Exhibit 10.1
Execution Version
AMENDED AND RESTATED REVOLVING AND TERM CREDIT AGREEMENT
DATED AS OF AUGUST 6, 2010
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

 

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TABLE OF CONTENTS

              Page
§1. DEFINITIONS AND RULES OF INTERPRETATION
    2  
 
       
§1.1 Definitions
    2  
§1.2 Rules of Interpretation
    28  
 
       
§2. LOANS AND LETTERS OF CREDIT
    29  
 
       
§2.1 Commitment to Lend
    29  
§2.2 Notes
    32  
§2.3 Interest on Loans
    33  
§2.4 Unused Facility Fee
    33  
§2.5 Reduction and Termination of Revolving Commitment
    33  
§2.6 Requests for Loans
    34  
§2.7 Funds for Loans
    34  
§2.8 Use of Proceeds
    35  
§2.9 Increase in Commitments
    35  
§2.10 Letters of Credit
    37  
 
       
§3. REPAYMENT AND PREPAYMENT OF THE LOANS
    40  
 
       
§3.1 Stated Maturity; Extension Option
    40  
§3.2 Mandatory Prepayments
    41  
§3.3 Optional Prepayments
    41  
§3.4 Partial Prepayments
    42  
§3.5 Effect of Prepayments
    42  
 
       
§4. CERTAIN GENERAL PROVISIONS
    42  
 
       
§4.1 Conversion Options; Number of LIBOR Contracts
    42  
§4.2 Certain Fees
    43  
§4.3 Letter of Credit Fees
    43  
§4.4 Funds for Payments
    44  
§4.5 Computations
    45  
§4.6 Inability to Determine LIBOR Rate
    45  
§4.7 Illegality
    45  
§4.8 Additional Interest
    46  
§4.9 Additional Costs, Etc.
    46  
§4.10 Capital Adequacy
    47  
§4.11 Indemnity by Borrower
    48  
§4.12 Interest on Overdue Amounts; Late Charge
    48  
§4.13 Certificate
    48  
§4.14 Limitation on Interest
    49  
 
       
§5. COLLATERAL SECURITY; RELEASES
    49  
 
       
§5.1 Collateral
    49  
§5.2 Appraisals; Evaluations; Adjusted Value
    50  
§5.3 Release of Mortgaged Property
    51  
§5.4 Additional Mineral Rights Leases
    52  
§5.5 Addition of Negative Pledge Properties to the Borrowing Base Assets
    53  

 

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              Page
§5.6 Operating Account
    54  
§5.7 Advance Account
    54  
§5.8 Alabama Mortgage Tax
    54  
 
       
§6. REPRESENTATIONS AND WARRANTIES
    55  
 
       
§6.1 Corporate Authority, Etc.
    55  
§6.2 Approvals
    56  
§6.3 Title to Properties; Leases
    56  
§6.4 Financial Statements
    57  
§6.5 No Material Changes
    57  
§6.6 Franchises, Patents, Copyrights, Etc.
    57  
§6.7 Litigation
    57  
§6.8 No Materially Adverse Contracts, Etc.
    58  
§6.9 Compliance with Organizational Documents, Other Instruments, Laws, Etc.
    58  
§6.10 Tax Status
    58  
§6.11 No Event of Default
    58  
§6.12 Investment Company Act
    58  
§6.13 Reserved
    59  
§6.14 Setoff, Etc.
    59  
§6.15 Certain Transactions
    59  
§6.16 Employee Benefit Plans
    59  
§6.17 Regulations T, U and X
    59  
§6.18 Environmental Compliance
    60  
§6.19 Loan Documents
    61  
§6.20 Mortgaged Properties and Negative Pledge Properties
    62  
§6.21 Reserved
    63  
§6.22 Brokers
    63  
§6.23 Ownership
    63  
§6.24 OFAC
    64  
§6.25 No Fraudulent Intent
    64  
§6.26 Transaction in Best Interests of Loan Parties; Consideration
    64  
§6.27 Solvency
    64  
§6.28 No Bankruptcy Filing
    65  
§6.29 Other Debt
    65  
 
       
§7. AFFIRMATIVE COVENANTS OF LOAN PARTIES
    65  
 
       
§7.1 Punctual Payment
    65  
§7.2 Maintenance of Office
    65  
§7.3 Records and Accounts
    66  
§7.4 Financial Statements, Certificates and Information
    66  
§7.5 Notices
    68  
§7.6 Existence; Maintenance of Properties
    69  
§7.7 Insurance
    69  
§7.8 Taxes
    71  
§7.9 Inspection of Mortgaged Properties, Negative Pledge Properties and Books
    71  

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§7.10 Compliance with Laws, Contracts, Licenses, and Permits
    71  
§7.11 Sweep of Certain Funds in Operating Accounts of Loan Parties and
Subsidiaries
    72  
§7.12 Further Assurances
    72  
§7.13 Project Approvals
    72  
§7.14 Timber Affirmative Covenants
    72  
§7.15 Plan Assets
    73  
§7.16 [RESERVED]
    73  
§7.17 Business Operations
    73  
§7.18 Registered Servicemark
    74  
§7.19 Mineral Activities
    74  
§7.20 More Restrictive Agreements
    75  
§7.21 Additional Subsidiaries; Additional Guarantors
    75  
§7.22 Future Advances Tax Payment
    76  
 
       
§8. CERTAIN NEGATIVE COVENANTS OF LOAN PARTIES
    76  
 
       
§8.1 Restrictions on Indebtedness
    76  
§8.2 Restrictions on Liens, Etc.
    78  
§8.3 Restrictions on Investments
    80  
§8.4 Merger, Consolidation
    82  
§8.5 Sale and Leaseback
    83  
§8.6 Compliance with Environmental Laws
    83  
§8.7 Distributions
    84  
§8.8 Asset Sales
    85  
§8.9 [RESERVED]
    86  
§8.10 Restriction on Prepayment of Indebtedness
    87  
§8.11 [RESERVED]
    87  
§8.12 Negative Pledges, Restrictive Agreements, etc.
    87  
§8.13 Organizational Documents
    88  
§8.14 Affiliate Transactions
    88  
§8.15 Management Fees, Expenses, etc.
    88  
§8.16 Deposit Account Control Agreements
    89  
§8.17 [RESERVED]
    89  
§8.18 Modification of Certain Agreements
    89  
 
       
§9. FINANCIAL COVENANTS OF BORROWER
    89  
 
       
§9.1 Corporate Financial Covenants of Loan Parties
    89  
§9.2 Borrowing Base Covenants
    91  
§9.3 Value to Commitment
    91  
 
       
§10. CLOSING CONDITIONS
    91  
 
       
§10.1 Loan Documents
    91  
§10.2 Certified Copies of Organizational Documents
    91  
§10.3 Resolutions
    92  
§10.4 Incumbency Certificate; Authorized Signers
    92  
§10.5 Opinion of Counsel
    92  
§10.6 Payment of Fees
    92  

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§10.7 Insurance
    92  
§10.8 Performance; No Default
    92  
§10.9 Representations and Warranties
    93  
§10.10 Proceedings and Documents
    93  
§10.11 Mortgaged Property Documents
    93  
§10.12 Surveys and Title Policies
    93  
§10.13 Compliance Certificate
    93  
§10.14 [RESERVED]
    93  
§10.15 Other Documents
    94  
§10.16 No Condemnation/Taking
    94  
§10.17 [RESERVED]
    94  
§10.18 No Litigation
    94  
§10.19 Other
    94  
 
       
§11. CONDITIONS TO ALL BORROWINGS AND LETTERS OF CREDIT
    94  
 
       
§11.1 Representations True; No Default
    94  
§11.2 No Legal Impediment
    95  
§11.3 Borrowing Documents
    95  
 
       
§12. EVENTS OF DEFAULT; ACCELERATION; ETC.
    95  
 
       
§12.1 Events of Default and Acceleration
    95  
§12.2 Limitation of Cure Periods
    98  
§12.3 Termination of Commitments
    98  
§12.4 Remedies
    98  
§12.5 Distribution of Collateral Proceeds
    99  
 
       
§13. SETOFF
    100  
 
       
§14. THE AGENT
    100  
 
       
§14.1 Authorization
    100  
§14.2 Employees and Agents
    101  
§14.3 No Liability
    101  
§14.4 No Representations
    101  
§14.5 Payments
    102  
§14.6 Holders of Notes
    103  
§14.7 Indemnity
    104  
§14.8 Agent as Lender
    104  
§14.9 Resignation
    104  
§14.10 Duties in the Case of Enforcement
    105  
§14.11 Request for Agent Action
    105  
§14.12 Removal of Agent
    106  
§14.13 Bankruptcy
    106  
 
       
§15. EXPENSES
    106  
 
       
§16. INDEMNIFICATION
    107  
 
       
§17. SURVIVAL OF COVENANTS, ETC.
    108  

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§18. ASSIGNMENT AND PARTICIPATION
    108  
 
       
§18.1 Conditions to Assignment by Lenders
    108  
§18.2 Register
    110  
§18.3 New Notes
    110  
§18.4 Participations
    111  
§18.5 Pledge by Lender
    111  
§18.6 No Assignment by Borrower
    111  
§18.7 Cooperation; Disclosure
    112  
§18.8 Mandatory Assignment
    112  
§18.9 Co-Agents
    113  
§18.10 Treatment of Certain Information; Confidentiality
    113  
§18.11 Withholding Tax
    114  
 
       
§19. NOTICES
    115  
 
       
§20. RELATIONSHIP
    117  
 
       
§21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE
    117  
 
       
§22. HEADINGS
    118  
 
       
§23. COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION
    118  
 
       
§24. ENTIRE AGREEMENT, ETC.
    119  
 
       
§25. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS
    119  
 
       
§26. DEALINGS WITH THE BORROWER
    119  
 
       
§27. CONSENTS, AMENDMENTS, WAIVERS, ETC.
    120  
 
       
§28. SEVERABILITY
    122  
 
       
§29. NO UNWRITTEN AGREEMENTS
    122  
 
       
§30. ACKNOWLEDGMENT OF INDEMNITY OBLIGATIONS
    122  
 
       
§31. REPLACEMENT OF NOTES
    122  
 
       
§32. TIME IS OF THE ESSENCE
    123  
 
       
§33. RIGHTS OF THIRD PARTIES
    123  
 
       
§34. GUARANTY
    123  
 
       
§34.1 The Guaranty
    123  
§34.2 Obligations Unconditional
    124  
§34.3 Reinstatement
    125  
§34.4 Certain Waivers
    125  
§34.5 Remedies
    126  

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§34.6 Rights of Contribution
    126  
§34.7 Guaranty of Payment; Continuing Guaranty
    126  
§34.8 Special Provisions Applicable to Guarantors
    126  
 
       
§35. EFFECTIVENESS OF AMENDMENT AND RESTATEMENT; NO NOVATION
    127  

EXHIBITS AND SCHEDULES

     
Exhibit A-1
  Form of Revolving Loan Note
Exhibit A-2
  Form of Term Loan Note
Exhibit A-3
  Form of Swing Line Note
Exhibit B
  Form of Compliance Certificate
Exhibit C
  Form of Assignment and Assumption Agreement
Exhibit D-1
  Form of Request for Loan
Exhibit D-2
  Form of Request for Swing Line Loan
Exhibit E
  Form of Borrowing Base Certificate
Exhibit F
  Patriot Act and OFAC Transferee and Assignee Identifying Information Form
Exhibit G
  Form of Letter of Credit Request
Exhibit H
  Form of Joinder Agreement (Guarantor)
Exhibit I
  Form of Officer’s Certificate
Schedule 1.1
  Lenders and Commitments
Schedule 2
  Mortgaged Property Documents
Schedule 3
  Mortgaged Properties
Schedule 4
  [ Reserved]
Schedule 5
  Timberland
Schedule 6
  High Value Timberland
Schedule 7
  Raw Entitled Land
Schedule 8
  Entitled Land Under Development
Schedule 9
  Non-Appraised Entitled Land
Schedule 10
  [ Reserved]
Schedule 11
  Excluded Subsidiaries as of Closing Date
Schedule 5.8
  Alabama Mortgage Modifications
Schedule 6.7
  Litigation
Schedule 6.10
  Open Audit Periods
Schedule 6.15
  Transactions with Affiliates
Schedule 6.20(f)
  Unresolved Real Estate Claims or Disputes
Schedule 6.20(g)
  Material Real Estate Agreements
Schedule 8.2
  Permitted Liens
Schedule 8.3
  Investments

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AMENDED AND RESTATED
REVOLVING AND TERM CREDIT AGREEMENT
     THIS AMENDED AND RESTATED REVOLVING AND TERM CREDIT AGREEMENT (this
“Agreement”) is made the                      day of August, 2010, 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, and that certain
Second Amendment to Revolving and Term Credit Agreement dated as of July 16,
2009 (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:

 

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§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, 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) all other Real Estate
owned by the Loan Parties, valued at book value without regard to any
Indebtedness; and (i) 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.
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 (h) or (i) 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.
     Affected Lender. See §18.8.
     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

2

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of the outstanding limited or general partnership interests, preferred stock or
other ownership interests of such Person.
     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 Amended and Restated Revolving and Term Credit Agreement,
including the Schedules and Exhibits hereto.
     Agreement Regarding Fees. The Agreement Regarding Fees dated as of August
___, 2010, 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. An appraisal of the value of Real Estate 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
regulatory 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 Leases and Rents. The 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 assigned
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 Amended and Restated
Assignment of Leases and Rents, dated as of even date herewith, from Forestar
Minerals LLC, and the 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

3

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from time to time by any other Loan Party 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 assigned
to Agent for the benefit of Lenders a security interest in the interest of
Forestar Minerals LLC, 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 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 Joint Venture, in favor of Agent for
the benefit of Agent and Lenders.
     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, 2009.
     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, plus the Base
Rate Spread; (ii) the Federal Funds Effective Rate in effect from time to time,
determined one Business Day in arrears, subject to the Interest Rate Floor, plus
1/2 of one percent (0.5%) per annum, plus the Base Rate Spread; or (iii) the
then-applicable LIBOR Rate for a one (1) month Interest Period, subject to the
Interest Rate Floor, plus one percent (1.0%) per annum, plus the LIBOR Rate
Spread.
     Base Rate Loans. Those Loans bearing interest by reference to the Base
Rate.
     Base Rate Spread. The per annum rate of two and one-half percent (2.5%).
     Bond Indebtedness. Indebtedness in the form of unsecured bonds or notes
issued by Forestar Group and sold either in an underwriting or in a private
placement transaction, including Convertible Bond Indebtedness.
     Bonus Payment. The initial payment received upon execution and delivery of
a new Mineral Rights Lease.
     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.

4

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     Borrowing Base. As of any date of determination, the sum of the following
percentages of the Borrowing Base Assets:
          (a) thirty-five percent (35%) of Timberland Value; plus
          (b) twenty-five percent (25%) 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;
provided, however, that the Borrowing Base shall be reduced by the amounts, if
any, by which (i) the portion of the Borrowing Base accounted for by clause
(b) of this definition would exceed fifteen percent (15%) of the Borrowing Base,
and (ii) the portion of the Borrowing Base accounted for by clause (c) of this
definition would exceed twenty-five percent (25%) of the Borrowing Base; and
provided further, however, that the Borrowing Base shall be reduced by any
reserve existing under §9.1(a)(iii).
     Borrowing Base Assets. Collectively, the Timberland, the High Value
Timberland, the Raw Entitled Land, the Entitled Land Under Development and the
Mineral Business, subject to §9.2. With respect to Borrowing Base Assets other
than the Mineral Business, 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.
     Borrowing Base Certificate. See §7.4(e).
     Bulk Sales. See §2.9.
     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 Eurodollar 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 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 upon exercise thereof based on a cap or
upper strike price (howsoever defined).

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     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.
     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 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.

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     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).
     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; 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 in connection with the
issuance of Convertible Bond Indebtedness with a strike or exercise price
(howsoever defined) initially equal

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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.
     Default. See §12.1.
     Default Rate. See §4.12.
     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).
     Delay Rental Payment. The payment received by any Loan Party from time to
time in the event the tenant or lessee under any Mineral Rights Lease does not
commence drilling within the applicable timeframe established under such Mineral
Rights Lease.
     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 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 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, have
otherwise been properly accounted for by such Loan Party in the Borrowing Base
Certificates submitted to Agent, including

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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; 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.
     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

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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 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.
     Entitled Land Under Development. Real Estate owned in fee simple absolute
by any Loan Party and described in Schedule 8 as of June 30, 2010, 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 ordered by and approved by Agent prior to
the Closing Date. 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

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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.
     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, 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 two and one-half percent (2.5%) 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; provided, however, that the Excluded Subsidiaries other than SPE
Subsidiaries shall

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not, collectively, have assets whose book value exceeds five percent (5%) 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).
     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.
     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

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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 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 June 30, 2010, 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 on which, or on a portion of which,
Timber is located and 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 (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

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(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.
     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 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.
     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

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(6), or, if available to all Lenders, nine (9) or twelve (12) months thereafter
and (b) thereafter, 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.
     Interest Rate Floor. A per annum rate equal to two percent (2%).
     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.

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     Joint Venture. Any Person (including non-wholly owned Subsidiaries) 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 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.
     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 quotations. If fewer than two quotations are provided as requested, the rate
for that date will be

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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 and one-half percent (4.5%).
     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.
     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.

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     Maturity Date. The Revolving Credit Maturity Date or the Term Loan Maturity
Date, whichever is applicable.
     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 for the most recently completed four (4) fiscal quarters,
multiplied by (b) four (4).
     Mineral Rights Lease. Any Lease, joint operating agreement, operating
agreement, joint venture agreement, oil and gas partnership agreement, division
order or other agreement pursuant to which any Loan Party grants one or more
third-parties the right to conduct Mineral Activity on Real Estate owned or
leased by such Loan Party or in which such Loan Party has rights interests,
obligations or privileges.
     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 or §5.3 hereof.
     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.
     Negative Pledge Property or Negative Pledge Properties. Individually and
collectively, any and all Real Estate owned in fee simple absolute (but not
including mineral interests only) 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

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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.
     Net Sale Proceeds. With respect to the sale of any Lots or all or any
portion of any Mortgaged Property, the gross sales price payable by the
purchaser thereof (net of any rebates or discounts) less all reasonable and
customary costs of sale that are charged to sellers of property and standard for
such market in a given jurisdiction, including without limitation, title
insurance charges, escrow fees, seller’s legal fees, prorated real estate taxes,
transfer taxes and real estate brokers’ commissions.
     Non-Appraised Entitled Land. The Real Estate described on Schedule 9 hereof
as of June 30, 2010 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) through and including the sixtieth
(60th) day after the acquisition of such Non-Appraised Entitled Land by the
applicable Loan Party. If the Appraisal described in the definition of Raw
Entitled Land or Entitled Land Under Development (as applicable) is not
delivered to Agent within such sixty (60)-day timeframe, such Non-Appraised
Entitled Land Value shall immediately and automatically be removed from the
Borrowing Base. Upon delivery of such Appraisal to Agent, whether before or
after such sixty (60)-day period expires, such Non-Appraised Entitled Land 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-Consenting Lender. See §18.8.
     Non-Recourse Assets. Real Estate (other than 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

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non-recourse financing of Real Estate and which, to the extent permitted under
this Agreement, are sold, transferred 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 one
or more parcels of Real Estate (other than Mortgaged Property) and related
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 Permitted Recourse Undertakings), 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).
     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 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.
     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.

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     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.
     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.
     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;
          (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.

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     Plan Asset Regulations. The regulations promulgated under ERISA at 29 CFR
2510.3-101, as amended and in effect from time to time.
     Plan Assets. Assets of any Employee Benefit Plan subject to Part 4,
Subtitle A, Title I of ERISA.
     Pledge and Security Agreement. The 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 necessary consents
have been obtained) in any of their respective Joint Ventures.
     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 repayment or prepayment, in whole or
in part, of any of the outstanding principal balance of the Term Loans, an
amount equal to the principal amount so prepaid, multiplied by (a) three percent
(3%) for any repayment or prepayment of Term Loans made prior to the six
(6) month anniversary of the Closing Date, (b) two percent (2%) for each
repayment or prepayment of the Term Loans made on or after the six (6) month
anniversary of the Closing Date and prior to the one (1) year anniversary of the
Closing Date, or (c) one percent (1%) for each repayment or prepayment of the
Term Loans made on or after the one (1) year anniversary of the Closing Date and
prior to the eighteen (18) month anniversary of the Closing Date; provided,
however, that no prepayment fee shall be payable with respect to the first
$25,000,000 of Term Loan principal repaid or prepaid. No Prepayment Fee will
apply to any repayment or prepayment of the Term Loans, or any portion thereof,
made on or after the eighteen (18) 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).
     Raw Entitled Land. The Real Estate described on Schedule 7 hereof as of
June 30, 2010 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

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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 ordered by
and approved by Agent prior to Closing. 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.
     RCRA. See §6.18(a).
     Real Estate. All 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.
     Reference Bank. KeyBank.
     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

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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 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 Exposure. For any Revolving Lender as of any date of
determination, such Lender’s Revolving Commitment Percentage of the sum of
(i) all Revolving Loans then Outstanding, (ii) all Outstanding Letters of
Credit, and (iii) any Swing Line Loans then Outstanding.

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     Revolving Credit Maturity Date. August ___, 2013, or if the Revolving
Credit Maturity Date is extended pursuant to §3.1(b), August ___, 2014, 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 $175,000,000 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.
     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, the 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 Indemnity 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.
     SPE Subsidiary. A bankruptcy remote or other special purpose entity which
is a Subsidiary and which is formed for the purpose of, and engages in no
material business other than, issuing or incurring Non-Recourse Indebtedness
and, in connection therewith, owning Non-Recourse Assets and pledging or
transferring interests therein.
     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, to be 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 hereunder, 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.
     Substitute Collateral. See §5.3(d)(ii).
     Survey. With respect to each Mortgaged Property 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 under the Term Commitments, not to exceed
$125,000,000 in the aggregate; subject, however, to increase in accordance with
§2.9.
     Term Loan Maturity Date. August ___, 2015, 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 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).
     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, plus (without duplication) such parties’ pro rata share of all
such expenditures incurred by unconsolidated Joint Ventures.

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     Total Funded Debt. As of any date of determination, an amount equal to one
hundred percent (100%) of all Funded Debt of any Loan Party, plus any Loan
Party’s pro rata share of the Funded Debt of their respective Joint Ventures.
     Total Leverage Ratio. As of any date of determination, the ratio of Total
Funded Debt to Adjusted Asset Value, expressed as a percentage.
     Total Revenues. For the relevant period, the aggregate amount of all gross
revenues derived from the operations of Forestar Group and its Subsidiaries,
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.
     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 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.

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               (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 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
sum of (x) the aggregate principal amount of Term Loans Outstanding or being
funded on such date of determination plus (y) unless Borrower shall have elected
to make all of the Borrowing Base Assets (other than the Mineral Business)
Mortgaged Properties pursuant to §9.2(b), the aggregate outstanding principal
amount of Permitted Bond Indebtedness at such time; 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

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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, 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; 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).
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
making of the Term Loans on the Closing Date will not involve the advance of any
funds to Borrower but only the continuation of the outstanding “Term Loans”
under the Original Credit Agreement, but each Term Loan will be in accordance
with the respective Term Commitments of the Term Lenders.
               (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 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).

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                    (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.
                    (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

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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 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

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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, subject to the Interest Rate Floor, plus (B) the LIBOR Rate Spread;
and
               (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 Base Rate.
               (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 the rate of forty-five
one-hundredths of one percent (0.45%) 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
commencing on the Effective Date and ending on the Revolving Credit Maturity
Date. 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

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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,
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

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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 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 Borrower’s working capital and general corporate needs which
include, without limitation, the construction and sale of Lots, 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
(iv) 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 January 31, 2013, 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:

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               (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);
               (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 $450,000,000;
               (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

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               (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, 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.

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               (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.
               (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

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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 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

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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.
               (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)

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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 fifty one hundredths of one percent (0.50%) of the aggregate
Revolving Commitments of the Revolving Lenders as of the Extension Effective
Date. Pursuant to §9.1(c), the maximum Total Leverage Ratio shall be reduced to
thirty percent (30%) as of the last day of any fiscal quarter of Borrower during
the Extension Period.
          §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, plus, unless Borrower
shall have elected to make all of the Borrowing Base Assets (other than the
Mineral Business) Mortgaged Properties pursuant to §9.2(b), the aggregate
outstanding principal amount of Permitted Bond Indebtedness, 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.
               (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).
               (c) Prepayment Fee relating to Term Loan. Contemporaneously with
each prepayment required under §3.2(a) or §3.2(b), in whole or in part, and from
whatever source, of the Outstanding principal of the Term Loans prior to the
date which is eighteen (18) months after the Closing Date, Borrower shall pay
the applicable Prepayment Fee to Agent for the account of Term Lenders.
          §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

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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 eighteen (18) months after the Closing Date, Borrower
shall pay the applicable 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 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

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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.
          §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

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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.
               (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

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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.
          §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

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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), shall:
               (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

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               (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.
          §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, 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

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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 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.

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          §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) 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, (iv) 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 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 Joint Venture pursuant to the
Pledge and Security Agreement is not permitted under the Organizational
Documents of the applicable 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 Joint Venture in
favor of Agent for the benefit of Lenders pursuant to the Assignment of Rights
to Joint Venture Distributions, such Equity Interests or rights shall not be
included as Collateral, and (v) 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. 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

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and as otherwise agreed by Agent. All Borrowing Base Assets other than the
Mineral Business shall be included in the Mortgaged Properties if Borrower
elects to secure all such Borrowing Base Assets pursuant to §9.2(b).
          §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 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.

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               (d) 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).
               (e) 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 as may be required by Agent in the exercise of its good
faith business judgment and after consultation with Borrower, and that Agent is
not bound by the value set forth in any Appraisal performed pursuant to this
Agreement and does not make any representations or warranties with respect to
any such Appraisal. Borrower further agrees that Lenders and Agent shall have no
liability as a result of or in connection with any such Appraisal for statements
contained in such Appraisal, including without limitation, the accuracy and
completeness of information, estimates, conclusions and opinions contained in
such Appraisal, or variance of such Appraisal from the fair value of such
property that is the subject of such Appraisal 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;

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               (c) all release documents to be executed by Agent shall be in
form and substance reasonably satisfactory to Agent;
               (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, Borrower will deliver to Agent a supplement to the list
delivered to Agent pursuant to

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Section 6.20(h), setting forth the list of all new Mineral Rights Leases
constituting Leases or joint operating agreements in effect as of the end of
that quarter and any such type of Mineral Rights Leases no longer in effect as
of the end of that quarter, 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, Borrower and the other
applicable Loan Parties agree to execute and deliver any and all additional
documents, instruments or agreements 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 the additional Mineral
Rights Leases.
          §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 and so long as Borrower has not elected to
include all Borrowing Base Assets (other than the Mineral Business) as Mortgaged
Properties pursuant to §9.2(b), 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 satisfies 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) After giving effect to the inclusion of such Real Estate in
the Borrowing Base Assets as a Negative Pledge Property, 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 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
Negative Pledge Property, 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
               (c) Borrower shall pay or reimburse Agent and Agent’s Special
Counsel for all fees, expenses and costs in connection with the foregoing.

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          §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.
          §5.8 Alabama Mortgage Tax.
               (a) Execution and Delivery of Documents. The parties acknowledge
that, on the Closing Date, Borrower will execute and deliver to Agent
modifications of the Security Deeds covering Mortgaged Property in Alabama more
particularly described on Schedule 5.8 (the “Alabama Mortgage Modifications”).
In connection therewith, Agent will prepare at Borrower’s expense a Petition for
Ascertainment of Mortgage Tax (the “Alabama Mortgage Tax Petition”) with respect
to the Alabama Mortgage Privilege Tax payable with respect to the Alabama
Mortgage Modifications, and in support thereof, Borrower will execute and
deliver to Agent on

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the Closing Date an Affidavit of Borrower (the “Mortgage Tax Affidavit”), in
form and substance satisfactory to Agent, with respect to valuations of the
Mortgaged Property located in Alabama relative to all Mortgaged Property.
               (b) Holding, Recording of Documents. In lieu of recording the
Alabama Mortgage Modifications on or about the Closing Date, Agent shall hold
them, together with the Alabama Mortgage Tax Petition and the Mortgage Tax
Affidavit, until such time as Agent, in its sole and absolute discretion, elects
to record the Alabama Mortgage Modifications, at which time a Mortgage Privilege
Tax Order will be obtained by Agent from the Alabama Department of Revenue, and
Borrower shall pay to Agent all Alabama Mortgage Privilege Recording Taxes (the
“Alabama Mortgage Taxes”) as provided in such order, together with other
recording costs, in connection with such recording.
               (c) Maintenance of Funds on Deposit. Until such time as the
Alabama Mortgage Modifications are recorded as provided in §5.8(b), Borrower
agrees to cause $75,000 to be on deposit in an account maintained with Agent and
which shall be under the control of Agent to cover the Alabama Mortgage Taxes
and other costs and expenses associated with recording the Alabama Mortgage
Modifications. Agent shall be entitled to withdraw amounts so deposited in such
account up to $75,000 to pay such amounts, and Agent agrees to promptly notify
Borrower of any such withdrawal.
               (d) Future Cooperation. Borrower agrees to cooperate as
reasonably necessary to assist Agent in obtaining the Mortgage Privilege Tax
Order described in §5.8(b) from the Alabama Department of Revenue, including,
without limitation, providing a new or updated Mortgage Tax Affidavit.
§6. REPRESENTATIONS AND WARRANTIES
     Borrower and each of the other Loan Parties (as applicable) represents and
warrants to Agent and Lenders as follows:
          §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

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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.
          §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 other
than those already obtained and the filing of the Security Documents in the
appropriate records office with respect thereto.
          §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), 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

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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.
          §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, 2009 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 March 31, 2010, or its statement of
income or cash flows for the fiscal quarter then ended, other than 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.
          §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, 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

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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 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.

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          §6.13 Reserved.
          §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 Deeds 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 the Forestar Form 10, 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 the Forestar Form 10, 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 the Forestar Form 10, 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 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

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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, 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 the
Forestar Form 10, 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 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.

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          §6.20 Mortgaged Properties and Negative Pledge Properties.
     The Loan Parties make the following representations and warranties
concerning each Mortgaged 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 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

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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 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.
               (h) Mineral Rights Leases. On or before the Closing Date,
Borrower has delivered to Agent a true and correct list of all Mineral Rights
Leases constituting Leases or joint operating agreements as of June 30, 2010
and, subsequent thereto, as of the most recent update of such list delivered to
Agent pursuant to §5.4.
          §6.21 Reserved.
          §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

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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.
          §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, 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

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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 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.
§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.

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          §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.
          §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;

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               (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
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; and

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               (k) from time to time such other financial data and information
pertaining to Forestar Group, its Subsidiaries, the Joint Ventures and the
Mortgaged Properties and Negative Pledge Properties, as Agent or any Lender may
reasonably request from time to time.
          §7.5 Notices.
               (a) Defaults. Borrower or Forestar Group will promptly notify
Agent in writing of the occurrence of any Default or Event of Default. If any
Person shall give any notice or take any other action in respect of a claimed
default (whether or not constituting an Event of Default) under this Agreement
or under any note, obligation or other evidence of Indebtedness in an
outstanding principal amount of at least $10,000,000, to which or with respect
to which Borrower or any other Loan Party is a party or obligor, whether as
principal or surety, and such event of default would permit the holder of such
note or obligation or other evidence of Indebtedness to accelerate the maturity
thereof or the existence of which claimed default might become an Event of
Default under §12.1(f), Borrower shall forthwith give written notice thereof to
Agent, describing the notice or action and the nature of the claimed default.
Borrower or Forestar Group shall also promptly notify Agent in writing of any
exercise of remedies by the holder of such note, obligation or other evidence of
Indebtedness (or any agent or representative thereof) with respect to such event
of default.
               (b) Environmental Events. Borrower or Forestar Group will
promptly give notice to Agent (i) upon Borrower or Forestar Group obtaining
knowledge of any potential or known Release, or threat of Release, of any
Hazardous Substances at or from any Mortgaged Property, Negative Pledge Property
or other Real Estate that, either singly or in the aggregate, could reasonably
be expected to have a Material Adverse Effect; (ii) of any violation of any
Environmental Law that any Loan Party reports in writing or is reportable by any
Loan Party in writing (or for which any written report supplemental to any oral
report is made) to any federal, state or local environmental agency that, either
singly or in the aggregate, could reasonably be expected to have a Material
Adverse Effect and (iii) upon becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any agency
of potential environmental liability, of any federal, state or local
environmental agency or board, that in either case could reasonably be expected
to have a Material Adverse Effect.
               (c) Notification of Claims Against Collateral. Borrower or
Forestar Group will, promptly upon obtaining Knowledge thereof, notify Agent in
writing of any claims pertaining to the Collateral or other property of the Loan
Parties which, either singly or in the aggregate, could reasonably be expected
to exceed $1,000,000, as well as any setoff, withholdings or other defenses to
which any of the Collateral, or the rights of Agent or Lenders with respect to
the Collateral, are subject, in each case, other than related to Permitted
Liens.
               (d) Notice of Litigation and Judgments. Borrower or Forestar
Group will give notice to Agent in writing within fifteen (15) days of becoming
aware of any litigation or proceedings threatened in writing or any pending
litigation and proceedings affecting any of the Loan Parties or their
Subsidiaries or to which any of such Persons is or is to become a party
involving an uninsured claim against any of such Persons that could reasonably
be expected to have a Material Adverse Effect and stating the nature and status
of such litigation or proceedings. Borrower or Forestar Group will give notice
to Agent, in writing, in form and detail satisfactory

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to Agent and each of Lenders, within ten (10) days of any judgment not covered
by insurance, whether final or otherwise, against any of the Loan Parties in an
amount, whether singly or in the aggregate, in excess of $1,000,000.
               (e) ERISA. Borrower or Forestar Group will give notice to Agent
within five (5) Business Days after Borrower or any ERISA Affiliate (i) gives or
is required to give notice to the PBGC of any ERISA Reportable Event with
respect to any Guaranteed Pension Plan, or knows that the plan administrator of
any such plan has given or is required to give notice of any such ERISA
Reportable Event; (ii) receives a copy of any notice of withdrawal liability
under Title IV of ERISA with respect to a Multiemployer Plan; or (iii) receives
any notice from the PBGC under Title IV of ERISA of an intent to terminate or
appoint a trustee to administer any Guaranteed Pension Plan.
               (f) Notice of Material Adverse Effect. Borrower or Forestar Group
will give notice to Agent in writing within fifteen (15) days of becoming aware
of the occurrence of any event or circumstance which could reasonably be
expected to have a Material Adverse Effect.
               (g) Notice of Tax-Sharing Agreement Claims. Borrower or Forestar
Group will give notice to Agent within fifteen (15) days after Forestar Group’s
receipt of written notice of any material claim for indemnity under the Spin-off
Tax Sharing Agreement, together with copies of all material correspondence and
other information relating to such claim.
          §7.6 Existence; Maintenance of Properties.
     Except as permitted under §8.4, the Loan Parties will do or cause to be
done all things necessary to preserve and keep in full force and effect their
respective legal existences and good standing in their respective jurisdictions
of incorporation, organization or formation (as the case may be) and those of
their respective Subsidiaries. Except as permitted under §8.4, the Loan Parties
will do or cause to be done all things necessary to preserve or establish their
respective good standing as a foreign entity and due authorization to do
business in the jurisdictions described in §6.1(a)(ii) and that of their
respective Subsidiaries. Except as permitted under §8.4, each Loan Party will do
or cause to be done all things necessary to preserve and keep in full force all
of its rights and franchises and those of its Subsidiaries, except where the
failure to preserve such rights and franchises would not reasonably be expected
to have a Material Adverse Effect.
          §7.7 Insurance.
               (a) Maintenance of Insurance. Each Loan Party will maintain with
financially sound and reputable insurers not Affiliates of Borrower that are
licensed to do business in the State where the policy is issued and, with
respect to any property and casualty insurance, also in the States where the
Mortgaged Property or Negative Pledge Property is located, insurance with
respect to its properties and business (including, without limitation, Mineral
Activity conducted by a Loan Party) against such casualties and contingencies,
as shall be in accordance with the general practices of businesses engaged in
similar activities in similar geographic areas, and in amounts, containing such
terms, in such forms and for such periods as may be reasonable and prudent in
accordance with sound business practices and the determination of management of
the Loan Parties. On or before the Closing Date, Borrower shall furnish to Agent
a certificate setting forth in reasonable detail the nature and extent of all
insurance maintained by Borrower and each

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other Loan Party, and shall cause each issuer of an insurance policy to provide
Agent with an endorsement (i) showing Agent as a loss payee with respect to each
policy of property or casualty insurance and naming Agent as an additional
insured with respect to each policy of liability insurance, (ii) providing that
30 days’ notice will be given to Agent prior to any cancellation of, or material
reduction or change in coverage provided by or other material modification to
such policy, and also a cross liability/severability endorsement. Forestar Group
or the other Loan Parties shall be responsible for all premiums on insurance
policies. Upon Agent’s request, Borrower or Forestar Group shall deliver
duplicate originals or certified copies of all such policies to Agent, and shall
promptly furnish to Agent all renewal notices and evidence that all premiums or
portions thereof then due and payable have been paid. At least fifteen (15) days
prior to the expiration date of the policies, Forestar Group shall deliver to
Agent evidence of continued coverage, including a certificate of insurance, as
may be satisfactory to Agent.
               (b) Endorsements. In addition to the endorsements referred to in
§7.7(a), all policies of insurance required by this Agreement shall contain
clauses or endorsements to the effect that (i) no act or omission of any Loan
Party, anyone acting for any Loan Party (including, without limitation, any
representations made in the procurement of such insurance), which might
otherwise result in a forfeiture of such insurance or any part thereof, no
occupancy or use of the Mortgaged Property and the Negative Pledge Property for
purposes more hazardous than permitted by the terms of the policy, and no
foreclosure or any other change in title to the Mortgaged Property and the
Negative Pledge Property or any part thereof, shall affect the validity or
enforceability of such insurance insofar as Agent is concerned, (ii) the insurer
waives any right of setoff, counterclaim, subrogation, or any deduction in
respect of any liability of any of the Loan Parties, and Agent, (iii) such
insurance is primary and without right of contribution from any other insurance
which may be available, (iv) such policies shall not be modified, canceled or
terminated prior to the scheduled expiration date thereof without the insurer
thereunder giving at least thirty (30) days prior written notice to Agent by
certified or registered mail, and (v) that Agent or Lenders shall not be liable
for any premiums thereon or subject to any assessments thereunder, and shall in
all events be in amounts sufficient to avoid any coinsurance liability. Upon
request by Borrower, Agent and Borrower may approve variations in the foregoing
requirements from time to time.
               (c) Blanket Policies. Such insurance may be provided under
blanket policies of insurance obtained by Forestar Group. Such blanket policies
may cover additional locations and property of Borrower and other Persons not
included in the Mortgaged Properties or the Negative Pledge Properties, provided
that such blanket policies comply with all of the terms and provisions of this
§7.7 and contain endorsements or clauses assuring that any claim recovery will
not be less than that which a separate policy would provide, including, without
limitation, a priority claim provision with respect to property insurance and an
aggregate limits of insurance endorsement in the case of liability insurance.
Upon request by Borrower, Agent and Borrower may approve variations in the
foregoing requirements from time to time.
               (d) No Separate Insurance. Borrower shall not carry separate
insurance, concurrent in kind or form or contributing in the event of loss, with
any insurance required under this Agreement unless such insurance complies with
the terms and provisions of this §7.7.

