall not require such evaluation updates more frequently than annually, Borrower shall not be required to pay for such evaluation updates more often than once in any period of twelve (12) consecutive months.

(c)           Agent on behalf of Lenders shall require “as is” Appraisals of the Raw Entitled Land and Entitled Land Under Development, in each case performed by MAI appraisers selected and engaged by Agent, which Appraisals will be ordered by Agent and reviewed and approved by Agent from time to time, and will cover a minimum of seventy-five percent (75%) of the remaining Lot portfolio and seventy-five percent (75%) of the remaining commercial acreage (both as selected by Agent) in order to determine the current Raw Entitled Land Value and the Entitled Land Under Development Value, as the case may be.  On an annual basis, such properties shall be reappraised.  Borrower agrees to pay to Agent on demand all reasonable out-of-pocket costs of all such Appraisals and reappraisals.  Notwithstanding anything to the contrary contained in this paragraph, however, so long as no Event of Default shall have occurred and be continuing and regulatory requirements of any Lender generally applicable to real estate loans of the category made under this Agreement as reasonably interpreted by such Lender shall not require such Appraisals or reappraisals more frequently than annually, Borrower shall not be required to pay for such Appraisals or reappraisals more often than once in any period of twelve (12) consecutive months.

(d)           Agent on behalf of Lenders shall require Appraisals of the Cibolo Resort SIDHT and the SIDR Reimbursements, which Appraisals will be ordered by Agent from time to time, but in any event at least annually, and will be reviewed and approved by Agent; provided, however, that so long as no Event of Default shall have occurred and be continuing, Borrower shall not be required to pay for such Appraisals or reappraisals more often than once in any period of twelve (12) consecutive months.

(e)           In the event that Agent shall advise Borrower in writing, on the basis of any Appraisal (or update of an existing Appraisal or evaluation), that the Borrowing Base is insufficient to comply with the requirements of §9.2(b), then until the Borrowing Base is increased or the Outstanding principal amount of the Loans is reduced such that the Borrowing Base is in compliance with §9.2(b), Revolving Lenders and Swing Line Lender shall not be required to make advances under §2.1, Agent shall not be required to issue any Letter of Credit under §2.10, and Borrower shall make the mandatory prepayment (if any) required under the provisions of §3.2(a).

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(f)            Borrower acknowledges that Agent may, upon five (5) Business Days prior notice to Borrower, make changes or adjustments to the value set forth in any Appraisal or Engineering Report as may be required by Agent in the exercise of its good faith business judgment (and, with respect to the Cibolo Resort SIDHT and the SIDR Reimbursements, Agent may take into account the effect of any amendments or modifications of the agreements under which such amounts are payable to Borrower since the date of the most recent applicable Appraisal) and after consultation with Borrower, and that Agent is not bound by the value set forth in any Appraisal or Engineering Report performed pursuant to this Agreement and does not make any representations or warranties with respect to any such Appraisal or Engineering Report.  Borrower further agrees that Lenders and Agent shall have no liability as a result of or in connection with any such Appraisal or Engineering Report for statements contained in such Appraisal or Engineering Report, including without limitation, the accuracy and completeness of information, estimates, conclusions and opinions contained in such Appraisal or Engineering Report, or variance of such Appraisal or Engineering Report from the fair value of such property that is the subject of such Appraisal or Engineering Report given by the local tax assessor’s office, or Borrower’s idea of the value of such property.

§5.3         Release of Mortgaged Property.

Provided no Default or Event of Default shall have occurred hereunder and be continuing (or would exist immediately after giving effect to the transactions contemplated by this §5.3), Agent shall release a Mortgaged Property or any portion thereof, from the lien or security title of the Security Documents encumbering the same upon the request of Borrower subject to and upon the following terms and conditions:

(a)           Borrower shall deliver to Agent a written notice of its desire to obtain such release no later than five (5) Business Days prior to the date on which such release is to be effected (or such lesser amount of time as agreed to by Agent), and, if the Mortgaged Property to be released in connection with any sale or related series of sales  contains more than 5,000 acres in the aggregate, such notice shall be accompanied by a pro forma Compliance Certificate showing that no Default or Event of Default exists either immediately prior, or after giving effect, to such release and that immediately after giving effect to such release, Loan Parties remain in compliance with the financial covenant in §9.3;

(b)           if the Mortgaged Property to be released in connection with any sale or related series of sales contains more than 10,000 acres in the aggregate or is valued in excess of $30,000,000 in the aggregate (based on the higher of book value or the gross sale price for such transaction or related series of transactions), Borrower shall submit to Agent with such request a Compliance Certificate prepared using the financial statements of Borrower most recently provided or required to be provided to Agent under §6.4 or §7.4, adjusted in the best good faith estimate of Borrower to give effect to the proposed release, and demonstrating that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such release;

(c)           all release documents to be executed by Agent shall be in form and substance reasonably satisfactory to Agent;

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(d)           such release shall be in conjunction with (i) a bona fide, arm’s-length sale or like-kind exchange of the property to be released to an unaffiliated third-party, or the transfer of such property to a Joint Venture as a capital contribution or sale, in either case for reasonably equivalent value or consideration, otherwise permitted under the terms of this Agreement, (ii) a donation, grant, dedication or other transfer of property (including, without limitation, donations, grants or other transfers of Mortgaged Property for use as schools, parks, utilities, rights-of-way or other public or quasi-public purposes) for a value or consideration (whether cash or non-cash, or any combination thereof) determined in good faith by Borrower to be reasonable and appropriate taking into account the actual or expected benefits to be received, directly or indirectly, by a Loan Party in respect of such donation, grant, dedication or other transfer, which determination shall be set forth in an officer’s certificate of Borrower in substantially the form of Exhibit I delivered to the Agent prior to or contemporaneously with the release, or (iii) (A) arrangements entered into with governmental or quasi-governmental authorities relating to the preservation of wetlands, streams, endangered species, carbon or similar items in exchange for offsetting credits or other benefits or (B) the creation of quasi-governmental water, utility or similar districts providing for the reimbursement of certain development costs.  In the case of (x) any donation, grant, dedication or other transfer of property pursuant to clause (ii) above in excess of 500 acres, or (y) any release pursuant to clause (iii) above in excess of 3,000 acres, such donations, grants, dedications, transfers or releases shall be approved by the Agent, such approval not to be unreasonably withheld, conditioned or delayed;

(e)           if the Mortgaged Property to be released in connection with any sale or related series of sales contains more than 10,000 acres in the aggregate or is valued in excess of $30,000,000 in the aggregate (based on the higher of book value or the gross sale price for such transaction or related series of transactions), Borrower shall submit to Agent a Borrowing Base Certificate, giving pro forma effect to the proposed transaction, demonstrating that immediately after giving effect to the proposed sale and release, Borrower will remain in compliance with the Borrowing Base requirements under this Agreement; and

(f)            if only a portion of any Mortgaged Property is to be released, and the portion of the Mortgaged Property to be released in connection with any sale or related series of sales contains more than 10,000 acres in the aggregate or is valued in excess of $30,000,000 in the aggregate (based on the higher of book value or the gross sale price for such transaction or related series of transactions), Borrower shall have provided Agent with evidence satisfactory to Agent (in its sole discretion) that the remaining portion of such Mortgaged Property will comply with all material Requirements, and have all necessary access, utility easements and other easements, rights-of-way or similar rights so that the applicable Loan Party’s ability to use the remaining portion of the Mortgaged Property for its intended purpose will not be materially diminished or impaired.