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          §7.8 Taxes.
     Each Loan Party will duly pay and discharge, or cause to be paid and
discharged, before the same shall become delinquent, all taxes, assessments and
other governmental charges imposed upon it and the Mortgaged Properties and the
Negative Pledge Properties owned by it, including, without limitation, any
payments in lieu of taxes, sales and activities, or any part thereof, or upon
the income or profits therefrom, as well as all claims for labor, materials or
supplies that if unpaid might by law become a lien or charge upon any of its
property or the property of any other Loan Party or their respective
Subsidiaries; provided that any such tax, assessment, charge, levy or claim need
not be paid if (a) the validity or amount thereof shall currently be contested
in good faith by appropriate proceedings, (b) no Mortgaged Property or Negative
Pledge Property nor any portion thereof or interest therein would be in any
danger of sale, forfeiture or loss by reason of such proceeding and (c) the Loan
Party shall have set aside on its books adequate reserves in accordance with
GAAP with respect thereto; and provided further that Borrower will pay, or cause
to be paid, all such taxes, assessments, charges, levies or claims forthwith
upon the commencement of proceedings to foreclose any lien that may have
attached as security therefor.
          §7.9 Inspection of Mortgaged Properties, Negative Pledge Properties
and Books.
     Borrower shall permit or cause the other Loan Parties and their respective
Subsidiaries to permit, Lenders, through Agent or any representative designated
by Agent, at Borrower’s expense and upon reasonable prior notice to visit and
inspect any of the Mortgaged Properties and the Negative Pledge Properties, to
examine the books of account of Borrower and the other Loan Parties and their
respective Subsidiaries (and to make copies thereof and extracts therefrom) and
to discuss the affairs, finances and accounts of Borrower and the other Loan
Parties and their respective Subsidiaries with, and to be advised as to the same
by, its officers, all at such reasonable times and intervals as Agent or any
Lender may reasonably request (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 visits and inspections more often than once in any twelve
(12) month period).
          §7.10 Compliance with Laws, Contracts, Licenses, and Permits.
     Borrower will comply and cause each of the other Loan Parties and their
respective Subsidiaries to comply, in all respects with (i) all applicable laws,
ordinances, regulations and requirements now or hereafter in effect wherever its
business is conducted, including all Environmental Laws, (ii) the provisions of
its Organizational Documents, (iii) all mortgages, indentures, contracts,
agreements and instruments to which it is a party or by which it or any of its
properties may be bound, (iv) all applicable decrees, orders, and judgments, and
(v) all licenses and permits required by applicable laws and regulations for the
conduct of its business or the ownership, use or operation of its properties,
except in each case where the failure to so comply would not reasonably be
expected to have a Material Adverse Effect. If at any time while any Loan, Note
or Letter of Credit is outstanding or Lenders have any obligation to make Loans
hereunder, or Agent has any obligation to issue Letters of Credit hereunder, any
authorization, consent, approval, permit or license from any officer, agency or
instrumentality of any government shall become necessary or required in order
that Borrower or any other Loan Party

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may fulfill any of their obligations hereunder or under the other Loan
Documents, Borrower will promptly take or cause to be taken all steps necessary
to obtain such authorization, consent, approval, permit or license and furnish
Agent and Lenders with evidence thereof.
     §7.11 Sweep of Certain Funds in Operating Accounts of Loan Parties and
Subsidiaries.
     The Loan Parties each agree to take all necessary steps, including the
execution and delivery of all necessary notices and other documentation to the
applicable Deposit Account Banks, to establish and maintain in effect at all
times instructions that all collected funds held in the operating accounts of
each Loan Party (other than Borrower) and its wholly-owned Subsidiaries (other
than SPE Subsidiaries) be swept on a daily basis into Borrower’s primary
Operating Account that is subject to a Deposit Account Control Agreement in
favor of Agent, provided that such Loan Parties and their wholly-owned
Subsidiaries (other than SPE Subsidiaries) collectively may retain an amount not
exceeding $15,000,000 in their operating accounts at any time.
     §7.12 Further Assurances.
     Borrower will cooperate, and cause the other Loan Parties to cooperate,
with Agent and Lenders and execute such further instruments and documents as
Lenders or Agent shall reasonably request to carry out to their satisfaction the
transactions contemplated by this Agreement and the other Loan Documents.
     §7.13 Project Approvals.
     Borrower will give all such notices to, and take all such other actions
with respect to, such Governmental Athority as may be required under applicable
Requirements to use, occupy and, where applicable, develop, the Mortgaged
Properties and the Negative Pledge Properties. Borrower will duly perform and
comply with, and cause each applicable other Loan Party to perform and comply
with, all of the terms and conditions of all Project Approvals obtained at any
time.
     §7.14 Timber Affirmative Covenants.
               (a) Management. Borrower shall use its best efforts to operate
the Timberland using silvicultural and harvesting practices and non-binding
guidance issued with respect to the management and harvesting of timberlands by
Governmental Authorities in the States where the Real Property is located, it
being understood, however, that Borrower does not intend to replant or reseed
for timber.
               (b) Damage. Borrower will promptly notify Agent of any damage to
the Timberland affecting more than 10,000 acres.
               (c) Fire Protection. Measures shall be taken which are reasonably
necessary to protect the Timberland from loss by fire.

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               (d) Notice of Appraisal. Borrower shall promptly provide to
Lenders a copy of any appraisal related to the Timberland.
               (e) Timber Purchase Agreement. Borrower shall not consent to, and
shall not permit any other Loan Party signatory thereto to consent to, any
amendment, supplement, waiver or other modification, termination or assignment
of the Timber Purchase Agreement which could reasonably be expected to be
adverse to the interests of Agent and Lenders without the prior consent of
Agent, and shall furnish Agent all information available to Borrower, as well as
any additional information reasonably requested by Agent, with respect thereto.
               (f) Timber Sale and Release. Borrower shall be permitted to cut,
or allow others to cut, Timber from the Timberland on the terms and conditions
set forth in this Agreement, and so as not to result in a violation of the
covenants contained in §9. The Lien of the Security Deeds (and the related
security interests under the Uniform Commercial Code) against any cut or severed
Timber (but not the proceeds thereof, it being the intent hereof that Agent’s
Lien, on behalf of Lenders, and security interest continue in the proceeds)
shall be automatically released, without any action by any of Borrower, any
other Loan Party, Agent or Lenders, upon the sale thereof by the applicable Loan
Party. Borrower shall pay to Agent all reasonable fees, costs and expenses
incurred by Agent in connection with any such partial releases including,
without limitation, legal, appraisal and accounting fees incurred by Agent and
all other expense, and recording and title insurance and title expenses.
               (g) Post-Default Restrictions. Upon the occurrence and during the
continuation of an Event of Default, upon notice from Agent to Borrower to such
effect, Borrower shall not enter into any new Timber cutting or stumpage
agreements pertaining to the Mortgaged Property or harvest Timber (or permit
Timber to be harvested) from the Mortgaged Property in excess of Borrower’s
harvesting plan then in effect, in each case without Agent’s prior written
consent.
          §7.15 Plan Assets.
     Borrower will do, or cause to be done, all things necessary to ensure that
none of the Collateral will be deemed to be Plan Assets at any time.
          §7.16 [RESERVED]
          §7.17 Business Operations.
     Each Loan Party shall, and shall cause its Subsidiaries to operate its
respective business generally in substantially the same manner as has been
previously conducted and businesses reasonably related thereto, and the Loan
Parties shall not, nor shall they cause or permit their Subsidiaries to,
materially change the nature of such business or engage in any other unrelated
businesses or activities. Each Loan Party shall further, and shall cause its
Subsidiaries to, operate their respective businesses in compliance with the
terms and conditions of the Loan Documents relating to such business.

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          §7.18 Registered Servicemark.
     Without the prior written consent of Agent, such consent not to be
unreasonably withheld or delayed, no Mortgaged Property or Negative Pledge
Property shall be owned or operated by Borrower or any other Loan Party under
any registered or protected trademark, tradename, servicemark or logo. Without
limiting the foregoing, Agent may condition its consent to the use of any of the
foregoing upon the granting to Agent for the benefit of Lenders of a perfected
first priority security interest therein.
          §7.19 Mineral Activities.
               (a) Except as permitted in this §7.19, the Loan Parties shall not
undertake or operate or cause to be undertaken or operated for the benefit of,
or as agent for, any Loan Party, or under any lease of the Real Estate, whether
directly or indirectly, any Mineral Activity. Any Mineral Activity on the Real
Estate, with respect to minerals owned by any Loan Party, if any, shall be
conducted in accordance with general industry operating standards and in such
manner as would be reasonably expected not to have a Material Adverse Effect and
either (i) carried out by third party lessees or operators (which may include
Joint Ventures) under bona fide Mineral Rights Leases, or (ii) conducted by a
Loan Party.
               (b) Mineral Activity conducted on the Real Estate by any Loan
Party shall be conducted in accordance in all material respects with all
applicable laws and regulations, including specifically Environmental Laws, and
the Loan Parties shall use commercially reasonable efforts to require that
Mineral Activity (including the clean up of Hazardous Materials) conducted on
the Real Estate by third party lessees or operators is conducted in accordance
with all applicable laws and regulations, including specifically Environmental
Laws.
               (c) The Loan Parties shall (A) comply, and shall require any
third parties engaged by a Loan Party to conduct Mineral Activity to comply, in
all material respects with all Laws concerning the exploration, extraction,
removal and transportation of Minerals, and (B) enforce the material terms and
conditions of the Mineral Rights Leases and use commercially reasonable efforts
to require the lessees and operators thereunder to comply with all material
terms and conditions of the Mineral Rights Leases. The Loan Parties shall
furnish to Agent, promptly following a request therefor, copies of its records
with regard to the compliance by lessees and operators with all material terms
and conditions of the Mineral Rights Leases.
               (d) Any Mineral Activity on the Real Estate permitted hereunder
shall not be undertaken or permitted by the Loan Parties, except in such manner
that would not reasonably be expected to result in liability to Agent or the
Lenders for any of such activities under applicable Environmental Laws,
including claims based upon the existence of any Hazardous Material,
non-hazardous wastes, discoloration or degradation of any water or streams,
interference with the bed of any stream or the natural flow thereof, reclamation
or revegetation.
               (e) The Loan Parties shall, or use commercially reasonable
efforts to cause third party lessees or operators to, conduct Mineral Activity
(A) with due regard for the present and future value of the Real Estate as
timber producing and/or oil and gas properties; (B) in compliance with all
material conditions, covenants and limitations contained in any of the

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instruments under which the Loan Parties hold title to the Real Estate or under
which the Loan Parties own minerals without ownership of the surface overlying
said minerals.
               (f) Agent shall have the right, but not the duty, at any and all
reasonable times to enter upon the Real Estate for the purposes of inspecting
the Mineral Activities being conducted thereon, including the financial records,
royalty summaries, mining reports, weighing devices and maps related thereto.
The Loan Parties agree to promptly furnish Agent, upon request and without cost
to Agent, the results of all core drilling and other exploratory openings and
tests made for coal, oil, gas or other minerals upon the Real Estate, including
the results of any analytical test made to determine the quality, type or
characteristics thereof, to the extent such information is in the possession of
a Loan Party or otherwise available to it without unreasonable cost or expense.
               (g) Without limiting §16, the Loan Parties shall indemnify and
hold harmless Agent and Lenders and their respective officers, directors and
employees and their respective successors, from and against all fines,
penalties, actions, suits, legal proceedings and all costs and expenses
associated therewith (including reasonable legal fees) arising out of or in any
way connected with any failure of the Loan Parties to perform their obligations
under this §7.19, except to the extent arising from Agent’s, any Lender’s or
their officers’, directors’, employees’ or successors’ gross negligence or
willful misconduct.
          §7.20 More Restrictive Agreements.
     Without limiting the terms of §8.1, should Borrower or any Subsidiary enter
into or modify any agreements or documents pertaining to any existing or future
Indebtedness which agreements or documents include financial covenants which are
individually or in the aggregate more restrictive against Borrower or such
Subsidiary than those set forth in §9, Borrower shall promptly notify Agent and,
if requested by the Required Lenders, Borrower, Agent, and the Required Lenders
shall promptly amend this Agreement and the other Loan Documents to include some
or all of such more restrictive provisions as determined by the Required Lenders
in their sole discretion.
          §7.21 Additional Subsidiaries; Additional Guarantors.
               Within thirty (30) days of any Person becoming a wholly owned,
direct or indirect Subsidiary of Borrower after the Closing Date (other than an
Excluded Subsidiary), or after an Excluded Subsidiary ceases to qualify as such,
Borrower will provide Agent with written notice thereof setting forth
information in reasonable detail describing the scope and approximate amount of
all assets of such Subsidiary and shall (a) cause such Subsidiary to execute and
deliver to Agent a Joinder Agreement (Guarantor), (b) cause the Equity Interests
in such Subsidiary (other than an SPE Subsidiary) to be pledged by joinder or
amendment to the Pledge Agreement, and (c) cause such Subsidiary and each
required Loan Party to deliver such additional documents and certificates under
such clauses as Agent reasonably shall request, certified resolutions and other
Organizational Documents and authorizing documents of such Subsidiary and
favorable opinions of counsel to such Subsidiary, all in form and substance
reasonably acceptable to Agent. Any document (other than opinions) or
certificate delivered in connection with this §7.21 shall constitute a Loan
Document. Forestar Group shall not create or acquire any Subsidiaries after the
Closing Date unless such Subsidiaries are direct or indirect Subsidiaries of
Borrower.

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          §7.22 Future Advances Tax Payment.
     Borrower will pay to Agent, on demand, any (or any additional) mortgage,
recording, intangible, documentary stamp or other similar taxes and charges
which Agent reasonably determines to be payable to any state or any county or
municipality thereof in which any of the Mortgaged Properties are located, and
will deliver to Agent, promptly upon request, such affidavits or other
information which Agent reasonably determines to be necessary in connection with
any Loans or other extensions of credit pursuant to this Agreement, the
extension of the Maturity Date or any other reason, in order to insure that the
Mortgages on Mortgaged Property located in such state secure Borrower’s
Obligations.
§8. CERTAIN NEGATIVE 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:
          §8.1 Restrictions on Indebtedness.
     Subject to the further restrictions of §9.1, the Loan Parties will not, and
will not permit any of their respective Subsidiaries to, create, incur, assume,
guarantee or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:
                    (i) the Obligations;
                    (ii) Indebtedness of Borrower to any Subsidiary that is a
Guarantor or Indebtedness of any Subsidiary to Borrower or another Subsidiary
that is a Guarantor;
                    (iii) to the extent constituting Indebtedness, liabilities
in respect of taxes, assessments, governmental charges or levies and claims for
labor, materials and supplies to the extent that payment therefor shall not at
the time be required to be made in accordance with the provisions of §7.8;
                    (iv) contingent obligations arising with respect to
customary indemnification obligations in favor of purchasers in connection with
dispositions permitted under §8.8;
                    (v) Indebtedness in respect of judgments or awards that
would not constitute an Event of Default;
                    (vi) obligations under any Hedge Agreement incurred in the
ordinary course of business for bona fide hedging purposes;
                    (vii) Indebtedness owing to insurance carriers or finance
companies and incurred to finance insurance premiums of any Loan Party in the
ordinary course of business in a principal amount not to exceed at any time the
amount of such insurance premiums to be paid by such Loan Party;

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                    (viii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds in the ordinary course of
business, or pursuant to netting services or otherwise in connection with
deposit accounts;
                    (ix) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary course
of business;
                    (x) Indebtedness in connection with surety (or similar)
bonds, letters of credit and performance bonds obtained in the ordinary course
of business in connection with workers’ compensation obligations of the Loan
Parties and in connection with other surety and performance bonds in the
ordinary course of business;
                    (xi) Permitted Existing Indebtedness, including any
Permitted Refinancing Indebtedness;
                    (xii) Non-Recourse Indebtedness (including the Loan Parties’
share of Non-Recourse Indebtedness incurred by any Joint Venture) in an
aggregate principal amount not exceeding $250,000,000 at any time, provided that
(a) such Non-Recourse Indebtedness is secured solely by either (1) property
wholly owned by Borrower or another Loan Party that is not included in the
Borrowing Base, or (2) by property wholly owned by a Joint Venture, (b) Borrower
shall have provided Agent (if requested by Agent) with true, correct and
complete copies of the substantially final operative loan documents with respect
to such Indebtedness at least five (5) Business Days prior to the incurrence of
such Indebtedness, (c) Borrower shall have provided to Agent a certificate that
(i) no Default or Event of Default exists or would be caused by the incurrence
of such Indebtedness, (ii) the leverage ratio of such Non-Recourse Indebtedness
relative to the value of the Real Estate securing the same shall, at the time
such Indebtedness is incurred, be less than seventy-five percent (75%) (or
eighty-five percent (85%) in the case of such Indebtedness in respect of
Multifamily Properties), and (iii) with respect to any Non-Recourse Indebtedness
of a Joint Venture, a portion of which is allocable to the Loan Parties for
purposes of this §8.1(xii), the leverage ratio of such Non-Recourse Indebtedness
of such Joint Venture relative to the value of the Real Estate of such Joint
Venture securing the same, shall at the time such Indebtedness is incurred, be
less than seventy-five percent (75%) (or eighty-five percent (85%) in the case
of such Indebtedness in respect of Multifamily Properties); and (d) only
Permitted Recourse Undertakings shall be permitted in connection with such
Non-Recourse Indebtedness;
                    (xiii) Indebtedness (other than Non-Recourse Indebtedness or
Bond Indebtedness) in an aggregate principal amount not exceeding $75,000,000 at
any time (including the portion of all Joint Venture Indebtedness that is
recourse to any Loan Party), provided that (a) such Indebtedness is secured
solely by property wholly owned by either by Borrower or its Subsidiaries that
is not included in the Borrowing Base, or by property wholly owned by a Joint
Venture, and (b) Borrower shall have provided to Agent a certificate that (i) no
Default or Event of Default exists or would be caused by the incurrence of such
Indebtedness, (ii) the leverage ratio of such Indebtedness relative to the value
of the property securing the same shall, at the time such Indebtedness is
incurred, be less than seventy-five percent (75%) (or eighty-five percent (85%)
in the case of such Indebtedness in respect of Multifamily Properties), and
(iii) with

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respect to any Indebtedness of a Joint Venture, a portion of which is allocable
to the Loan Parties for purposes of this §8.1(xiii), the ratio of such
Indebtedness of such Joint Venture relative to the value of the Joint Venture’s
property securing the same, shall, at the time such Indebtedness is incurred, be
less than seventy-five percent (75%) (or eighty-five percent (85%) in the case
of such Indebtedness in respect of Multifamily Properties); provided, however,
that the portion of any secured surety bond Indebtedness in excess of
$15,000,000 permitted pursuant to §8.1(xiv) shall be counted against the
$75,000,000 limit provided in this paragraph;
                    (xiv) surety, statutory or appeal bonds or similar
obligations incurred in the ordinary course of business under which the Loan
Parties’ collective potential exposure shall not at any time exceed $75,000,000,
of which up to $25,000,000 may be secured by Liens pursuant to §8.2(iii);
                    (xv) Indebtedness under Commodity Hedge Agreements incurred
for bona fide hedging purposes up to a maximum aggregate exposure at any time of
$25,000,000; provided that the aggregate exposure amount may exceed such maximum
amount for a period not to exceed five (5) consecutive Business Days; and
                    (xvi) Bond Indebtedness (including any guaranties in respect
thereof by any Subsidiary of Forestar Group) in an aggregate principal amount
not exceeding $250,000,000 at any time, provided that (a) such Indebtedness is
unsecured, (b) Borrower shall have provided to Agent a certificate that no
Default or Event of Default exists or would be caused by the incurrence of such
Indebtedness, (c) if such Bond Indebtedness is not Convertible Bond
Indebtedness, the net cash proceeds from the issuance thereof must be applied
first to the repayment in full of the Term Loan and thereafter may be used for
general corporate purposes (it being understood and agreed that the net cash
proceeds from the issuance of Convertible Bond Indebtedness shall not be
required to be applied to prepay the Loans), and (d) if such Bond Indebtedness
is Convertible Bond Indebtedness and a Call Option Overlay is entered into in
conjunction therewith, the terms of such Call Option Overlay shall be those
customary for such transactions.
          §8.2 Restrictions on Liens, Etc.
     The Loan Parties will not, and will not permit any of their respective
Subsidiaries to, (a) create or incur or suffer to be created or incurred or to
exist any lien, encumbrance, mortgage, pledge, negative pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (b) transfer any of its property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; or (d) sell,
assign, pledge or otherwise encumber any accounts, contract rights, general
intangibles, chattel paper or instruments, with or without recourse
(collectively the “Liens”); provided that the Loan Parties may, and may permit
their respective Subsidiaries to, create or incur or suffer to be created or
incurred or to exist any of the following (the “Permitted Liens”):

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                    (i) Liens for taxes, assessments and other governmental
charges or claims for labor, material or supplies in respect of obligations not
overdue or being contested in good faith;
                    (ii) Liens in favor of Agent and Lenders under the Loan
Documents;
                    (iii) Liens on properties of any Loan Party or their
respective Subsidiaries other than the Mortgaged Property, any other Collateral
or any interest therein (including the rents, issues and profits therefrom) in
respect of Indebtedness which is permitted by §8.1(xi) §8.1(xii), §8.1(xiii) or
§8.1(xiv);
                    (iv) Liens arising in the ordinary course of business
(including (A) Liens of carriers, warehousemen, mechanics, landlords and
materialmen and other similar Liens imposed by law and (B) Liens incurred in
connection with worker’s compensation, unemployment compensation and other types
of social security (excluding Liens arising under ERISA) or in connection with
surety bonds, bids, performance bonds and similar obligations) for sums not
overdue or being diligently contested in good faith by appropriate proceedings
and not involving any deposits or advances or borrowed money or the deferred
purchase price of property or services and, in each case, for which it maintains
adequate reserves in accordance with GAAP and the execution or other enforcement
of which is effectively stayed;
                    (v) Liens described on Schedule 8.2 as of the Closing Date;
                    (vi) options on property and rights of transferees pending
the transfer thereof otherwise permitted by this Agreement;
                    (vii) attachments, appeal bonds, judgments and other similar
Liens, with respect to judgments that do not otherwise result in or cause an
Event of Default;
                    (viii) easements, rights of way, zoning ordinances,
entitlements, minor defects or irregularities in title or survey, building codes
and other land use laws and environmental restrictions, regulations and
ordinances, and other similar Liens regulating the use or occupancy of real
property or the activities conducted thereon which are imposed by a Governmental
Authority having jurisdiction over such real property which are not violated in
any material respect by the current use or occupancy of such real property and
do not interfere in any material respect with the ordinary operation of the
business of any Loan Party;
                    (ix) leases or subleases granted to others not interfering
in any material respect with the business of any Loan Party and any interest or
title of a lessor under any lease;
                    (x) licenses or sublicenses of intellectual property granted
in the ordinary course of business;
                    (xi) Liens arising under Article 2 or Article 4 of the
Uniform Commercial Code and customary banker’s liens and rights of set-off,
revocation, refund or chargeback in favor of banks or other financial
institutions where the Loan Parties maintain deposits in the ordinary course of
business;

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                    (xii) Liens arising from precautionary Uniform Commercial
Code financing statements regarding operating leases or consignments;
                    (xiii) Liens deemed to exist in connection with repurchase
agreements and other similar investments to the extent such Investments are
permitted under this Agreement;
                    (xiv) the replacement, extension or renewal of any Lien
permitted by clause (iii) above upon or in the same property subject thereto
arising out of the extension, renewal or replacement of the Indebtedness secured
thereby;
                    (xv) Liens existing on any asset of a Person at the time
such Person becomes a Subsidiary of Borrower and not created in contemplation of
such event;
                    (xvi) other Liens, excluding Liens on Collateral, securing
amounts (other than Indebtedness for borrowed money) in an aggregate amount not
to exceed $1,000,000; and
                    (xvii) Liens under Mineral Rights Leases which arise in the
ordinary course of the Mineral Business, which are usual and customary in
respect of Mineral Activity and secure obligations of a Loan Party under a
Mineral Rights Lease not constituting Indebtedness for borrowed money.
          §8.3 Restrictions on Investments.
     The Loan Parties will not make or permit to exist or to remain outstanding
any Investment except Investments in:
               (a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of purchase by
any Loan Party;
               (b) marketable direct obligations of any of the following:
Federal Home Loan Mortgage Corporation, Student Loan Marketing Association,
Federal Home Loan Banks, Federal National Mortgage Association, Government
National Mortgage Association, Bank for Cooperatives, Federal Intermediate
Credit Banks, Federal Financing Banks, Export-Import Bank of the United States,
Federal Land Banks, or any other agency or instrumentality of the United States
of America;
               (c) demand deposits, certificates of deposit, bankers acceptances
and time deposits of United States banks having total assets in excess of
$100,000,000; provided, however, that the aggregate amount at any time so
invested with any single bank having total assets of less than $1,000,000,000
will not exceed $200,000;
               (d) securities commonly known as “commercial paper” issued by a
corporation organized and existing under the laws of the United States of
America or any State which at the time of purchase are rated by Moody’s or by
S&P at not less than “P-1” if then rated by Moody’s, and not less than “A-1”, if
then rated by S&P;
               (e) mortgage-backed securities guaranteed by the Government
National Mortgage Association, the Federal National Mortgage Association or the
Federal Home Loan

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Mortgage Corporation and other mortgage-backed bonds which at the time of
purchase are rated by Moody’s or by S&P at not less than “Aa” if then rated by
Moody’s and not less than “AA” if then rated by S&P;
               (f) shares of so-called “money market funds” registered with the
SEC under the Investment Company Act of 1940 which maintain a level per-share
value, invest principally in investments described in the foregoing subsections
(a) through (e) and have total assets in excess of $50,000,000;
               (g) the Mortgaged Properties and the Negative Pledge Properties
and related personal property;
               (h) Investments in other Loan Parties or in wholly owned
Subsidiaries of any Loan Party that is or becomes a Guarantor substantially
contemporaneously therewith pursuant to §7.21;
               (i) Investments in Joint Ventures that are not otherwise
prohibited under this Agreement;
               (j) the acquisition of Real Estate and extensions of trade credit
in the ordinary course of business;
               (k) Investments of any Person existing at the time such Person
becomes a Subsidiary or consolidates or merges with Borrower or any of its
Subsidiaries so long as such Investments were not made in contemplation of such
Person becoming a Subsidiary or of such consolidation or merger;
               (l) any Investments received in consideration for an asset sale
permitted by this Agreement;
               (m) Investments (including Indebtedness and other obligations)
received in connection with the bankruptcy or reorganization of customers and in
settlement of delinquent obligations of, and other disputes with, customers and
suppliers in the ordinary course of business;
               (n) Investments listed on Schedule 8.3 as of the Closing Date;
               (o) Investments in an SPE Subsidiary in connection with
Non-Recourse Indebtedness; provided that (i) any such Investment in an SPE
Subsidiary is in the form of a contribution of additional Non-Recourse Assets or
as common equity, and (ii) purchases of Non-Recourse Assets pursuant to
Permitted Recourse Undertakings in connection with Non-Recourse Indebtedness;
               (p) indemnities made and surety and performance bonds and letters
of credit issued in the ordinary course of business;
               (q) Investments in connection with Hedge Agreements and Commodity
Hedge Agreements permitted under this Agreement;

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               (r) the purchase or other acquisition of property and assets or
businesses of any Person or of assets constituting a business unit, a line of
business or division of such Person, or Equity Interests in a Person that, upon
the consummation thereof, will be a Subsidiary of Borrower (including as a
result of a merger or consolidation); provided, that with respect to each
purchase or other acquisition made pursuant to this §8.3(r) (each, a “Permitted
Acquisition”):
                    (1) to the extent required by this Agreement, the Equity
Interest of such Subsidiary shall constitute Collateral and each applicable Loan
Party and any such newly created or acquired Subsidiary shall be a Guarantor;
and
                    (2) (A) immediately before and after giving pro forma effect
to any such purchase or other acquisition, no Default or Event of Default shall
exist and be continuing and (B) Borrower has delivered to Agent a pro forma
Compliance Certificate showing that after giving effect to such Investment, Loan
Parties remain in compliance with the financial covenants in §9.1;
               (s) in addition to Investments otherwise expressly permitted by
this Section, Investments by Borrower or any of its Subsidiaries in an aggregate
amount not to exceed, at any time, 2% of Consolidated Tangible Net Worth; and
               (t) Investments in connection with Distributions permitted by
§8.7.
               (u) Investment in Real Estate to the extent of a fifty percent
(50%) undivided interest in approximately 6000 acres in the form of a
distribution in respect of a fifty percent (50%) interest in a Joint Venture
with Cousins Properties (or an Affiliate of Cousins Properties) in a project
known as “TEMCO Associates” (the “TEMCO Investment”);
               (v) Investments constituting (i) interests in oil and gas
minerals or otherwise in respect of Mineral Activity and (ii) the acquisition of
additional mineral interest acreage; and
               (w) Investments in Convertible Bond Hedge Transactions and Capped
Call Transactions.
          §8.4 Merger, Consolidation.
     The Loan Parties will not, and will not permit their respective
Subsidiaries to, become a party to any dissolution, liquidation, merger,
reorganization, consolidation or other business combination, or agree to or
effect any asset acquisition or stock acquisition or other acquisition which may
have a similar effect as any of the foregoing without the prior written consent
of the Required Lenders, except that:
               (a) any Subsidiary of the Borrower may be merged or consolidated
with or into the Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or with or into any Subsidiary that is a Guarantor
(provided that (i) such Guarantor shall be the continuing or surviving
corporation or (ii) simultaneously with such transaction, the continuing or
surviving corporation shall become a Guarantor and the Borrower shall comply
with §7.21 in connection therewith);

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               (b) any Subsidiary of the Borrower may dispose of any or all of
its assets (upon voluntary liquidation or otherwise) to Borrower or any
Subsidiary that is a Guarantor;
               (c) an Excluded Subsidiary pursuant to clause (i) of the
definition thereof (i) may be merged or consolidated with or into Borrower or
any other Subsidiary of Borrower and (ii) may dispose of any or all of its
assets (upon voluntary liquidation or otherwise) pro rata to its equity holders;
and
               (d) Borrower or any Subsidiary may consummate any Investment
otherwise permitted by §8.3(r) by merger or consolidation, provided that if
(i) such merger or consolidation involves the Borrower, the Borrower is the
continuing or surviving corporation and (ii) if such merger or consolidation
involves a Guarantor, such Guarantor is the continuing or surviving corporation.
          §8.5 Sale and Leaseback.
     The Loan Parties will not, and will not permit their respective
Subsidiaries to, enter into any arrangement, directly or indirectly, whereby
such Person shall sell or transfer any Mortgaged Property or Negative Pledge
Property in order that then or thereafter such Person shall lease back such
Mortgaged Property or such Negative Pledge Property.
          §8.6 Compliance with Environmental Laws.
     The Loan Parties will not, and will not permit their respective
Subsidiaries and will use good faith efforts to not permit any tenants of any of
the Mortgaged Properties or the Negative Pledge Properties or any other Real
Estate owned by a Loan Party to do any of the following: (a) use any Mortgaged
Property or Negative Pledge Property as a facility for the handling, processing,
storage or disposal of Hazardous Substances, except for quantities of Hazardous
Substances used in the ordinary course of business and in material compliance
with all applicable Environmental Laws, (b) cause or permit to be located on any
Mortgaged Property or Negative Pledge Property any underground tank or other
underground storage receptacle for Hazardous Substances except in material
compliance with Environmental Laws, (c) generate any Hazardous Substances on any
Mortgaged Property, Negative Pledge Property or any other Real Estate owned by a
Loan Party except as generated in the ordinary course of business and in
material compliance with Environmental Laws, (d) cause a Release of Hazardous
Substances on, upon or into the Mortgaged Property, the Negative Pledge Property
or any other Real Estate owned by a Loan Party which give rise to liability
under CERCLA or any other Environmental Law, or (e) transport or arrange for the
transport of any Hazardous Substances (except as required in the ordinary course
of business and in material compliance with all Environmental Laws).
     If any Loan Party causes any Release of Hazardous Substances in violation
of Environmental Laws to occur, such Loan Party shall cause the prompt
containment and removal of such Hazardous Substances and remediation of the
Mortgaged Property or the Negative Pledge Property in material compliance with
all applicable Environmental Laws.
     At any time after an Event of Default shall have occurred and is continuing
hereunder, at any time that Agent or the Required Lenders shall have reasonable
grounds to believe that a Release of Hazardous Substances may have occurred
relating to any Mortgaged Property or

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Negative Pledge Property, Agent may at its election (and will at the request of
the Required Lenders) obtain such assessments, including, without limitation,
environmental assessments of such Mortgaged Property or such Negative Pledge
Property prepared by an Environmental Engineer as may be reasonably necessary
for the purpose of evaluating or confirming whether any Hazardous Substances
have been Released by any Loan Party on such Mortgaged Property or such Negative
Pledge Property, which Release will result in a Material Adverse Effect. Such
assessments may include detailed visual inspections of such Mortgaged Property
or such Negative Pledge Property including, without limitation, any and all
storage areas, storage tanks, drains, dry wells and leaching areas, and the
taking of soil or other samples, as well as such other investigations or
analyses as are reasonably necessary for a determination of whether such Release
results in a Material Adverse Effect. All reasonable costs related to such
environmental assessments shall be at the sole cost and expense of Borrower.
     At any time after an Event of Default, Agent may, but shall never be
obligated to, remove or cause the removal of any Hazardous Substances which are
in violation of any Environmental Law from a Mortgaged Property or Negative
Pledge Property (or if removal is prohibited by any Environmental Law or any
other applicable law, physical restriction or other reason, take or cause the
taking of such other action as is required to cause any Mortgaged Property or
Negative Pledge Property to be in material compliance with any Environmental
Law) if any other Loan Party or any of its Subsidiaries fails to materially
comply with its obligations hereunder with respect thereto; and Agent and its
designees are hereby granted access to the Mortgaged Property and the Negative
Pledge Property at any reasonable time or times, upon reasonable notice, to
remove or cause such removal or to take or cause the taking of any such other
action. All costs, including, without limitation, the reasonable costs incurred
by Agent in taking the foregoing action, damages, liabilities, losses, claims,
expenses (including attorneys’ fees and disbursements) which are incurred by
Agent, as the result of any Loan Party’s failure to comply with the provisions
of this §8.6, shall be paid by Borrower or the other applicable Loan Party to
Agent upon demand by Agent and shall be additional obligations secured by the
Security Documents, except for costs resulting from or related to Agent’s gross
negligence or willful misconduct.
          §8.7 Distributions.
     No Distributions shall be made by the Loan Parties, or any of them, except
as permitted in this §8.7. Distributions are permitted as follows:
(a) Borrower’s Subsidiaries may make Distributions to Borrower (whether directly
or indirectly through one or more intermediate Distributions to Borrower’s other
Subsidiaries), (b) so long as no Default or Event of Default shall have occurred
and be continuing, Forestar Group may purchase Forestar Group’s common stock or
common stock options from present or former officers, directors or employees of
the Loan Parties upon the death, disability or termination of employment of such
officer or employer, and Borrower may make Distributions to Forestar Group to
enable Forestar Group to make such purchases, (c) Forestar Group may make
repurchases of its common stock which are deemed to occur upon the cashless
exercise of options or warrants and may repurchase restricted common stock held
by present or former officers, directors or employees to the extent representing
such Person’s tax liability for vested restricted stock, (d) Forestar Group may
declare and make Distributions to its stockholders in the form of equity
securities pursuant to the Rights Agreement, (e) any Loan Party may declare and
make Distributions payable solely in its common stock, (f) any Subsidiary may
make Distributions to Borrower, and Borrower may make Distributions to