§5.4         Additional Mineral Rights Leases.

Within forty-five (45) days after the end of each fiscal quarter of Forestar Group and at the time of the Credo Acquisition, Borrower will deliver to Agent a supplement to the list delivered to Agent pursuant to §6.30, setting forth the list of all new Mineral Rights Leases in effect as of the end of that quarter or at the time of the Credo Acquisition, as applicable, and any Mineral Rights Leases no longer in effect as of the end of that quarter or at the time of the Credo

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Acquisition, as applicable, whereupon such list shall automatically be deemed to have been modified accordingly, without the necessity of any approval of Lenders or Agent.  Without limiting the generality of §7.12 and in connection with each such supplemental list, Borrower and the other applicable Loan Parties agree to execute and deliver any and all Assignments of Mineral Rights Leases and/or supplements or amendments of existing Assignments of Mineral Rights Leases, covering such newly acquired Mineral Rights Leases, as Agent may reasonably request from time to time in order to further evidence or perfect Agent’s security interest in the Loan Parties’ right, title and interest in, to and under such additional Mineral Rights Leases; provided that no Assignments of Mineral Rights Leases shall be required in respect of Oil and Gas Properties subject to Security Deeds pursuant to §5.8.

§5.5         Addition of Negative Pledge Properties to the Borrowing Base Assets.

After the Closing Date, so long as no Default or Event of Default shall have occurred and be continuing, subject to the satisfaction by Borrower of the conditions set forth in this §5.5, Borrower shall have the right to request that a Negative Pledge Property be added to the Borrowing Base Assets.  Real Estate constituting Negative Pledge Property not initially included as a Borrowing Base Asset shall be added to the Borrowing Base Assets if, as and when the following conditions precedent shall have been satisfied.

(a)           such Real Estate satisfied all of the following conditions, unless otherwise waived in writing by the Required Lenders:

(i)            such Real Estate is owned in fee simple absolute by Borrower or a Guarantor, subject only to Permitted Liens;

(ii)           such Real Estate is not mortgaged to secure any Indebtedness (other than pursuant to any pre-existing mortgage, deed of trust or deed to secure debt which will be cancelled and satisfied of record in connection with the acquisition thereof by the applicable Loan Party); and

(iii)          such Real Estate constitutes either (A) Timberland, (B) High Value Timberland, (C) Raw Entitled Land, or (D) Entitled Land Under Development.

(b)           if Borrowing Base Assets are required to be included in the Mortgaged Properties pursuant to §5.1, such Real Estate shall become Mortgaged Property and the Mortgaged Property Documents for such Mortgaged Property shall have been delivered to Agent, granting Agent a first-priority lien on such Mortgaged Property, subject only to Permitted Liens.  Borrower shall have paid to Agent any mortgage, recording, intangible, documentary stamp or other similar taxes and charges which Agent reasonably determines to be payable as a result of the recording of such Mortgaged Properties are located, and deliver to Agent such affidavits or other information with Agent reasonably determines to be necessary in connection with such payment in order to insure that the Security Deeds on such Mortgaged Property located in such state secures Borrower’s obligation with respect to the Loans.

(c)           after giving effect to the inclusion of such Real Estate in the Borrowing Base Assets, each of the representations and warranties made by or on behalf of Borrower and the other Loan Parties contained in this Agreement, the other Loan Documents or in any document or

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instrument delivered pursuant to or in connection with this Agreement shall be true in all material respects both as of the date as of which it was made and shall also be true as of the time of the addition of such Real Estate as Borrowing Base Assets, with the same effect as if made at and as of that time (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall only be required to be true and correct in all material respects only as of such specified date); and

(d)           Borrower shall pay or reimburse Agent and Agent’s Special Counsel for all fees, expenses and costs in connection with the foregoing.

§5.6         Operating Account.

Borrower shall cause its main operating account (the “Operating Account”) to be subject to a Deposit Account Control Agreement reasonably acceptable to Agent among Agent, the applicable Loan Party and the subject banking institution.  Upon the occurrence and during the continuation of any Event of Default, Agent may direct the Deposit Account Bank where such Operating Account is held to sweep all funds on deposit in the Operating Account to an account designated by Agent on a daily basis pursuant to the terms of the applicable Deposit Account Control Agreement.  Borrower hereby grants to Agent a first-in-priority security interest in and to all funds now or at any time hereafter held on deposit in such Operating Account to secure the payment and performance of the Obligations, and Agent shall have all rights and remedies available to a secured party under the Uniform Commercial Code with respect to such funds.

§5.7         Advance Account.

On the Closing Date, Agent shall open an account at Agent’s Head Office in the name of Borrower to facilitate the funding of the Loans (the “Advance Account”).  The sole signatory on the Advance Account shall be Borrower.  The Advance Account shall be a non-interest bearing account.

(a)           Deposits of Loans to the Advance Account.  The proceeds of all Loans shall be deposited by Agent to the Advance Account, and all Loans shall accrue interest from the date of deposit in the Advance Account.  Provided no Event of Default has occurred and is continuing, Borrower shall have access to all funds contained in the Advance Account.  Upon withdrawal of Loan proceeds from the Advance Account, Borrower shall apply such Loan proceeds as permitted under §2.8.

(b)           Funds Following an Event of Default.  Upon the occurrence of an Event of Default, Agent may terminate Borrower’s rights to access or direct the application of funds on deposit in the Advance Account.  Thereafter, Agent shall either hold all or any portion of the funds on deposit as security for the Obligations or apply all or any portion of such funds in satisfaction of any part of the Obligations.

(c)           Security Interest.  Borrower hereby grants to Agent a perfected, first-in-priority security interest in and to all funds now or at any time hereafter held on deposit in the Advance Account to secure the payment and performance of the Obligations, subject to Permitted Liens described in section 8.2(i), and Agent shall have all rights and remedies available to a secured party under the Uniform Commercial Code with respect to such funds.

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§5.8         Credo Mortgaged Properties; Credo Reserves Component.

(a)           At the time of the consummation of the Credo Acquisition, the Credo Entities shall execute and deliver Security Deeds covering Oil and Gas Properties owned by the Credo Entities associated with not less than eighty percent (80%) of the PDP Reserves Value as determined by an Engineering Report dated January 9, 2012, prepared by Netherland, Sewell & Associates, Inc. and an Engineering Report dated December 15, 2011, prepared by LaRoche Petroleum Consultants, in each case delivered to Agent, or any roll forward or update to such reports delivered to Agent prior to the closing of the Credo Acquisition (collectively, the “Initial Engineering Report”).  Such Oil and Gas Properties shall constitute the initial Credo Mortgaged Properties, and Borrower shall provide Title Evidence with respect thereto not later than the consummation of the Credo Acquisition.  Thereafter, the Credo Entities shall execute and deliver such additional Security Deeds, accompanied by Title Evidence with respect to the Oil and Gas Properties covered thereby, as shall be necessary for the Credo Mortgaged Properties to constitute Oil and Gas Properties associated with not less than eighty percent (80%) of the PDP Reserves Value, as production, reserves and PDP Reserves Value change over time; it being understood that any additional Security Deeds and Title Evidence required in order to comply with the foregoing requirement shall not be required to be delivered until sixty (60) days (or such other period acceptable to Agent) after Borrower obtains knowledge that such requirement is not satisfied.

(b)           If Borrower does not comply with the requirement to provide additional Security Deeds and Title Evidence in accordance with the last sentence of §5.8(a) within the time period provided herein, such failure shall, in and of itself, not constitute a Default but the shortfall in the amount required to cause Borrower to be in compliance with such requirement, as reasonably determined by Agent, shall be deducted as a reserve from the Borrowing Base.

(c)           That portion of the Borrowing Base attributable to the Credo Reserves Component shall be redetermined from time to time based on the Engineering Report delivered pursuant to §7.4(k).  The Credo Reserves Component as so redetermined shall be included in the Credo Borrowing Base Value (and therefore in the Borrowing Base, in accordance with the definition of such term) until the effective date of the next redetermination of the Credo Reserves Component in accordance with this §5.8.

(d)           Borrower may, by written notice, request that the portion of the Borrowing Base attributable to the Credo Reserves Component be redetermined from time to time, but not more often than once between two consecutive scheduled deliveries of Engineering Reports, on the basis of an Engineering Report updating the most recently delivered Engineering Report.  The Credo Reserves Component as so redetermined shall be included in the Credo Borrowing Base Value (and therefore in the Borrowing Base) until the effective date of the next redetermination of the Credo Reserves Component in accordance with this §5.8.

§6.          REPRESENTATIONS AND WARRANTIES

Borrower and each of the other Loan Parties (as applicable) represents and warrants to Agent and Lenders as follows:

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§6.1         Corporate Authority, Etc.

(a)           Organization; Good Standing.  Borrower is a Delaware corporation duly organized pursuant to its certificate of incorporation filed with the Secretary of State of Delaware and is validly existing under the laws of the State of Delaware.  Each other Loan Party is a corporation, partnership or limited liability company duly organized, validly existing, and in good standing under the laws of its state of incorporation or formation.  Each Loan Party (i) has all requisite power to own its respective properties and conduct its respective business as now conducted and as presently contemplated, and (ii) is duly authorized to do business in each other jurisdiction where a failure to be so authorized in such other jurisdiction could reasonably be expected to have a materially adverse effect on the business, assets or financial condition of such Person.

(b)           Subsidiaries and Joint Ventures.  Except as disclosed to Agent in writing on or before the Closing Date, as of the Closing Date, Forestar Group does not have any Subsidiaries or Joint Ventures.  Such written disclosure shall set forth as of the Closing Date, for each Person set forth thereon, a complete and accurate statement of (a) the percentage ownership of each such Person by Forestar Group or any other Loan Party (as applicable), (b) the State or other jurisdiction of incorporation, organization or formation, as appropriate, of each such Person, and (c) each State in which each such Person is qualified to do business on the Closing Date.

(c)           Authorization.  The execution, delivery and performance of this Agreement and the other Loan Documents to which the Loan Parties, or any of them, are or are to become a party and the transactions contemplated hereby and thereby (i) are within the authority of such Person, (ii) have been duly authorized by all necessary proceedings on the part of such Person, (including any required stockholder, partner or member approval), (iii) do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which such Person is subject or any judgment, order, writ, injunction, license or permit applicable to such Person, except for such conflicts or breaches that, individually and the aggregate, could not reasonably be expected to have a Material Adverse Effect, (iv) do not and will not conflict with or constitute a default (whether with the passage of time or the giving of notice, or both) under any provision of the Organizational Documents of, or any mortgage, indenture, agreement, contract or other instrument binding upon, such Person or any of its properties or to which such Person is subject, except for such conflicts or defaults that, individually and in the aggregate, could not reasonably be expected to have a Material Adverse Effect and (v) do not and will not result in or require the imposition of any Lien or other encumbrance on any of the properties, assets or rights of such Person except for the Liens and security title granted by the Loan Documents.

(d)           Enforceability.  The execution and delivery of this Agreement and the other Loan Documents to which the Loan Parties, or any of them, are or are to become a party are valid and legally binding obligations of such Person enforceable in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.

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§6.2         Approvals.

The execution, delivery and performance by the Loan Parties, or any of them, of this Agreement and the other Loan Documents to which they are or are to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any Person or the authorization, consent or approval of, or any license or permit issued by, or any filing or registration with, or the giving of any notice to, any court, department, board, commission or other governmental agency or authority, in each case other than those already obtained and the filing of the Security Documents in the appropriate records office with respect thereto, or where failure to obtain or make such authorizations, consents, approvals, licenses, permits or registrations or to give notice that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

§6.3         Title to Properties; Leases.

The Loan Parties and their Subsidiaries own all of their respective assets reflected on the consolidated balance sheet of Forestar Group (including, without limitation, the Mortgaged Properties and the Negative Pledge Properties) most recently delivered to the Agent, subject to no rights of others, including any mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens.  Without limiting the foregoing, the Loan Parties and their Subsidiaries have good and marketable fee simple or leasehold title to all real and personal property reasonably necessary for the operation of its business in whole, free from all liens or encumbrances of any nature whatsoever, except for Permitted Liens.  Notwithstanding the foregoing, this §6.3 shall not apply to the Oil and Gas Properties owned by the Credo Entities as representations and warranties related thereto shall be subject to §6.13.

§6.4         Financial Statements.

Borrower has furnished or caused to be furnished to each of Lenders:  (a) the audited financial statements filed by Forestar Group with the Securities and Exchange Commission for the fiscal year ended December 31, 2011, and (b) projected profit and loss statements and cash flow statements of Forestar Group and its Subsidiaries, prepared on a quarterly basis for the next two (2) calendar years.  Such audited financial statements described in clause (a) have been prepared in accordance with GAAP and fairly present in all material respects the financial condition of Borrower and its Subsidiaries as of such date and the results of the operations of Borrower and its Subsidiaries, for such period.  There are no liabilities, contingent or otherwise, of Borrower or any Subsidiary of Borrower involving material amounts not disclosed in said financial statements and the related notes thereto.  All projections and estimates have been prepared in good faith on the basis of reasonable assumptions and represent the best estimate of future performance by the party supplying the same, it being agreed that projections are subject to uncertainties and contingencies and that no assurance can be given that any projection will be realized.