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Forestar Group, to pay any taxes that are due and payable, (g) Borrower may make
Distributions to Forestar Group and Forestar Group may make Distributions in
connection with Permitted Bond Indebtedness and the Call Option Overlay, and
(h) so long as no Default or Event of Default shall have occurred and be
continuing, Borrower may make other Distributions to Forestar Group (and
Forestar Group may make Distributions to its stockholders), provided that, for
purposes of this clause (h), (i) the Total Leverage Ratio as of the last day of
the most recently completed fiscal quarter is less than thirty percent (30%),
(ii) the Interest Coverage Ratio for the most recent Test Period exceeds
3.0:1.0, (iii) the Revenues/Capital Expenditures Ratio for the most recent Test
Period is greater than 1.5:1.0, and (iv) Available Liquidity as of the last day
of the most recently completed fiscal quarter is not less than $125,000,000, all
of the requirements of clauses (i), (ii), (iii) and (iv) tested after giving pro
forma effect to the proposed Distribution, as if such Distribution had occurred
on the last day of the most recently completed fiscal quarter or the first day
of the relevant Test Period, as applicable.
          §8.8 Asset Sales.
     The Loan Parties shall not, in any single transaction or series of related
transactions, directly or indirectly, hypothecate, sell, assign, transfer,
mortgage, pledge, encumber or otherwise dispose of any Mortgaged Property,
Negative Pledge Property, any Equity Interests held by a Loan Party in any other
Loan Party or in any of their respective Subsidiaries or Joint Ventures, or any
other Collateral, or permit the same to be sold, assigned, transferred,
conveyed, contracted for or encumbered, or otherwise disposed of, or otherwise
incur, create, assume or permit to exist any mortgage, pledge, security
interest, encumbrance, Lien or charge of any kind upon such assets (other than
to Agent or in respect of Permitted Liens), nor shall the Loan Parties, or any
of them, whether in a single transaction or a series of related transactions,
convey, lease with option to purchase, enter into a contract for sale, or grant
an option to purchase all or any portion of such assets, except as follows:
               (a) any Mortgaged Property, or any portion thereof or interest
therein, may be sold, transferred, conveyed or otherwise disposed of if such
property is entitled to be released, and is in fact released, from the Security
Documents to which it is subject pursuant to the provisions of §5.3;
               (b) the sale of Lots from inventory in the ordinary course of
business or the donation, dedication or other transfer of common areas, streets
and similar areas in connection with the Development of Real Estate;
               (c) the sale or transfer of any other Real Estate (i.e., other
than Mortgaged Property and other than Lots), in a single transaction or a
series of related transactions; provided that if the consideration for, or book
value of, such Real Estate, whichever is greater, exceeds $25,000,000, Borrower
shall provide Agent with (i) notice prior to such sale or transfer, (ii) a pro
forma Compliance Certificate showing that no Default or Event of Default exists
either immediately prior to or after giving effect to such sale, transfer or
disposition, and that immediately after giving effect to such sale, transfer or
disposition, Loan Parties remain in compliance with the financial covenants in
§9.1, and (iii) if the Real Estate in question is included in the Borrowing
Base, a pro forma Borrowing Base Certificate showing that after giving effect

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to such sale or transfer, Loan Parties remain in compliance with all Borrowing
Base provisions in §9.2.
               (d) transfers, conveyances or other dispositions of any Real
Estate resulting from any condemnation;
               (e) transfers, conveyances or other dispositions of any property
resulting from the granting of Permitted Liens;
               (f) sales of timber and mineral rights in the ordinary course of
business or pursuant to timber leases, timber cutting contracts and/or Mineral
Rights Leases;
               (g) sales and dispositions of assets that are obsolete, worn out
or no longer used or useful in the applicable Loan Party’s business;
               (h) dispositions of assets by a Subsidiary of Borrower to
Borrower or another Subsidiary of Borrower that is a Guarantor;
               (i) the cancellation of intercompany Indebtedness with other Loan
Parties permitted under this Agreement;
               (j) dispositions or liquidations of cash and other Investments in
the ordinary course of business;
               (k) the termination, surrender or sublease of leases (as lessee),
licenses (as licensee), subleases (as sublessee) and sublicenses (as
sublicensee) in the ordinary course of business;
               (l) the lease, sublease or license or sublicense of real or
personal property, including patents, trademarks and other intellectual property
rights that do not materially interfere with the business of such Loan Party;
               (m) the settlement or write-off of accounts receivable in the
ordinary course of business;
               (n) the sale or other disposition of Equity Interests in Joint
Ventures and Subsidiaries in a single transaction or series of related
transactions; provided that if the consideration exceeds $10,000,000 Borrower
shall provide Agent with (i) notice prior to such sale or disposition, and
(ii) a pro forma Compliance Certificate showing that no Default or Event of
Default exists either immediately prior to or after giving effect to such sale
or disposition, and that immediately after giving effect to such sale or
disposition, the Loan Parties remain in compliance with the financial covenants
in §9.1; and
               (o) transactions permitted by §8.4.
          §8.9 [RESERVED]

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          §8.10 Restriction on Prepayment of Indebtedness.
     Without limiting the terms of §8.1, Borrower shall not prepay, redeem or
purchase the principal amount of, in whole or in part, or cause the acceleration
of, any Indebtedness other than (i) the Obligations after the occurrence and
during the continuation of any Event of Default, (ii) any mandatory prepayment
required by the documents evidencing or securing such Indebtedness, or (iii) any
redemption and/or conversion or exchange required by the terms of any Permitted
Bond Indebtedness.
          §8.11 [RESERVED]
          §8.12 Negative Pledges, Restrictive Agreements, etc.
     The Loan Parties will not, and will not permit any of their respective
Subsidiaries to, enter into any agreement (excluding this Agreement and any
other Loan Document) prohibiting or restricting:
               (a) the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired, except for Liens
expressly permitted pursuant to §8.2;
               (b) the ability of Borrower or any other Loan Party to amend or
otherwise modify this Agreement or any other Loan Document; or
               (c) the ability of any Subsidiary of Borrower (other than an SPE
Subsidiary) to make any payments, directly or indirectly, to Borrower by way of
dividends, distributions, return on equity, advances, repayments of loans or
advances, reimbursements of management and other intercompany charges, expenses
and accruals or other returns on investments, or any other agreement or
arrangement which restricts the ability of any such Subsidiary to make any
payment or transfer any property or asset, directly or indirectly, to Borrower,
in each case other than (A) customary restrictions and conditions contained in
agreements relating to the sale of all or any part of the Equity Interests or
assets of any Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary or assets to be sold and such sale is
permitted hereunder, (B) restrictions or conditions imposed by any agreement
relating to Indebtedness permitted under this Agreement if such restrictions or
conditions apply only to the property or assets securing such Indebtedness,
(C) customary provisions in leases, licenses and other contracts restricting the
assignment thereof, (D) provisions relating to the transfer, assignment or
sublet of any lease or other agreement entered into in the ordinary course of
business, (E) restrictions or conditions on a Subsidiary existing prior to such
Subsidiary becoming a Subsidiary of a Borrower, so long as such restriction or
condition only applies to such Subsidiary, (F) restrictions contained in the
operative agreements of any Joint Ventures against transferring, assigning or
pledging the Equity Interests in such Joint Ventures or any Real Estate held by
a Loan Party in connection with the TEMCO Investment and (G) restrictions
contained in agreements governing Permitted Bond Indebtedness so long as
customary and usual for transactions of that type.

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          §8.13 Organizational Documents.
     Neither Borrower nor any other Loan Party shall modify, amend, cancel,
release, surrender, terminate or permit the modification, amendment,
cancellation, release, surrender or termination of, any of its Organizational
Documents if such action could reasonably be expected to adversely affect the
Agent and Lenders, it being understood and agreed that Forestar Group shall be
permitted to amend its Organizational Documents in order to incur Convertible
Bond Indebtedness.
          §8.14 Affiliate Transactions.
     Except for the Loan Documents and the other agreements listed on
Schedule 6.15, the Loan Parties will not, and will not permit any of their
respective Subsidiaries to, enter into, or cause, suffer or permit to exist any
arrangement or contract with, any of their respective Affiliates unless such
arrangement or contract:
               (a) is not otherwise prohibited by this Agreement or the other
Loan Documents;
               (b) (i) is in the ordinary course of business of the applicable
Loan Party or Loan Parties, or the applicable Subsidiary or Subsidiaries and
(ii) which is on terms which are not materially less favorable to any such Loan
Party or Subsidiary than are obtainable from any Person which is not one of its
Affiliates.
     The foregoing provisions of this §8.14 shall not prohibit any Loan Party
from engaging in any of the following transactions: (i) any transaction by and
between or among the Loan Parties, (ii) entering into any employment agreement
or equity incentive arrangements, with any employee, officer, director, member
or consultant of any Loan Party, in each case, in the ordinary course of
business, (iii) any Distributions or other payments permitted under this
Agreement, (iv) the payment of fees and compensation to, and customary
indemnities and reimbursements provided on behalf of, officers, directors,
employees and agents of any Loan Party or its Subsidiaries to the extent not
prohibited by this Agreement, (v) Investments in Joint Ventures permitted under
this Agreement and (vi) any disposition of Non-Recourse Assets in connection
with any Non-Recourse Indebtedness, as and to the extent otherwise permitted
under this Agreement.
          §8.15 Management Fees, Expenses, etc.
     The Loan Parties will not, or will not permit any of their respective
Subsidiaries, to pay management, advisory, consulting, director or other similar
fees, other than:
                    (i) fees payable to Agent, Lenders or any of their
Affiliates as in effect on the date hereof;
                    (ii) fees payable to non-Affiliates engaged on an
arm’s-length basis; or
                    (iii) director fees and reimbursement of out-of-pocket
expenses.

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          §8.16 Deposit Account Control Agreements.
     Borrower will cause its primary operating account to be subject to a
Deposit Account Control Agreement with a Deposit Account Bank.
          §8.17 [RESERVED]
          §8.18 Modification of Certain Agreements.
               (a) Subject to clause (b) of this Section and other applicable
terms, no Loan Party will enter into or consent to any amendment, supplement,
waiver or other modification of any of the terms or provisions contained in, or
applicable to, the Temple-Inland Agreements which in any case:
                    (i) is contrary to the terms of this Agreement or any other
Loan Document; or
                    (ii) could reasonably be expected to result in a Material
Adverse Effect.
               (b) No Loan Party will enter into or consent to any amendment,
supplement, waiver or other modification of any of the terms or provisions
contained in, or applicable to, the Timber Purchase Agreement in a manner
contrary to §7.14(e).
               (c) No Loan Party will enter into or consent, or permit any of
its Subsidiaries to enter into or consent, to any amendment, supplement, waiver
or other modification of any of the terms or provisions contained in, or
applicable to, any document, instrument or agreement evidencing, guaranteeing,
securing or otherwise relating to Indebtedness permitted pursuant to §8.1(xii)
or §8.1(xiii), or increase the amount of such Indebtedness if the effect would
be to cause such Indebtedness to no longer be permitted under the relevant
clause of §8.1 if such Indebtedness were deemed to be incurred on the date such
amendment, supplement, waiver, modification, increase or release is to be
effective.
§9. FINANCIAL COVENANTS OF BORROWER
     The Loan Parties covenant and agree that, so long as any Loan, Note, Letter
of Credit or other Obligation is outstanding or any Lender has any obligation to
make any Loans or Agent has any obligation to issue any Letter of Credit:
          §9.1 Corporate Financial Covenants of Loan Parties.
               (a) Interest Coverage Ratio. The Loan Parties will not, as of the
end of any fiscal quarter of Forestar Group, permit the Interest Coverage Ratio
for the fiscal quarter then ended and the immediately preceding three (3) fiscal
quarters (treated as a single accounting period) (the “Test Period”), to be less
than 1.05:1.0; provided, however, that unless the Interest Coverage Ratio equals
or exceeds 1.50:1.0 for the most recent Test Period (it being understood that an
Interest Coverage Ratio equal to or greater than 1.05:1.0 but less than 1.50:1.0
for any Test Period will not constitute, in and of itself, a Default or Event of
Default), (i) the Loan Parties may not (A) make additional Investments in the
form of cash or other transfers of assets of a Loan

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Party otherwise permitted under §8.3 (except those which the Loan Parties are
contractually obligated to make pursuant to agreements entered into previously)
except with the prior written approval of Agent who may, in its discretion,
approve up to $10,000,000 of additional Investments, (B) make Distributions
otherwise permitted under §8.7(b) or (h), or (C) make Acquisition Expenditures
or Development Expenditures except those which the Loan Parties are
contractually obligated to make pursuant to agreements entered into previously,
(ii) interest on the Loans shall accrue at a rate per annum equal to two percent
(2.0%) above the rate that would otherwise be applicable, and (iii) Agent shall
determine, in consultation with Borrower, an amount constituting six (6) months
of projected interest on the Loans plus six (6) months of projected general and
administrative expenses of the Loan Parties based on the budget submitted under
§7.4(h), which amount shall either be deposited in cash by the Loan Parties in a
reserve account under Agent’s control as security for the Loans or deducted as a
reserve from the Borrowing Base, whichever Borrower shall elect. Upon the
Interest Coverage Ratio being equal to or in excess of 1.50:1.0 for any
subsequent Test Period, then all restrictions in the immediately preceding
sentence shall cease to exist and any cash deposited or any Borrowing Base
reserve established shall be released, subject to the automatic reinstatement of
such restrictions (without the need for any notice or other action by the Agent)
in the event that the Interest Coverage Ratio for any subsequent Testing Period
is not at least 1.50:1.0.
               (b) Revenues/Capital Expenditures Ratio. The Loan Parties will
not, for any Test Period, permit the Revenues/Capital Expenditures Ratio as of
the last day of such Test Period to be less than 1.0:1.0.
               (c) Total Leverage Ratio. The Loan Parties will not permit the
Total Leverage Ratio as of the last day of any fiscal quarter to exceed forty
percent (40%); provided, however, that during the Extension Period, the Total
Leverage Ratio as of the last day of any fiscal quarter may not exceed thirty
percent (30%).
               (d) Liquidity. In order for the Loan Parties to (i) make
additional Investments in the form of cash or other transfers of assets of a
Loan Party otherwise permitted under §8.3 (other than those which the Loan
Parties are contractually obligated to make pursuant to agreements entered into
previously and other than as approved by Agent in writing), (ii) make
Distributions otherwise permitted under §8.7(b) or (h), or (iii) make
Acquisition Expenditures or Development Expenditures other than those which the
Loan Parties are contractually obligated to make pursuant to agreements entered
into previously, Borrower must have Available Liquidity of at least the lesser
of (x) $35,000,000, or (y) ten percent (10%) of the aggregate Commitments then
in effect. For avoidance of doubt, the failure to have such minimum Available
Liquidity shall not constitute, in and of itself, a Default or Event of Default.
               (e) Net Worth. The Loan Parties will not, as of the last day of
any fiscal quarter, permit the Consolidated Tangible Net Worth of Forestar Group
and its Subsidiaries to be less than the sum of (i) $402,800,000, plus
(ii) eighty-five percent (85%) of the aggregate net proceeds received by
Forestar Group after the Closing Date in connection with any Equity Offering to
any other Person (including for the purposes hereof, any proceeds received from
any offering to current stockholders of Forestar Group), plus (iii) seventy-five
percent (75%) of all positive Net Income, on a cumulative basis, for each fiscal
quarter ended after the Closing Date and on or before the fiscal quarter being
tested.

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     The determination of the relevant Loan Parties’ compliance with the
foregoing covenants and the components thereof by Agent shall be conclusive and
binding absent manifest error.
          §9.2 Borrowing Base Covenants.
               (a) All assets included in the Borrowing Base must be owned by
Borrower or a Guarantor and must be unencumbered except for Permitted Liens;
provided, however, that for purposes of this paragraph, the term “Permitted
Liens” shall not include Liens permitted under clauses (iii), (xiv) and (xv) of
§8.2.
               (b) Borrower shall not at any time permit the sum of (i) the
Outstanding principal balance of the Loans, plus (ii) the Outstanding Letters of
Credit, plus (iii) the aggregate outstanding principal amount of Permitted Bond
Indebtedness to be greater than the Borrowing Base; provided, however, that
Borrower may elect at any time to secure all of the Borrowing Base Assets (other
than the Mineral Business) by making them Mortgaged Properties, and upon all
such Borrowing Base Assets becoming Mortgaged Properties, the foregoing clause
(iii) shall no longer be included in such sum.
          §9.3 Value to Commitment.
     Borrower shall not at any time permit the ratio of (i) the sum of
Timberland Value, plus High Value Timberland Amount, plus the Raw Entitled Land
Value with respect to any Raw Entitled Land that is part of the Mortgaged
Property, and plus Mineral Business Enterprise Value to (ii) the aggregate
Commitments (after giving effect to any reductions in the aggregate Commitments
on such day), to be less than 1.60:1.0.
§10. CLOSING CONDITIONS
     The obligations of Agent and Lenders to make the Loans and Agent to issue
any Letters of Credit shall be subject to the satisfaction of the following
conditions precedent on or prior to the Closing Date:
          §10.1 Loan Documents.
     Each of the Loan Documents shall have been duly executed and delivered by
the respective parties thereto, shall be in full force and effect and shall be
in form and substance satisfactory to the Required Lenders. Agent shall have
received a fully executed copy of each such document, except that each Lender
shall have received a fully executed counterpart of its Note or Notes.
          §10.2 Certified Copies of Organizational Documents.
     Agent shall have received from Borrower a copy, certified as of a recent
date by the appropriate officer of each State in which Borrower, and any other
Loan Party is organized or in which the Mortgaged Properties are located and a
duly authorized member, manager, partner or officer of Borrower and each other
Loan Party, as applicable, to be true and complete, of the Organizational
Documents of Borrower and each other Loan Party, as applicable, or its
qualification to do business, as applicable, as in effect on such date of
certification.

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          §10.3 Resolutions.
     All action on the part of Borrower and each other Loan Party necessary for
the valid execution, delivery and performance by Borrower and each other Loan
Party of this Agreement and the other Loan Documents (as applicable) to which
such Person is or is to become a party shall have been duly and effectively
taken, and evidence thereof satisfactory to Agent shall have been provided to
Agent. Agent shall have received from Borrower and each other Loan Party true
copies of their respective resolutions adopted by their respective board of
directors or other governing body authorizing the transactions described herein,
each certified by its secretary, assistant secretary or other appropriate
representative as of a recent date to be true and complete.
          §10.4 Incumbency Certificate; Authorized Signers.
     Agent shall have received from Borrower and each other Loan Party, an
incumbency certificate, dated as of the Closing Date, signed by a duly
authorized officer of Borrower or such other Loan Party (as applicable) and
giving the name and bearing a specimen signature of each individual who shall be
authorized to sign, in the name and on behalf of Borrower or such other Loan
Party, each of the Loan Documents to which such Person is or is to become a
party. Agent shall have also received from Borrower a certificate, dated as of
the Closing Date, signed by a duly authorized member of Borrower and giving the
name and specimen signature of each individual who shall be authorized to make
Loan Requests, Letter of Credit Requests and Conversion Requests, and give
notices and to take other action on behalf of Borrower under the Loan Documents.
          §10.5 Opinion of Counsel.
     Agent shall have received a favorable opinion addressed to Lenders and
Agent and dated as of the Closing Date, in form and substance reasonably
satisfactory to Agent, from counsel of Borrower and the other Loan Parties, and
counsel in such other states as may be requested by Agent, as to such matters as
Agent shall reasonably request.
          §10.6 Payment of Fees.
     Borrower shall have paid to Agent the fees payable pursuant to §4.2.
          §10.7 Insurance.
     Agent shall have received evidence satisfactory to it that the insurance
coverages required by this Agreement or the other Loan Documents are in effect.
          §10.8 Performance; No Default.
     Borrower and each of the other Loan Parties shall have performed and
complied with all terms and conditions herein required to be performed or
complied with by them on or prior to the Closing Date, and on the Closing Date
there shall exist no Default or Event of Default.

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          §10.9 Representations and Warranties.
     The representations and warranties made by Borrower and each of the other
Loan Parties in the Loan Documents or otherwise made by or on behalf of Borrower
and each of the other Loan Parties in connection therewith on the date thereof
shall have been true and correct in all material respects when made and shall
also be true and correct in all material respects on the Closing Date, and Agent
shall have received written confirmation thereof from the Loan Parties.
          §10.10 Proceedings and Documents.
     All proceedings in connection with the transactions contemplated by this
Agreement and the other Loan Documents shall be reasonably satisfactory to Agent
and Agent’s Special Counsel in form and substance, and Agent shall have received
all information and such counterpart originals or certified copies of such
documents and such other certificates, opinions or documents as Agent and
Agent’s Special Counsel may reasonably require. No proceeding challenging or
seeking to enjoin any of the transactions contemplated by the Loan Documents, or
which could reasonably be expected to have a Material Adverse Effect shall be
pending or shall have been threatened.
          §10.11 Mortgaged Property Documents.
     The Mortgaged Property Documents for each Mortgaged Property shall have
been delivered to Agent at Borrower’s expense, granting Agent a first-priority
Lien on the Mortgaged Property, subject only to Permitted Liens. Subject to
§5.8, Borrower will 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 Loans made on the Closing Date or
the recording of the Mortgaged Property Documents to any state or any county or
municipality thereof in which any of the 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 the Mortgaged Property located in such state secure
Borrower’s obligation with respect to the Loans made on the Closing Date.
          §10.12 Surveys and Title Policies.
     Agent shall have received the Surveys and Title Policies in the possession
of Borrower or the other Loan Parties as of the Closing Date.
          §10.13 Compliance Certificate.
     A Compliance Certificate dated as of the date of the Closing Date
demonstrating compliance with each of the covenants calculated therein as of the
most recent fiscal quarter end for which Borrower has provided financial
statements under §6.4 adjusted in the best good faith estimate of Borrower dated
as of the date of the Closing Date shall have been delivered to Agent, and
calculated on a pro forma basis after giving effect to the Loans made or to be
made on the Closing Date and the application of the proceeds thereof, as if such
Loans and application of proceeds were made as of the first day of the relevant
Test Period.
          §10.14 [RESERVED]

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           §10.15 Other Documents.
     Agent shall have received executed copies of all other material agreements
as Agent may have reasonably requested.
          §10.16 No Condemnation/Taking.
     Agent shall have received satisfactory evidence that no condemnation
proceedings are pending or, to Borrower’s Knowledge, threatened against any
Mortgaged Property or any Negative Pledge Property or, if any such proceedings
are pending or threatened, identifying the same and the Mortgaged Property or
the Negative Pledge Property affected thereby and Agent shall have determined
that none of such proceedings is or will be material to the Mortgaged Property
or the Negative Pledge Property affected thereby.
          §10.17 [RESERVED]
          §10.18 No Litigation.
     Agent shall have received satisfactory evidence that there are no actions,
suits, investigations or proceedings pending or threatened, in any court or
before any arbitrator or other Governmental Authority that purports to adversely
affect any Loan Party or Loan Parties, or any Subsidiary or Joint Venture
thereof, or any transaction contemplated hereby, that could reasonably be
expected to have a Material Adverse Effect.
          §10.19 Other.
     Agent shall have reviewed such other documents, instruments, certificates,
opinions, assurances, consents and approvals as Agent or Agent’s Special Counsel
may reasonably have requested.
§11. CONDITIONS TO ALL BORROWINGS AND LETTERS OF CREDIT
     The obligations of Lenders to make any Loan and the obligation of Agent to
issue any Letter of Credit, whether on or after the Closing Date, shall also be
subject to the satisfaction of the following conditions precedent:
          §11.1 Representations True; No Default.
     Each of the representations and warranties made by Borrower or the other
Loan Parties contained in this Agreement, 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 both as of the date as of which
they were made and shall also be true in all material respects as of the time of
the making of such Loan or the issuance of such Letter of Credit (as the case
may be), with the same effect as if made at and as of that time, 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), and no Default or Event
of

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Default shall have occurred and be continuing, or shall result from the making
of such Loan or the issuance of such Letter of Credit.
          §11.2 No Legal Impediment.
     No change shall have occurred in any law or regulations thereunder or
interpretations thereof that in the reasonable opinion of any Lender would make
it illegal for such Lender to make such Loan or for Agent to issue such Letter
of Credit.
          §11.3 Borrowing Documents.
     Agent shall have received a fully completed Loan Request for such Loan and
the other documents and information as required by §2.6. In the case of any
request for a Letter of Credit, Agent shall have received a fully completed
Letter of Credit Request.
§12. EVENTS OF DEFAULT; ACCELERATION; ETC.
          §12.1 Events of Default and Acceleration.
     If any of the following events (“Events of Default” or, if the giving of
notice or the lapse of time or both is required, then, prior to such notice or
lapse of time, “Defaults”) shall occur:
               (a) Borrower shall fail to pay any principal of the Loans when
the same shall become due and payable, whether at the stated date of maturity or
any accelerated date of maturity or at any other date fixed for payment;
               (b) Borrower shall fail to pay any interest on the Loans or any
other sums due hereunder or under any of the other Loan Documents when the same
shall become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment, and such
failure shall continue for ten (10) days (provided that such grace period will
not apply to interest due upon the maturity of the Obligations);
               (c) Borrower or any other Loan Party shall fail to comply with
any covenant contained in §7.4, §7.9, §7.11, §7.21, §8 or §9 (subject to the
provisos contained in each of §9.1(a) and (d));
               (d) Borrower or any other Loan Party shall fail to perform any
other term, covenant or agreement contained herein or in any of the other Loan
Documents (other than those specified in the other subclauses of this §12); and
such failure shall continue for thirty (30) days after written notice thereof
shall have been given to Borrower by Agent;
               (e) Any representation or warranty made by any Loan Party in this
Agreement or any other Loan Document, or in any report, certificate, financial
statement, request for a Loan or a Letter of Credit, or in any other document or
instrument delivered pursuant to or in connection with this Agreement, any
advance of a Loan, the issuance of any Letter of Credit or any of the other Loan
Documents shall prove to have been false or misleading in any material respect
upon the date when made or deemed to have been made or repeated;

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               (f) Any Loan Party shall fail to pay at maturity or otherwise
when due, or within any applicable period of grace, any obligation for borrowed
money or credit received or other Indebtedness (other than Non-Recourse
Indebtedness) having an aggregate principal amount outstanding of at least
$10,000,000, or fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound, evidencing or
securing any such borrowed money or credit received or other Indebtedness for
such period of time as would permit (assuming the giving of appropriate notice
if required) the holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof;
               (g) Any Loan Party (1) shall make an assignment for the benefit
of creditors, or admit in writing its general inability to pay or generally fail
to pay its debts as they mature or become due, or shall petition or apply for
the appointment of a trustee or other custodian, liquidator or receiver of any
Loan Party or of any substantial part of the assets of any thereof, including,
without limitation, any Mortgaged Property or any Negative Pledge Property,
(2) shall commence any case or other proceeding relating to any Loan Party under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction, now or hereafter
in effect, or (3) shall take any action to authorize or in furtherance of any of
the foregoing;
               (h) A petition or application shall be filed for the appointment
of a trustee or other custodian, liquidator or receiver of any Loan Party, or
any substantial part of the assets of any thereof, including, without
limitation, any Mortgaged Property or any Negative Pledge Property, or a case or
other proceeding shall be commenced against any Loan Party under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law of any jurisdiction, now or hereafter in effect, and
any Loan Party thereof shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition, application, case or proceeding shall not
have been dismissed within ninety (90) days following the filing or commencement
thereof;
               (i) A decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating any Loan Party thereof
bankrupt or insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in respect of any Loan
Party thereof in an involuntary case under federal bankruptcy laws as now or
hereafter constituted;
               (j) There shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days, whether or not consecutive, any final
judgment against any Loan Party, or any Subsidiary thereof, that, with other
outstanding final judgments, undischarged, against the Loan Parties and their
Subsidiaries (or any of them) exceeds in the aggregate $5,000,000 (to the extent
not paid or covered by insurance);
               (k) If any of the Loan Documents shall be canceled, terminated,
revoked or rescinded otherwise than in accordance with the terms thereof or with
the express prior written agreement, consent or approval of Lenders, or any
action at law, suit in equity or other legal proceeding to cancel, revoke or
rescind any of the Loan Documents shall be commenced by or on behalf of any Loan
Party or any of their respective stockholders, partners, members or
beneficiaries, or any court or any other governmental or regulatory authority or
agency of

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competent jurisdiction shall make a determination that, or issue a judgment,
order, decree or ruling to the effect that, any one or more of the Loan
Documents is illegal, invalid or unenforceable in accordance with the terms
thereof;
               (l) Any dissolution, termination, partial or complete
liquidation, merger or consolidation of any Loan Party, or any Subsidiary
thereof, or any sale, transfer or other disposition of the assets of any Loan
Party, other than as permitted under the terms of this Agreement or the other
Loan Documents;
               (m) Any Loan Party shall be indicted for a federal crime, a
punishment for which could include the forfeiture of any assets of such Person
included in the Collateral or the Property;
               (n) With respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred that reasonably could be expected to result
in liability of any of any Loan Party to the PBGC or such Guaranteed Pension
Plan in an aggregate amount exceeding $1,000,000 and such event in the
circumstances occurring reasonably could constitute grounds for the termination
of such Guaranteed Pension Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such
Guaranteed Pension Plan; or a trustee shall have been appointed by the United
States District Court to administer such Guaranteed Pension Plan; or the PBGC
shall have instituted proceedings to terminate such Guaranteed Pension Plan;
               (o) A Change of Control shall occur without the prior written
approval of all of Lenders (which consent may be withheld by Lenders in their
sole and absolute discretion);
               (p) Any Event of Default, as defined in any of the other Loan
Documents, shall occur;
               (q) Any amendment to or termination of a financing statement
naming any Loan Party as debtor and Agent as secured party relating to the
Collateral, or any correction statement with respect thereto, is filed in any
jurisdiction by, or caused by, or at the instance of any Loan Party without the
prior written consent of Agent (except to the extent of a release of Collateral
permitted by this Agreement); or any amendment to or termination of a financing
statement naming any Loan Party as debtor and Agent as secured party, or any
correction statement with respect thereto, is filed in any jurisdiction by any
party other than Agent or Agent’s counsel (or by a Loan Party at Agent’s
direction) without the prior written consent of Agent and Borrower or the
affected other Loan Party fails to use its best efforts to cause the effect of
such filing to be completely nullified to the reasonable satisfaction of Agent
within ten (10) days after notice to Borrower thereof; or
               (r) Temple-Inland shall make any written claim for indemnity
against Forestar Group under the Spin-off Tax Sharing Agreement related to the
taxable nature of the Spin-off Transaction in excess of $25,000,000;
then, and in any such event, Agent may, and upon the request of the Required
Lenders shall, by notice in writing to Borrower declare all amounts owing with
respect to this Agreement, the Notes and the other Loan Documents to be, and
they shall thereupon forthwith become,

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immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by Borrower; provided that
in the event of any Event of Default specified in §12.1(g), §12.1(h) or
§12.1(i), all such amounts shall become immediately due and payable
automatically and without any requirement of notice from any of Lenders or
Agent.
          §12.2 Limitation of Cure Periods.
     Notwithstanding anything in this Agreement or any other Loan Document to
the contrary, any reference in this Agreement or any other Loan Document to “the
continuance of a default” or “the continuance of an Event of Default” or any
similar phrase shall not create or be deemed to create any right on the part of
Borrower or any other party to cure any default following the expiration of any
applicable grace or notice and cure period.
          §12.3 Termination of Commitments.
     If any one or more Events of Default specified in §12.1(g), §12.1(h) or
§12.1(i) shall occur, then immediately and without any action on the part of
Agent or any Lender any unused portion of the credit hereunder shall terminate
and Lenders shall be relieved of all obligations to make Loans to Borrower, and
Agent shall be relieved of any further obligation to issue Letters of Credit,
pursuant to this Agreement. If any other Event of Default shall have occurred
and be continuing, Agent may, and upon the election of the Required Lenders
shall, by notice to Borrower terminate the obligation to make Loans to Borrower
and to issue Letters of Credit hereunder. No termination under this §12.3 shall
relieve Borrower or any other Loan Party of their respective obligations to
Lenders arising under this Agreement or the other Loan Documents. Nothing in
this Section shall limit or impair the terms of this Agreement (including §2.1)
which provide that Revolving Lenders shall have no obligation to make Revolving
Loans upon the occurrence of a Default or Event of Default.
          §12.4 Remedies.
               (a) In case any one or more of the Events of Default shall have
occurred and be continuing, and whether or not Lenders shall have accelerated
the maturity of the Loans and other Obligations pursuant to §12.1, Agent on
behalf of Lenders may, and upon direction of the Required Lenders shall, proceed
to protect and enforce their rights and remedies under this Agreement, the Notes
or any of the other Loan Documents by suit in equity, action at law or other
appropriate proceeding, whether for the specific performance of any covenant or
agreement contained in this Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations are evidenced, including to the
full extent permitted by applicable law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right. No remedy herein conferred upon Agent or the holder of
any Note is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law. In the event that all or any portion of the Obligations
is collected by or through an attorney-at-law, Borrower shall pay all costs of
collection including, but not limited to, reasonable attorney’s fees.
Notwithstanding the provisions of this Agreement providing that the Loans may be
evidenced by multiple Notes in favor of Lenders, Lenders

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acknowledge and agree that only Agent may exercise any remedies arising by
reason of a Default or Event of Default, including without limitation, bringing
any suit for collection of any Note. Notwithstanding anything herein to the
contrary, upon the occurrence of any Event of Default, an amount equal to the
aggregate amount of the Outstanding Letters of Credit shall, at the Required
Lenders’ option, without demand or further notice to Borrower, be deemed to have
been paid or disbursed by Agent under the Letter of Credit and a Revolving Loan
to Borrower from the Revolving Lenders in such amount to have been made and
accepted, which Revolving Loan shall be immediately due and payable.
          §12.5 Distribution of Collateral Proceeds.
     In the event that, following the occurrence or during the continuance of
any Event of Default, any monies are received in connection with the enforcement
of any of the Loan Documents, or otherwise with respect to the realization upon
any of the assets of Borrower or any other Person liable with respect to the
Obligations (including the Collateral), such monies shall be distributed for
application as follows:
               (a) First, to the payment of, or (as the case may be) the
reimbursement of, Agent for or in respect of all reasonable costs, expenses,
disbursements and losses which shall have been incurred or sustained by Agent to
protect or preserve the Collateral or in connection with the collection of such
monies by Agent, for the exercise, protection or enforcement by Agent of all or
any of the rights, remedies, powers and privileges of Agent under this Agreement
or any of the other Loan Documents or in respect of the Collateral or in support
of any provision of adequate indemnity to Agent against any taxes or liens which
by law shall have, or may have, priority over the rights of Agent to such
monies;
               (b) Second, to all other Obligations in the following order:
(i) first to the payment of any fees or charges (other than Letter of Credit
fees and Facility Fees) outstanding hereunder or under the other Loan Documents
(excluding any Hedge Agreements), (ii) next to any accrued and outstanding
Default Rate interest, (iii) next to any accrued and outstanding interest under
the Swing Line Loans, (iv) next to any accrued and outstanding Letter of Credit
fees, Facility Fees, and interest on the Loans (other than interest on the Swing
Line Loans), (v) next to any Outstanding principal on the Swing Line Loans,
(vi) next to any Outstanding principal on the Loans other than Swing Line Loans,
and (vii) last to any remaining Obligations (including with respect to any Hedge
Agreement) in such order as the Required Lenders may determine; provided,
however, that (A) in the event that any Lender shall have wrongfully failed or
refused to make an advance under §2.6, §2.7 or §2.10 and such failure or refusal
shall be continuing, advances made by other Lenders during the pendency of such
failure or refusal shall be entitled to be repaid as to principal and accrued
interest in priority to the other Obligations described in this subsection (b),
and (B) Obligations owing to Revolving Lenders and Term Lenders with respect to
each type of Obligation such as interest, principal, fees and expenses, shall be
made among such Lenders pro rata in accordance with their Commitment
Percentages, without preference or priority of Revolving Loans over Term Loans,
or vice versa; and provided, further, that the Required Lenders may in their
discretion make proper allowance to take into account any Obligations not then
due and payable; and

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               (c) Third, the excess, if any, shall be returned to Borrower or
to such other Persons as are entitled thereto.
§13. SETOFF
     Regardless of the adequacy of any Collateral, during the continuance of any
Event of Default, any deposits (general or specific, time or demand, provisional
or final, regardless of currency, maturity, or the branch of where such deposits
are held) or other sums credited by or due from Agent or any of Lenders to any
of the Loan Parties and any securities or other property of the Loan Parties in
the possession of Agent or any Lender may be applied to or set off against the
payment of Obligations and any and all other liabilities, direct, or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
of the Loan Parties to such Lender. Upon the occurrence and during the
continuance of an Event Default, any Lender, including Agent with respect to the
Advance Account, may, but shall not be obligated to freeze withdrawals from any
account of the Loan Parties held by such Lender. Each Lender agrees with each
other Lender that if such Lender shall receive from any Loan Party or Loan
Parties, whether by voluntary payment, exercise of the right of setoff, or
otherwise, and shall retain and apply to the payment of the Note or Notes held
by such Lender any amount in excess of its ratable portion of the payments
received by all of Lenders with respect to the Notes held by all of Lenders,
such Lender will make such disposition and arrangements with the other Lenders
with respect to such excess, either by way of distribution, pro tanto assignment
of claims, subrogation or otherwise as shall result in each Lender receiving in
respect of the Notes held by it its proportionate payment as contemplated by
this Agreement; provided that if all or any part of such excess payment is
thereafter recovered from such Lender, such disposition and arrangements shall
be rescinded and the amount restored to the extent of such recovery, but without
interest.
§14. THE AGENT
          §14.1 Authorization.
     Each of the Lenders hereby irrevocably appoints KeyBank to act on its
behalf as Agent hereunder and under the other Loan Documents and authorizes
Agent to take such actions on its behalf and to exercise such powers as are
delegated to Agent by the terms hereof or thereof, together with such actions
and powers as are reasonably incident thereto, provided that no duties or
responsibilities not expressly assumed herein or therein shall be implied to
have been assumed by Agent. The obligations of Agent hereunder are primarily
administrative in nature, and nothing contained in this Agreement or any of the
other Loan Documents shall be construed to constitute Agent as a trustee or
fiduciary for any Lender or to create any agency or fiduciary relationship.
Agent shall act as the contractual representative of Lenders hereunder, and
notwithstanding the use of the term “Agent”, it is understood and agreed that
Agent shall not have any fiduciary duties or responsibilities to any Lender by
reason of this Agreement or any other Loan Document and is acting as an
independent contractor, the duties and responsibilities of which are limited to
those expressly set forth in this Agreement and the other Loan Documents.
Borrower and any other Person shall be entitled to conclusively rely on a
statement from Agent that it has the authority to act for and bind Lenders
pursuant to this Agreement and the other Loan Documents.