§6.5         No Material Changes.

As of the Closing Date there has occurred no materially adverse change in the financial condition or business of Forestar Group and any of its Subsidiaries, taken as a whole, as shown on or reflected in the balance sheet of Forestar Group or its Subsidiaries as of June 30, 2012, or its

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statement of income or cash flows for the fiscal quarter then ended, other than (i) changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business or financial condition of Borrower and its Subsidiaries, and (ii) changes resulting from the Credo Acquisition.

§6.6         Franchises, Patents, Copyrights, Etc.

Each Loan Party and its Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade names, service marks, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of their business substantially as now conducted without known conflict with any rights of others except where the failure to so possess could not, individually and in the aggregate, reasonably be expected to have a Material Adverse Effect.  The Mortgaged Properties and the Negative Pledge Properties are not owned or operated under or by reference to any registered or protected trademark, tradename, servicemark or logo.

§6.7         Litigation.

As of the Closing Date, except as described on Schedule 6.7 hereto or as disclosed in Forestar Group’s Annual, Quarterly or Current Reports, each as filed with the Securities and Exchange Commission prior to August 10, 2012, there are no actions, suits, proceedings or investigations of any kind pending or to the Borrower’s Knowledge, threatened, against any Loan Party or their Subsidiaries or any of the Mortgaged Properties or the Negative Pledge Properties before any court, tribunal, administrative agency or board, mediator or arbitrator that, if adversely determined, individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.  As of the Closing Date, there are no judgments outstanding against or affecting any Loan Party, any of their respective Subsidiaries or any of the Collateral.

§6.8         No Materially Adverse Contracts, Etc.

No Loan Party or any of their Subsidiaries is a party to any mortgage, indenture, or other material contract or agreement or other instrument that has had or is reasonably expected, in the judgment of the members, partners or officers of such Person, to have a Material Adverse Effect.

§6.9         Compliance with Organizational Documents, Other Instruments, Laws, Etc.

No Loan Party or any of its respective Subsidiaries is in violation of any provision of its Organizational Documents, or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could reasonably be expected to result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of such Person.

§6.10       Tax Status.

Each Loan Party and its Subsidiaries (a) has made or filed all federal and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject, except to the extent such Person has obtained a valid extension of the deadline to file such return, (b) has paid all material taxes and other material governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in

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good faith and by appropriate proceedings, and (c) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply, if applicable or required.  There are no unpaid taxes or assessments in any material amount claimed to be due by the taxing authority of any jurisdiction or pursuant to any private agreement except for those that are being contested as permitted by this Agreement.  The charges, accruals and reserves on the books of the Loan Parties and their Subsidiaries in respect of taxes are, in the reasonable good faith judgment of the Loan Parties, adequate.  As of the Closing Date, except as set forth on Schedule 6.10 hereto, no Loan Party or any of their Subsidiaries has been audited, or has knowledge of any pending audit, by the Internal Revenue Service or any other taxing authority.

§6.11       No Event of Default.

No Default or Event of Default has occurred and is continuing.

§6.12       Investment Company Act.

No Loan Party or any of their Subsidiaries is an “investment company”, or an “affiliated company” or a “principal underwriter” of an “investment company”, as such terms are defined in the Investment Company Act of 1940.

§6.13       Credo Oil and Gas Properties.

The Loan Parties make the following representations and warranties, effective upon the consummation of the Credo Acquisition.  Except to the extent such non-compliance or inaccuracy in this §6.13 could not reasonably be expected to have a Material Adverse Effect:

(a)           Ownership; Obligations.  Except as set forth on Schedule 6.13(a), the applicable Credo Entity has good and defensible title to the working interests and revenue interests in production attributable to the wells and units comprising the Credo Reserve Properties evaluated in the Initial Engineering Report free and clear of all Liens, except for Permitted Liens.  The ownership of the Credo Reserve Properties does not in the aggregate in any material respect obligate the Loan Parties to bear the costs and expenses relating to the maintenance, development and operations of the Credo Reserve Properties in an amount materially in excess of the working interest set forth in the most recent Engineering Report furnished to Agent.  Upon delivery of each Engineering Report furnished to Agent pursuant to §7.4(k), the statements made in the preceding sentences of this §6.13(a) shall be true with respect to the Credo Reserve Properties evaluated in such Engineering Report.

(b)           Leases and Contracts; Performance of Obligations.  The Mineral Rights Leases forming a part of the Credo Reserve Properties covered by the Initial Engineering Report and each subsequent Engineering Report are in full force and effect, and all rents, royalties and other payments due and payable under such Mineral Rights Leases or otherwise attendant to the ownership or operation of the Credo Reserve Properties, have been properly and timely paid, except to the extent any such payment is subject to a good faith dispute.  No Credo Entity is in default with respect to its obligations (and no Credo Entity has knowledge of any default by any third party with respect to such third party’s obligations) under any such Mineral Rights Leases, or otherwise attendant to the ownership or operation of any part of the Credo Reserve Properties,

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where such default could materially and adversely affect the ownership or operation of the Credo Reserve Properties.

(c)           Sale of Production.  (i) All proceeds from the sale of the interests of the Credo Entities in oil, gas and other hydrocarbons from the Credo Reserve Properties are currently being paid in full to the applicable Credo Entity by the purchaser or remitter thereof on a timely basis and at prices and terms generally available at the time such prices and terms were negotiated for oil and gas production from producing areas situated near the Credo Reserve Properties, and none of such proceeds are currently being held in suspense by such purchaser or any other party; (ii)  neither the Credo Entities, nor their  predecessors in title, have entered into or are subject to any agreement or arrangement (including without limitation, “take or pay” or similar arrangements) nor are the Credo Reserve Properties subject to any such agreement or arrangement, to deliver oil, gas or other hydrocarbons produced or to be produced from the Credo Reserve Properties at some future time without then or thereafter receiving full payment therefor; (iii)  none of the Credo Reserve Properties  is subject to any contractual or other arrangement whereby payment for production from such Credo Reserve Properties is to be deferred for a substantial period after the month in which such production is delivered (that is, in the case of oil, not in excess of 60 days, and in the case of gas, not in excess of 90 days);  (iv)  none of the Credo Reserve Properties is subject to any contractual or other arrangement for the sale of crude oil that cannot be canceled on 180 days’ or less notice; and no material portion of the Credo Reserve Properties is subject to a gas sales contract that contains terms that are not customary in the industry;  (v)  none of the Credo Reserve Properties is subject at the present time to any regulatory refund obligation and, to the Loan Parties’ knowledge, no facts exist that might cause the same to be imposed; and (vi)  none of the Credo Reserve Properties is subject to a gas balancing arrangement under which an imbalance exists with respect to which imbalance the Credo Entities or the Credo Reserve Properties is in an overproduced status and is required to (a) permit one or more third parties to take a portion of the production attributable to such Credo Reserve Properties without payment (or without full payment) therefor or (b) make payment in cash, in order to correct such imbalance.