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          §14.2 Employees and Agents.
     Agent may exercise its rights and powers and execute any and all of its
duties hereunder or under any other Loan Document by or through employees or
agents and shall be entitled to take, and to rely on, advice of counsel
concerning all matters pertaining to its rights and duties under this Agreement
and the other Loan Documents. Agent and any such agent may perform any and all
of its duties and exercise its rights and powers by or through their respective
Related Parties. The exculpatory provisions of this Section shall apply to any
such agent and to the Related Parties of Agent and any such agent, and shall
apply to their respective activities in connection with the syndication of the
credit facilities provided for herein as well as activities as Agent. Agent may
utilize the services of such Persons as Agent may reasonably determine, and all
reasonable fees and expenses of any such Persons shall be paid by Borrower.
          §14.3 No Liability.
     Neither Agent nor any of its shareholders, directors, officers or employees
nor any other Person assisting them in their duties nor any agent, or employee
thereof, shall be liable to Lenders for any waiver, consent or approval given or
any action taken, or omitted to be taken, in good faith by it or them hereunder
or under any of the other Loan Documents, or in connection herewith or
therewith, or be responsible for the consequences of any oversight or error of
judgment whatsoever, except that Agent or such other Person, as the case may be,
shall be liable for losses due to its willful misconduct or gross negligence.
Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing (including any electronic message, Internet or
intranet website posting or other distribution) reasonably believed by it to be
genuine and to have been signed, sent or otherwise authenticated by the proper
Person. Agent also may rely upon any statement made to it orally or by telephone
and reasonably believed by it to have been made by the proper Person, and shall
not incur any liability for relying thereon. In determining compliance with any
condition hereunder to the making of a Loan, that by its terms must be fulfilled
to the satisfaction of a Lender, Agent may presume that such condition is
satisfactory to such Lender unless Agent shall have received notice to the
contrary from such Lender prior to the making of such Loan. Agent may consult
with legal counsel (who may be counsel for Borrower), independent accountants
and other experts selected by it, and shall not be liable for any action taken
or not taken by it in accordance with the advice of any such counsel,
accountants or experts.
          §14.4 No Representations.
     Agent shall not have any duties or obligations except those expressly set
forth herein and in the other Loan Documents. Without limiting the generality of
the foregoing, Agent:
               (a) shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing;
               (b) shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby or by the other Loan Documents that Agent is
required to exercise as directed in writing by the Required Lenders (or such
other number or percentage of Lenders as shall be expressly provided for herein
or in the other Loan Documents), provided that Agent shall not be required to
take any

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action that, in its opinion or the opinion of its counsel, may expose Agent to
liability or that is contrary to any Loan Document or applicable law; and
               (c) shall not, except as expressly set forth herein and in the
other Loan Documents, have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to Borrower or any of its
Affiliates that is communicated to or obtained by the Person serving as Agent or
any of its Affiliates in any capacity.
     Agent shall not be liable for any action taken or not taken by it (i) with
the consent or at the request of the Required Lenders (or such other number or
percentage of Lenders as shall be necessary, or as Agent shall believe in good
faith shall be necessary, under the circumstances as provided in §27 and §12.4)
or (ii) in the absence of its own gross negligence or willful misconduct. Agent
shall be deemed not to have knowledge of any Default unless and until notice
describing such Default is given to Agent by any Loan Party or any Lender.
     Agent shall not be responsible for the execution or validity or
enforceability of this Agreement, the Notes, any of the other Loan Documents or
any instrument at any time constituting, or intended to constitute, collateral
security for the Notes, or for the value of any such collateral security or for
the validity, enforceability or collectibility of any such amounts owing with
respect to the Notes, or for any recitals or statements, warranties or
representations made herein, or any agreement, instrument or certificate
delivered in connection therewith or in any of the other Loan Documents or in
any certificate or instrument hereafter furnished to it by or on behalf of any
of the Loan Parties, or be bound to ascertain or inquire as to the performance
or observance of any of the terms, conditions, covenants or agreements herein or
in any other of the Loan Documents.
     Agent shall not be bound to ascertain whether any notice, consent, waiver
or request delivered to it by any Loan Party or any holder of any of the Notes
shall have been duly authorized or is true, accurate and complete. Agent has not
made nor does it now make any representations or warranties, express or implied,
nor does it assume any liability to Lenders, with respect to the
creditworthiness or financial condition of Borrower or any other Loan Party or
the value of the Collateral or any other assets of such Persons.
     Each Lender acknowledges that it has, independently and without reliance
upon Agent or any other Lender or any of their Related Parties, and based upon
such information and documents as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon Agent or any
other Lender or any of their Related Parties, based upon such information and
documents as it deems appropriate at the time, continue to make its own credit
analysis and decisions in taking or not taking action under or based upon this
Agreement, any other Loan Document or any related agreement or any document
furnished hereunder or thereunder.
          §14.5 Payments.
               (a) A payment by Borrower to Agent hereunder or under any of the
other Loan Documents for the account of any Lender shall constitute a payment to
such Lender. Agent agrees to distribute to each Lender not later than one
(1) Business Day after Agent’s receipt of good funds, determined in accordance
with Agent’s customary practices, such Lender’s pro rata

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share of payments received by Agent for the account of Lenders except as
otherwise expressly provided herein or in any of the other Loan Documents. All
payments of principal, interest, fees and other amounts in respect of the Swing
Line Loans shall be for the account of Swing Line Lender only (except to the
extent any Lender shall have acquired and funded a participating interest in any
such Swing Line Loan pursuant to §2.1(c), in which case such payments shall be
pro rata in accordance with such participating interests).
               (b) If in the opinion of Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any of the
other Loan Documents might involve it in liability, it may refrain from making
distribution until its right to make distribution shall have been adjudicated by
a court of competent jurisdiction. If a court of competent jurisdiction shall
adjudge that any amount received and distributed by Agent is to be repaid, each
Person to whom any such distribution shall have been made shall either repay to
Agent its proportionate share of the amount so adjudged to be repaid or shall
pay over the same in such manner and to such Persons as shall be determined by
such court.
               (c) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Lender that fails (i) to make
available to Agent its pro rata share of any Loan that it is obligated to make
available under the terms of this Agreement, unless such obligation is the
subject of a bona fide, good faith dispute of which the Agent has received
written notice from such Lender (it being agreed that any such notice given
later than three (3) Business Days after such failure shall be ineffective for
purposes of this paragraph (c)), or (ii) to comply with the provisions of §13
with respect to making dispositions and arrangements with the other Lenders,
where such Lender’s share of any payment received, whether by setoff or
otherwise, is in excess of its pro rata share of such payments due and payable
to all of Lenders, in each case as, when and to the full extent required by the
provisions of this Agreement, shall be deemed delinquent (a “Delinquent Lender”)
and shall be deemed a Delinquent Lender until such time as such delinquency is
satisfied. A Delinquent Lender shall be deemed to have assigned any and all
payments due to it from Borrower, whether on account of Outstanding Loans,
interest, fees or otherwise, to the remaining non-Delinquent Lenders for
application to, and reduction of, their respective pro rata shares of all
outstanding Loans in accordance with the terms of this Agreement. The Delinquent
Lender hereby authorizes Agent to distribute such payments to the non-Delinquent
Lenders in proportion to their respective pro rata shares of all outstanding
Loans in accordance with the terms of this Agreement. A Delinquent Lender shall
be deemed to have satisfied in full a delinquency, and to no longer be a
Delinquent Lender, when and if, as a result of application of the assigned
payments to all outstanding Loans of the non-Delinquent Lenders or as a result
of other payments by the Delinquent Lenders to the non-Delinquent Lenders,
Lenders’ respective pro rata shares of all outstanding Loans have returned to
those in effect immediately prior to such delinquency and without giving effect
to the nonpayment causing such delinquency.
          §14.6 Holders of Notes.
     Subject to the terms of §18, Agent may deem and treat the payee of any Note
as the absolute owner or purchaser thereof for all purposes hereof until it
shall have been furnished in writing with a different name by such payee or by a
subsequent holder, assignee or transferee.

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          §14.7 Indemnity.
     Lenders ratably agree hereby to indemnify and hold harmless Agent from and
against any and all claims, actions and suits (whether groundless or otherwise),
losses, damages, costs, expenses (to the extent of any losses, damages, costs
and expenses for which Agent has not been reimbursed by Borrower as required by
§15 or §16), and liabilities of every nature and character arising out of or
related to this Agreement, the Notes or any of the other Loan Documents or the
transactions contemplated or evidenced hereby or thereby, or Agent’s actions
taken hereunder or thereunder, except to the extent that any of the same shall
be directly caused by Agent’s willful misconduct or gross negligence.
          §14.8 Agent as Lender.
     In its individual capacity, KeyBank shall have the same obligations and the
same rights, powers and privileges in respect to its Revolving Commitment and
Term Commitment and the Revolving Loans and Term Loans made by it, and as the
holder of any of the Notes as it would have were it not also Agent and the term
“Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the
context otherwise requires, include the Person serving as Agent hereunder in its
individual capacity. Such Person and its Affiliates may accept deposits from,
lend money to, act as the financial advisor or in any other advisory capacity
for and generally engage in any kind of business with Borrower, any of the other
Loan Parties or any Subsidiary or other Affiliate thereof as if such Person were
not Agent hereunder and without any duty to account therefor to Lenders.
          §14.9 Resignation.
     Agent may resign at any time by giving thirty (30) calendar days’ prior
written notice thereof to Lenders and Borrower. Upon any such resignation, the
Required Lenders, subject to the terms of §18.1, shall have the right to appoint
as a successor Agent any Lender or any other bank whose senior debt obligations
are rated not less than “A” or its equivalent by Moody’s or not less than “A” or
its equivalent by S&P and which has a net worth of not less than $500,000,000.
Any such resignation shall be effective upon appointment and acceptance of a
successor agent selected by the Required Lenders. If no successor Agent shall
have been so appointed and shall have accepted such appointment within thirty
(30) days after the retiring Agent’s giving of notice of resignation, then the
retiring Agent may, on behalf of Lenders, appoint a successor Agent, which shall
be a bank whose debt obligations are rated not less than “A” or its equivalent
by Moody’s or not less than “A” or its equivalent by S&P Corporation and which
has a net worth of not less than $500,000,000, provided that if Agent shall
notify Borrower and Lenders that no qualifying Person has accepted such
appointment, then such resignation shall nonetheless become effective in
accordance with such notice and (1) the retiring Agent shall be discharged from
its duties and obligations hereunder and under the other Loan Documents (except
that in the case of any collateral security held by Agent on behalf of Lenders
under any of the Loan Documents, the retiring Agent shall continue to hold such
collateral security until such time as a successor Agent is appointed) and
(2) all payments, communications and determinations provided to be made by, to
or through Agent shall instead be made by or to each Lender directly, until such
time as the Required Lenders appoint a successor Agent as provided for above in
this paragraph. Unless a Default or Event of Default shall have occurred and be
continuing, such

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successor Agent shall be reasonably acceptable to Borrower. Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder as Agent. The fees payable
by Borrowers to a successor Agent shall be the same as those payable to its
predecessor unless otherwise agreed between Borrower and such successor. After
any retiring Agent’s resignation, the provisions of this Agreement and the other
Loan Documents shall continue in effect for the benefit of such retiring Agent,
its agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by it while it was acting as Agent.
          §14.10 Duties in the Case of Enforcement.
     In case one or more Events of Default have occurred and shall be
continuing, and whether or not acceleration of the Obligations shall have
occurred, Agent may and shall, if (a) so requested by the Required Lenders and
(b) Lenders have provided to Agent such additional indemnities and assurances
against expenses and liabilities as Agent may reasonably request, proceed to
enforce the provisions of the Security Documents authorizing the sale or other
disposition of all or any part of the Collateral and exercise all or any other
legal and equitable and other rights or remedies as it may have. The Required
Lenders may direct Agent in writing as to the method and the extent of any such
exercise, Lenders hereby agreeing to indemnify and hold Agent harmless from all
liabilities incurred in respect of all actions taken or omitted in accordance
with such directions, provided that Agent need not comply with any such
direction to the extent that Agent reasonably believes Agent’s compliance with
such direction to be unlawful or commercially unreasonable in any applicable
jurisdiction.
          §14.11 Request for Agent Action.
     Agent and Lenders acknowledge that in the ordinary course of business of
Borrower, (a) the Loan Parties may enter into Leases covering the Mortgaged
Property and the Negative Pledge Property that may require the execution of a
subordination, attornment and non-disturbance agreement, (b) the Mortgaged
Property and the Negative Pledge Property may be subject to a condemnation or
other taking, (c) the Loan Parties may desire to enter into easements or other
agreements affecting the Mortgaged Property or the Negative Pledge Property,
record a subdivision plat, dedicate roads or utilities, or take other actions or
enter into other agreements in the ordinary course of business which similarly
require the consent, approval or agreement of Agent. In connection with the
foregoing, Lenders hereby expressly authorize Agent to (a) execute and deliver
with the applicable Loan Party or Loan Parties and any tenant, subordination,
attornment and non-disturbance agreements with respect to any lease upon such
terms as Agent in its good faith reasonable judgment determines are appropriate
(Agent in the exercise of its good faith reasonable judgment may agree to allow
some or all of the casualty, condemnation, restoration or other provisions of
the applicable lease to control over the applicable provisions of the Loan
Documents), (b) execute releases of Liens of Mortgaged Property and Equity
Interests in connection with dispositions permitted in this Agreement or in
connection with any condemnation or other taking, (c) execute consents or
subordinations in form and substance reasonably satisfactory to Agent in
connection with any easements, agreements, plats, dedications or similar matters
affecting the Mortgaged Property or Negative Pledge Property, or (d) execute
consents, approvals, or other agreements in form and substance reasonably
satisfactory to Agent

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in connection with such other actions or agreements as may be desirable by Agent
or any tenant necessary in the ordinary course of the Loan Parties’ respective
businesses.
          §14.12 Removal of Agent.
     The Required Lenders may remove Agent from its capacity as agent in the
event of Agent’s willful misconduct or gross negligence. Such removal shall be
effective upon appointment and acceptance of a successor agent selected by the
Required Lenders. Any successor Agent must satisfy the conditions set forth in
§14.9. Upon the acceptance of any appointment as agent hereunder by a successor
agent, such successor agent shall thereupon succeed to and become vested with
all rights, powers, privileges and duties of the removed Agent, and the removed
Agent shall be discharged from all further duties and obligations as Agent under
this Agreement and the Loan Documents (subject to Agent’s right to be
indemnified as provided in the Loan Documents); provided that Agent shall remain
liable to the extent provided herein or in the Loan Documents for its acts or
omissions occurring prior to such removal or resignation.
          §14.13 Bankruptcy.
     In the event a bankruptcy or other insolvency proceeding is commenced by or
against any of the Loan Parties, Agent shall have the sole and exclusive right
and duty to file and pursue a joint proof of claim on behalf of all Lenders.
Each Lender irrevocably waives its right to file or pursue a separate proof of
claim in any such proceedings.
§15. EXPENSES
     Borrower agrees to pay (a) the reasonable and documented costs of producing
and reproducing this Agreement, the other Loan Documents and the other
agreements and instruments mentioned herein, (b) any taxes (including any
interest and penalties in respect thereto) payable by Agent or any of Lenders,
including any recording, mortgage, documentary or intangibles taxes in
connection with the Security Deeds and other Loan Documents, or other taxes
payable on or with respect to the transactions contemplated by this Agreement
(other than Excluded Taxes, except that Agent and Lenders shall be entitled to
indemnification for any and all amounts paid by them in respect of taxes based
on income or other taxes assessed by any State in which Mortgaged Property or
other Collateral is located, such indemnification to be limited to taxes due
solely on account of the granting of Collateral under the Security Documents,
including any such taxes payable by Agent or any of Lenders after the Closing
Date (Borrower hereby agreeing to indemnify Agent and each Lender with respect
thereto), (c) all appraisal fees, engineer’s fees, charges of Agent for
commercial finance exams and engineering and environmental reviews and the
reasonable and documented fees, expenses and disbursements of Agent, Agent’s
Special Counsel and any other counsel to Agent, counsel for KeyBank and any
local counsel to Agent incurred in connection with the performance of due
diligence and the preparation, negotiation, administration, or interpretation of
the Loan Documents and other instruments mentioned herein, the addition and
release of Collateral, each closing hereunder, and amendments, modifications,
approvals, consents, waivers or Collateral releases hereto or hereunder, (d) the
reasonable fees, expenses and disbursements of Agent incurred by Agent in
connection with the performance of due diligence, underwriting analysis, credit
reviews and the preparation, negotiation, administration, syndication or
interpretation of the Loan Documents and other instruments mentioned herein,
credit and collateral evaluations, the release, addition or substitution of

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additional Collateral, (e) all reasonable and documented out-of-pocket expenses
(including reasonable attorneys’ fees and costs, which attorneys may be
employees of any Lender or Agent and the fees and costs of appraisers,
engineers, investment bankers or other experts retained by any Lender or Agent)
incurred by any Lender or Agent in connection with (i) the enforcement of or
preservation of rights under any of the Loan Documents against Borrower or other
Loan Parties or the administration thereof after the occurrence of a Default or
Event of Default (including, without limitation, the cost of all title
examinations and title reports, Lien searches and related costs and expenses in
order specifically to identify the Mortgaged Properties and the state of the
Loan Parties’ title thereto), (ii) the sale of, collection from or other
realization upon any of the Collateral, (iii) the failure of Borrower or any
other Loan Party to perform or observe any provision of the Loan Documents, and
(iv) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to Agent’s or any of Lenders’ relationships with
any of the Loan Parties, and (f) all reasonable fees, expenses and disbursements
of Agent incurred in connection with Uniform Commercial Code searches, Uniform
Commercial Code filings or Security Deed recordings and, after the occurrence
and during the continuance of an Event of Default, title rundowns and title
searches. The covenants of this §15 shall survive payment or satisfaction of
payment of amounts owing with respect to the Notes.
§16. INDEMNIFICATION
     Borrower agrees to indemnify and hold harmless Agent and Lenders and each
director, officer, employee, agent and Person who controls Agent or any Lender
from and against any and all claims, actions and suits, whether groundless or
otherwise, and from and against any and all liabilities, losses, damages and
expenses of every nature and character arising out of or relating to this
Agreement or any of the other Loan Documents or the transactions contemplated
hereby and thereby including, without limitation, (a) any leasing fees and any
brokerage, finders or similar fees asserted against any Person indemnified under
this §16 based upon any agreement, arrangement or action made or taken, or
alleged to have been made or taken, by any of the Loan Parties, (b) any
condition, use, operation or occupancy of a Mortgaged Property or other
Collateral other than with respect to matters relating to such Mortgaged
Property and/or the Collateral first occurring after Agent or its nominee
acquires title to such Mortgaged Property by the exercise of its foreclosure
remedies or transfer in lieu of foreclosure, (c) any actual or proposed use by
Borrower of the proceeds of any of the Loans or any actual or proposed use of a
Letter of Credit by any beneficiary of a Letter of Credit, (d) any actual or
alleged infringement of any patent, copyright, trademark, service mark or
similar right of any of the Loan Parties comprised in the Collateral, (e) the
Loan Parties’ entering into or performing this Agreement or any of the other
Loan Documents, (f) any actual or alleged violation of any law, ordinance, code,
order, rule, regulation, approval, consent, permit or license relating to a
Negative Pledge Property, a Mortgaged Property or the other Collateral, or
(g) with respect to the Loan Parties, their respective Subsidiaries and Joint
Ventures, and their respective properties and assets, including, without
limitation, the Mortgaged Properties and the Negative Pledge Properties, the
violation of any Environmental Law, the Release or threatened Release of any
Hazardous Substances or any action, suit, proceeding or investigation brought or
threatened with respect to any Hazardous Substances (including, but not limited
to claims with respect to wrongful death, personal injury or damage to
property), other than with respect to matters relating to such Mortgaged
Property and/or the Collateral first occurring after Agent or its nominee
acquires title to such Mortgaged Property by the exercise of its foreclosure
remedies or transfer in lieu of foreclosure, in each case

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including, without limitation, the reasonable fees and disbursements of counsel
and allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding; provided, however, that Borrower
shall not be obligated under this §16 to indemnify any Person for liabilities
arising from such Person’s own gross negligence or willful misconduct. In
litigation, or the preparation therefor, Lenders and Agent shall be entitled to
select a single law firm as their own counsel and, in addition to the foregoing
indemnity, Borrower agrees to pay promptly all Court costs and other expenses of
litigation incurred by Agent and Lenders, including the reasonable fees and
expenses of such counsel. If, and to the extent that the obligations of Borrower
under this §16 are unenforceable for any reason, Borrower hereby agrees to make
the maximum contribution to the payment in satisfaction of such obligations
which is permissible under applicable law. There shall be specifically excluded
from the foregoing indemnification any claims, actions, suits, liabilities,
losses, damages and expenses arising from disputes among Lenders with respect to
the Loans or the Loan Documents. In the event that any such claims, actions,
suits, liabilities, losses, damages and expenses involve both a dispute among
Lenders and other matters covered by this indemnification provision, Agent shall
make a reasonable good faith allocation of all losses, damages and expenses
incurred between Lenders’ dispute and the other matters covered by this
indemnification provision, which allocation by Agent shall, absent manifest
error, be final and binding upon the parties hereto. All amounts payable by
Borrower pursuant to this Section shall constitute Obligations until paid in
full by Borrower. The provisions of this §16 shall survive the repayment of the
Loans and the termination of the obligations of Lenders hereunder.
§17. SURVIVAL OF COVENANTS, ETC
     All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of Borrower or any other Loan Party pursuant
hereto or thereto shall be deemed to have been relied upon by Lenders and Agent,
notwithstanding any investigation heretofore or hereafter made by any of them,
and shall survive the making by Lenders of any of the Loans and the issuance by
Agent of any Letter of Credit, as herein contemplated, and shall continue in
full force and effect so long as any amount due under this Agreement or the
Notes or any of the other Loan Documents remains outstanding or any Letter of
Credit is Outstanding or any Lender has any obligation to make any Loans or
Agent has any obligation to issue a Letter of Credit. The indemnification
obligations of Borrower provided herein and the other Loan Documents shall
survive the full repayment of amounts due and the termination of the obligations
of Lenders hereunder and thereunder to the extent provided herein and therein.
All statements contained in any certificate or other paper delivered to any
Lender or Agent at any time by or on behalf of any of the Loan Parties pursuant
hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties as to the matters contained in such
certificate or other paper by any of the Loan Parties hereunder.
§18. ASSIGNMENT AND PARTICIPATION
          §18.1 Conditions to Assignment by Lenders.
               (a) Each Lender shall have the right to assign, transfer, sell,
negotiate, pledge or otherwise hypothecate this Agreement and any of its rights
and security hereunder and under

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the other Loan Documents to any other Eligible Assignee with the prior written
consent of Agent and with the prior written consent of Borrower, which consents
by Agent and Borrower shall not be unreasonably withheld, conditioned or delayed
(provided that no consent of Borrower shall be required if the Eligible Assignee
is also a Lender or an Affiliate thereof or if an Event of Default then exists)
and no consent of Agent shall be required if the Eligible Assignee is also a
Lender or an Affiliate thereof; provided, however, that (i) the parties to each
such assignment shall execute and deliver to Agent, for its approval and
acceptance, an Assignment and Assumption Agreement in the form of Exhibit C
attached hereto and made a part hereof (an “Assignment and Assumption
Agreement”), (ii) each such assignment shall be of a constant, and not a
varying, percentage of the assigning Lender’s rights and obligations under this
Agreement, (iii) if the potential assignee is not already a Lender hereunder, at
least ten (10) days prior to the settlement date of the assignment, the
potential assignee shall deliver to Agent the fully completed Patriot Act and
OFAC forms attached as Exhibit F attached hereto and made a part hereof and such
other information as Agent shall require to successfully complete Agent’s
Patriot Act Customer Identification Process and OFAC Review Process, (iv) unless
Agent and, so long as no Event of Default exists, Borrower otherwise consent,
the aggregate amount of the total Commitment of the assigning Lender being
assigned pursuant to each such assignment shall in no event be less than
$2,000,000 and no less than $1,000,000 under either the Revolving Commitment or
the Term Commitment (or each of them, as applicable), (iv) Agent shall receive
from the assigning Lender a processing fee of $3,500, (vi) if the assignment is
less than the assigning Lender’s entire interest in the Loans, the assigning
Lender (if a Revolving Lender) must retain at least a $5,000,000 Revolving
Commitment and (if a Term Loan Lender), must retain at least a $1,000,000
interest in the Term Loans, unless the assigning Lender assigns its entire
interest under either the Revolving Commitment or the Term Loans, in which case,
the assigning Lender must retain at least a $5,000,000 Revolving Commitment (if
such Lender is assigning its entire interest in the Term Loans) or at least a
$1,000,000 interest in the Term Loans (if such Lender is assigning its entire
Revolving Commitment). Upon such execution, delivery, approval and acceptance,
and upon the effective date specified in the applicable Assignment and
Assumption Agreement, (a) the Eligible Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Assumption Agreement, have the
rights and obligations of a Lender hereunder and under the other Loan Documents,
and Borrower hereby agrees that all of the rights and remedies of Lenders in
connection with the interest so assigned shall be enforceable against Borrower
by an Eligible Assignee with the same force and effect and to the same extent as
the same would have been enforceable but for such assignment provided that no
assignment shall increase the Borrower’s obligations under section 4.4 or
section 4.9, (b) the assigning Lender thereunder shall, to the extent that
rights and obligations hereunder and under the other Loan Documents have been
assigned by it pursuant to such Assignment and Assumption Agreement, relinquish
its rights and be released from its obligations hereunder and thereunder, and
(c) Agent may unilaterally amend Schedule 1.1 to reflect such assignment. For
purposes of this paragraph, in connection with any assignment or simultaneous,
multiple assignments by any Lender which is a fund to one or more of its Related
Funds: (1) compliance with the minimum amounts for assigned Commitments and
Loans, and for retained Commitments and Loans (both in the aggregate and within
any particular Class of Loans) as hereinabove provided shall be determined in
the aggregate for such assigning fund and any of its Related Funds that are or
are to become Lenders as part of any assignment transaction or simultaneous,
multiple assignment transactions; (2) after giving effect to such assignment or
assignments, no such assignor or assignee fund in connection with a partial
assignment of the

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assigning fund’s Revolving Commitment shall hold a Revolving Commitment of less
than $5,000,000, (3) after giving effect to such assignment or assignments, no
such assignor or assignee fund in connection with a partial assignment of the
assigning fund’s Term Commitment shall hold a Term Commitment of less than
$1,000,000, and (4) only one processing fee shall be payable to Agent in
connection with simultaneous, multiple assignment transactions.
     (b) By executing and delivering an Assignment and Assumption Agreement, the
assigning Lender thereunder and the Eligible Assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) except as
provided in such Assignment and Assumption Agreement, such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document or any other instrument or document furnished in connection
therewith; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Borrower or
any other Loan Party or the performance or observance by Borrower or any other
Loan Party of any of its obligations under any Loan Document or any other
instrument or document furnished in connection therewith; (iii) such Eligible
Assignee confirms that it has received a copy of this Agreement together with
such financial statements, Loan Documents and other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into the Assignment and Assumption Agreement and to become a Lender hereunder;
(iv) such Eligible Assignee will, independently and without reliance upon Agent,
the assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
Eligible Assignee appoints and authorizes Agent to take such action as Agent on
its behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto; (vi) such Eligible
Assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
          §18.2 Register.
     Agent shall maintain a copy of each assignment delivered to it and a
register or similar list (the “Register”) for the recordation of the names and
addresses of Lenders and the Commitment Percentages, Revolving Commitment
Percentages and Term Commitment Percentages of, and principal amount of (and
interest on) the Loans owing to Lenders from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the Loan
Parties, Agent and Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by Borrower and Lenders at any reasonable time
and from time to time upon reasonable prior notice.
          §18.3 New Notes.
     Upon its receipt of an assignment executed by the parties to such
assignment, together with each Note (if any) subject to such assignment, Agent
shall (a) record the information contained therein in the Register, and (b) give
prompt notice thereof to Borrower and Lenders

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(other than the assigning Lender). Within five (5) Business Days after receipt
of such notice, Borrower, upon Lender’s request and at Lender’s expense, shall
execute and deliver to Agent, in exchange for each surrendered Note, a new
Revolving Loan Note, Term Loan Note or both, as the case may be, to the order of
such assignee in an amount equal to the amount assumed by such assignee pursuant
to such assignment and, if the assigning Lender has retained some portion of its
obligations hereunder, a new Revolving Loan Note, Term Loan Note or both, as the
case may be, to the order of the assigning Lender in an amount equal to the
amount retained by it hereunder. Such new Notes shall provide that they are
replacements for the surrendered Notes of the same category, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such assignment and
shall otherwise be in substantially the form of the assigned Notes. The
surrendered Notes shall be canceled and returned to Borrower.
          §18.4 Participations.
     Each Lender may sell participations to one or more banks or other entities
in all or a portion of such Lender’s rights and obligations under this Agreement
and the other Loan Documents; provided that (a) any such sale or participation
shall not affect the rights and duties of the selling Lender hereunder to
Borrower, (b) such participation shall not entitle such participant to any
rights or privileges under this Agreement or the Loan Documents, including,
without limitation, the right to approve waivers, amendments or modifications,
(c) such participant shall have no direct rights against any of the Loan Parties
except the rights granted to Lenders pursuant to §13, (d) such sale is effected
in accordance with all applicable laws, and (e) such participant shall not be a
Person controlling, controlled by or under common control with, or which is not
otherwise free from influence or control by, any of the Loan Parties. Any Lender
which sells a participation shall promptly notify Agent and Borrower of such
sale and the identity of the purchaser of the interest.
          §18.5 Pledge by Lender.
     Any Lender may at any time pledge all or any portion of its interest and
rights under this Agreement (including all or any portion of its Note) to secure
obligations of such Lender, including without limitation, (a) any pledge or
assignment to secure obligations to any of the twelve Federal Reserve Banks
organized under §4 of the Federal Reserve Act, 12 U.S.C. §341, to any Federal
Home Loan Bank or to any institution within the Farm Credit System, and (b) for
any Lender that is a fund, any pledge or assignment to any holders of
obligations owed, or securities issued, by such Lender including any trustee
for, or any other representative of, such holders. In addition, any Lender may,
with the consent of Agent (which may be granted or withheld in Agent’s sole
discretion) pledge all or any portion of its interests and rights under the
Agreement (including all or any portion of its Note or Notes) to a Person
approved by Agent. Notwithstanding anything to the contrary contained herein, no
pledge permitted pursuant to this Section or the enforcement thereof shall
release the pledgor Lender from its obligations hereunder or under any of the
other Loan Documents.
          §18.6 No Assignment by Borrower.
     Borrower shall not assign or transfer any of its rights or obligations
under any of the Loan Documents without the prior written consent of each of
Lenders.

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          §18.7 Cooperation; Disclosure.
     Borrower and the other Loan Parties agree to promptly cooperate with any
Lender in connection with any proposed assignment or participation of all or any
portion of its Commitment. Borrower and the other Loan Parties agree that in
addition to disclosures made in accordance with standard lending practices any
Lender may disclose information obtained by such Lender pursuant to this
Agreement to assignees or participants and potential assignees or participants
hereunder, subject to the provisions of §18.10. Notwithstanding anything herein
to the contrary, Agent and each Lender may disclose to any and all Persons,
without limitation of any kind, any information with respect to the “tax
treatment” and “tax structure” (in each case, within the meaning of Treasury
Regulation Section 1.6011-4) of the transactions contemplated hereby and all
materials of any kind (including opinions or other tax analyses) that are
provided to Agent or any Lender relating to such tax treatment and tax
structure; provided that with respect to any document or similar item that in
either case contains information concerning the tax treatment or tax structure
of the transaction as well as other information, this sentence shall only apply
to such portions of the document or similar item that relate to the tax
treatment or tax structure of the Loans and transactions contemplated hereby. In
order to facilitate assignments to Eligible Assignees and sales to Eligible
Assignees, the Loan Parties shall execute such further documents, instruments or
agreements as Lenders may reasonably require. In addition, the Loan Parties
agree to cooperate fully with Lenders in the exercise of Lenders’ rights
pursuant to this Section, including providing such information and documentation
regarding the Loan Parties, their Subsidiaries and Joint Ventures as any Lender
or any potential Eligible Assignee or participant may reasonably request and to
meet with potential Eligible Assignees.
          §18.8 Mandatory Assignment.
     In the event (i) Borrower requests that certain amendments, modifications
or waivers be made to this Agreement or any of the other Loan Documents which
request is approved by Agent or Required Lenders but is not approved by one or
more of Lenders (any such non-consenting Lender shall hereafter be referred to
as the “Non-Consenting Lender”), (ii) Borrower becomes obligated to pay
additional amounts to any Lender pursuant to §4.4 or §4.9, or any Lender gives
notice of the occurrence of any circumstances described in §4.10, (iii) any
Lender with a Revolving Loan Commitment defaults in the obligation to make
Revolving loans hereunder or is otherwise a Defaulting Lender (any such Lender
shall hereafter be referred to as an “Affected Lender”) then, within thirty
(30) days after Borrower’s receipt of notice of such disapproval by such
Non-Consenting Lender, or, in the case of clause (ii), (iii) or (iv) above at
any time after the occurrence of such event, Borrower shall have the right as to
such Affected Lender, to be exercised by delivery of written notice delivered to
Agent and the Affected Lender, to elect to cause the Affected Lender to transfer
its Loans and Commitments. Agent shall promptly notify the remaining Lenders
that each of such Lenders shall have the right, but not the obligation, to
acquire a portion of the Commitment, pro rata based upon their relevant
Commitment Percentages, of the Affected Lender (or if any of such Lenders does
not elect to purchase its pro rata share, then to such remaining Lenders in such
proportion as approved by Agent). In the event that Lenders do not elect to
acquire all of the Affected Lender’s Loans and Commitment, then Agent shall use
commercially reasonable efforts to find a new Lender or Lenders to acquire such
remaining Loans and Commitment. Upon any such purchase of the Loans and
Commitments of the Affected Lender, the Affected Lender’s interests in the
Obligations and its

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rights hereunder and under the Loan Documents shall terminate at the date of
purchase, and the Affected Lender shall promptly execute and deliver any and all
documents reasonably requested by Agent to surrender and transfer such interest,
including, without limitation, an assignment and assumption agreement in the
form attached hereto as Exhibit C and such Affected Lender’s original Note. The
purchase price for the Affected Lender’s Commitment shall equal any and all
amounts outstanding and owed by Borrower to the Affected Lender, including
principal and all accrued and unpaid interest or fees, plus any applicable
prepayment fees which would be owed to such Affected Lender if the Loans were to
be repaid in full on the date of such purchase of the Affected Lender’s
Commitment.
          §18.9 Co-Agents.
     Agent may designate any Lender to be a “Co-Agent”, an “Arranger” or similar
title, but such designation shall not confer on such Lender the rights or duties
of Agent. Any such “Co-Agent” or “Arranger” shall not have any additional rights
or obligations under the Loan Documents, except for those rights and
obligations, if any, as a Lender.
          §18.10 Treatment of Certain Information; Confidentiality.
     Each of Agent and Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its Affiliates and to its and its Affiliates’ respective partners, directors,
officers, employees, agents, advisors and other representatives (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any self-regulatory
authority, such as the National Association of Insurance Commissioners), (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party hereto, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to
(i) any assignee of or participant in, or, with Borrower’s consent, any
prospective assignee of or participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to Borrower and its
obligations, (g) with the consent of Borrower or (h) to the extent such
Information (x) becomes publicly available other than as a result of a breach of
this Section or (y) becomes available to Agent, any Lender, or any of their
respective Affiliates on a nonconfidential basis from a source other than
Borrower.
     For purposes of this Section, “Information” means all information received
from the Loan Parties or any of their Subsidiaries relating to the Loan Parties
or any of their Subsidiaries or Joint Ventures or any of their respective
businesses, other than any such information that is available to Agent or any
Lender on a nonconfidential basis prior to disclosure by the Loan Parties or any
of their Subsidiaries. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.

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          §18.11 Withholding Tax.
               (a) If any Lender is a “foreign corporation, partnership or
trust” within the meaning of the Code and such Lender is entitled to claim
exemption from, or a reduction of, United States withholding tax under
Sections 1441 or 1442 of the Code, such Lender agrees with and in favor of Agent
and Borrower, to deliver to Agent and Borrower:
                    (i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly completed IRS
Form W-8BEN before the payment of any interest in the first calendar year and
before the payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;
                    (ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two
(2) properly completed and executed copies of IRS Form W-8ECI before the payment
of any interest is due in the first taxable year of such Lender and in each
succeeding taxable year of such Lender during which interest may be paid under
this Agreement;
                    (iii) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax; and
                    (iv) in the case of any Lender claiming exemption from
United States withholding tax under Sections 871(b) or 881(c) of the Code, with
respect to payments of “Portfolio Interest,” a Form W-8BEN, or any subsequent
versions thereof or successors thereto, and if the Lender delivers a Form
W-8BEN, a certificate representing that such Lender is not a bank for purposes
of Section 881(c) of the Code, is not a ten percent (10%) shareholder (within
the meaning of Section 871(h)(3)(b) of the Code) of Borrower, and is not a
controlled foreign corporation related to Borrower (within the meaning of
Section 864(d)(4) of the Code).
Each such certificate and form shall be properly completed and duly executed by
such Lender claiming complete exemption from or a reduced rate of United States
withholding tax on payments by Borrower under the Loan Documents. Each Lender
agrees to promptly notify Agent and Borrower of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
               (b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form W-8BEN,
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of Borrower and the other Loan Parties
to such Lender, such Lender agrees to notify Agent and Borrower of the
percentage amount in which it is no longer the beneficial owner of Obligations
of Borrower to such Lender. To the extent of such percentage amount, Agent will
treat such Lender’s IRS Form W-8BEN as no longer valid.
               (c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form W-8ECI with Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrower to such Lender, such Lender agrees to undertake sole

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responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the Code.
               (d) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by §18.11(a) above
are not delivered to Agent, then Agent may withhold from any interest payment to
such Lender not providing such forms or other documentation an amount equivalent
to the applicable withholding tax.
               (e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent or Borrower did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify Agent or Borrower of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify Agent and
Borrower fully for all amounts paid, directly or indirectly, by Agent or
Borrower as tax or otherwise, including penalties and interest, and including
any taxes imposed by any jurisdiction on the amounts payable to Agent or
Borrower under this §18.11, together with all costs and expenses (including
reasonable attorneys’ fees and legal expenses). The obligation of Lenders under
this subsection (e) shall survive the payment of all Obligations and the
resignation or replacement of Agent.
§19. NOTICES
     Each notice, demand, election or request provided for or permitted to be
given pursuant to this Agreement (hereinafter in this §19 referred to as
“Notice”), but specifically excluding to the maximum extent permitted by law any
notices of the institution or commencement of foreclosure proceedings, must be
in writing and shall be deemed to have been properly given or served by personal
delivery or by sending same by overnight courier or by depositing same in the
United States Mail, postpaid and registered or certified, return receipt
requested, or as expressly permitted herein, by telegraph, telecopy, telefax or
telex, and, to the extent permitted by §23, email addressed as follows:
     If to Agent or any Lender, at the address set forth on the signature page
for Agent or such Lender, and in the case of each notice to Agent pursuant to
§7.5, with a copy to:
     Agent’s Special Counsel:
Bryan Cave LLP
1201 West Peachtree Street, NW
14th Floor
Atlanta, Georgia 30309-3488
Facsimile: (404) 572-6999
Attention: F. Donald Nelms, Jr.
and

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     if to Borrower:
Forestar (USA) Real Estate Group Inc.
6300 Bee Cave Road
Building Two, Suite 500
Austin, Texas 78746
Facsimile: (512) 433-5203
Attention: Chief Financial Officer
     with a copy to:
Forestar (USA) Real Estate Group Inc.
6300 Bee Cave Road
Building Two, Suite 500
Austin, Texas 78746
Facsimile: (512) 433-5203
Attention: General Counsel
and
     if to any of the other Loan Parties, to it at:
c/o Forestar (USA) Real Estate Group Inc.
6300 Bee Cave Road
Building Two, Suite 500
Austin, Texas 78746
Facsimile: (512) 433-5203
Attention: Chief Financial Officer
with a copy to:
c/o Forestar (USA) Real Estate Group Inc.
6300 Bee Cave Road
Building Two, Suite 500
Austin, Texas 78746
Facsimile: (512) 433-5203
Attention: General Counsel
and to each other Lender which may hereafter become a party to this Agreement at
such address as may be designated by such Lender. Each Notice shall be effective
upon being personally delivered or upon being sent by overnight courier or upon
being deposited in the United States Mail as aforesaid. The time period in which
a response to such Notice must be given or any action taken with respect thereto
(if any), however, shall commence to run from the date of receipt if personally
delivered or sent by overnight courier, or if so deposited in the United States
Mail, the earlier of three (3) Business Days following such deposit or the date
of receipt as disclosed on the return receipt. Rejection or other refusal to
accept or the inability to deliver

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because of changed address for which no notice was given shall be deemed to be
receipt of the Notice sent. By giving at least fifteen (15) days prior Notice
thereof, Borrower, a Lender or Agent shall have the right from time to time and
at any time during the term of this Agreement to change their respective
addresses and each shall have the right to specify as its address any other
address within the United States of America.
§20. RELATIONSHIP
     Neither Agent nor any Lender has any fiduciary relationship with or
fiduciary duty to any of the Loan Parties arising out of or in connection with
the Agreement or the other Loan Documents or the transactions contemplated
hereunder and thereunder, and the relationship between each Lender and Borrower
is solely that of a lender and borrower, and between each Lender and any
Guarantor is solely that of a lender and guarantor, and nothing contained herein
or in any of the other Loan Documents shall in any manner be construed as making
the parties hereto partners, joint venturers or any other relationship other
than lender and borrower, or lender and guarantor (as the case may be). In
addition, each of the Loan Parties agrees that notwithstanding any other
relationship that KeyBank or any affiliate thereof may have with Borrower or any
of the other Loan Parties or their respective Subsidiaries and Affiliates, in
any proceeding relating to the Loan Parties, or any of them, under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution, liquidation or similar proceeding, such Loan Party will not
challenge Lenders’ right to receive payment of the Obligations as a creditor of
Borrower and the other Loan Parties on the grounds of the equitable
subordination principles contained in §510 of the United States Bankruptcy Code
(11 U.S.C. §101 et seq.), as from time to time amended, or any similar provision
under any applicable law. The covenants contained in this §20 are a material
consideration and inducement to Lenders to enter into the Agreement.
§21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE
     THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW
YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF SUCH STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF
LAW). EACH OF THE LOAN PARTIES AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH
SUIT BEING MADE UPON THE BORROWER AND THE OTHER APPLICABLE LOAN PARTIES (IF ANY)
BY MAIL AT THE ADDRESS SPECIFIED IN §19. EACH OF THE LOAN PARTIES HEREBY WAIVES
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR
ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

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§22. HEADINGS
     The captions in this Agreement are for convenience of reference only and
shall not define or limit the provisions hereof.
§23. COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION
     (a) Counterparts; Integration; Effectiveness. This Agreement and any
amendment hereof may be executed in several counterparts (and by different
parties hereto in different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute one instrument.
In proving this Agreement it shall not be necessary to produce or account for
more than one such counterpart signed by the party against whom enforcement is
sought. This Agreement and the other Loan Documents, any separate letter
agreements with respect to fees payable to Agent (including the Agreement
Regarding Fees) and any provisions of any commitment letter or similar letter
relating to the transactions contemplated by this Agreement that expressly
survive the Closing Date, constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in §10, this Agreement shall become effective when it
shall have been executed by Agent and when Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto. Delivery of an executed counterpart of a signature
page of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
     (b) Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption Agreement
shall be deemed to include electronic signatures or the keeping of records in
electronic form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act,
or any other similar state laws based on the Uniform Electronic Transactions
Act.
     (c) Electronic Communication. Notices and other communications to Agent and
Lenders hereunder may be delivered or furnished by electronic communication
(including e-mail and Internet or intranet websites) pursuant to procedures
approved by Agent, provided that the foregoing shall not apply to notices to any
Lender pursuant to Article 4 if such Lender has notified Agent that it is
incapable of receiving notices under such Article by electronic communication.
Agent or Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it, provided that approval of such procedures may be
limited to particular notices or communications. Unless Agent otherwise
prescribes, (i) notices and other communications sent to an e-mail address shall
be deemed received upon the sender’s receipt of an acknowledgment from the
intended recipient (such as by the “return receipt requested” function, as
available, return e-mail or other written acknowledgment), provided that if such
notice or other communication is not sent during the normal business hours of
the recipient, such notice or

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communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.
§24. ENTIRE AGREEMENT, ETC.
     The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Agreement nor any term hereof may
be changed, waived, discharged or terminated, except as provided in §27.
§25. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS
     TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE BORROWER,
THE OTHER LOAN PARTIES, AGENT AND THE LENDERS HEREBY WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY
RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS
AND OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY PROHIBITED BY LAW, EACH OF
BORROWER AND THE OTHER LOAN PARTIES HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM
OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. EACH OF BORROWER AND THE OTHER LOAN PARTIES (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER OR AGENT HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR AGENT WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT
AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS §25. EACH OF BORROWER AND THE OTHER
LOAN PARTIES ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO REVIEW THIS §25 WITH
ITS LEGAL COUNSEL AND THAT EACH OF BORROWER AND THE OTHER LOAN PARTIES AGREES TO
THE FOREGOING AS ITS FREE, KNOWING AND VOLUNTARY ACT.
§26. DEALINGS WITH THE BORROWER
     The Lenders and their affiliates may accept deposits from, extend credit to
and generally engage in any kind of banking, trust or other business with
Borrower, or any of its affiliates regardless of the capacity of the Lender
hereunder.

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§27. CONSENTS, AMENDMENTS, WAIVERS, ETC.
     Except as otherwise expressly provided in this Agreement, any consent or
approval required or permitted by this Agreement may be given, and any term of
this Agreement or of any other Loan Document may be amended, and the performance
or observance by Borrower or any other Loan Party of any terms of this Agreement
or such other instrument or the continuance of any Default or Event of Default
may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written consent of the
Required Lenders. Notwithstanding the foregoing provisions of this Section:
               (a) none of the following may occur without the written consent
of each affected Lender:
                    (i) a decrease in the rate of interest on the Notes;
                    (ii) an increase in the amount of the Commitments of
Lenders, except as provided in §2.9;
                    (iii) a forgiveness, reduction or waiver of the principal of
any unpaid Loan or any interest thereon or fee payable under the Loan Documents
(other than in connection with the imposition or rescission of the Default
Rate);
                    (iv) a decrease in the amount of any fee payable to a Lender
hereunder;
                    (v) an extension of a Maturity Date except as provided in
§3.1(b) with respect to the Revolving Credit Maturity Date;
                    (vi) the release of Borrower, any Guarantor or any of the
Collateral except as otherwise provided herein;
                    (vii) a change to this §27;
                    (viii) any postponement of any date fixed for any payment of
principal of or interest on, or fees in respect of, the Loans except as provided
in §3.1(b) with respect to the Revolving Credit Maturity Date;
                    (ix) any change in the manner of distribution of any
payments to Lenders or Agent;
                    (x) an amendment of the definition of Required Lenders or of
any requirement for consent by all of Lenders; or
                    (xi) an amendment of any provision of this Agreement or the
Loan Documents which requires the approval of all of Lenders or the Required
Lenders to require a lesser number of Lenders to approve such action.
               (b) Other Consents. No amendment, modification, termination or
waiver of any provision of the Loan Documents, or consent to any departure by
any Loan Party therefrom, shall:

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               (i) increase the Revolving Commitment of any Revolving Lender
over the amount thereof then in effect without the consent of such Lender;
provided, no amendment, modification or waiver of any condition precedent,
covenant, Default or Event of Default shall constitute an increase in any
Revolving Commitment of any Lender;
               (ii) increase the aggregate Revolving Commitments or the
aggregate Term Loan Commitments over the amount thereof then in effect without
the consent of the Requisite Class Lenders (other than pursuant to and in
accordance with §2.9);
               (iii) amend, modify, terminate or waive any provision hereof
relating to the Swing Line Commitment or the Swing Line Loans without the
consent of Swing Line Lender;
               (iv) amend the definition of Requisite Class Lenders or
Applicable Approval Percentage without the consent of Requisite Class Lenders of
each Class; provided, subject to §27(b)(viii), additional extensions of credit
pursuant hereto may be included in the determination of such Requisite
Class Lenders on substantially the same basis as the Term Commitments, the Term
Loans, the Revolving Commitments and the Revolving Loans are included on the
Closing Date;
               (v) alter the required application of any repayments or
prepayments as between Classes pursuant to §3.4 or §12.5 of this Agreement or
pursuant to any other Loan Document without the unanimous consent of all Lenders
of each Class which is being allocated a lesser repayment or prepayment as a
result thereof; provided, Requisite Class Lenders may waive, in whole or in
part, any prepayment so long as the application, as between Classes, of any
portion of such prepayment which is still required to be made is not altered;
               (vi) amend, modify, terminate or waive any obligation of
Revolving Lenders relating to the purchase of participations in Letters of
Credit as provided in §2.10(d) without the written consent of Agent;
               (vii) waive any condition precedent to the initial Loans on the
Closing Date, for which it is expressly provided in such Section that
satisfaction of such condition is to be acceptable to or approved by Agent,
without the consent of Agent, and in any such event it shall not be necessary to
obtain the consent of any other Lender to such waiver; or
               (viii) amend, modify, terminate or waive the amount or timing of
payment of any fee payable to Agent for its own account, any provision of §14 as
the same applies to Agent, or any other provision hereof as the same applies to
the rights or obligations of Agent, in each case without the consent of Agent;
               (ix) any modification to require a Revolving Lender to fund a pro
rata share of a request for a Revolving Loan made by Borrower other than based
on its applicable Required Commitment Percentage, or to require a Term Lender to
fund a pro rata share of a request for a Term Loan made by Borrower other than
based on its

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     applicable Term Commitment Percentage, without the unanimous consent of all
Lenders of the Class affected by such modification Lenders; or
               (x) any amendment which would disproportionately affect the
obligation of Borrower or any Loan Party to make payment of the Revolving Loans
or the Term Loans shall not be effective without the unanimous approval of all
Lenders of the Class affected by such modification.
     No waiver shall extend to or affect any obligation not expressly waived or
impair any right consequent thereon. No course of dealing or delay or omission
on the part of Agent or any Lender in exercising any right shall operate as a
waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon
Borrower or the other Loan Parties shall entitle Borrower or any other Loan
Party to other or further notice or demand in similar or other circumstances. In
the event any Lender fails to expressly grant or deny any consent, amendment or
waiver sought under this Agreement within ten (10) days of a written request
therefor submitted by Agent or Agent’s Special Counsel, such Lender shall be
deemed to have granted to Agent an irrevocable proxy with respect to such
specific matter. The right of any Lender to consent under subsections (a) and
(b) of this §27 shall not apply to a Defaulting Lender, except for purposes of
subsections (a)(v) and (b)(i) of this §27.
§28. SEVERABILITY
     The provisions of this Agreement are severable, and if any one clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
§29. NO UNWRITTEN AGREEMENTS
     THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
§30. ACKNOWLEDGMENT OF INDEMNITY OBLIGATIONS
     BORROWER HEREBY ACKNOWLEDGES THAT THIS AGREEMENT CONTAINS INDEMNITY
OBLIGATIONS OF THE BORROWER.
§31. REPLACEMENT OF NOTES
     Upon receipt of evidence reasonably satisfactory to Borrower of the loss,
theft, destruction or mutilation of any Note, and in the case of any such loss,
theft or destruction, upon delivery of an indemnity agreement reasonably
satisfactory to such Borrower or, in the case of any such mutilation, upon
surrender and cancellation of the applicable Note, such Borrower will execute
and deliver, in lieu thereof, a replacement Note, identical in form and
substance to the applicable

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Note and dated as of the date of the applicable Note and upon such execution and
delivery all references in the Loan Documents to such Note shall be deemed to
refer to such replacement Note.
§32. TIME IS OF THE ESSENCE
     Time is of the essence with respect to each and every covenant, agreement
and obligation of Borrower under this Agreement and the other Loan Documents.
§33. RIGHTS OF THIRD PARTIES
     This Agreement and the other Loan Documents are made and entered into for
the sole protection and legal benefit of Loan Parties, Lenders and Agent, and
their permitted successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any of the other Loan Documents. All
conditions to the performance of the obligations of Agent and Lenders under this
Agreement, including the obligation to make Loans, are imposed solely and
exclusively for the benefit of Agent and Lenders and no other Person shall have
standing to require satisfaction of such conditions in accordance with their
terms or be entitled to assume that Agent and Lenders will refuse to make Loans
in the absence of strict compliance with any or all thereof and no other Person
shall, under any circumstances, be deemed to be a beneficiary of such
conditions, any and all of which may be freely waived in whole or in part by
Agent and Lenders at any time if in their sole discretion they deem it desirable
to do so. In particular, Agent and Lenders make no representations and assume no
obligations as to third parties concerning the quality of the construction by
Borrower of any development or the absence therefrom of defects.
§34. GUARANTY
          §34.1 The Guaranty.
               (a) Each of Guarantors hereby jointly and severally guarantees to
Agent for the benefit of the Lenders and each of the holders of the Obligations,
as hereinafter provided, as primary obligor and not as surety, the prompt
payment of the Obligations (the “Guaranteed Obligations”) in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise) strictly in accordance with the
terms thereof. Guarantors hereby further agree that if any of the Guaranteed
Obligations are not paid in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration, as a mandatory cash collateralization or
otherwise), Guarantors will, jointly and severally, promptly pay the same,
without any demand or notice whatsoever, and that in the case of any extension
of time of payment or renewal of any of the Guaranteed Obligations, the same
will be promptly paid in full when due (whether at extended maturity, as a
mandatory prepayment, by acceleration, as a mandatory cash collateralization or
otherwise) in accordance with the terms of such extension or renewal.
               (b) Notwithstanding any provision to the contrary contained
herein, in any other of the Loan Documents or other documents relating to the
Obligations, the obligations of each Guarantor under this Agreement and the
other Loan Documents shall be limited to an aggregate amount equal to the
largest amount that would not render such obligations subject to

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avoidance under the United States Bankruptcy Code and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization or similar
debtor relief laws of the United States from time to time in effect and
affecting the rights of creditors generally (collectively, “Debtor Relief Laws”)
or any comparable provisions of any applicable state law.
          §34.2 Obligations Unconditional.
     The obligations of Guarantors under §34.1 are joint and several, absolute
and unconditional, irrespective of the value, genuineness, validity, regularity
or enforceability of any of the Loan Documents or other documents relating to
the Obligations, or any substitution, compromise, release, impairment or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this §34.2 that the obligations of Guarantors hereunder
shall be absolute and unconditional under any and all circumstances. Each
Guarantor agrees that such Guarantor shall have no right of subrogation,
indemnity, reimbursement or contribution against Borrower or any other Guarantor
for amounts paid under this §34 until such time as the Obligations have been
irrevocably paid in full and the commitments relating thereto have expired or
been terminated. Without limiting the generality of the foregoing, it is agreed
that, to the fullest extent permitted by law, the occurrence of any one or more
of the following shall not alter or impair the liability of any Guarantor
hereunder, which shall remain absolute and unconditional as described above:
               (a) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or compliance
shall be waived;
               (b) any of the acts mentioned in any of the provisions of any of
the Loan Documents, or other documents relating to the Guaranteed Obligations or
any other agreement or instrument referred to therein shall be done or omitted;
               (c) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Obligations shall be modified, supplemented or
amended in any respect, or any right under any of the Loan Documents or other
documents relating to the Guaranteed Obligations, or any other agreement or
instrument referred to therein shall be waived or any other guarantee of any of
the Guaranteed Obligations or any security therefor shall be released, impaired
or exchanged in whole or in part or otherwise dealt with;
               (d) any Lien granted to, or in favor of, Agent or any of the
holders of the Guaranteed Obligations as security for any of the Guaranteed
Obligations shall fail to attach or be perfected; or
               (e) any of the Guaranteed Obligations shall be determined to be
void or voidable (including, without limitation, for the benefit of any creditor
of any Guarantor) or shall be subordinated to the claims of any Person
(including, without limitation, any creditor of any Guarantor).

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          With respect to its obligations hereunder, each Guarantor hereby
expressly waives diligence, presentment, demand of payment, protest notice of
acceptance of the guaranty given hereby and of Loans that may constitute
obligations guaranteed hereby, notices of amendments, waivers and supplements to
the Loan Documents and other documents relating to the Guaranteed Obligations,
or the compromise, release or exchange of collateral or security, and all
notices whatsoever, and any requirement that Agent or any holder of the
Guaranteed Obligations exhaust any right, power or remedy or proceed against any
Person under any of the Loan Documents or any other documents relating to the
Guaranteed Obligations or any other agreement or instrument referred to therein,
or against any other Person under any other guarantee of, or security for, any
of the Obligations.
          §34.3 Reinstatement.
     Neither Guarantors’ obligations hereunder nor any remedy for the
enforcement thereof shall be impaired, modified, changed or released in any
manner whatsoever by an impairment, modification, change, release or limitation
of the liability of Borrower or any other Guarantor, by reason of Borrower’s or
any other Guarantor’s bankruptcy or insolvency or by reason of the invalidity or
unenforceability of all or any portion of the Guaranteed Obligations. The
obligations of Guarantors under this §34 shall be automatically reinstated if
and to the extent that for any reason any payment by or on behalf of any Person
in respect of the Guaranteed Obligations is rescinded or must be otherwise
restored by any holder of any of the Obligations, whether as a result of any
proceedings pursuant to any Debtor Relief Law or otherwise, and each Guarantor
agrees that it will indemnify Agent and each holder of Guaranteed Obligations on
demand for all reasonable out-of-pocket costs and expenses (including all
reasonable fees, expenses and disbursements of any law firm or other outside
counsel incurred by the Agent) incurred by Agent or such holder of Guaranteed
Obligations in connection with such rescission or restoration, including any
such costs and expenses incurred in defending against any claim alleging that
such payment constituted a preference, fraudulent transfer or similar payment
under any Debtor Relief Law.
          §34.4 Certain Waivers.
     Each Guarantor acknowledges and agrees that (a) the guaranty given hereby
may be enforced without the necessity of resorting to or otherwise exhausting
remedies in respect of any other security or collateral interests, and without
the necessity at any time of having to take recourse against Borrower or any
other Guarantor hereunder or against any collateral securing the Guaranteed
Obligations or otherwise, (b) it will not assert any right to require the action
first be taken against Borrower or any other Person (including any co-guarantor)
or pursuit of any other remedy or enforcement any other right, and (c) nothing
contained herein shall prevent or limit action being taken against Borrower or
any other Guarantor hereunder, under the other Loan Documents or the other
documents and agreements relating to the Guaranteed Obligations or from
foreclosing on any security or collateral interests relating hereto or thereto,
or from exercising any other rights or remedies available in respect thereof, if
none of Borrower nor Guarantors shall timely perform their obligations, and the
exercise of any such rights and completion of any such foreclosure proceedings
shall not constitute a discharge of Guarantors’ obligations hereunder unless as
a result thereof, the Guaranteed Obligations shall have been paid in full and
the commitments relating thereto shall have expired or been terminated, it being
the

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purpose and intent that Guarantors’ obligations hereunder be absolute,
irrevocable, independent and unconditional under all circumstances.
          §34.5 Remedies.
     Guarantors agree that, to the fullest extent permitted by Law, as between
Guarantors, on the one hand, and Agent and the holders of the Guaranteed
Obligations, on the other hand, the Guaranteed Obligations may be declared to be
forthwith due and payable as provided in §12.1 (and shall be deemed to have
become automatically due and payable in the circumstances provided in §12.1) for
purposes of §34.1, notwithstanding any stay, injunction or other prohibition
preventing such declaration (or preventing the Guaranteed Obligations from
becoming automatically due and payable) as against any other Person and that, in
the event of such declaration (or the Guaranteed Obligations being deemed to
have become automatically due and payable), the Guaranteed Obligations (whether
or not due and payable by any other Person) shall forthwith become due and
payable by Guarantors for purposes of §34.1. Guarantors acknowledge and agree
that if the Guaranteed Obligations are secured pursuant to the terms of the
Security Documents, the holders of the Guaranteed Obligations may exercise their
remedies thereunder in accordance with the terms thereof.
          §34.6 Rights of Contribution.
     Guarantors hereby agree as among themselves that, in connection with
payments made hereunder, each Guarantor shall have a right of contribution from
each other Guarantor in accordance with applicable law. Such contribution rights
shall be subordinate and subject in right of payment to the Guaranteed
Obligations until such time as the Guaranteed Obligations have been irrevocably
paid in full and the commitments relating thereto shall have expired or been
terminated, and none of Guarantors shall exercise any such contribution rights
until the Guaranteed Obligations have been irrevocably paid in full and the
commitments relating thereto shall have expired or been terminated.
          §34.7 Guaranty of Payment; Continuing Guaranty.
     The guarantee in this §34 is a guaranty of payment and not of collection,
and is a continuing guarantee, and shall apply to all Guaranteed Obligations
whenever arising.
          §34.8 Special Provisions Applicable to Guarantors.
     (a) Guarantors hereby agree, among themselves, that if any Guarantor shall
become an Excess Funding Guarantor (as defined below) by reason of the payment
by such Guarantor of any Obligations, each other Guarantor shall, on demand of
such Excess Funding Guarantor (but subject to the next sentence), pay to such
Excess Funding Guarantor an amount equal to such Guarantor’s Pro Rata Share (as
defined below and determined, for this purpose, without reference to the
properties, debts and liabilities of such Excess Funding Guarantor) of the
Excess Payment (as defined below) in respect of such Obligations. The payment
obligation of a Guarantor to any Excess Funding Guarantor under this §34.8(a)
shall be subordinate and subject in right of payment to the prior payment in
full of the obligations of such Guarantor under the other provisions of this
Guaranty, and such Excess Funding Guarantor shall not exercise any right or
remedy with respect to such excess until payment and satisfaction in full of all
such obligations.

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For purposes of this §34.8(a), (i) “Excess Funding Guarantor” shall mean, in
respect of any Obligations, a Guarantor that has paid an amount in excess of the
amount of proceeds of Loans advanced to it by Borrower that have not been repaid
as of the date of determination, plus its Pro Rata Share of the remaining
portion of such Obligations, (ii) “Excess Payment” shall mean, in respect of any
Obligations, the amount paid by an Excess Funding Guarantor in excess of the
amount of proceeds of Loans advanced to it by Borrower that have not been repaid
as of the date of determination, plus its Pro Rata Share of the remaining
portion of such Obligations and (iii) “Pro Rata Share” shall mean, for any
Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the
aggregate present fair saleable value of all properties of such Guarantor
(excluding any shares of stock of any other Guarantor) exceeds the amount of all
the debts and liabilities of such Guarantor (including contingent, subordinated,
unmatured and unliquidated liabilities, but excluding the obligations of such
Guarantor hereunder and any obligations of any other Guarantor that have been
guaranteed by such Guarantor) to (y) the amount by which the aggregate fair
saleable value of all properties of Borrower and all of Guarantors exceeds the
amount of all the debts and liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities, but excluding the obligations of
Borrower and Guarantors hereunder) of Borrower and all of Guarantors, all as of
the Closing Date.
               (b) Pursuant to §7.21 of this Agreement, each new wholly owned,
direct or indirect Subsidiary of Borrower (other than an Excluded Subsidiary),
and each Excluded Subsidiary that is wholly-owned, directly or indirectly, and
that ceases to qualify as an Excluded Subsidiary, is required to enter into this
Agreement by executing and delivering to Agent a Joinder Agreement (Guarantor).
Upon the execution and delivery of a Joinder Agreement (Guarantor) by such
Subsidiary, such Subsidiary shall become a Guarantor hereunder with the same
force and effect as if originally named as a Guarantor herein. The execution and
delivery of any Joinder Agreement (Guarantor) adding an additional Guarantor as
a party to this Agreement shall not require the consent of any other party
hereto. The rights and obligations of each party hereunder shall remain in full
force and effect notwithstanding the addition of any new Guarantor hereunder.
§35. EFFECTIVENESS OF AMENDMENT AND RESTATEMENT; NO NOVATION
     The amendment and restatement of the Original Credit Agreement pursuant to
this Agreement shall be effective upon the date hereof. All obligations and
rights of the Loan Parties, Agent and Lenders relating to the period commencing
on the date hereof shall be governed by the terms and provisions of this
Agreement; the obligations and rights of the Loan Parties, Agent and Lenders
relating to the period prior to the date hereof shall continue to be governed by
the Original Credit Agreement without giving effect to the amendment and
restatement provided for herein. The “Obligations” under the Original Credit
Agreement are in all respects continuing with only the terms thereof being
modified as provided in this Agreement and, except as expressly provided herein,
the Liens as granted under the Security Documents securing payment of such
“Obligations” are in all respects continuing and in full force and effect and
secure the payment of the Obligations defined herein and are fully ratified and
affirmed. Except as expressly provided hereinbelow, this Agreement shall not
constitute a novation or termination of the Loan Parties’ obligations under the
Original Credit Agreement (including, without limitation, the obligations of the
Guarantors under §34 of the Original Credit Agreement) or any document, note or
agreement executed or delivered in connection therewith, but shall constitute an
amendment and restatement of the obligations and covenants of the Loan Parties
under such

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documents, notes and agreements, and the Loan Parties hereby reaffirm all such
obligations and covenants, as amended and restated hereby. Notwithstanding the
foregoing, all obligations of Firstland Investment Corporation and LIC Ventures
(collectively, the “Release Parties”) under the “Loan Documents” (as defined in
the Original Credit Agreement) are hereby released and all Liens granted by the
Release Parties under or in connection with such “Loan Documents” are terminated
and released without any further action by any party. It is expressly
acknowledged and agreed that the foregoing release and termination shall apply
only with respect to the Release Parties and not with respect to any other “Loan
Party” under the Original Credit Agreement.
[SIGNATURES BEGIN ON FOLLOWING PAGE]

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     IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as of the date first set forth above.

            BORROWER:

FORESTAR (USA) REAL ESTATE GROUP INC., a Delaware corporation
      By:   /s/ Christopher L. Nines         Name:   Christopher L. Nines       
Title:   Chief Financial Officer     

[SIGNATURES CONTINUED ON FOLLOWING PAGES]

 

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[Execution of Revolving and Term Credit Agreement Continued]

            GUARANTORS:

FORESTAR GROUP INC., a Delaware corporation
      By:   /s/ Christopher L. Nines         Name:   Christopher L. Nines       
Title:   Chief Financial Officer        FORESTAR MINERALS LLC, a Delaware
limited liability company
      By:   /s/ Christopher L. Nines         Name:   Christopher L. Nines       
Title:   Chief Financial Officer        FORESTAR OIL & GAS LLC
      By:   /s/ Christopher L. Nines         Name:   Christopher L. Nines       
Title:   Chief Financial Officer     

[SIGNATURES CONTINUED ON FOLLOWING PAGES]

 

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[Execution of Revolving and Term Credit Agreement Continued]

            FORESTAR REALTY INC.,
a Delaware corporation
      By:   /s/ Christopher L. Nines         Name:   Christopher L. Nines       
Title:   Chief Financial Officer        FORESTAR HOTEL HOLDING COMPANY INC.,
a Nevada corporation
      By:   /s/ Christopher L. Nines         Name:   Christopher L. Nines       
Title:   Chief Financial Officer        CAPITOL OF TEXAS INSURANCE GROUP INC., a
Delaware corporation
      By:   /s/ Christopher L. Nines         Name:   Christopher L. Nines       
Title:   Chief Financial Officer     

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

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[Execution of Revolving and Term Credit Agreement Continued]

            KEYBANK NATIONAL ASSOCIATION, as a Lender, as Swing Line Lender and
as Agent
      By:   /s/ Nathan Weyer       Name:   Nathan Weyer       Title:   Vice
President    

KeyBank National Association
1200 Abernathy Road, NE
Suite 1550
Atlanta, Georgia 30328
Attn: Daniel Silbert
Facsimile: (770) 510-2195

 

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[Execution Continued]

            AgFIRST FARM CREDIT BANK, as a lender
      By:   /s/ Matt Jeffords       Name:   Matt Jeffords      Title:  
Assistant Vice President     

Address:
1401 Hampton Street
Columbia, SC 29201
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]

 

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[Execution Continued]

            AMEGY BANK NATIONAL ASSOCIATION, as a lender
      By:   /s/ Melinda N. Jackson       Name:   Melinda N. Jackson     
Title:   Senior Vice President     

Address:
4400 Post Oak Parkway
Houston, TX 77027
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]

 

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[Execution Continued]

            CAPITAL ONE N.A., as a lender
      By:   /s/ Michael B. Perrine       Name:   Michael B. Perrine     
Title:   Commercial Banking President-Austin     

Address:
901 South Mopac
Building 1, Suite 500
Austin, TX 78746
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]

 

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[Execution Continued]

            GOLDMAN SACHS BANK USA, as a lender
      By:   /s/ Mark Walton       Name:   Mark Walton      Title:   Authorized
Signatory     

Address:
200 West Street
New York, NY 10282
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]

 

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[Execution Continued]

                  METROPOLITAN LIFE INSURANCE COMPANY, as a lender    
 
           
 
  By:
Name:   /s/ C. Ray Smith
 
C. Ray Smith    
 
  Title:   Director    

Address:
6750 Poplar Avenue
Suite 109
Germantown, TN 38138
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]

 

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[Execution Continued]

                  NORTHWEST FARM CREDIT SERVICES, PCA, as a lender    
 
           
 
  By:
Name:   /s/ Carol L. Sobson
 
Carol L. Sobson    
 
  Title:   Vice President    

Address:
1700 South Assembly Street
Spokane, WA 99224
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]

 

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[Execution Continued]

                  TEXAS CAPITAL BANK, NATIONAL ASSOCIATION, as a lender    
 
           
 
  By:
Name:   /s/ Mike McConnell
 
Mike McConnell    
 
  Title:   Senior Vice President    

Address:
114 West 7th Street
Suite 300
Austin, TX 78701
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]

 

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[Execution Continued]

                  UNITED FCS, PCA, d/b/a FCS COMMERCIAL FINANCE GROUP, successor
in interest to AgCountry Farm Credit Services, PCA, d/b/a FCS Commercial
Financial [sic] Group, as a lender    
 
           
 
  By:
Name:   /s/ Lisa Caswell
 
Lisa Caswell    
 
  Title:   Assistant Vice President    

Address:
600 Highway 169 South
Suite 850
Minneapolis, MN 55426

 

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Exhibit A-1
REVOLVING PROMISSORY NOTE

U.S. $                                            as of ______ ___, 2010

     FOR VALUE RECEIVED, FORESTAR (USA) REAL ESTATE GROUP INC., a Delaware
corporation, having an address of 6300 Bee Cave Road, Building Two, Suite 500,
Austin, Texas 78746 (hereinafter referred to as “Maker”), promises to pay to
                                                             (hereinafter
referred to as “Payee,” Payee and any and all other holders of this Note being
hereinafter collectively referred to as “Holder”), at the Agent’s Office (as
defined in the Credit Agreement) or such other place as Payee may designate in
writing, the lesser of the principal sum of
                                         AND NO/100 DOLLARS (U.S.
$                    .00), or so much thereof as may be advanced pursuant to the
Credit Agreement (defined herein), together with interest as provided in this
note (this “Note”). All capitalized terms in this Note not otherwise defined
herein shall be defined as set forth in the Credit Agreement (defined
hereinafter). The terms of interest and repayment are as follows:

1.   Interest. From and after the date hereof (until maturity, adjustment or
default as hereinafter provided), interest shall accrue on the principal amount
of this Note which is outstanding from time to time at the rate or rates
provided in that certain Amended and Restated Revolving and Term Credit
Agreement dated of even date, among Maker, Payee, certain guarantors party
thereto, KeyBank National Association as Agent thereunder, the other lenders
party thereto and KeyBanc Capital Markets (as hereafter amended, modified,
restated, renewed or extended and in effect from time to time, hereinafter
referred to as the “Credit Agreement”). Interest shall be computed as set forth
in the Credit Agreement. Accrued but unpaid interest only shall be due and
payable as set forth in the Credit Agreement, with a final payment on the
Revolving Credit Maturity Date.   2.   Principal. Principal shall be payable
from time to time in the amounts and at the times provided in the Credit
Agreement, with the entire outstanding principal balance hereunder becoming due
and payable in full on the Revolving Credit Maturity Date.