(d)           Operation of the Credo Oil and Gas Properties.  The Oil and Gas Properties owned by the Credo Entities (and all properties unitized therewith) are being (and, to the extent the same could adversely affect the ownership or operation of such Oil and Gas Properties after the date hereof, have in the past been) maintained, operated and developed in a good and workmanlike manner, in accordance with prudent industry standards and in conformity with all applicable laws and in conformity with all Mineral Rights Leases forming a part of such Oil and Gas Property and in conformity with the Permitted Liens.  No Credo Reserve Property is subject to having allowable production after the date hereof reduced below the full and regular allowable (including the maximum permissible tolerance) because of any overproduction (whether or not the same was permissible at the time) prior to the date hereof and (ii) none of the wells located on the Credo Reserve Properties (or properties pooled, communitized or unitized therewith) are deviated from the vertical more than the maximum permitted by applicable laws, regulations, rules and orders, and such wells are bottomed under and producing from, with the well bores wholly within, the Credo Reserve Properties (or, in the case of wells located on properties pooled, communitized or unitized therewith, such pooled, communitized or unitized properties).  There are no wells on the Oil and Gas Properties owned by the Credo Entities or on lands pooled, communitized or unitized therewith, that (i) the Credo Entities are obligated by Requirements to

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plug and abandon other than those subject to exceptions to a requirement to plug and abandon issued by any Governmental Authority having jurisdiction over such Oil and Gas Properties; or (ii) have been plugged and abandoned or reclaimed other than in accordance with applicable Requirements.

§6.14       Setoff, Etc.

Borrower and Guarantors are the owners of the Collateral free from any lien, security interest, encumbrance or other claim or demand, except those encumbrances permitted in the Security Documents or Permitted Liens.

§6.15       Certain Transactions.

Except as set forth in Schedule 6.15 hereto or as otherwise permitted pursuant to §8.14, none of the partners, members, officers, trustees, directors, or employees of any Loan Party or any of their respective wholly-owned Subsidiaries is a party to any transaction with any of their Affiliates or their members, employees, officers, trustees and directors (other than employment and severance agreements relating to services as partners, members, employees, officers, trustees and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any Affiliate, partner, member, officer, trustee, director or such employee or, to Borrower’s Knowledge, any limited liability company, corporation, partnership, trust or other entity in which any Affiliate, partner, member, officer, trustee, director, or any such employee has a substantial interest or is an officer, director, trustee, partner or member.

§6.16       Employee Benefit Plans.

Borrower and each ERISA Affiliate has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Guaranteed Pension Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Employee Benefit Plan.  Neither Borrower nor any ERISA Affiliate has (a) sought a waiver of the minimum funding standard under Section 412 of the Code in respect of any Employee Benefit Plan, (b) failed to make any contribution or payment to any Guaranteed Pension Plan, or made any amendment to any Guaranteed Pension Plan, which has resulted in the imposition of a Lien or the posting of a bond or other security under ERISA or the Code, or (c) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.  None of the assets of Borrower constitute a Plan Asset.

§6.17       Regulations T, U and X.

No portion of any Loan is to be used for the purpose of purchasing or carrying any “margin security” or “margin stock” as such terms are used in Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 220, 221 and 224.  The Loan Parties and their Subsidiaries are not engaged, and will not engage, principally or as one of their important activities in the business of extending credit for the purpose of purchasing or carrying any “margin security” or “margin stock” as such terms are used in Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 220, 221 and 224.

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§6.18       Environmental Compliance.

The Loan Parties have delivered to Agent true and complete copies of all written environmental site assessment reports in the possession of any of the Loan Parties with respect to the Mortgaged Properties (collectively, the “Environmental Reports”) and makes the following representations and warranties:

(a)           Except as disclosed in Forestar Group’s Annual, Quarterly or Current Reports, each as filed with the Securities and Exchange Commission prior to August 10, 2012, to Borrower’s Knowledge, no Loan Party or any of their respective Subsidiaries, is in material violation, or alleged material violation at the Mortgaged Properties and the Negative Pledge Properties, of any applicable judgment, decree, code, order, law, rule of common law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any applicable state or local statute, regulation, ordinance, order or decree relating to the environment (hereinafter “Environmental Laws”).  To Borrower’s Knowledge, any violation reflected in the Environmental Reports involving any of the Real Estate would not reasonably be expected to have a Material Adverse Effect.

(b)           Except as disclosed in Forestar Group’s Annual, Quarterly or Current Reports, each as filed with the Securities and Exchange Commission prior to August 10, 2012, to Borrower’s Knowledge, no Loan Party or any of their respective Subsidiaries has received written notice from any third party including, without limitation, any Governmental Authority, (i) that it has been identified by the United States Environmental Protection Agency (“EPA”) as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste, as defined by 42 U.S.C. §9601(5), any hazardous substances as defined by 42 U.S.C. §9601(14), any pollutant or contaminant as defined by 42 U.S.C. §9601(33) or any toxic substances or hazardous materials or other chemicals or substances regulated by any Environmental Laws (“Hazardous Substances”) which it has generated, transported or disposed of have been found at any site at, on or under the Real Estate for which a federal, state or local agency or other third party has conducted or has ordered that any Loan Party or their respective Subsidiaries conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party’s incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances.

(c)           (i) To Borrower’s Knowledge, except as disclosed in any Environmental Reports provided to Agent on or before the date hereof and except as disclosed in Forestar Group’s Annual, Quarterly or Current Reports, each as filed with the Securities and Exchange Commission prior to August 10, 2012, or with respect to Real Estate which becomes a Mortgaged Property after the date hereof, the Environmental Reports with respect thereto provided to Agent, (1) no portion of the Mortgaged Property or Negative Pledge Property has been used by Borrower

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as a landfill or for dumping or for the handling, processing, storage or disposal of Hazardous Substances except in material compliance with applicable Environmental Laws, and (2) no underground tank for Hazardous Substances has been operated by Borrower on the Mortgaged Property or Negative Pledge Property except in material compliance with applicable Environmental Laws; (ii) in the course of any activities conducted by any Loan Party, or any of its respective wholly-owned Subsidiaries, no Hazardous Substances have been generated or are being used on any Mortgaged Property or Negative Pledge Property, except in the ordinary course of business and in material compliance with applicable Environmental Laws; (iii) to Borrower’s Knowledge, there has been no past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping (a “Release”) of Hazardous Substances on, upon, into or from any Mortgaged Property or Negative Pledge Property, which Release could reasonably be expected to have a Material Adverse Effect; (iv) to Borrower’s Knowledge, there have been no Releases on, upon, from or into any real property in the vicinity of any Mortgaged Property or Negative Pledge Property, which, through soil or groundwater contamination, may have come to be located on such real property, and which could reasonably be expected to have a Material Adverse Effect; and (v) to Borrower’s Knowledge, any Hazardous Substances that have been generated on any Mortgaged Property or Negative Pledge Property by Borrower have been transported off-site, treated and disposed of in material compliance with applicable Environmental Laws.