     Notwithstanding any provisions in this Note, or in any instrument securing
this Note, the total liability for payments legally regarded as interest shall
not exceed the maximum limits imposed by applicable law, and any payment in
excess of the amount allowed thereby shall, as of the date of such payment,
automatically be deemed to have been applied to the payment of the principal
evidenced hereby, or, if the principal has been fully repaid, shall be repaid to
Maker upon demand. Any notation or record of Holder with respect to such
required application which is inconsistent with the provisions of this paragraph
shall be disregarded for all purposes and shall not be binding upon either Maker
or Holder.
     All sums payable under this Note shall be paid not later than 2:00 p.m.
(Cleveland time) on the day when due in immediately available funds in lawful
money of the United States of America. Whenever any payment to be made under
this Note shall be stated to be due on a day

A(1)-1

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other than a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall in such case be included in the
computation of payment of interest.
     All payments under this Note shall be made to Holder without setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, restrictions or
conditions of any nature now or hereafter imposed or levied by any jurisdiction
or any political subdivision thereof or any taxing or other authority therein as
and to the extent provided for in the Credit Agreement.
     At the option of Holder, upon the occurrence and during the continuance of
an Event of Default and subject to the provisions of the Credit Agreement, the
entire principal amount outstanding under this Note, together with all accrued
interest thereon and all other sums due under this Note, may be declared to be
immediately due and payable in full, whereupon they shall become immediately due
and payable in full, without further notice or demand. Failure to exercise such
option shall not constitute a waiver of the right to exercise such option if an
Event of Default has occurred and is continuing. Upon the occurrence of an Event
of Default, Maker shall pay Holder all reasonable expenses and costs of
collection, including, but not limited to, court costs and reasonable attorney’s
fees and disbursements as and to the extent provided for in the Credit
Agreement. Time is of the essence of this Note.
     To the extent permitted by applicable law and to the extent provided in the
Credit Agreement, any amount of principal of this Note which is not paid when
due after the passage of any cure period (whether at stated maturity,
acceleration or otherwise) and any amount of interest under this Note which is
not paid when due after the passage of any cure period, shall bear interest,
from the date on which such overdue amount shall have become due and payable by
Maker until payment in full (whether before or after judgment), payable on
demand, at the Default Rate.
     In addition, and without limiting the right of Holder to accelerate the
Maturity Date, if any payment under this Note, except upon maturity or
acceleration, is not received by Holder within ten (10) days of the date such
payment is due, without notice or demand, Maker shall pay to Holder a late
charge equal to five percent (5%) of the amount of such payment.
     Maker may prepay the outstanding principal amount of this Note, or a
portion thereof, only in accordance with the terms of the Credit Agreement. To
the extent provided in the Credit Agreement, amounts so prepaid may be subject
to reborrowing.
     The obligations of the Maker under this Note and the Credit Agreement are
secured by the Collateral. From time to time, without affecting the obligation
of Maker or any sureties, guarantors, endorsers, accommodation parties or other
persons liable or to become liable on this Note to pay the outstanding principal
balance of this Note and observe the covenants of Maker contained herein,
without giving notice to or obtaining the consent of Maker or any such sureties,
guarantors, endorsers, accommodation parties or other persons, and without
liability on the part of Holder, Holder may, at the option of Holder, grant
extensions or postponements of the time for payment of the outstanding principal
balance, interest or any part thereof, release anyone liable on any of said
outstanding principal balance, accept a renewal of this Note, release or

A(1)-2

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accept a substitution of all or any Collateral, join in any extension or
subordination agreement, agree in writing with Maker to modify the rate of
interest or terms and time of payment of outstanding principal balance or period
of amortization, if any, of this Note or change the amount of the monthly
installments, if any, payable hereunder, or grant any other indulgence or
forbearance whatsoever. No one or more of such actions shall constitute a
novation.
     Maker and all sureties, guarantors, endorsers and accommodation parties
hereof and all other persons liable or to become liable on this Note hereby
waive presentment, notice of dishonor, protest and notice of protest and any and
all lack of diligence or delays in collection or enforcement of this Note. This
Note shall be the joint and several obligation of Maker and all sureties,
guarantors, endorsers, accommodation parties and all other persons liable or to
become liable on this Note, and shall be binding upon them and their heirs,
legal representatives, successors and assigns.
     Each notice, demand, election or request provided for or permitted to be
given pursuant to this Note shall be given in the manner provided in the Credit
Agreement.
     This Note is issued pursuant to, is entitled to the benefits of, is a
“Revolving Loan Note” as defined in, and is subject to the provisions of the
Credit Agreement. In the event of any conflict between the terms of this Note
and the Credit Agreement, the terms of the Credit Agreement shall control. The
indebtedness evidenced by this Note is secured by, among other things, certain
real property.
     This Note may be transferred pursuant to and in accordance with the
registration and other provisions of the Credit Agreement.
     This Note and the obligations of Maker hereunder shall be governed by and
interpreted and determined in accordance with the laws of the State of New York
(excluding the laws applicable to conflicts or choice of law).
     MAKER HEREBY IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO PERSONAL
JURISDICTION IN THE STATE OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS NOTE, AND (B) WAIVES ANY AND ALL PERSONAL
RIGHTS UNDER THE LAWS OF ANY STATE (I) TO THE RIGHT, IF ANY, TO TRIAL BY JURY,
(II) TO OBJECT TO JURISDICTION WITHIN THE STATE OF NEW YORK OR VENUE IN ANY
PARTICULAR FORUM WITHIN THE STATE OF NEW YORK, AND (III) TO THE RIGHT, IF ANY,
TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR
ANY DAMAGES OTHER THAN ACTUAL DAMAGES. MAKER AGREES THAT, IN ADDITION TO ANY
METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO MAKER AT THE ADDRESS SET
FORTH ABOVE, AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS AFTER THE SAME
SHALL BE SO MAILED. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT HOLDER FROM
BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST ANY
SECURITY AND AGAINST MAKER, AND

A(1)-3

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AGAINST ANY PROPERTY OF MAKER, IN ANY OTHER STATE. INITIATING SUCH SUIT, ACTION
OR PROCEEDING OR TAKING SUCH ACTION IN ANY STATE SHALL IN NO EVENT CONSTITUTE A
WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF MAKER AND HOLDER HEREUNDER OR THE
SUBMISSION HEREIN MADE BY MAKER TO PERSONAL JURISDICTION WITHIN THE STATE OF NEW
YORK.
     This Note may not be amended, modified, or changed, nor shall any waiver of
any provision hereof be effective, except only by an instrument in writing
signed by the party against whom enforcement of any waiver, amendment, change,
modification or discharge is sought.
     Whenever used herein, the words “Maker,” “Payee” and “Holder” shall be
deemed to include their respective heirs, legal representatives, successors and
assigns.
[EXECUTION ON FOLLOWING PAGE]

A(1)-4

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     IN WITNESS WHEREOF, Maker has caused this Note to be executed and delivered
as of the date first above written.

            MAKER:

FORESTAR (USA) REAL ESTATE GROUP INC.,
a Delaware corporation
      By:           Name:           Title:      

A(1)-5

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Exhibit A-2
TERM PROMISSORY NOTE

U.S. $                                                               as of
                     ___, 2010

     FOR VALUE RECEIVED, FORESTAR (USA) REAL ESTATE GROUP INC., a Delaware
corporation, having an address of 6300 Bee Cave Road, Building Two, Suite 500,
Austin, Texas 78746 (hereinafter referred to as “Maker”), promises to pay to
                                                                    
             (hereinafter referred to as “Payee,” Payee and any and all other
holders of this Note being hereinafter collectively referred to as “Holder”), at
the Agent’s Office (as defined in the Credit Agreement) or such other place as
Payee may designate in writing, the lesser of the principal sum of
                                                             AND NO/100 DOLLARS
(U.S. $                    .00), or so much thereof as may be advanced pursuant
to the Credit Agreement (defined herein), together with interest as provided in
this note (this “Note”). All capitalized terms in this Note not otherwise
defined herein shall be defined as set forth in the Credit Agreement (defined
hereinafter). The terms of interest and repayment are as follows:

3.   Interest. From and after the date hereof (until maturity, adjustment or
default as hereinafter provided), interest shall accrue on the principal amount
of this Note which is outstanding from time to time at the rate or rates
provided in that certain Amended and Restated Revolving and Term Credit
Agreement dated of even date, among Maker, Payee, certain guarantors party
thereto, KeyBank National Association as Agent thereunder, the lenders party
thereto and KeyBanc Capital Markets (as hereafter amended, modified, restated,
renewed or extended and in effect from time to time, hereinafter referred to as
the “Credit Agreement”). Interest shall be computed as set forth in the Credit
Agreement. Accrued but unpaid interest only shall be due and payable as set
forth in the Credit Agreement, with a final payment on the Term Loan Maturity
Date.   4.   Principal. Principal shall be payable from time to time in the
amounts and at the times provided in the Credit Agreement, with the entire
outstanding principal balance hereunder becoming due and payable in full on the
Term Loan Maturity Date.

     Notwithstanding any provisions in this Note, or in any instrument securing
this Note, the total liability for payments legally regarded as interest shall
not exceed the maximum limits imposed by applicable law, and any payment in
excess of the amount allowed thereby shall, as of the date of such payment,
automatically be deemed to have been applied to the payment of the principal
evidenced hereby, or, if the principal has been fully repaid, shall be repaid to
Maker upon demand. Any notation or record of Holder with respect to such
required application which is inconsistent with the provisions of this paragraph
shall be disregarded for all purposes and shall not be binding upon either Maker
or Holder.
     All sums payable under this Note shall be paid not later than 2:00 p.m.
(Cleveland time) on the day when due in immediately available funds in lawful
money of the United States of America. Whenever any payment to be made under
this Note shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day

A(2)-1

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and such extension of time shall in such case be included in the computation of
payment of interest.
     All payments under this Note shall be made to Holder without setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, restrictions or
conditions of any nature now or hereafter imposed or levied by any jurisdiction
or any political subdivision thereof or any taxing or other authority therein as
and to the extent provided for in the Credit Agreement.
     At the option of Holder, upon the occurrence and during the continuance of
an Event of Default and subject to the provisions of the Credit Agreement, the
entire principal amount outstanding under this Note, together with all accrued
interest thereon and all other sums due under this Note, may be declared to be
immediately due and payable in full, whereupon they shall become immediately due
and payable in full, without further notice or demand. Failure to exercise such
option shall not constitute a waiver of the right to exercise such option if an
Event of Default has occurred and is continuing. Upon the occurrence of an Event
of Default, Maker shall pay Holder all reasonable expenses and costs of
collection, including, but not limited to, court costs and reasonable attorney’s
fees and disbursements as and to the extent provided for in the Credit
Agreement. Time is of the essence of this Note.
     To the extent permitted by applicable law and to the extent provided in the
Credit Agreement, any amount of principal of this Note which is not paid when
due after the passage of any cure period (whether at stated maturity,
acceleration or otherwise) and any amount of interest under this Note which is
not paid when due after the passage of any cure period, shall bear interest,
from the date on which such overdue amount shall have become due and payable by
Maker until payment in full (whether before or after judgment), payable on
demand, at the Default Rate.
     In addition, and without limiting the right of Holder to accelerate the
Maturity Date, if any payment under this Note, except upon maturity or
acceleration, is not received by Holder within ten (10) days of the date such
payment is due, without notice or demand, Maker shall pay to Holder a late
charge equal to five percent (5%) of the amount of such payment.
     Maker may prepay the outstanding principal amount of this Note, or a
portion thereof, only in accordance with the terms of the Credit Agreement.
Amounts prepaid or repaid may not be reborrowed.
     The obligations of the Maker under this Note and the Credit Agreement are
secured by the Collateral. From time to time, without affecting the obligation
of Maker or any sureties, guarantors, endorsers, accommodation parties or other
persons liable or to become liable on this Note to pay the outstanding principal
balance of this Note and observe the covenants of Maker contained herein,
without giving notice to or obtaining the consent of Maker or any such sureties,
guarantors, endorsers, accommodation parties or other persons, and without
liability on the part of Holder, Holder may, at the option of Holder, grant
extensions or postponements of the time for payment of the outstanding principal
balance, interest or any part thereof, release anyone liable on any of said
outstanding principal balance, accept a renewal of this Note, release or accept
a substitution of all or any Collateral, join in any extension or subordination
agreement,

A(2)-2

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agree in writing with Maker to modify the rate of interest or terms and time of
payment of outstanding principal balance or period of amortization, if any, of
this Note or change the amount of the monthly installments, if any, payable
hereunder, or grant any other indulgence or forbearance whatsoever. No one or
more of such actions shall constitute a novation.
     Maker and all sureties, guarantors, endorsers and accommodation parties
hereof and all other persons liable or to become liable on this Note hereby
waive presentment, notice of dishonor, protest and notice of protest and any and
all lack of diligence or delays in collection or enforcement of this Note. This
Note shall be the joint and several obligation of Maker and all sureties,
guarantors, endorsers, accommodation parties and all other persons liable or to
become liable on this Note, and shall be binding upon them and their heirs,
legal representatives, successors and assigns.
     Each notice, demand, election or request provided for or permitted to be
given pursuant to this Note shall be given in the manner provided in the Credit
Agreement.
     This Note is issued pursuant to, is entitled to the benefits of, is a “Term
Loan Note” as defined in, and is subject to the provisions of the Credit
Agreement. In the event of any conflict between the terms of this Note and the
Credit Agreement, the terms of the Credit Agreement shall control. The
indebtedness evidenced by this Note is secured by, among other things, certain
real property.
     This Note may be transferred pursuant to and in accordance with the
registration and other provisions of the Credit Agreement.
     This Note and the obligations of Maker hereunder shall be governed by and
interpreted and determined in accordance with the laws of the State of New York
(excluding the laws applicable to conflicts or choice of law).
     MAKER HEREBY IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO PERSONAL
JURISDICTION IN THE STATE OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS NOTE, AND (B) WAIVES ANY AND ALL PERSONAL
RIGHTS UNDER THE LAWS OF ANY STATE (I) TO THE RIGHT, IF ANY, TO TRIAL BY JURY,
(II) TO OBJECT TO JURISDICTION WITHIN THE STATE OF NEW YORK OR VENUE IN ANY
PARTICULAR FORUM WITHIN THE STATE OF NEW YORK, AND (III) TO THE RIGHT, IF ANY,
TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR
ANY DAMAGES OTHER THAN ACTUAL DAMAGES. MAKER AGREES THAT, IN ADDITION TO ANY
METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO MAKER AT THE ADDRESS SET
FORTH ABOVE, AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS AFTER THE SAME
SHALL BE SO MAILED. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT HOLDER FROM
BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST ANY
SECURITY AND AGAINST MAKER, AND AGAINST ANY PROPERTY OF MAKER, IN ANY OTHER
STATE. INITIATING SUCH

A(2)-3

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SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY STATE SHALL IN NO EVENT
CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE STATE
OF NEW YORK SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF MAKER AND HOLDER
HEREUNDER OR THE SUBMISSION HEREIN MADE BY MAKER TO PERSONAL JURISDICTION WITHIN
THE STATE OF NEW YORK.
     This Note may not be amended, modified, or changed, nor shall any waiver of
any provision hereof be effective, except only by an instrument in writing
signed by the party against whom enforcement of any waiver, amendment, change,
modification or discharge is sought.
     Whenever used herein, the words “Maker,” “Payee” and “Holder” shall be
deemed to include their respective heirs, legal representatives, successors and
assigns.
[EXECUTION ON FOLLOWING PAGE]

A(2)-4

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, Maker has caused this Note to be executed and delivered
as of the date first above written.

            MAKER:

FORESTAR (USA) REAL ESTATE GROUP INC.,
a Delaware corporation
      By:           Name:           Title:      

A(2)-5

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Exhibit A-3
SWING LINE NOTE

U.S. $                                        .00   as of                     
___, 2010

     FOR VALUE RECEIVED, FORESTAR (USA) REAL ESTATE GROUP INC., a Delaware
corporation, having an address of 6300 Bee Cave Road, Building Two, Suite 500,
Austin, Texas 78746 (hereinafter referred to as “Maker”), promises to pay to
KEYBANK NATIONAL ASSOCIATION, a national Banking association (hereinafter
referred to as “Swing Line Lender,” Swing Line Lender and any and all other
holders of this Note being hereinafter collectively referred to as “Holder”), at
the Agent’s Office or such other place as Swing Line Lender may designate in
writing, the lesser of the principal sum of                    
                                            (U.S. $                    ), or so
much thereof as may be advanced as a Swing Line Loan pursuant to the Credit
Agreement (defined herein), together with interest as provided in this note
(this “Swing Line Note”). All capitalized terms in this Swing Line Note not
otherwise defined herein shall be defined as set forth in the Credit Agreement
(defined hereinafter). The terms of interest and repayment are as follows:

1.   Interest. From and after the date hereof (until maturity, adjustment or
default as hereinafter provided), interest shall accrue on the principal amount
of this Swing Line Note which is outstanding from time to time at the rate or
rates provided in that certain Amended and Restated Revolving and Term Credit
Agreement dated of even date, among Maker, Swing Line Lender, certain guarantors
party thereto, KeyBank National Association, as Agent thereunder and the other
lenders party thereto (as hereafter amended, modified, restated, renewed or
extended and in effect from time to time, hereinafter referred to as the “Credit
Agreement”). Interest shall be computed as set forth in the Credit Agreement.
Accrued but unpaid interest only shall be due and payable as set forth in the
Credit Agreement, with a final payment on the Revolving Credit Maturity Date.  
2.   Principal. Principal shall be payable from time to time in the amounts and
at the times provided in the Credit Agreement, with the entire outstanding
principal balance hereunder becoming due and payable in full on the Revolving
Credit Maturity Date.

     Notwithstanding any provisions in this Swing Line Note, or in any
instrument securing this Swing Line Note, the total liability for payments
legally regarded as interest shall not exceed the maximum limits imposed by
applicable law, and any payment in excess of the amount allowed thereby shall,
as of the date of such payment, automatically be deemed to have been applied to
the payment of the principal evidenced hereby, or, if the principal has been
fully repaid, shall be repaid to Maker upon demand. Any notation or record of
Holder with respect to such required application which is inconsistent with the
provisions of this paragraph shall be disregarded for all purposes and shall not
be binding upon either Maker or Holder.
     All sums payable under this Swing Line Note shall be paid not later than
2:00 p.m.. (Cleveland time) on the day when due in immediately available funds
in lawful money of the

A(3)-1

--------------------------------------------------------------------------------

 

United States of America. Whenever any payment to be made under this Swing Line
Note shall be stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time
shall in such case be included in the computation of payment of interest.
     All payments under this Swing Line Note shall be made to Holder without
setoff or counterclaim and free and clear of and without deduction for any
taxes, levies, imposts, duties, charges, fees, deductions, withholdings,
restrictions or conditions of any nature now or hereafter imposed or levied by
any jurisdiction or any political subdivision thereof or any taxing or other
authority therein as and to the extent provided for in the Credit Agreement.
     At the option of Holder, upon the occurrence of an Event of Default and the
expiration of any applicable cure period relating thereto and subject to the
provisions of the Credit Agreement, the entire principal amount outstanding
under this Swing Line Note, together with all accrued interest thereon and all
other sums due under this Swing Line Note, may be declared to be immediately due
and payable in full, whereupon they shall become immediately due and payable in
full, without further notice or demand. Failure to exercise such option shall
not constitute a waiver of the right to exercise such option if an Event of
Default has occurred. Upon the occurrence of an Event of Default, Maker shall
pay Holder all expenses and costs of collection, including, but not limited to,
court costs and reasonable attorney’s fees and disbursements as and to the
extent provided for in the Credit Agreement. Time is of the essence of this
Swing Line Note.
     To the extent permitted by applicable law and to the extent provided in the
Credit Agreement, any amount of principal of this Swing Line Note which is not
paid when due (whether at stated maturity, acceleration or otherwise) and any
amount of interest under this Swing Line Note which is not paid when due, shall
bear interest, from the date on which such overdue amount shall have become due
and payable by Maker until payment in full (whether before or after judgment),
payable on demand, at the Default Rate.
     In addition, and without limiting the right of Holder to accelerate the
Maturity Date, if any payment under this Swing Line Note, except upon maturity
or acceleration, is not received by Holder within ten (10) days of the date such
payment is due, without notice or demand, Maker shall pay to Holder a late
charge equal to five percent (5%) of the amount of such payment.
     Maker may prepay the outstanding principal amount of this Swing Line Note,
or a portion thereof, only in accordance with the terms of the Credit Agreement.
To the extent provided in the Credit Agreement, amounts so prepaid may be
subject to reborrowing.
     The obligations of the Maker under this Swing Line Note and the Credit
Agreement are secured by the Collateral. From time to time, without affecting
the obligation of Maker or any sureties, guarantors, endorsers, accommodation
parties or other persons liable or to become liable on this Swing Line Note to
pay the outstanding principal balance of this Swing Line Note and observe the
covenants of Maker contained herein, without giving notice to or obtaining the
consent of Maker or any such sureties, guarantors, endorsers, accommodation
parties or other persons, and without liability on the part of Holder, Holder
may, at the option of Holder, grant

A(3)-2

--------------------------------------------------------------------------------

 

extensions or postponements of the time for payment of the outstanding principal
balance, interest or any part thereof, release anyone liable on any of said
outstanding principal balance, accept a renewal of this Swing Line Note, release
or accept a substitution of all or any Collateral, join in any extension or
subordination agreement, agree in writing with Maker to modify the rate of
interest or terms and time of payment of outstanding principal balance or period
of amortization of this Swing Line Note or change the amount of the monthly
installments payable hereunder, or grant any other indulgence or forbearance
whatsoever. No one or more of such actions shall constitute a novation.
     Maker and all sureties, guarantors, endorsers and accommodation parties
hereof and all other persons liable or to become liable on this Swing Line Note
hereby waive presentment, notice of dishonor, protest and notice of protest and
any and all lack of diligence or delays in collection or enforcement of this
Swing Line Note. This Swing Line Note shall be the joint and several obligation
of Maker and all sureties, guarantors, endorsers, accommodation parties and all
other persons liable or to become liable on this Swing Line Note, and shall be
binding upon them and their heirs, legal representatives, successors and
assigns.
     Each notice, demand, election or request provided for or permitted to be
given pursuant to this Swing Line Note shall be given in the manner provided in
the Credit Agreement.
     This Swing Line Note is issued pursuant to, is entitled to the benefits of,
is the “Swing Line Note” as defined in, and is subject to the provisions of the
Credit Agreement. In the event of any conflict between the terms of this Swing
Line Note and the Credit Agreement, the terms of the Credit Agreement shall
control. The indebtedness evidenced by this Swing Line Note is secured by, among
other things, certain real property.
     This Swing Line Note may only be transferred pursuant to and in accordance
with the registration and other provisions of the Credit Agreement.
     This Swing Line Note and the obligations of Maker hereunder shall be
governed by and interpreted and determined in accordance with the laws of the
State of New York (excluding the laws applicable to conflicts or choice of law).
     MAKER HEREBY IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO PERSONAL
JURISDICTION IN THE STATE OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS SWING LINE NOTE, AND (B) WAIVES ANY AND ALL
PERSONAL RIGHTS UNDER THE LAWS OF ANY STATE (I) TO THE RIGHT, IF ANY, TO TRIAL
BY JURY, (II) TO OBJECT TO JURISDICTION WITHIN THE STATE OF NEW YORK OR VENUE IN
ANY PARTICULAR FORUM WITHIN THE STATE OF NEW YORK, AND (III) TO THE RIGHT, IF
ANY, TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN ACTUAL DAMAGES. MAKER AGREES THAT, IN ADDITION
TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL
SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO MAKER AT THE
ADDRESS SET FORTH ABOVE, AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS
AFTER THE

A(3)-3

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SAME SHALL BE SO MAILED. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT HOLDER
FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST
ANY SECURITY AND AGAINST MAKER, AND AGAINST ANY PROPERTY OF MAKER, IN ANY OTHER
STATE. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY
STATE SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN
THAT THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE RIGHTS AND OBLIGATIONS
OF MAKER AND HOLDER HEREUNDER OR THE SUBMISSION HEREIN MADE BY MAKER TO PERSONAL
JURISDICTION WITHIN THE STATE OF NEW YORK.
     This Swing Line Note may not be amended, modified, or changed, nor shall
any waiver of any provision hereof be effective, except only by an instrument in
writing signed by the party against whom enforcement of any waiver, amendment,
change, modification or discharge is sought.
     Whenever used herein, the words “Maker,” “Swing Line Lender” and “Holder”
shall be deemed to include their respective heirs, legal representatives,
successors and assigns.
[EXECUTION ON FOLLOWING PAGE]

A(3)-4

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     IN WITNESS WHEREOF, Maker has caused this Swing Line Note to be executed
and delivered as of the date first above written.

            MAKER:

FORESTAR (USA) REAL ESTATE GROUP INC.
a Delaware corporation
      By:           Name:           Title:        

[END OF SIGNATURES]

A(3)-5

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Exhibit B
Compliance Certificate
[on Borrower’s letterhead]

To:     KeyBank National Association, as Administrative Agent
1200 Abernathy Road, N.E. — Suite 1550
Atlanta, Georgia 30328
Attn: Daniel Silbert   Re:     Compliance Certificate dated

Ladies and Gentlemen:
     Reference is made to that certain Amended and Restated Revolving and Term
Credit Agreement, dated as of August ___, 2010, as amended from time to time
(the “Loan Agreement”), among Forestar (USA) Real Estate Group Inc.
(“Borrower”), certain guarantors party thereto, certain lenders party thereto
and KeyBank National Association, as Agent. Capitalized terms used in this
Compliance Certificate have the meanings set forth in the Loan Agreement unless
specifically defined herein.
     Pursuant to Section 7.4(c) of the Loan Agreement, the undersigned Principal
Financial Officer of Forestar Group hereby certifies that:
     1. The financial information of Forestar Group furnished in Schedule 1
attached hereto, has been prepared in accordance with GAAP [(other than the
inclusion of footnotes)] and fairly presents in all material respects the
financial condition of Forestar Group and its Subsidiaries [(subject to year end
adjustments)].
     2. Such officer has reviewed the terms of the Loan Agreement and has made,
or caused to be made under his/her supervision, a review in reasonable detail of
the transactions and condition of Borrower during the accounting period covered
by the financial statements delivered pursuant to Section 7.4 of the Loan
Agreement.
     3. Such review has not disclosed the existence on and as of the date
hereof, and the undersigned does not have knowledge of the existence as of the
date hereof, of any event or condition that constitutes a Default or Event of
Default, except for such conditions or events listed on Schedule 2 attached
hereto, specifying the nature and period of existence thereof and what action
the Loan Parties have taken, are taking, or propose to take with respect
thereto. Without limiting the generality of the foregoing, the Loan Parties are
in compliance with the covenants contained in Section 8.3(s) and Section 8.7(h),
if applicable, and Section 9 of the Loan Agreement as demonstrated on Schedule 3
hereof.

B-1

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     IN WITNESS WHEREOF, this Compliance Certificate is executed by the
undersigned this ___ day of                                         ,
                    .

                             Name:           Title:      

B-2

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Exhibit C
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
ASSIGNMENT AND ACCEPTANCE
     This Assignment and Acceptance (the “Assignment and Acceptance”) is dated
as of the Effective Date set forth below and is entered into by and between
[the][each] Assignor identified in item 1 below ([the][each, an] “Assignor”) and
[the][each] Assignee identified in item 2 below ([the][each, an] “Assignee”). It
is understood and agreed that the rights and obligations of the Assignors and
the Assignees hereunder are several and not joint. Capitalized terms used but
not defined herein shall have the meanings given to them in the Credit Agreement
identified in items below (as amended, restated, supplemented or otherwise
modified, the “Credit Agreement”), receipt of a copy of which is hereby
acknowledged by [the][each] Assignee. The Standard Terms and Conditions set
forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment and Acceptance as if set forth
herein in full.
     For an agreed consideration, [the][each] Assignor hereby irrevocably sells
and assigns to [the Assignee][the respective Assignees], and [the][each]
Assignee hereby irrevocably purchases and assumes from [the Assignor][the
respective Assignors], subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Agent as contemplated below (i) all of [the Assignor’s][the respective
Assignors’] rights and obligations in [its capacity as a Lender][their
respective capacities as Lenders] under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of [the Assignor][the respective Assignors] under the
respective facilities identified below (including without limitation any letters
of credit, guarantees, and Swing Line loans included in such facilities) and
(ii) to the extent permitted to be assigned under applicable law, all claims,
suits, causes of action and any other right of [the Assignor (in its capacity as
a Lender)][the respective Assignors (in their respective capacities as Lenders)]
against any Person, whether known or unknown, arising under or in connection
with the Credit Agreement, any other documents or instruments delivered pursuant
thereto or the loan transactions governed thereby or in any way based on or
related to any of the foregoing, including, but not limited to, contract claims,
tort claims, malpractice claims, statutory claims and all other claims at law or
in equity related to the rights and obligations sold and assigned pursuant to
clause (i) above (the rights and obligations sold and assigned by [the][any]
Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being
referred to herein collectively as [the][an] “Assigned Interest”). Each such
sale and assignment is without recourse to [the][any] Assignor and, except as
expressly provided in this Assignment and Acceptance, without representation or
warranty by [the][any] Assignor.

             
1.
  Assignor[s]:        
 
     
 
   
 
           
 
     
 
   

C-1

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2.
  Assignee[s]:        
 
     
 
   
 
           
 
     
 
        [for each Assignee, indicate [Affiliate] of [identify Lender]
 
           
3.
  Borrower:   Forestar (USA) Real Estate Group Inc.    
 
           
4.
  Agent:   KeyBank National Association, as the agent under the Credit Agreement
   
 
           
5.
  Credit Agreement:   That certain Amended and Restated Revolving and Term
Credit Agreement dated as of August ___, 2010 among, the Guarantors (as defined
therein) party thereto from time to time, the Lenders parties thereto, and
KeyBank National Association, as the Agent.
 
           
6.
  Assigned Interest[s]:        

                                                  Aggregate Amount of   Amount
of   Percentage Assigned of                 Commitment/ Loans   Commitment/  
Commitment/     Assignor[s]   Assignee[s] Facility Assigned for all Lenders  
Loans Assigned   Loans   CUSIP Number  
 
            $       $       %      
 
            $       $       %      
 
            $       $       %      

         
[7.
  Trade Date:                                           ]

[Signature page follows]

C-2

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Effective Date:                                          ___, 20___ [TO BE
INSERTED BY THE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF
TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment and Acceptance are hereby agreed to:

            ASSIGNOR
[NAME OF ASSIGNOR]
      By:           Title:                ASSIGNEE]
[NAME OF ASSIGNEE]
      By:           Title:             

            [Consented to and] Accepted:

KeyBank National Association, a national
banking association, as Agent
      By:           Name:           Title:           Forestar (USA) Real Estate
Group Inc.
      By:           Name:           Title:        

C-3

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ANNEX 1
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ACCEPTANCE
     1. Representations and Warranties.
     1.1 Assignor[s]. [The][Each] Assignor (a) represents and warrants that
(i) it is the legal and beneficial owner of [the][the relevant] Assigned
Interest, (ii) [the][such] Assigned Interest is free and clear of any lien,
encumbrance or other adverse claim and (iii) it has full power and authority,
and has taken all action necessary, to execute and deliver this Assignment and
Acceptance and to consummate the transactions contemplated hereby; and
(b) assumes no responsibility with respect to (i) any statements, warranties or
representations made in or in connection with the Credit Agreement or any other
Loan Document, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Documents or any collateral
thereunder, (iii) the financial condition of the Borrower, any of its
Subsidiaries or Affiliates or any other Person obligated in respect of any Loan
Document or (iv) the performance or observance by the Borrower, any of its
Subsidiaries or Affiliates or any other Person of any of their respective
obligations under any Loan Document.
     1.2. Assignee[s]. [The][Each] Assignee (a) represents and warrants that
(i) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Acceptance and to consummate the
transactions contemplated hereby and to become a Lender under the Credit
Agreement, (ii) it meets all the requirements to be an assignee under §18 of the
Credit Agreement (subject to such consents, if any, as may be required under §
27 of the Credit Agreement), (iii) from and after the Effective Date, it shall
be bound by the provisions of the Credit Agreement as a Lender thereunder and,
to the extent of [the][the relevant] Assigned Interest, shall have the
obligations of a Lender thereunder, (iv) it is sophisticated with respect to
decisions to acquire assets of the type represented by the Assigned Interest and
either it, or the person exercising discretion in making its decision to acquire
the Assigned Interest, is experienced in acquiring assets of such type, (v) it
has received a copy of the Credit Agreement, and has received or has been
accorded the opportunity to receive copies of the most recent financial
statements delivered pursuant to §7.4 thereof, as applicable, and such other
documents and information as it deems appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance and to
purchase [the][such] Assigned Interest, (vi) it has, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Assignment and Acceptance and to purchase
[the][such] Assigned Interest, and (vii) if it is a foreign lender (as
contemplated by §18.11 of the Credit Agreement), attached to the Assignment and
Acceptance is any documentation required to be delivered by it pursuant to the
terms of the Credit Agreement, duly completed and executed by [the][such]
Assignee; and (b) agrees that (i) it will, independently and without reliance on
the Agent, [the][any] Assignor or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not

Annex(1)-C-1

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taking action under the Loan Documents, and (ii) it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Documents
are required to be performed by it as a Lender.
     2. Payments. From and after the Effective Date, the Agent shall make all
payments in respect of [the][each] Assigned Interest (including payments of
principal, interest, fees and other amounts) to [the][the relevant] Assignor for
amounts which have accrued to but excluding the Effective Date and to [the][the
relevant] Assignee for amounts which have accrued from and after the Effective
Date.
     3. General Provisions. This Assignment and Acceptance shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns. This Assignment and Acceptance may be executed in any
number of counterparts, which together shall constitute one instrument. Delivery
of an executed counterpart of a signature page of this Assignment and Acceptance
by telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance. This Assignment and Acceptance shall be governed
by, and construed in accordance with, the law of the State of New York, without
regard to the conflict of laws principles thereof.

Annex(1) C-2

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Exhibit D-1
Form of Loan Request
KeyBank National Association
1200 Abernathy Road, N.E. — Suite 1550
Atlanta, Georgia 30328
Attn: Daniel Silbert
Ladies and Gentlemen:
     Pursuant to the provisions of §2.6(a) of the Amended and Restated Revolving
and Term Credit Agreement dated as of August ___, 2010 (together with all
amendments, modifications, restatements, and supplements thereto, the “Credit
Agreement”) among Forestar (USA) Real Estate Group Inc.; the Guarantors from
time to time party thereto; KeyBank National Association (the “Agent”); and the
other Lenders party thereto, the undersigned hereby certifies as follows (all
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto under the Credit Agreement):
     a. Loan. The Borrower hereby requests the following [Revolving/Term] Loan:

       
Principal Amount:
$    
 
     
Type (LIBOR Rate Loan or Base Rate Loan):
     
 
     
 
     
Drawdown Date:
     
 
     
 
     
Interest Period (if LIBOR Rate Loan is selected):
     
 
     

by wire transfer to the Advance Account.
     b. Use of Proceeds. Such Loan shall be used for a purpose permitted by §2.8
of the Credit Agreement.
     c. No Default. The undersigned officer of Borrower certifies that no
Default or Event of Default has occurred and is continuing, except as may be
disclosed in an attachment to this Loan Request.
     d. Representations True. Each of the representations and warranties made by
the Loan Parties contained in the Loan Documents is true in all material
respects at and as of the Drawdown Date for the Loan requested hereby (except to
the extent of changes resulting from transactions not prohibited by the Loan
Documents, or except to the extent that such representations and warranties
relate expressly to an earlier date, in which latter case such representations
and warranties are true in all material respects as of such earlier date).