(d)           To Borrower’s Knowledge and except as disclosed in Forestar Group’s Annual, Quarterly or Current Reports, each as filed with the Securities and Exchange Commission prior to August 10, 2012, no Loan Party or any of its wholly-owned Subsidiaries or any Mortgaged Property or Negative Pledge Property is subject to any applicable Environmental Law requiring the giving of notice to any governmental agency or the recording or delivery to other Persons of an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby, or as a condition to the recording of the Security Deeds or to the effectiveness of any other transactions contemplated hereby.

(e)           This §6.18 shall set forth the sole and exclusive representations and warranties made by the Borrower with regard to Environmental Laws, Hazardous Substances, or any other environmental, health or safety matter.

§6.19       Loan Documents.

All of the representations and warranties of the Loan Parties made in this Agreement and the other Loan Documents or any document or instrument delivered by any Loan Party to Agent or Lenders pursuant to or in connection with any of such Loan Documents are true and correct in all material respects, and no Loan Party has failed to disclose such information as is necessary to make such representations and warranties not misleading.  The information, reports, financial statements, exhibits and schedules (excluding projections which have been proposed in good faith) furnished by the Loan Parties to Agent and Lenders in connection with the negotiation, preparation or delivery of this Agreement and the other Loan Documents or included herein or therein or delivered pursuant hereto or thereto, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein not misleading. All written information furnished after the date hereof by the Loan Parties to Agent or Lenders in connection with this Agreement and the other Loan Documents and the transactions

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contemplated hereby and thereby will be true, correct and accurate in every material respect and shall not omit to state any material fact necessary to make the statements herein or therein not misleading, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified; it being recognized by Agent and Lenders that any projections and forecasts provided by Loan Parties are subject to significant uncertainties and contingencies, many of which are beyond the control of the Loan Parties.

§6.20       Mortgaged Properties and Negative Pledge Properties.

The Loan Parties make the following representations and warranties concerning each Mortgaged Property (other than any Mortgaged Property that is an Oil and Gas Property) and each Negative Pledge Property:

(a)           No Required Mortgaged Property and Negative Pledge Property Consents, Permits, Etc.  Neither Borrower nor any other Loan Party has received any written notice of, has Knowledge of, any approvals, consents, licenses, permits, utility installations and connections (including, without limitation, drainage facilities), curb cuts and street openings, required by applicable laws, rules, ordinances or regulations or any agreement affecting the Mortgaged Property and the Negative Pledge Property for the maintenance, operation, servicing and use of the Mortgaged Property and the Negative Pledge Property for its current use (hereinafter referred to as the “Project Approvals”) which have not been granted, effected, or performed and completed (as the case may be), or any fees or charges therefor which have not been fully paid, or which are no longer in full force and effect.  No Project Approvals (including, without limitation, any railway siding agreements) will terminate, or become void or voidable or terminable on any foreclosure sale of the Mortgaged Property and the Negative Pledge Property pursuant to the applicable Security Deed.  There are no outstanding suits, orders, decrees or judgments relating to building use and occupancy, fire, health, sanitation or other violations affecting, against, or with respect to, the Mortgaged Property and the Negative Pledge Property or any part thereof, which, if adversely determined, either singly or in the aggregate could reasonably be expected to have a Material Adverse Effect.

(b)           No Violations.  Neither Borrower nor any other Loan Party has received notice of, or has any Knowledge of, any violation of any applicable Requirements, Project Approvals or any other restrictions or agreements by which any Loan Party or the Mortgaged Property or Negative Pledge Property is bound which violation, either singly or in the aggregate with other such violations, could reasonably be expected to have a Material Adverse Effect.

(c)           Insurance.  Neither Borrower nor any other Loan Party has received any written notice from any insurer or its agent requiring performance of any work with respect to the Mortgaged Property and the Negative Pledge Property or canceling or threatening to cancel any policy of insurance, and the Mortgaged Property and the Negative Pledge Property complies in all material respects with the requirements of all of Borrower’s insurance carriers.

(d)           Real Property and other Taxes; Special Assessments.  There are no unpaid or outstanding real estate or other taxes or assessments on or against the Mortgaged Property and the Negative Pledge Property or any part thereof, including, without limitation, any payments in lieu of taxes, which are payable by Borrower, any other Loan Party or any of their respective Subsidiaries (except only real estate or other taxes or assessments that are not yet delinquent or

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subject to any penalties, interest or other late charges, or are being contested as permitted under this Agreement, or which have been adequately reserved against in accordance with GAAP).  There are no unpaid or outstanding gross receipts, rent or sales taxes payable by Borrower, any other Loan Party or any of their respective Subsidiaries with respect to the use and operation of the Mortgaged Property and the Negative Pledge Property which are due and payable.  No abatement proceedings are pending with reference to any real estate taxes or private assessments assessed against the Mortgaged Property and the Negative Pledge Property.  There are no betterment assessments or other special assessments presently pending with respect to any portion of the Mortgaged Property and the Negative Pledge Property, and neither Borrower nor any other Loan Party has received any written notice of any such special assessment being contemplated.

(e)           Eminent Domain; Casualty.  As of the Closing Date, there are no pending eminent domain proceedings against the Mortgaged Property or the Negative Pledge Property or any part thereof, and, to Borrower’s Knowledge, no such proceedings are presently threatened or contemplated by any taking authority.  Neither the Mortgaged Property, the Negative Pledge Property nor any part thereof is, as of the Closing Date, materially damaged or injured as a result of any fire, explosion, accident, flood or other casualty.

(f)            Unresolved Real Estate Disputes.  Except as may be disclosed to Agent or on Schedule 6.20(f), there are no unresolved suits, actions, demands, claims or disputes relating to access to any material portion of the Real Estate that could reasonably be expected to have a material adverse effect on the intended use of such Real Estate by the Loan Parties or their respective Subsidiaries, or otherwise have, either singly or in the aggregate, a Material Adverse Effect.