D(1)-1

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     e. Other Conditions. All other conditions to the making of the Loan
requested hereby set forth in §11 of the Credit Agreement have been satisfied.
[SIGNATURE PAGES FOLLOWS]

D(1)-2

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     IN WITNESS WHEREOF, Borrower has executed this Loan Request as of this
                     day of                                         , 20___.

            FORESTAR (USA) REAL ESTATE GROUP INC.
      By:           Name:           Title:      

D(1)-3

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Exhibit D-2
Form of Request for Swing Line Loan
KeyBank National Association
1200 Abernathy Road, N.E.
Suite 1550
Atlanta, Georgia 30328
Attn: Daniel Silbert
Ladies and Gentlemen:
          Pursuant to the provisions of §2.6(b) of the Amended and Restated
Revolving and Term Credit Agreement dated as of August ___, 2010 (together with
all amendments, modifications, restatements, and supplements thereto, the
“Credit Agreement”) among FORESTAR (USA) REAL ESTATE GROUP INC., a Delaware
corporation (“Borrower”); certain guarantors party thereto KeyBank National
Association (“Agent”); the other lenders party thereto and KeyBanc Capital
Markets, Borrower hereby requests and certifies as follows (all capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto
under the Credit Agreement):
     a. Loan. The Borrower hereby requests a Swing Line Loan in the principal
amount of $                     by wire transfer to the Advance Account.
     b. No Default. The undersigned officer of Borrower certifies that no
Default or Event of Default has occurred and is continuing, except as may be
disclosed in an attachment to this Loan Request.
     c. Representations True. Each of the representations and warranties made by
the Loan Parties contained in the Credit Agreement or in the other Loan
Documents is true in all material respects at and as of the Drawdown Date for
the Loan requested hereby (except to the extent of changes resulting from
transactions permitted by the Credit Agreement and the other Loan Documents, or
except to the extent that such representations and warranties relate expressly
to an earlier date, in which latter case such representations and warranties are
true in all material respects as of such earlier date).
     d. Other Conditions. All other conditions to the making of the Loan
requested hereby set forth in §11 of the Credit Agreement have been satisfied.
[SIGNATURE PAGE FOLLOWS]

D(2)-1

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the Borrower has executed this Request for Swing Line
Loan as of this                      day of
                                        , 20___.

            BORROWER:

FORESTAR (USA) REAL ESTATE GROUP INC.,
a Delaware corporation
      By:           Name:           Title:      

D(2)-2

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Exhibit E
Form of Borrowing Base Certificate
CERTIFICATE DATE:
To:        KeyBank National Association, as Agent
              1200 Abernathy Road, N.E. — Suite 1550
              Atlanta, Georgia 30328
Ladies and Gentlemen:
     Reference is made to that certain Amended and Restated Revolving and Term
Credit Agreement, dated as of August ___, 2010 (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the “Credit
Agreement”) among Forestar (USA) Real Estate Group Inc., the Guarantors party
thereto from time to time, KeyBank National Association (the “Agent”) on behalf
of itself and the other Lenders party thereto (all capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto under the
Credit Agreement).
The undersigned Principal Financial Officer of Borrower, in his capacity as
such, hereby certifies and warrants to the Agent and the Lenders as follows:

I.   The undersigned is a duly qualified and acting Principal Financial Officer
of Borrower and is familiar with the financial statements and financial affairs
of Borrower and the other Loan Parties. The undersigned is authorized to execute
this Borrowing Base Certificate on behalf of Borrower.

II.   Attached hereto as Schedule 1 are true and correct computations of the
Borrowing Base under the Credit Agreement as of the date set forth below.

Borrower, on behalf of each Loan Party, further represents and warrants to the
Agent and the Lenders that the representations and warranties contained in §6 of
the Credit Agreement are true and correct in all material respects on and as of
the date of this Borrowing Base Certificate as if made on and as of the date
hereof (except to the extent of changes resulting from transactions not
prohibited by the Loan Documents, or except to the extent that such
representations and warranties relate expressly to an earlier date, in which
latter case such representations and warranties are true and correct in all
material respects as of such earlier date), and that no Default or Event of
Default has occurred and is continuing, except as disclosed in an attachment to
this Borrowing Base Certificate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

E-1

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, Borrower has caused this Borrowing Base Certificate to
be executed and delivered on this ___ day of                     , 20___.

            FORESTAR (USA) REAL ESTATE GROUP INC.
      By:           Name:           Its:   

E-2

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Schedule 1 to Borrowing Base Certificate

E-3

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EXHIBIT F
PATRIOT ACT AND OFAC TRANSFEREE AND
ASSIGNEE IDENTIFYING INFORMATION FORM
1. Patriot Act Checklist

     
ADDITIONAL LENDER REQUIRED INFORMATION
   
 
   
Name:
   
 
   
Identification
                     
(a) (US Company) TIN
  (a)                     
(b) (Non-US) Gov’t issued document certifying existence
  (b)                     
 
   
Phone Number
   
 
   
BUSINESS REPRESENTATIVE REQUIRED INFORMATION PERSON WHO WILL EXECUTE DOCUMENTS
   
 
   
Name
   
 
   
Residential Address
   
 
   
Date of Birth
   
 
   
Form of Identification
   
(a) (US Citizen) Social Security Number
  (a)                     
(b) (No-US) TIN, Passport Number (country of issuance, number & date), or Alien
Identification Number
  (b)                     
 
   
2. OFAC Checklist:
   
 
   
Name:
   
 
   
Co-Lenders
   
 
   
General Partner/Managing Member/Trustee
   
 
   
Limited Partners/Members/Beneficiaries
   

F-4

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Exhibit G
Form of Letter of Credit Request
KeyBank National Association
1200 Abernathy Road, N.E. — Suite 1550
Atlanta, Georgia 30328
Attn: Daniel Silbert
Ladies and Gentlemen:
     Pursuant to the provisions of §2.10 of the Amended and Restated Revolving
and Term Credit Agreement dated as of August ___, 2010 (together with all
amendments, modifications, restatements, and supplements thereto, the “Credit
Agreement”) among Forestar (USA) Real Estate Group Inc., the Guarantors from
time to time party thereto, KeyBank National Association (the “Agent”), and the
other Lenders party thereto, the Borrower hereby certifies as follows (all
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto under the Credit Agreement):
     a. Letter of Credit. The Borrower requests the following Letter of Credit:

           
Type (Standby or Trade):
   
 
         
 
     
Amount:
$    
 
       
Term:
   
 
     
 
     
Issuance Date:
   
 
       
 
     
For the Account of:
   
 
       

     b. Use of Proceeds. Such Letter of Credit shall be used for a purpose
permitted by the Credit Agreement.
     c. No Default. The undersigned officer of Borrower certifies that no
Default or Event of Default has occurred and is continuing or will be caused by
the issuance of the Letter of Credit requested hereby.
     d. Representations True. Each of the representations and warranties made by
the Loan Parties contained in the Loan Documents is true in all material
respects as of the date as of which it was made and shall also be true in all
material respects at and as of the issuance date for the Letter of Credit
requested hereby, (except to the extent of changes resulting from transactions
not prohibited by the Loan Documents, or except to the extent that such
representations and warranties relate expressly to an earlier date, in which
latter case such representations and warranties are true in all material
respects as of such earlier date).

G-1

--------------------------------------------------------------------------------

 

     e. Other Conditions. All other conditions to the issuance of the Letter of
Credit requested hereby set forth in §11 of the Credit Agreement have been
satisfied.
[SIGNATURE PAGES FOLLOWS]

G-2

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, Borrower has executed this Letter of Credit Request as
of this                      day of
                                                            , 20___.

            FORESTAR (USA) REAL ESTATE GROUP INC.
      By:           Name:           Title:      

G-3

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Exhibit H
Form of Joinder Agreement (Guarantor)
     THIS JOINDER AGREEMENT (“Joinder Agreement”) is executed as of
                                         ___, 20___, by
                                                            , a
                                          (“Joining Party”), and delivered to
KeyBank National Association (“KeyBank”), as Agent, pursuant to §7.21 of the
Amended and Restated Revolving and Term Credit Agreement dated as of August ___,
2010 (as amended, restated, supplemented or modified from time to time, the
“Credit Agreement”), among Forestar (USA) Real Estate Group Inc., the Guarantors
from time to time a party thereto, KeyBank, for itself and as the Agent, and the
other Lenders from time to time party thereto. Terms used but not defined in
this Joinder Agreement shall have the meanings defined for those terms in the
Credit Agreement.
RECITALS
     (A) Joining Party is required, pursuant to §7.21 of the Credit Agreement,
to become an additional Guarantor under the Credit Agreement and a party to all
the other Loan Documents to which any such existing Guarantor is a party,
including, without limitation, the Credit Agreement and the guaranty provisions
thereof.
     (B) Joining Party expects to realize direct and indirect benefits as a
result of the availability to Borrower of the credit facilities under the Credit
Agreement.
     NOW, THEREFORE, for and in consideration of the foregoing premises and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Joining Party agrees as follows:
AGREEMENT
     1. Joinder. By this Joinder Agreement, the Joining Party hereby becomes a
“Guarantor” under the Credit Agreement and agrees to be jointly and severally
liable for all the Obligations of a Guarantor now or hereafter incurred under
the Credit Agreement and the other Loan Documents. Joining Party agrees that
Joining Party is and shall be bound by, and hereby assumes, all representations,
warranties, covenants, terms, conditions, duties and waivers applicable to a
Guarantor under the Credit Agreement and the other Loan Documents, including,
without limitation, the terms and provisions of §34 of the Credit Agreement.
     2. Representations and Warranties of Joining Party. Joining Party
represents and warrants to Agent and Lenders that, as of the Effective Date (as
defined below), except as disclosed in writing by Joining Party to Agent on or
prior to the date hereof and approved by the Agent in writing (which disclosures
shall be deemed to amend the Schedules and other disclosures delivered as
contemplated in the Credit Agreement), the representations and warranties made
by Joining Party as a Guarantor under the Credit Agreement are true and correct
in all material respects as applied to Joining Party as a Guarantor on and as of
date hereof (except to the extent such representations and warranties expressly
relate to an earlier date). As of the Effective Date, Joining Party hereby
represents and warrants that no Default or Event of Default shall be caused by
the joinder of it provided for hereunder.

H-1

--------------------------------------------------------------------------------

 

     3. Further Assurances. Joining Party agrees to execute and deliver such
other instruments and documents and take such other action, as the Agent may
reasonably request to evidence its joinder as a Guarantor under the Loan
Documents.
     4. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL
OBLIGATION UNDER, AND SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (EXCLUDING THE LAWS
APPLICABLE TO CONFLICTS OR CHOICE OF LAW).
     5. The effective date (the “Effective Date”) of this Joinder Agreement is
                     ___, 20___.
     IN WITNESS WHEREOF, the undersigned has executed this Joinder Agreement as
of the Effective Date.

            JOINING PARTY
        ,          a                By:           Name:           Title:        

ACKNOWLEDGED:
KEYBANK NATIONAL ASSOCIATION, as Agent

                By:         Name:         Title:      

H-2

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EXHIBIT I
FORESTAR (USA) REAL ESTATE GROUP INC.
OFFICER’S CERTIFICATE
[§5.3(d)(ii) Release]
     Reference is made to the Amended and Restated Revolving and Term Credit
Agreement (as amended, restated, supplemented or otherwise modified, the “Credit
Agreement”) dated as of August ___, 2010, by and among Forestar (USA) Real
Estate Group Inc., a Delaware corporation, as borrower (“Borrower”), Forestar
Group Inc., a Delaware corporation, and the wholly owned, direct and indirect
Subsidiaries of Borrower signatory thereto, as guarantors, the financial
institutions signatory thereto and KeyBank National Association, a national
banking association, as administrative agent. All capitalized terms used herein
but not defined herein shall have the meaning ascribed in the Credit Agreement.
     This Certificate is being delivered in connection with the donation, grant,
dedication or other transfer by Borrower of certain Real Property described on
Exhibit A attached hereto and made a part hereof (“Released Property”). In
accordance with §5.3(d)(ii) of the Credit Agreement, the undersigned hereby
certifies to Agent and Lenders that:
     1. The undersigned is authorized to execute and deliver this Certificate on
behalf of Borrower.
     2. The donation, grant, dedication or other transfer of the Released
Property is being made for the following purpose:
                                         [PROVIDE BRIEF DESCRIPTION], and 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.
     This Certificate shall constitute a “Loan Document” for all purposes under
the Credit Agreement and the other Loan Documents.
[signature page follows]

I-1

--------------------------------------------------------------------------------

 

     It is understood and acknowledged that the undersigned is executing this
Certificate not in an individual capacity but solely in the undersigned’s
capacity as an officer and is without any personal liability as to the matters
contained in this Certificate.
     IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:                     , 20___

            FORESTAR (USA) REAL ESTATE GROUP INC.
      By:           Name:           Title:        

Attachments:
Exhibit A — Description of Released Property

I-2

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Schedule 1.1
Lenders and Commitments
(see attached)

--------------------------------------------------------------------------------

 

Lenders commitments A & R 6.8.2010

                                      Forestar                                  
A & R Revolver                   A & R Term Facility             Lenders  
Commitment     %     Lenders   Commitment     %  
KEYBANK/KREC
    60,548,464.00       34.599122285714300 %   KEYBANK/KREC     40,451,535.00  
    32.361228000000000 %
UNITED FCS, PCA, d/b/a FCS COMMERCIAL
    17,564,573.00       10.036898857142900 %   UNITED FCS, PCA, d/b/a FCS
COMMERCIAL     7,435,427.00       5.948341600000000 %
AGFIRST FARM CREDIT BANK
    39,232,275.00       22.418442857142900 %   AGFIRST FARM CREDIT BANK    
15,767,725.00       12.614180000000000 %
AMEGY BANK
    14,678,571.00       8.387754857142860 %   AMEGY BANK     5,321,429.00      
4.257143200000000 %
CAPITAL ONE
    19,700,287.00       11.257306857142900 %   CAPITAL ONE     9,299,713.00    
  7.439770400000000 %
NORTHWEST FARM CREDIT SERV
    7,025,830.00       4.014760000000000 %   NORTHWEST FARM CREDIT SERV    
2,974,171.00       2.379336800000000 %
GOLDMAN SACHS
    6,500,000.00       3.714285714285710 %   GOLDMAN SACHS     3,500,000.00    
  2.800000000000000 %
TEXAS CAPITAL
    9,750,000.00       5.571428571428570 %   TEXAS CAPITAL     5,250,000.00    
  4.200000000000000 %
 
                  METLIFE     35,000,000.00       28.000000000000000 %
TOTAL
    175,000,000.00       100.00 %   TOTAL     125,000,000.00       100.00 %
 
    0.00                   0.00          

--------------------------------------------------------------------------------

 

Schedule 2
Mortgaged Property Documents

1.   Each of the Security Deeds, including the following modifications thereto:

  a.   Second Modification of Mortgage, Assignment of Rents, Leases and Other
Agreements, Security Agreement and Fixture filing dated as of August ___, 2010,
to be recorded in the Office of the Judge of Probate of Cherokee County,
Alabama;     b.   Third Modification of Mortgage, Assignment of Rents, Leases
and Other Agreements, Security Agreement and Fixture filing dated as of August
___, 2010, to be recorded in the Office of the Judge of Probate of Cleburne
County, Alabama;     c.   Second Modification of Mortgage, Assignment of Rents,
Leases and Other Agreements, Security Agreement and Fixture filing dated as of
August ___, 2010, to be recorded in the Office of the Judge of Probate of Etowah
County, Alabama;     d.   Second Modification of Mortgage, Assignment of Rents,
Leases and Other Agreements, Security Agreement and Fixture filing dated as of
August ___, 2010, to be recorded in the Office of the Judge of Probate of
Randolph County, Alabama;     e.   Modifications of Deed of Trust, Assignment of
Rents, Leases and Other Agreements, Security Agreement and Fixture Filing, each
dated as of August ___, 2010, and to be recorded in the official records of
Anderson, Angelina, Cherokee, Hardin, Harris, Houston, Jasper, Liberty,
Nacogdoches, Rusk, Sabine, San Augustine and San Jacinto Counties, Texas;     f.
  Modification of Deed to Secure Debt, Assignment of Rents, Leases and Other
Agreements and Security Agreement dated as of August ___, 2010, original
counterparts of which to be recorded in the Office of the Clerk of the Superior
Court of Banks, Bartow, Carroll, Chattooga, Cherokee, Coweta, Dawson, Douglas,
Elbert, Floyd, Franklin, Gilmer, Gordon, Hall, Haralson, Harris, Hart, Heard,
Jackson, Lumpkin, Madison, Murray, Pickens, Polk, Stephens, Troup and Walker
Counties, Georgia;     g.   Amended and Restated Mortgage, Assignment of Rents,
Leases and Other Agreements, Security Agreement and Fixture Filing dated as of
August ___, 2010, to be recorded in the Office of the Clerk of the Court of
Sabine Parish, Louisiana;     h.   Modification of Deed of Trust, Assignment of
Rents, Leases and Other Agreements, Security Agreement and Fixture Filing dates
as of August ___, 2010, to be recorded in the official records of Los Angeles
County, California; and

2.   Petition for Ascertainment of Mortgage Tax executed by KeyBank, the
Affidavit in Support of Petition for Ascertainment of Mortgage Tax executed by
an officer of Borrower and form of Mortgage Tax Order pertaining to the Security
Deeds encumbering the Mortgaged Properties located in the State of Alabama.

--------------------------------------------------------------------------------

 

Schedule 3
Mortgaged Properties

--------------------------------------------------------------------------------

 

FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
10002
  AL   Cherokee     455  
10008
  AL   Cherokee     165  
10030
  AL   Cherokee     619  
10032
  AL   Cherokee     67  
10058
  AL   Cherokee     74  
10068
  AL   Cherokee     55  
10080
  AL   Cherokee     1,011  
10093
  AL   Cherokee     999  
10094
  AL   Cherokee     191  
10504
  AL   Cherokee     81  
10509
  AL   Cherokee     614  
10514
  AL   Cherokee     1,018  
10553
  AL   Cherokee     694  
10593
  AL   Cherokee     68  
11001
  AL   Cherokee     724  
11004
  AL   Cherokee     522  
11035
  AL   Cherokee     1,039  
11062
  AL   Cherokee     868  
11200
  AL   Cherokee     191  
19000
  AL   Cherokee     408  
11083
  AL   Cleburne     482  
11143
  AL   Cleburne     733  
11144
  AL   Cleburne     555  
11149
  AL   Cleburne     1,254  
11184
  AL   Cleburne     77  
11209
  AL   Cleburne     210  
12144
  AL   Cleburne     1,106  
12146
  AL   Cleburne     88  
12148
  AL   Cleburne     139  
12152
  AL   Cleburne     226  
12153
  AL   Cleburne     83  
12154
  AL   Cleburne     87  
12155
  AL   Cleburne     119  
12161
  AL   Cleburne     668  
12165
  AL   Cleburne     41  

Page 1

--------------------------------------------------------------------------------

 

FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
12170
  AL   Cleburne     107  
12177
  AL   Cleburne     366  
12181
  AL   Cleburne     79  
12183
  AL   Cleburne     39  
12184
  AL   Cleburne     80  
12193
  AL   Cleburne     63  
12195
  AL   Cleburne     119  
12197
  AL   Cleburne     800  
10569
  AL   Etowah     1,417  
12163
  AL   Randolph     36  
13010
  AL   Randolph     29  
13015
  AL   Randolph     211  
13026
  AL   Randolph     821  
13115
  AL   Randolph     146  
13127
  AL   Randolph     202  
13183
  AL   Randolph     194  
13184
  AL   Randolph     424  
15000
  GA   Banks     436  
15001
  GA   Banks     453  
15003
  GA   Banks     303  
15011
  GA   Banks     119  
15013
  GA   Banks     781  
15016
  GA   Banks     61  
15019
  GA   Banks     206  
15022
  GA   Banks     110  
13503
  GA   Bartow     32  
13504
  GA   Bartow     336  
13506
  GA   Bartow     814  
13507
  GA   Bartow     1,053  
13508
  GA   Bartow     516  
13509
  GA   Bartow     98  
13510
  GA   Bartow     18  
13514
  GA   Bartow     7  
14510
  GA   Bartow     477  
14511
  GA   Bartow     297  

Page 2

--------------------------------------------------------------------------------

 

FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
14515
  GA   Bartow     59  
14518
  GA   Bartow     177  
14520
  GA   Bartow     51  
14521
  GA   Bartow     39  
14524
  GA   Bartow     451  
14525
  GA   Bartow     366  
14526
  GA   Bartow     598  
14527
  GA   Bartow     95  
14528
  GA   Bartow     615  
14529
  GA   Bartow     108  
14530
  GA   Bartow     181  
14531
  GA   Bartow     524  
14532
  GA   Bartow     562  
14533
  GA   Bartow     373  
14534
  GA   Bartow     433  
14535
  GA   Bartow     461  
14536
  GA   Bartow     155  
14537
  GA   Bartow     208  
14539
  GA   Bartow     248  
14543
  GA   Bartow     547  
14544
  GA   Bartow     515  
14546
  GA   Bartow     130  
14549
  GA   Bartow     163  
14552
  GA   Bartow     508  
14555
  GA   Bartow     74  
14561
  GA   Bartow     546  
14562
  GA   Bartow     617  
14563
  GA   Bartow     627  
14564
  GA   Bartow     501  
14570
  GA   Bartow     38  
14607
  GA   Bartow     158  
12035
  GA   Carroll     217  
12057
  GA   Carroll     423  
12064
  GA   Carroll     745  
12065
  GA   Carroll     877  

Page 3

--------------------------------------------------------------------------------

 

FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
12066
  GA   Carroll     115  
12067
  GA   Carroll     37  
12068
  GA   Carroll     222  
12069
  GA   Carroll     121  
12070
  GA   Carroll     1,126  
12073
  GA   Carroll     426  
12074
  GA   Carroll     292  
12079
  GA   Carroll     725  
12080
  GA   Carroll     1,116  
12081
  GA   Carroll     244  
12082
  GA   Carroll     166  
12083
  GA   Carroll     624  
12084
  GA   Carroll     199  
12087
  GA   Carroll     195  
12091
  GA   Carroll     149  
12092
  GA   Carroll     201  
12093
  GA   Carroll     133  
12094
  GA   Carroll     88  
12095
  GA   Carroll     322  
12096
  GA   Carroll     719  
12097
  GA   Carroll     758  
12104
  GA   Carroll     330  
12106
  GA   Carroll     104  
12107
  GA   Carroll     750  
12108
  GA   Carroll     802  
12109
  GA   Carroll     92  
12110
  GA   Carroll     600  
12111
  GA   Carroll     152  
12112
  GA   Carroll     412  
12113
  GA   Carroll     307  
12118
  GA   Carroll     513  
12122
  GA   Carroll     733  
12125
  GA   Carroll     350  
12126
  GA   Carroll     488  
12127
  GA   Carroll     69  

Page 4

--------------------------------------------------------------------------------

 

FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
12128
  GA   Carroll     58  
12129
  GA   Carroll     58  
12130
  GA   Carroll     50  
12131
  GA   Carroll     79  
12132
  GA   Carroll     239  
12133
  GA   Carroll     135  
12134
  GA   Carroll     20  
12135
  GA   Carroll     510  
12136
  GA   Carroll     710  
12138
  GA   Carroll     78  
12139
  GA   Carroll     500  
12206
  GA   Carroll     624  
12207
  GA   Carroll     261  
12208
  GA   Carroll     74  
12209
  GA   Carroll     37  
12211
  GA   Carroll     86  
12212
  GA   Carroll     49  
12213
  GA   Carroll     48  
12214
  GA   Carroll     124  
12215
  GA   Carroll     228  
12216
  GA   Carroll     115  
12217
  GA   Carroll     418  
12218
  GA   Carroll     191  
12219
  GA   Carroll     511  
12220
  GA   Carroll     203  
12221
  GA   Carroll     55  
12223
  GA   Carroll     107  
12224
  GA   Carroll     47  
12226
  GA   Carroll     107  
12227
  GA   Carroll     38  
12228
  GA   Carroll     91  
12229
  GA   Carroll     60  
12233
  GA   Carroll     311  
12234
  GA   Carroll     119  
12238
  GA   Carroll     102  

Page 5

--------------------------------------------------------------------------------

 

FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
12239
  GA   Carroll     90  
12241
  GA   Carroll     154  
12243
  GA   Carroll     77  
12531
  GA   Carroll     85  
12532
  GA   Carroll     85  
12533
  GA   Carroll     777  
12627
  GA   Carroll     174  
13185
  GA   Carroll/Heard     88  
10023
  GA   Chattooga     996  
10024
  GA   Chattooga     932  
10032
  GA   Chattooga     76  
10036
  GA   Chattooga     40  
10039
  GA   Chattooga     163  
10041
  GA   Chattooga     59  
10042
  GA   Chattooga     104  
10049
  GA   Chattooga     32  
10050
  GA   Chattooga     122  
10051
  GA   Chattooga     34  
10053
  GA   Chattooga     79  
10072
  GA   Chattooga     143  
10083
  GA   Chattooga     523  
10084
  GA   Chattooga     277  
10085
  GA   Chattooga     269  
10088
  GA   Chattooga     686  
10092
  GA   Chattooga     127  
10101
  GA   Chattooga     649  
13505
  GA   Cherokee     161  
13509
  GA   Cherokee     470  
13510
  GA   Cherokee     327  
13511
  GA   Cherokee     166  
13514
  GA   Cherokee     50  
13515
  GA   Cherokee     177  
13521
  GA   Cherokee     149  
13523
  GA   Cherokee     94  
13524
  GA   Cherokee     1  

Page 6

--------------------------------------------------------------------------------

 

FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
13525
  GA   Cherokee     377  
13526
  GA   Cherokee     385  
13527
  GA   Cherokee     632  
13528
  GA   Cherokee     327  
13529
  GA   Cherokee     141  
13530
  GA   Cherokee     1  
13531
  GA   Cherokee     420  
13532
  GA   Cherokee     1,066  
13533
  GA   Cherokee     414  
13534
  GA   Cherokee     299  
13535
  GA   Cherokee     149  
13537
  GA   Cherokee     131  
13546
  GA   Cherokee     72  
13548
  GA   Cherokee     32  
13549
  GA   Cherokee     226  
13550
  GA   Cherokee     256  
13551
  GA   Cherokee     171  
13553
  GA   Cherokee     104  
13556
  GA   Cherokee     696  
13557
  GA   Cherokee     74  
13564
  GA   Cherokee     346  
13564
  GA   Cherokee     4  
13566
  GA   Cherokee     504  
13571
  GA   Cherokee     166  
13572
  GA   Cherokee     792  
13573
  GA   Cherokee     99  
13574
  GA   Cherokee     453  
13575
  GA   Cherokee     222  
13576
  GA   Cherokee     175  
13577
  GA   Cherokee     515  
14593
  GA   Cherokee     513  
14596
  GA   Cherokee     190  
14606
  GA   Cherokee     319  
15503
  GA   Cherokee     327  
12060
  GA   Coweta     83  

Page 7

--------------------------------------------------------------------------------

 

FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
12076
  GA   Coweta     102  
12077
  GA   Coweta     214  
12078
  GA   Coweta     105  
12088
  GA   Coweta     229  
12090
  GA   Coweta     1,512  
12098
  GA   Coweta     466  
12100
  GA   Coweta     238  
12101
  GA   Coweta     58  
12102
  GA   Coweta     153  
12120
  GA   Coweta     198  
12501
  GA   Coweta     101  
12507
  GA   Coweta     154  
12508
  GA   Coweta     125  
12510
  GA   Coweta     60  
12514
  GA   Coweta     40  
12515
  GA   Coweta     829  
12516
  GA   Coweta     367  
12517
  GA   Coweta     399  
12519
  GA   Coweta     41  
12520
  GA   Coweta     644  
12522
  GA   Coweta     88  
12524
  GA   Coweta     1,214  
12527
  GA   Coweta     205  
15500
  GA   Dawson     558  
15501
  GA   Dawson     808  
15508
  GA   Dawson     199  
15512
  GA   Dawson     408  
15513
  GA   Dawson     429  
15514
  GA   Dawson     220  
15515
  GA   Dawson     157  
15516
  GA   Dawson     290  
15518
  GA   Dawson     274  
15524
  GA   Dawson     49  
15529
  GA   Dawson     592  
15532
  GA   Dawson     459  

Page 8

--------------------------------------------------------------------------------

 

FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
15535
  GA   Dawson     173  
15537
  GA   Dawson     430  
15539
  GA   Dawson     351  
15540
  GA   Dawson     485  
15541
  GA   Dawson     244  
15543
  GA   Dawson     422  
15548
  GA   Dawson     111  
12001
  GA   Douglas     52  
12002
  GA   Douglas     114  
12056
  GA   Douglas     634  
12085
  GA   Douglas     158  
15118
  GA   Elbert     123  
15130
  GA   Elbert     948  
15135
  GA   Elbert     196  
15180
  GA   Elbert     413  
10007
  GA   Floyd     329  
10019
  GA   Floyd     443  
10020
  GA   Floyd     271  
10045
  GA   Floyd     27  
10062
  GA   Floyd     367  
10066
  GA   Floyd     146  
10068
  GA   Floyd     494  
10077
  GA   Floyd     87  
10086
  GA   Floyd     134  
10100
  GA   Floyd     242  
11008
  GA   Floyd     42  
11045
  GA   Floyd     747  
11048
  GA   Floyd     46  
11049
  GA   Floyd     71  
11065
  GA   Floyd     370  
11169
  GA   Floyd     95  
11192
  GA   Floyd     307  
14538
  GA   Floyd     124  
14554
  GA   Floyd     424  
14556
  GA   Floyd     719  

Page 9

--------------------------------------------------------------------------------

 

FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
14560
  GA   Floyd     648  
14563
  GA   Floyd     181  
14608
  GA   Floyd     316  
14609
  GA   Floyd     234  
16011
  GA   Floyd     145  
17011
  GA   Floyd     112  
15016
  GA   Franklin     128  
15023
  GA   Franklin     279  
15025
  GA   Franklin     57  
15026
  GA   Franklin     77  
15027
  GA   Franklin     124  
15028
  GA   Franklin     279  
15030
  GA   Franklin     73  
15032
  GA   Franklin     156  
15034
  GA   Franklin     110  
15039
  GA   Franklin     162  
15042
  GA   Franklin     115  
14001
  GA   Gilmer     1,061  
14015
  GA   Gilmer     45  
14016
  GA   Gilmer     465  
14017
  GA   Gilmer     733  
14022
  GA   Gilmer     95  
14033
  GA   Gilmer     649  
14035
  GA   Gilmer     982  
14036
  GA   Gilmer     99  
14052
  GA   Gilmer     345  
14053
  GA   Gilmer     206  
14054
  GA   Gilmer     56  
14055
  GA   Gilmer     283  
14066
  GA   Gilmer     483  
14070
  GA   Gilmer     95  
14074
  GA   Gilmer     269  
14075
  GA   Gilmer     826  
14080
  GA   Gilmer     170  
13500
  GA   Gordon     168  

Page 10

--------------------------------------------------------------------------------

 

FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
13502
  GA   Gordon     74  
13503
  GA   Gordon     58  
14009
  GA   Gordon     85  
14010
  GA   Gordon     110  
14011
  GA   Gordon     8  
14045
  GA   Gordon     41  
14048
  GA   Gordon     895  
14063
  GA   Gordon     433  
14071
  GA   Gordon     181  
14073
  GA   Gordon     1,245  
14500
  GA   Gordon     221  
14501
  GA   Gordon     160  
14507
  GA   Gordon     45  
14508
  GA   Gordon     147  
14517
  GA   Gordon     400  
14518
  GA   Gordon     155  
14520
  GA   Gordon     267  
14521
  GA   Gordon     6  
15052
  GA   Hall     206  
15053
  GA   Hall     961  
15065
  GA   Hall     304  
11084
  GA   Haralson     573  
11086
  GA   Haralson     225  
11087
  GA   Haralson     163  
11088
  GA   Haralson     651  
11091
  GA   Haralson     448  
11092
  GA   Haralson     250  
11094
  GA   Haralson     178  
11095
  GA   Haralson     289  
11096
  GA   Haralson     188  
11097
  GA   Haralson     162  
11098
  GA   Haralson     554  
11099
  GA   Haralson     817  
11100
  GA   Haralson     776  
11103
  GA   Haralson     498  

Page 11

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FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
11104
  GA   Haralson     104  
11105
  GA   Haralson     52  
11106
  GA   Haralson     99  
11108
  GA   Haralson     617  
11109
  GA   Haralson     61  
11110
  GA   Haralson     90  
11111
  GA   Haralson     231  
11115
  GA   Haralson     641  
11116
  GA   Haralson     721  
11117
  GA   Haralson     192  
11119
  GA   Haralson     239  
11120
  GA   Haralson     703  
11121
  GA   Haralson     742  
11138
  GA   Haralson     508  
11142
  GA   Haralson     134  
11172
  GA   Haralson     1,151  
11181
  GA   Haralson     303  
11215
  GA   Haralson     51  
11221
  GA   Haralson     60  
11222
  GA   Haralson     43  
11223
  GA   Haralson     113  
11227
  GA   Haralson     1,522  
11228
  GA   Haralson     806  
11229
  GA   Haralson     199  
11244
  GA   Haralson     93  
11245
  GA   Haralson     91  
11248
  GA   Haralson     18  
11249
  GA   Haralson     94  
11250
  GA   Haralson     22  
11251
  GA   Haralson     118  
11252
  GA   Haralson     93  
11253
  GA   Haralson     52  
11254
  GA   Haralson     335  
11255
  GA   Haralson     368  
11256
  GA   Haralson     75  

Page 12

--------------------------------------------------------------------------------

 

FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
11257
  GA   Haralson     156  
11258
  GA   Haralson     42  
11260
  GA   Haralson     27  
11261
  GA   Haralson     88  
11262
  GA   Haralson     59  
11263
  GA   Haralson     38  
11264
  GA   Haralson     124  
11265
  GA   Haralson     86  
11266
  GA   Haralson     37  
11267
  GA   Haralson     201  
11268
  GA   Haralson     82  
11269
  GA   Haralson     107  
11270
  GA   Haralson     175  
11271
  GA   Haralson     104  
11274
  GA   Haralson     692  
11275
  GA   Haralson     858  
11276
  GA   Haralson     245  
11283
  GA   Haralson     111  
11284
  GA   Haralson     82  
12203
  GA   Haralson     121  
12204
  GA   Haralson     153  
12211
  GA   Haralson     3  
12242
  GA   Haralson     94  
12625
  GA   Haralson     202  
12700
  GA   Haralson     479  
12701
  GA   Haralson     532  
12702
  GA   Haralson     294  
12708
  GA   Haralson     248  
12709
  GA   Haralson     180  
12710
  GA   Haralson     30  
16084
  GA   Haralson     124  
13232
  GA   Harris     103  
15090
  GA   Hart     108  
15091
  GA   Hart     70  
12502
  GA   Heard     13  

Page 13

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FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
12520
  GA   Heard     168  
13051
  GA   Heard     126  
13053
  GA   Heard     1,127  
13054
  GA   Heard     837  
13055
  GA   Heard     181  
13056
  GA   Heard     333  
13057
  GA   Heard     33  
13058
  GA   Heard     94  
13060
  GA   Heard     385  
13061
  GA   Heard     140  
13075
  GA   Heard     278  
13076
  GA   Heard     136  
13077
  GA   Heard     239  
13082
  GA   Heard     164  
13088
  GA   Heard     70  
13091
  GA   Heard     784  
13096
  GA   Heard     980  
13098
  GA   Heard     209  
13101
  GA   Heard     773  
13102
  GA   Heard     150  
13130
  GA   Heard     242  
13136
  GA   Heard     76  
13141
  GA   Heard     2,060  
13142
  GA   Heard     1,109  
13143
  GA   Heard     115  
13147
  GA   Heard     117  
13156
  GA   Heard     38  
13158
  GA   Heard     104  
13160
  GA   Heard     28  
13185
  GA   Heard     149  
15012
  GA   Jackson     82  
15022
  GA   Jackson     32  
15068
  GA   Jackson     575  
15069
  GA   Jackson     162  
15072
  GA   Jackson     173  