(g)           Material Real Property Agreements; No Options.  Except as set forth in Schedule 6.20(g), there are no material agreements pertaining to the management or operation of the Mortgaged Property or the Negative Pledge Property other than as described in this Agreement; and no person or entity has any right of first refusal, right of first offer or other option to acquire the Mortgaged Property or any portion thereof or interest therein.  Each reaffirmation of the representation and warranty contained in this sub-paragraph (g) shall take into account the most recent update of Schedule 6.20(g) delivered to Agent pursuant to §7.4(i) and shall be deemed reaffirmed as of the most recent date any update to said Schedule 6.20(g) was required to have been delivered to Agent pursuant to §7.4(i), whether or not any such update is so delivered.

§6.21       Representations and Warranties Regarding Credo Acquisition.

The following representations and warranties shall be effective upon the consummation of the Credo Acquisition:

(a)           Merger Documents.  The Loan Parties have delivered to Agent a complete and correct copy of the Credo Merger Agreement, including all schedules and exhibits thereto, and as to which any such exhibits or other material documents, instruments, and agreements are required to be executed and delivered by any Person in connection with the consummation of the Credo Acquisition, the Loan Parties have delivered to Agent complete and correct copies of such executed exhibits, documents, instruments and agreements (collectively, the “Merger Documents”).  Such Merger Documents set forth the material agreements and understandings of the parties thereto relating to the subject matter thereof, and there are no other material

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agreements, arrangements or understandings, written or oral, relating to the matters covered thereby.

(b)           Consummation of Merger.  The transactions contemplated by the Merger Documents to be effected on the closing under the Credo Merger Agreement have become effective in all material respects in accordance with terms of the Merger Documents and applicable law.  At the time of consummation thereof, all material consents and approvals of, and material filings and registrations with, and all other material actions in respect of, all Governmental Authorities required in order to consummate the transactions in accordance with the terms of the Merger Documents and all applicable laws shall have been obtained, given, filed or taken and are in full force and effect (or effective judicial relief with respect thereto has been obtained).  Additionally, at the time of consummation thereof, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon the consummation of the transactions contemplated by the Merger Documents.

§6.22       Brokers.

Borrower has not engaged or otherwise dealt with any broker, finder or similar entity in connection with this Agreement or the Loans contemplated hereunder.

§6.23       Ownership.

As of the Closing Date, the Equity Interests owned by the Loan Parties in Borrower, in each other Loan Party and in each other Person in which they own any Equity Interests are set forth in a written disclosure delivered to Agent on or before the Closing Date.  Except for Equity Interests granted pursuant to the Equity Plan or as set forth on such written disclosure to Agent, as of the Closing Date there are no (a) outstanding rights to purchase, options, warrants or similar rights pursuant to which Forestar Group, Borrower or any of their respective Subsidiaries may be required to issue, sell, repurchase or redeem any of its Equity Interests or (b) voting rights agreements with respect to such Equity Interests.  The Equity Interests so specified on Schedule 6.23 are fully paid and non-assessable and are owned by the applicable Person, directly or indirectly, free and clear of all Liens (other than Permitted Liens).

§6.24       OFAC.

No Loan Party or any of their respective Subsidiaries or any Joint Venture is (or will be) a person with whom Agent is restricted from doing business under OFAC (including, those Persons named on OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including, the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and shall not engage in any dealings or transactions or otherwise be associated with such persons.  In addition, the Loan Parties hereby agree to provide Agent with any additional information that Agent deems necessary from time to time in order to ensure compliance with all applicable laws concerning money laundering and similar activities.

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§6.25       No Fraudulent Intent.

Neither the execution and delivery of this Agreement or any of the other Loan Documents nor the performance of any actions required hereunder or thereunder is being undertaken by Borrower or any other Loan Party with or as a result of any actual intent by any of such Persons to hinder, delay or defraud any entity to which any of such Persons is now or will hereafter become indebted.

§6.26       Transaction in Best Interests of  Loan Parties; Consideration.

The transactions evidenced by this Agreement and the other Loan Documents are in the best interests of the Loan Parties.  The direct and indirect benefits to inure to the Loan Parties pursuant to this Agreement and the other Loan Documents constitute substantially more than “reasonably equivalent value” (as such term is used in Section 548 of the Bankruptcy Code) and “valuable consideration,” “fair value,” and “fair consideration,” (as such terms are used in any applicable state fraudulent conveyance law), in exchange for the Obligations of the Loan Parties pursuant to this Agreement and the other Loan Documents.

§6.27       Solvency.

As of the Closing Date and after giving affect to the transactions contemplated by this Agreement and the other Loan Documents and the Merger Documents (if closing under the Merger Agreement occurs as of the Closing Date), including all of the Loans made or to be made, and Letters of Credit issued or to be issued, hereunder, with respect to the Loan Parties taken as a whole, (a) the fair value of their assets on a going concern basis is greater than the amount of their liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated, (b) the present fair saleable value of their assets is not less than the amount that will be required to pay the probable liability on their debts as they become absolute and matured, (c) they will be able to pay their debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business (taking into account all available financing options), (d) they do not intend to, and do not believe that they will, incur debts or liabilities beyond their ability to pay as such debts and liabilities mature and (e) they are not engaged in business or a transaction, and are not about to engage in business or a transaction, for which their property would constitute unreasonably small capital.

§6.28       No Bankruptcy Filing.

No Loan Party is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of its assets or property, and to Borrower’s Knowledge, no Person is contemplating the filing of any such petition against any Loan Party.

§6.29       Other Debt.

Neither any Loan Party nor any of their respective Subsidiaries nor any Joint Venture are in default (after giving effect to applicable grace periods) in the payment of any Indebtedness or the terms of any agreement, mortgage, deed of trust, security agreement, financing agreement, indenture or other lease to which any of them is a party which default, either singly or in the

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aggregate, could reasonably be expected to have a Material Adverse Effect.  Neither any Loan Party nor any of their respective Subsidiaries are a party to or bound by any agreement, instrument or indenture that may require the subordination in right or time of payment of any of the Obligations to any other Indebtedness or obligation of Borrower, any other Loan Party or any of their respective Subsidiaries.  Prior to the Closing Date Borrower has provided to Agent a written disclosure containing a description of the Permitted Existing Indebtedness, which Agent has approved.  Nothing in this §6.29 shall alter or affect the provisions of §8.1.

§6.30       Mineral Rights Leases.

On or before the Closing Date, Borrower has delivered to Agent a true and correct list of all Mineral Rights Leases of the Loan Parties as of August 31, 2012; such list, as supplemented from time to time pursuant to §5.4, will be a true correct list of all Mineral Rights Leases of the Loan Parties as of the effective date of the last of such supplements.

§7.          AFFIRMATIVE COVENANTS OF LOAN PARTIES

Borrower and the other Loan Parties (as applicable) covenant and agree that, so long as any Loan, Note, Letter of Credit or other Obligation (other than contingent indemnification obligations for which no claim has been asserted) is Outstanding or any Lender has any obligation to make any Loans or Agent has any obligation to issue any Letter of Credit:

§7.1         Punctual Payment.

Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans and all interest and fees provided for in this Agreement, all in accordance with the terms of this Agreement and the Notes as well as all other sums owing pursuant to the Loan Documents.

§7.2         Maintenance of Office.

Each Loan Party will maintain its chief executive office at 6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746, or at such other place in the United States of America as Borrower or Forestar Group shall designate upon at least thirty (30) days (or such lesser number of days as is acceptable to Agent) prior written notice to Agent, where notices, presentations and demands to or upon the Loan Parties in respect of the Loan Documents may be given or made.  The Loan Parties agree that, in the event of any such change, they will execute and deliver such amendments and other documents as Agent may request to maintain Agent’s perfected Lien on the Collateral.

§7.3         Records and Accounts.

Each Loan Party will, and will cause its Subsidiaries to, keep true and accurate records and books of account in which full, true and correct entries will be made in accordance with GAAP, as revised from time to time.  No Loan Party shall, without the prior written consent of Agent, make, or permit any of its Subsidiaries to make, any material change to the accounting procedures used by them in preparing the financial statements and other information described in §6.4 except as required by law or as required by GAAP.  No Loan Party shall change, or permit any of its Subsidiaries to change, its fiscal year without the prior written consent of Agent.

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§7.4         Financial Statements, Certificates and Information.

Forestar Group and Borrower will deliver to Agent:

(a)           not later than one hundred (100) days after the end of each fiscal year of Forestar Group, the audited Consolidated  balance sheet of Forestar Group and its Subsidiaries as of the end of such year, and the related statements of income, changes in capital and cash flows for such year, each setting forth in comparative form the figures for the previous fiscal year and all such statements to be in reasonable detail, prepared in accordance with GAAP, and accompanied by an auditor’s report prepared without qualification by a nationally recognized accounting firm reasonably acceptable to Agent, and any other information Agent may require to complete a financial analysis of Forestar Group and its Subsidiaries; provided that so long as Forestar Group is required to file its audited financial statements with the Securities and Exchange Commission, the delivery of such filed financial statements shall satisfy the foregoing requirements of this clause (a);

(b)           not later than forty-five (45) days after the end of each fiscal quarter of Forestar Group and its Subsidiaries (excluding the fourth fiscal quarter in each year), copies of the balance sheet of Forestar Group and its Subsidiaries as of the end of such quarter, and the related statements of income, changes in capital and cash flows for the portion of Forestar Group’s fiscal year then elapsed, all in reasonable detail and prepared on a Consolidated basis in accordance with GAAP (other than the inclusion of footnotes); provided that so long as Forestar Group is required to file its quarterly financial statements with the Securities and Exchange Commission, the delivery of such filed financial statements shall satisfy the foregoing requirements; together with a certification by the Principal Financial Officer of Forestar Group that the information contained in such financial statements fairly presents, in all material respects, the financial position of Forestar Group and its Subsidiaries on the date thereof (subject to year-end adjustments);

(c)           simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) of this §7.4, a statement (a “Compliance Certificate”) certified by the Principal Financial Officer of Forestar Group in the form of Exhibit B hereto (or in such other form as Agent may approve from time to time) setting forth in reasonable detail computations evidencing compliance with the covenants contained in §8.3(i), §8.7 and §9 and the other covenants described therein, and (if applicable) reconciliations to reflect changes in GAAP since the Balance Sheet Date;

(d)           concurrently with the delivery of the financial statements described in subsections (a) and (b) of this §7.4, a certificate signed by the Principal Financial Officer of Forestar Group to the effect that, having read this Agreement, and based upon an examination which such officer deems sufficient to enable such officer to make an informed statement, such officer is not aware of any Default or Event of Default, or if such Default or Event of Default has occurred, specifying the facts with respect thereto;

(e)           within twenty (20) days after the end of each calendar month, a certificate in the form of Exhibit E attached hereto (a “Borrowing Base Certificate”), certified by a Principal Financial Officer of Forestar Group, pursuant to which Forestar Group shall calculate the amount of the Borrowing Base as of the end of the immediately preceding calendar month; provided that

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Borrower may, at its option, deliver one additional Borrowing Base Certificate each month in connection with a redesignation or addition of Borrowing Base Assets as contemplated hereunder.  All income, expense and value associated with Mortgaged Property or Negative Pledge Property or other assets disposed of during such calendar month will be eliminated from calculations, where applicable;

(f)            simultaneously with the delivery of the Compliance Certificate referred to in subsection (c) of this §7.4, a statement, certified as true and correct by the Principal Financial Officer of Forestar Group, of all Indebtedness of Forestar Group and its Subsidiaries as the end of such fiscal quarter, including, with respect to each such Indebtedness, the original principal amount thereof and outstanding principal amount as of the end of such fiscal quarter, the amount remaining undisbursed, if any, the maturity date and any extension options, the required monthly payments of principal and interest, the identity of the lender, the interest rate, the collateral for such Indebtedness, whether such Indebtedness is recourse or Non-recourse Indebtedness, and whether any default or event of default exists with respect to such Indebtedness;

(g)           if requested by Agent, copies of all annual federal income tax returns and amendments thereto of Forestar Group and its Subsidiaries;

(h)           not later than March 1 of each year during the term of the Loan, the Budget for Forestar Group and its Subsidiaries for such calendar year.  Such Budget shall be in form reasonably satisfactory to Agent and shall be submitted to Agent together with a narrative description of the assumptions upon which the Budget is based and such other information as Agent may request;

(i)            not later than March 1 of each year during the term of the Loan, projected statements of profit and loss and cash flows for Forestar Group and its Subsidiaries, prepared on a quarterly basis, for the current calendar year and next succeeding calendar year.  Such projections shall be in form reasonably satisfactory to Agent and shall be submitted to Agent together with a narrative description of the assumptions upon which such projections are based and such other information as Agent may request;

(j)            simultaneously with the delivery of the Compliance Certificate referred to in subsection (c) of this §7.4, an updated Schedule 6.20(g) reflecting the addition or the expiration or termination of any material agreements described in §6.20(g) or a certification from Borrower that there have been no changes in that Schedule;

(k)           if the Credo Acquisition has occurred, by March 31 of each year, commencing in 2013, an Engineering Report as of the immediately preceding December 31 prepared by Netherland, Sewell & Associates, Inc., LaRoche Petroleum Consultants or another independent petroleum engineering firm of recognized standing chosen by Borrower and reasonably acceptable to Agent, concerning the Oil and Gas Properties owned by the Credo Entities which have attributable to them proved oil or gas reserves, which report shall contain sufficient information to enable Forestar Group to meet the reporting requirements concerning oil and gas reserves contained in Regulations S-K and S-X promulgated by the SEC (including the definitions and guidelines as set forth therein and including applicable FASB accounting standards, except as may be noted in such report).  This report shall be prepared in accordance with applicable petroleum resources management system guidelines approved by the Society of