Page 14

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FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
15076
  GA   Jackson     202  
15078
  GA   Jackson     498  
15078
  GA   Jackson     30  
15502
  GA   Lumpkin     775  
15509
  GA   Lumpkin     635  
15512
  GA   Lumpkin     121  
15513
  GA   Lumpkin     129  
15514
  GA   Lumpkin     433  
15519
  GA   Lumpkin     542  
15520
  GA   Lumpkin     42  
15527
  GA   Lumpkin     719  
15529
  GA   Lumpkin     53  
15533
  GA   Lumpkin     1,153  
15536
  GA   Lumpkin     389  
15538
  GA   Lumpkin     746  
15541
  GA   Lumpkin     672  
15547
  GA   Lumpkin     689  
15158
  GA   Madison     201  
15159
  GA   Madison     184  
14023
  GA   Murray     541  
14024
  GA   Murray     89  
14025
  GA   Murray     72  
14026
  GA   Murray     31  
14058
  GA   Murray     260  
14076
  GA   Murray     110  
13513
  GA   Pickens     268  
13516
  GA   Pickens     334  
13517
  GA   Pickens     491  
13518
  GA   Pickens     135  
13520
  GA   Pickens     348  
13523
  GA   Pickens     338  
13524
  GA   Pickens     900  
13525
  GA   Pickens     364  
13526
  GA   Pickens     128  
13528
  GA   Pickens     93  

Page 15

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FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
13529
  GA   Pickens     265  
13530
  GA   Pickens     529  
13543
  GA   Pickens     323  
13544
  GA   Pickens     144  
13545
  GA   Pickens     162  
13548
  GA   Pickens     385  
13576
  GA   Pickens     131  
14000
  GA   Pickens     196  
14011
  GA   Pickens     241  
14013
  GA   Pickens     195  
14015
  GA   Pickens     361  
14016
  GA   Pickens     16  
14017
  GA   Pickens     240  
14031
  GA   Pickens     308  
14032
  GA   Pickens     442  
14035
  GA   Pickens     0  
14050
  GA   Pickens     388  
14051
  GA   Pickens     450  
14064
  GA   Pickens     297  
14064
  GA   Pickens     420  
14077
  GA   Pickens     291  
15523
  GA   Pickens     186  
11006
  GA   Polk     462  
11015
  GA   Polk     133  
11018
  GA   Polk     79  
11022
  GA   Polk     646  
11027
  GA   Polk     157  
11028
  GA   Polk     21  
11029
  GA   Polk     174  
11032
  GA   Polk     38  
11056
  GA   Polk     120  
11079
  GA   Polk     134  
11080
  GA   Polk     158  
11116
  GA   Polk     15  
11119
  GA   Polk     52  

Page 16

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FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
11125
  GA   Polk     58  
11126
  GA   Polk     68  
11127
  GA   Polk     103  
11128
  GA   Polk     153  
11129
  GA   Polk     120  
11167
  GA   Polk     119  
11175
  GA   Polk     265  
11180
  GA   Polk     43  
11202
  GA   Polk     129  
11221
  GA   Polk     0  
11227
  GA   Polk     238  
11228
  GA   Polk     442  
11238
  GA   Polk     47  
11239
  GA   Polk     138  
11240
  GA   Polk     134  
11271
  GA   Polk     341  
11285
  GA   Polk     41  
11286
  GA   Polk     39  
16116
  GA   Polk     93  
15082
  GA   Stephens     131  
13142
  GA   Troup     18  
13144
  GA   Troup     304  
13147
  GA   Troup     211  
13175
  GA   Troup     546  
13186
  GA   Troup     188  
13191
  GA   Troup     219  
13194
  GA   Troup     120  
10026
  GA   Walker     56  
10055
  GA   Walker     12  
10056
  GA   Walker     48  
10099
  GA   Walker     93  
1396
  LA   Sabine     203  
1266
  TX   Anderson     1,572  
3273
  TX   Houston Only     31  
3275
  TX   Houston Only     33  

Page 17

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FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
3427
  TX   Anderson     588  
3429
  TX   Anderson     1,414  
3430
  TX   Anderson     949  
3432
  TX   Anderson     1,628  
3433
  TX   Anderson     901  
3119
  TX   Angelina     243  
3129
  TX   Angelina     589  
3155
  TX   Angelina     574  
3156
  TX   Angelina     846  
3157
  TX   Angelina     23  
3160
  TX   Angelina     25  
4724
  TX   Angelina     411  
6057
  TX   Angelina     261  
6058
  TX   Angelina     294  
3363
  TX   Cherokee     889  
3369
  TX   Cherokee     562  
3370
  TX   Cherokee     1,141  
3372
  TX   Cherokee     709  
3373
  TX   Cherokee     615  
3515
  TX   Cherokee     889  
387
  TX   Hardin     361  
1177
  TX   Hardin     269  
1178
  TX   Hardin     571  
1179
  TX   Hardin     646  
1180
  TX   Hardin     974  
1181
  TX   Hardin     963  
1182
  TX   Hardin     395  
1553
  TX   Hardin     426  
3245
  TX   Houston     821  
3246
  TX   Houston     373  
3247
  TX   Houston     690  
3248
  TX   Houston     1,205  
3249
  TX   Houston     518  
3250
  TX   Houston     845  
3251
  TX   Houston     270  

Page 18

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FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
3252
  TX   Houston     578  
3253
  TX   Houston     599  
3254
  TX   Houston     772  
3255
  TX   Houston     644  
3265
  TX   Houston     234  
3266
  TX   Houston     694  
3267
  TX   Houston     226  
3269
  TX   Houston     341  
3271
  TX   Houston     276  
3273
  TX   Houston     830  
3274
  TX   Houston     697  
3275
  TX   Houston     238  
1327
  TX   Jasper     362  
1227
  TX   Liberty     648  
1228
  TX   Liberty     1,605  
1229
  TX   Liberty     1,252  
3231
  TX   Rusk     697  
3233
  TX   Rusk     312  
3236
  TX   Rusk     286  
1232
  TX   Sabine     1,574  
1233
  TX   Sabine     17  
2147
  TX   Sabine     222  
2181
  TX   Sabine     3  
2182
  TX   Sabine     464  
2291
  TX   Sabine     61  
6051
  TX   Sabine     347  
1232
  TX   San Augustine     105  
1233
  TX   San Augustine     1,235  
1235
  TX   San Augustine     1,577  
1236
  TX   San Augustine     473  
2139
  TX   San Augustine     61  
2147
  TX   San Augustine     1,374  
2155
  TX   San Augustine     1,439  
2161
  TX   San Augustine     1,525  
2182
  TX   San Augustine     462  

Page 19

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FORESTAR (USA) REAL ESTATE GROUP INC.
PLEDGED PROPERTIES LIST
AS OF 2ND QUARTER 2010

                      Property Location                   Approx. Comp No.  
State   County   Acreage
6051
  TX   San Augustine     372  
1511
  TX   San Jacinto     397  
Terrace at Hidden Hills
  CA   Los Angeles     26  
Hidden Creek Estates
  CA   Los Angeles     702  
 
           
 
  TOTAL ACRES         225,849  
 
           

Page 20

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Schedule 5
Timberland

 

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
10002
  AL   Cherokee     455  
10008
  AL   Cherokee     165  
10030
  AL   Cherokee     619  
10032
  AL   Cherokee     67  
10058
  AL   Cherokee     74  
10068
  AL   Cherokee     55  
10080
  AL   Cherokee     1,011  
10093
  AL   Cherokee     999  
10094
  AL   Cherokee     191  
10504
  AL   Cherokee     81  
10509
  AL   Cherokee     614  
10514
  AL   Cherokee     1,018  
10553
  AL   Cherokee     694  
10593
  AL   Cherokee     68  
11001
  AL   Cherokee     724  
11004
  AL   Cherokee     522  
11035
  AL   Cherokee     1,039  
11062
  AL   Cherokee     868  
11200
  AL   Cherokee     191  
19000
  AL   Cherokee     408  
11083
  AL   Cleburne     482  
11143
  AL   Cleburne     733  
11144
  AL   Cleburne     555  
11149
  AL   Cleburne     1,254  
11184
  AL   Cleburne     77  
11209
  AL   Cleburne     210  
12144
  AL   Cleburne     1,106  
12146
  AL   Cleburne     88  
12148
  AL   Cleburne     139  
12152
  AL   Cleburne     226  
12153
  AL   Cleburne     83  
12154
  AL   Cleburne     87  
12155
  AL   Cleburne     119  
12161
  AL   Cleburne     668  
12165
  AL   Cleburne     41  

Page 1

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
12170
  AL   Cleburne     107  
12177
  AL   Cleburne     366  
12181
  AL   Cleburne     79  
12183
  AL   Cleburne     39  
12184
  AL   Cleburne     80  
12193
  AL   Cleburne     63  
12195
  AL   Cleburne     119  
12197
  AL   Cleburne     800  
10569
  AL   Etowah     1,417  
12163
  AL   Randolph     36  
13010
  AL   Randolph     29  
13015
  AL   Randolph     211  
13026
  AL   Randolph     821  
13115
  AL   Randolph     146  
13127
  AL   Randolph     202  
13183
  AL   Randolph     194  
13184
  AL   Randolph     424  
15000
  GA   Banks     436  
15001
  GA   Banks     453  
15003
  GA   Banks     303  
15011
  GA   Banks     119  
15016
  GA   Banks     61  
15022
  GA   Banks     110  
13503
  GA   Bartow     32  
13504
  GA   Bartow     336  
13506
  GA   Bartow     814  
13507
  GA   Bartow     1,053  
13508
  GA   Bartow     516  
13509
  GA   Bartow     98  
13514
  GA   Bartow     7  
14510
  GA   Bartow     477  
14511
  GA   Bartow     297  
14515
  GA   Bartow     59  
14518
  GA   Bartow     177  
14520
  GA   Bartow     51  

Page 2

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
14521
  GA   Bartow     39  
14524
  GA   Bartow     451  
14527
  GA   Bartow     95  
14528
  GA   Bartow     615  
14529
  GA   Bartow     108  
14531
  GA   Bartow     524  
14532
  GA   Bartow     562  
14533
  GA   Bartow     373  
14534
  GA   Bartow     433  
14535
  GA   Bartow     461  
14536
  GA   Bartow     155  
14537
  GA   Bartow     208  
14539
  GA   Bartow     248  
14543
  GA   Bartow     547  
14544
  GA   Bartow     515  
14546
  GA   Bartow     130  
14549
  GA   Bartow     163  
14552
  GA   Bartow     508  
14555
  GA   Bartow     74  
14561
  GA   Bartow     546  
14562
  GA   Bartow     617  
14563
  GA   Bartow     627  
14570
  GA   Bartow     38  
14607
  GA   Bartow     158  
12066
  GA   Carroll     115  
12067
  GA   Carroll     37  
12068
  GA   Carroll     222  
12069
  GA   Carroll     121  
12081
  GA   Carroll     244  
12082
  GA   Carroll     166  
12083
  GA   Carroll     624  
12087
  GA   Carroll     195  
12093
  GA   Carroll     133  
12094
  GA   Carroll     88  
12095
  GA   Carroll     322  

Page 3

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
12096
  GA   Carroll     719  
12108
  GA   Carroll     802  
12109
  GA   Carroll     92  
12110
  GA   Carroll     600  
12127
  GA   Carroll     69  
12128
  GA   Carroll     58  
12129
  GA   Carroll     58  
12130
  GA   Carroll     50  
12131
  GA   Carroll     79  
12132
  GA   Carroll     239  
12133
  GA   Carroll     135  
12134
  GA   Carroll     20  
12135
  GA   Carroll     510  
12136
  GA   Carroll     710  
12138
  GA   Carroll     78  
12206
  GA   Carroll     624  
12207
  GA   Carroll     261  
12208
  GA   Carroll     74  
12209
  GA   Carroll     37  
12211
  GA   Carroll     86  
12212
  GA   Carroll     49  
12213
  GA   Carroll     48  
12214
  GA   Carroll     124  
12215
  GA   Carroll     228  
12216
  GA   Carroll     115  
12217
  GA   Carroll     418  
12218
  GA   Carroll     191  
12219
  GA   Carroll     511  
12220
  GA   Carroll     203  
12221
  GA   Carroll     55  
12223
  GA   Carroll     107  
12224
  GA   Carroll     47  
12226
  GA   Carroll     107  
12227
  GA   Carroll     38  
12228
  GA   Carroll     91  

Page 4

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
12229
  GA   Carroll     60  
12233
  GA   Carroll     311  
12234
  GA   Carroll     119  
12238
  GA   Carroll     102  
12239
  GA   Carroll     90  
12243
  GA   Carroll     77  
12531
  GA   Carroll     85  
12532
  GA   Carroll     85  
12533
  GA   Carroll     777  
12627
  GA   Carroll     174  
13185
  GA   Carroll/Heard     88  
10023
  GA   Chattooga     996  
10024
  GA   Chattooga     932  
10032
  GA   Chattooga     76  
10036
  GA   Chattooga     40  
10039
  GA   Chattooga     163  
10041
  GA   Chattooga     59  
10042
  GA   Chattooga     104  
10049
  GA   Chattooga     32  
10050
  GA   Chattooga     122  
10051
  GA   Chattooga     34  
10053
  GA   Chattooga     79  
10072
  GA   Chattooga     143  
10083
  GA   Chattooga     523  
10084
  GA   Chattooga     277  
10085
  GA   Chattooga     269  
10088
  GA   Chattooga     686  
10092
  GA   Chattooga     127  
10101
  GA   Chattooga     649  
13505
  GA   Cherokee     161  
13509
  GA   Cherokee     470  
13511
  GA   Cherokee     166  
13514
  GA   Cherokee     50  
13515
  GA   Cherokee     177  
13521
  GA   Cherokee     149  

Page 5

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
13523
  GA   Cherokee     94  
13524
  GA   Cherokee     1  
13525
  GA   Cherokee     377  
13526
  GA   Cherokee     385  
13527
  GA   Cherokee     632  
13528
  GA   Cherokee     327  
13529
  GA   Cherokee     141  
13530
  GA   Cherokee     1  
13531
  GA   Cherokee     420  
13533
  GA   Cherokee     414  
13534
  GA   Cherokee     299  
13537
  GA   Cherokee     131  
13546
  GA   Cherokee     72  
13548
  GA   Cherokee     32  
13549
  GA   Cherokee     226  
13550
  GA   Cherokee     256  
13551
  GA   Cherokee     171  
13553
  GA   Cherokee     104  
13556
  GA   Cherokee     696  
13557
  GA   Cherokee     74  
13564
  GA   Cherokee     346  
13564
  GA   Cherokee     4  
13574
  GA   Cherokee     453  
13575
  GA   Cherokee     222  
13576
  GA   Cherokee     175  
13577
  GA   Cherokee     515  
14596
  GA   Cherokee     190  
14606
  GA   Cherokee     319  
15503
  GA   Cherokee     327  
12060
  GA   Coweta     83  
12076
  GA   Coweta     102  
12077
  GA   Coweta     214  
12078
  GA   Coweta     105  
12120
  GA   Coweta     198  
12501
  GA   Coweta     101  

Page 6

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
12507
  GA   Coweta     154  
12508
  GA   Coweta     125  
12510
  GA   Coweta     60  
12514
  GA   Coweta     40  
12519
  GA   Coweta     41  
12520
  GA   Coweta     644  
12522
  GA   Coweta     88  
15500
  GA   Dawson     558  
15501
  GA   Dawson     808  
15512
  GA   Dawson     408  
15513
  GA   Dawson     429  
15514
  GA   Dawson     220  
15515
  GA   Dawson     157  
15516
  GA   Dawson     290  
15518
  GA   Dawson     274  
15524
  GA   Dawson     49  
15529
  GA   Dawson     592  
15535
  GA   Dawson     173  
15539
  GA   Dawson     351  
15540
  GA   Dawson     485  
15541
  GA   Dawson     244  
15543
  GA   Dawson     422  
15548
  GA   Dawson     111  
12001
  GA   Douglas     52  
12002
  GA   Douglas     114  
12085
  GA   Douglas     158  
15118
  GA   Elbert     123  
15130
  GA   Elbert     948  
15135
  GA   Elbert     196  
15180
  GA   Elbert     413  
10007
  GA   Floyd     329  
10019
  GA   Floyd     443  
10020
  GA   Floyd     271  
10045
  GA   Floyd     27  
10062
  GA   Floyd     367  

Page 7

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
10066
  GA   Floyd     146  
10068
  GA   Floyd     494  
10077
  GA   Floyd     87  
10086
  GA   Floyd     134  
10100
  GA   Floyd     242  
11008
  GA   Floyd     42  
11011
  GA   Floyd     112  
11045
  GA   Floyd     747  
11048
  GA   Floyd     46  
11049
  GA   Floyd     71  
11065
  GA   Floyd     370  
11169
  GA   Floyd     95  
11192
  GA   Floyd     307  
14538
  GA   Floyd     124  
14554
  GA   Floyd     424  
14556
  GA   Floyd     719  
14560
  GA   Floyd     648  
14563
  GA   Floyd     181  
14608
  GA   Floyd     316  
14609
  GA   Floyd     234  
15016
  GA   Franklin     128  
15023
  GA   Franklin     279  
15025
  GA   Franklin     57  
15026
  GA   Franklin     77  
15027
  GA   Franklin     124  
15028
  GA   Franklin     279  
15030
  GA   Franklin     73  
15032
  GA   Franklin     156  
15034
  GA   Franklin     110  
15039
  GA   Franklin     162  
15042
  GA   Franklin     115  
14001
  GA   Gilmer     1,061  
14015
  GA   Gilmer     45  
14016
  GA   Gilmer     465  
14017
  GA   Gilmer     733  

Page 8

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
14022
  GA   Gilmer     95  
14033
  GA   Gilmer     649  
14035
  GA   Gilmer     982  
14036
  GA   Gilmer     99  
14052
  GA   Gilmer     345  
14053
  GA   Gilmer     206  
14054
  GA   Gilmer     56  
14055
  GA   Gilmer     283  
14066
  GA   Gilmer     483  
14070
  GA   Gilmer     95  
14074
  GA   Gilmer     269  
14075
  GA   Gilmer     826  
14080
  GA   Gilmer     170  
13500
  GA   Gordon     168  
13502
  GA   Gordon     74  
13503
  GA   Gordon     58  
14009
  GA   Gordon     85  
14010
  GA   Gordon     110  
14011
  GA   Gordon     8  
14045
  GA   Gordon     41  
14048
  GA   Gordon     895  
14063
  GA   Gordon     433  
14071
  GA   Gordon     181  
14073
  GA   Gordon     1,245  
14500
  GA   Gordon     221  
14501
  GA   Gordon     160  
14507
  GA   Gordon     45  
14508
  GA   Gordon     147  
14517
  GA   Gordon     400  
14518
  GA   Gordon     155  
14520
  GA   Gordon     267  
14521
  GA   Gordon     6  
15052
  GA   Hall     206  
15053
  GA   Hall     961  
15065
  GA   Hall     304  

Page 9

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
11084
  GA   Haralson     697  
11086
  GA   Haralson     225  
11087
  GA   Haralson     163  
11088
  GA   Haralson     651  
11091
  GA   Haralson     448  
11092
  GA   Haralson     250  
11094
  GA   Haralson     178  
11095
  GA   Haralson     289  
11096
  GA   Haralson     188  
11097
  GA   Haralson     162  
11098
  GA   Haralson     554  
11099
  GA   Haralson     817  
11100
  GA   Haralson     776  
11103
  GA   Haralson     498  
11104
  GA   Haralson     104  
11105
  GA   Haralson     52  
11106
  GA   Haralson     99  
11108
  GA   Haralson     617  
11109
  GA   Haralson     61  
11110
  GA   Haralson     90  
11111
  GA   Haralson     231  
11115
  GA   Haralson     641  
11116
  GA   Haralson     732  
11117
  GA   Haralson     192  
11119
  GA   Haralson     239  
11120
  GA   Haralson     703  
11121
  GA   Haralson     742  
11138
  GA   Haralson     508  
11142
  GA   Haralson     134  
11181
  GA   Haralson     303  
11215
  GA   Haralson     51  
11221
  GA   Haralson     60  
11222
  GA   Haralson     43  
11223
  GA   Haralson     113  
11227
  GA   Haralson     1,522  

Page 10

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
11228
  GA   Haralson     806  
11229
  GA   Haralson     199  
11244
  GA   Haralson     93  
11245
  GA   Haralson     91  
11248
  GA   Haralson     18  
11249
  GA   Haralson     94  
11250
  GA   Haralson     22  
11251
  GA   Haralson     118  
11252
  GA   Haralson     93  
11253
  GA   Haralson     52  
11254
  GA   Haralson     335  
11255
  GA   Haralson     368  
11256
  GA   Haralson     75  
11257
  GA   Haralson     156  
11258
  GA   Haralson     42  
11260
  GA   Haralson     27  
11261
  GA   Haralson     88  
11262
  GA   Haralson     59  
11263
  GA   Haralson     38  
11264
  GA   Haralson     124  
11265
  GA   Haralson     86  
11266
  GA   Haralson     37  
11267
  GA   Haralson     201  
11268
  GA   Haralson     82  
11269
  GA   Haralson     107  
11270
  GA   Haralson     175  
11271
  GA   Haralson     104  
11274
  GA   Haralson     692  
11275
  GA   Haralson     858  
11276
  GA   Haralson     245  
11283
  GA   Haralson     111  
11284
  GA   Haralson     82  
12211
  GA   Haralson     3  
12242
  GA   Haralson     94  
12625
  GA   Haralson     202  

Page 11

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
12700
  GA   Haralson     479  
12701
  GA   Haralson     532  
12702
  GA   Haralson     294  
12708
  GA   Haralson     248  
12709
  GA   Haralson     180  
12710
  GA   Haralson     30  
13232
  GA   Harris     103  
15090
  GA   Hart     108  
15091
  GA   Hart     70  
12502
  GA   Heard     13  
12520
  GA   Heard     168  
13051
  GA   Heard     126  
13053
  GA   Heard     1,127  
13054
  GA   Heard     837  
13055
  GA   Heard     181  
13056
  GA   Heard     333  
13057
  GA   Heard     33  
13058
  GA   Heard     94  
13060
  GA   Heard     385  
13061
  GA   Heard     140  
13075
  GA   Heard     278  
13076
  GA   Heard     136  
13077
  GA   Heard     239  
13082
  GA   Heard     164  
13088
  GA   Heard     70  
13091
  GA   Heard     784  
13096
  GA   Heard     980  
13098
  GA   Heard     209  
13101
  GA   Heard     773  
13102
  GA   Heard     150  
13130
  GA   Heard     242  
13136
  GA   Heard     76  
13141
  GA   Heard     2,060  
13142
  GA   Heard     1,109  
13143
  GA   Heard     115  

Page 12

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
13147
  GA   Heard     117  
13156
  GA   Heard     38  
13158
  GA   Heard     104  
13160
  GA   Heard     28  
13185
  GA   Heard     149  
15012
  GA   Jackson     82  
15022
  GA   Jackson     32  
15068
  GA   Jackson     575  
15069
  GA   Jackson     162  
15072
  GA   Jackson     173  
15076
  GA   Jackson     202  
15078
  GA   Jackson     498  
15078
  GA   Jackson     30  
15502
  GA   Lumpkin     775  
15509
  GA   Lumpkin     635  
15512
  GA   Lumpkin     121  
15513
  GA   Lumpkin     129  
15514
  GA   Lumpkin     433  
15519
  GA   Lumpkin     542  
15520
  GA   Lumpkin     42  
15527
  GA   Lumpkin     719  
15529
  GA   Lumpkin     53  
15533
  GA   Lumpkin     1,153  
15536
  GA   Lumpkin     389  
15538
  GA   Lumpkin     746  
15541
  GA   Lumpkin     672  
15547
  GA   Lumpkin     689  
15158
  GA   Madison     201  
15159
  GA   Madison     184  
14023
  GA   Murray     541  
14024
  GA   Murray     89  
14025
  GA   Murray     72  
14026
  GA   Murray     31  
14058
  GA   Murray     260  
14076
  GA   Murray     110  

Page 13

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
13513
  GA   Pickens     268  
13516
  GA   Pickens     334  
13517
  GA   Pickens     491  
13518
  GA   Pickens     135  
13520
  GA   Pickens     348  
13523
  GA   Pickens     338  
13524
  GA   Pickens     900  
13525
  GA   Pickens     364  
13526
  GA   Pickens     128  
13528
  GA   Pickens     93  
13529
  GA   Pickens     265  
13530
  GA   Pickens     529  
13543
  GA   Pickens     323  
13544
  GA   Pickens     144  
13576
  GA   Pickens     131  
14000
  GA   Pickens     196  
14011
  GA   Pickens     241  
14013
  GA   Pickens     195  
14015
  GA   Pickens     361  
14016
  GA   Pickens     16  
14017
  GA   Pickens     240  
14031
  GA   Pickens     308  
14032
  GA   Pickens     442  
14035
  GA   Pickens     0  
14050
  GA   Pickens     388  
14051
  GA   Pickens     450  
14077
  GA   Pickens     291  
15523
  GA   Pickens     186  
11006
  GA   Polk     462  
11015
  GA   Polk     133  
11018
  GA   Polk     79  
11022
  GA   Polk     646  
11027
  GA   Polk     157  
11028
  GA   Polk     21  
11029
  GA   Polk     174  

Page 14

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
11032
  GA   Polk     38  
11056
  GA   Polk     120  
11079
  GA   Polk     134  
11080
  GA   Polk     158  
11116
  GA   Polk     113  
11119
  GA   Polk     52  
11125
  GA   Polk     58  
11126
  GA   Polk     68  
11127
  GA   Polk     103  
11128
  GA   Polk     153  
11129
  GA   Polk     120  
11167
  GA   Polk     119  
11175
  GA   Polk     265  
11180
  GA   Polk     43  
11202
  GA   Polk     129  
11221
  GA   Polk     0  
11227
  GA   Polk     238  
11228
  GA   Polk     442  
11238
  GA   Polk     47  
11239
  GA   Polk     138  
11240
  GA   Polk     134  
11271
  GA   Polk     341  
11285
  GA   Polk     41  
11286
  GA   Polk     39  
15082
  GA   Stephens     131  
13142
  GA   Troup     18  
13144
  GA   Troup     304  
13147
  GA   Troup     211  
13175
  GA   Troup     546  
13191
  GA   Troup     219  
13194
  GA   Troup     120  
10026
  GA   Walker     56  
10055
  GA   Walker     12  
10056
  GA   Walker     48  
10099
  GA   Walker     93  

Page 15

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
1396
  LA   Sabine     203  
1266
  TX   Anderson     1,572  
3273
  TX   Houston Only     31  
3275
  TX   Houston Only     33  
3427
  TX   Anderson     588  
3429
  TX   Anderson     1,414  
3430
  TX   Anderson     949  
3432
  TX   Anderson     1,628  
3433
  TX   Anderson     901  
3119
  TX   Angelina     243  
3129
  TX   Angelina     589  
3155
  TX   Angelina     574  
3156
  TX   Angelina     846  
3157
  TX   Angelina     23  
3160
  TX   Angelina     25  
4724
  TX   Angelina     411  
6057
  TX   Angelina     261  
6058
  TX   Angelina     294  
3363
  TX   Cherokee     889  
3369
  TX   Cherokee     562  
3370
  TX   Cherokee     1,141  
3372
  TX   Cherokee     709  
3373
  TX   Cherokee     615  
3515
  TX   Cherokee     889  
387
  TX   Hardin     361  
1177
  TX   Hardin     269  
1178
  TX   Hardin     571  
1179
  TX   Hardin     646  
1180
  TX   Hardin     974  
1181
  TX   Hardin     963  
1182
  TX   Hardin     395  
1553
  TX   Hardin     426  
3245
  TX   Houston     821  
3246
  TX   Houston     373  
3247
  TX   Houston     690  

Page 16

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
3248
  TX   Houston     1,205  
3249
  TX   Houston     518  
3250
  TX   Houston     845  
3251
  TX   Houston     270  
3252
  TX   Houston     578  
3253
  TX   Houston     599  
3254
  TX   Houston     772  
3255
  TX   Houston     644  
3265
  TX   Houston     234  
3266
  TX   Houston     694  
3267
  TX   Houston     226  
3269
  TX   Houston     341  
3271
  TX   Houston     276  
3273
  TX   Houston     830  
3274
  TX   Houston     697  
3275
  TX   Houston     238  
1327
  TX   Jasper     362  
1227
  TX   Liberty     648  
1228
  TX   Liberty     1,605  
1229
  TX   Liberty     1,252  
3231
  TX   Rusk     697  
3233
  TX   Rusk     312  
3236
  TX   Rusk     286  
1232
  TX   Sabine     1,574  
1233
  TX   Sabine     17  
2147
  TX   Sabine     222  
2181
  TX   Sabine     3  
2182
  TX   Sabine     464  
2291
  TX   Sabine     61  
6051
  TX   Sabine     347  
1232
  TX   San Augustine     105  
1233
  TX   San Augustine     1,235  
1235
  TX   San Augustine     1,577  
1236
  TX   San Augustine     473  
2139
  TX   San Augustine     61  

Page 17

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FORESTAR (USA) REAL ESTATE GROUP INC.
SCHEDULE 5 — TIMBERLAND

                      Property Location                   Approx. Comp No.  
State   County   Acreage
2147
  TX   San Augustine     1,374  
2155
  TX   San Augustine     1,439  
2161
  TX   San Augustine     1,525  
2182
  TX   San Augustine     462  
6051
  TX   San Augustine     372  
1511
  TX   San Jacinto     397  
 
 
TOTAL ACRES
    196,408  

Page 18

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Schedule 6
High Value Timberland

 

--------------------------------------------------------------------------------

 

Schedule 6
High Value Timberland — In Entitlement
as of 6/30/2010

                          County   Estimated Acres  
Wholly-Owned, Appraised
               
 
               
Georgia
               
 
               
 
  Atlanta            
 
  Ball Ground   Cherokee     500  
 
  Burt Creek (Gold Creek)   Dawson     970  
 
  Fincher Road (Ph I & Ph II) (Dry Pond)   Cherokee     3,890  
 
  Wolf Creek   Carroll/Douglas     12,230  
 
  Yellow Creek   Cherokee     1,060  
 
               
 
             
 
  Total Georgia         18,650  
 
             
 
               
California
               
 
  Los Angeles            
 
  Hidden Creeks Estates   Los Angeles     700  
 
               
 
             
 
  Total California         700  
 
             
 
               
Texas
               
 
  Houston            
 
  Lake Houston   Harris/Liberty     3,700  
 
               
 
             
 
  Total Texas         3,700  
 
             
 
              Total High Value Timberland — In Entitlement (Wholly-Owned,
Appraised)     23,050  
 
             
 
               
Wholly-Owned, Non-Appraised
               
 
               
Georgia
               
 
               
 
  Atlanta            
 
  Crossing   Coweta     230  
 
  Dallas Highway   Haralson     1,060  
 
  Fox Hall (Ph II)   Coweta     960  
 
  Garland Mountain   Cherokee/Bartow     350  
 
  Home Place   Coweta     1,510  
 
  Martin’s Bridge   Banks     970  
 
  Mill Creek   Coweta     770  
 
  Serenity (Bay Springs)   Carroll     440  
 
  Waleska   Cherokee     150  
 
               
 
             
 
  Total Georgia         6,440  
 
             
 
               
California
               
 
  Los Angeles            
 
  Terrace at Hidden Hills   Los Angeles     30  
 
               
 
             
 
  Total California         30  
 
             
 
               
Texas
               
 
  Houston            
 
  San Jacinto   Montgomery     150  
 
               
 
             
 
  Total Texas         150  
 
             
 
                Total High Value Timberland — In Entitlement (Wholly-Owned,
Non-Appraised)     6,620  
 
             
 
                Total High Value Timberland (Wholly-Owned, Appraised &
Non-Appraised)     29,670  
 
             

 

--------------------------------------------------------------------------------

 

Schedule 7
Raw Entitled Land

 

--------------------------------------------------------------------------------

 

Schedule 7
Raw-Entitled Land
as of 6/30/2010

                          County   Estimated Acres  
Wholly-Owned, Appraised
               
 
               
Georgia
               
 
  Atlanta            
 
  Corinth Landing (Four Seasons)   Coweta     382  
 
  Highgrove (High Grove)   Pickens     521  
 
  Pickens School   Pickens     591  
 
  Ridgeview (Lithia Springs)   Haralson     105  
 
  Towne West   Bartow     808  
 
               
 
  Total Georgia         2,407  
 
             
California
               
 
        Oakland            
 
  San Joaquin River   Contra Costa / Sacramento 288
 
               
 
  Total California         288  
 
             
Colorado
               
 
  Denver            
 
  Buffalo Highlands   Weld     270  
 
  Johnstown Farms   Weld     82  
 
  Pinery West   Douglas     134  
 
  Stonebraker   Weld     175  
 
               
 
  Total Colorado         661  
 
             
Texas
               
 
  Austin            
 
  Hunter's Crossing   Bastrop     107  
 
  La Conterra   Williamson     136  
 
  The Colony   Bastrop     1,381  
 
  The Ridge at Ribelin Ranch   Travis     16  
 
  Westside at Buttercup Creek   Williamson     41  
 
               
 
  Corpus Christi / Gulf Coast            
 
  Harbor Mist   Calhoun     1,034  
 
               
 
  Dallas/Fort Worth            
 
  Caruth Lakes   Rockwall     92  
 
  Harbor Lakes   Hood     67  
 
  Maxwell Creek   Collin     96  
 
  The Preserve at Pecan Creek   Denton     146  
 
               
 
  San Antonio            
 
  Cibolo Canyons   Bexar     745  
 
  Oak Creek Estates (Oakcreek Estates)   Comal     105  
 
               
 
  Total Texas         3,966  
 
             
 
                Total Raw-Entitled Land (Wholly-Owned, Appraised)     7,322  
 
             

 

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Schedule 7
Raw-Entitled Land (Cont.)
as of 6/30/2010

                          County   Estimated Acres  
Wholly-Owned, Non-Appraised
               
 
               
Georgia
               
 
               
 
  Atlanta            
 
  Birch House Farms   Bartow     120  
 
  Cedar Creek Preserve (Dunaway Gardens)   Coweta     102  
 
  Coweta South Industrial Park (Grove Park)   Coweta     171  
 
  Euharlee North (Euharlee II West)   Bartow     337  
 
  Genesee (Happy Valley Farm)   Coweta     359  
 
  Parkside at Woodbury (Triple C Road)   Bartow     159  
 
  Retreat at Cotton Crossroads   Troup     143  
 
  Terra Glen (Legion Lake)   Carroll     124  
 
  The Overlook (The Overlook at Waleska)   Cherokee     306  
 
  Woodlands at Burt Creek (Portion of Burt Creek Entitled)   Dawson     50  
 
             
 
               
 
  Total Georgia         1,871  
Missouri
               
 
               
 
  Kansas City            
 
               
 
  Somerbrook   Clay     82  
 
               
 
  Total Missouri         82  
 
             
 
               
 
               
 
  Total Colorado         —  
 
             
Texas
               
 
               
 
  Austin            
 
  Arrowhead Ranch   Hays     237  
 
  Onion Creek   Travis     2  
 
  Parkside at Slaughter Creek   Travis     2  
 
  Village at Western Oaks   Travis     11  
 
               
 
  Dallas/Fort Worth            
 
  The Gables at North Hill   Collin     27  
 
  Windy Hill Farms   Collin     4  
 
               
 
  Houston            
 
  Spring Lakes   Harris     4  
 
               
 
               
 
  Total Texas         287  
 
             
Utah
               
 
               
 
  Salt Lake City            
 
  Fort Bingham Estates   Weber     28  
 
               
 
  Total Utah         28  
 
             
 
                Total Raw-Entitled Land (Wholly-Owned, Non-Appraised)     2,268
 
 
             
 
                Total Raw-Entitled Land (Wholly-Owned, Appraised &
Non-Appraised)     9,590  
 
             

 

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Schedule 8
Entitled Land Under Development

 

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Schedule 8
Entitled Land Under Development
as of 6/30/2010

                          County   Estimated Acres  
Wholly-Owned, Appraised
               
 
               
 
  Total Georgia         —  
 
             
 
               
 
  Total California         —  
Colorado
               
 
               
 
  Denver            
 
               
 
  Johnstown Farms   Weld     13  
 
               
 
               
 
  Total Colorado         13  
 
             
Texas
               
 
               
 
  Austin            
 
  Hunter's Crossing   Bastrop     3  
 
  La Conterra   Williamson     17  
 
  The Colony   Bastrop     124  
 
  Westside at Buttercup Creek   Williamson     22  
 
               
 
  Dallas/Fort Worth            
 
  Caruth Lakes   Rockwall     20  
 
  Harbor Lakes   Hood     11  
 
  Maxwell Creek   Collin     16  
 
  The Preserve at Pecan Creek   Denton     8  
 
               
 
  San Antonio            
 
  Cibolo Canyons   Bexar     66  
 
  Oak Creek Estates (Oakcreek Estates)   Comal     27  
 
               
 
  Total Texas         314  
 
             
 
                Total Entitled Land Under Development (Wholly-Owned, Appraised)
    327  
 
             

 

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Schedule 8
Entitled Land Under Development (Cont.)
as of 6/30/2010

                          County   Estimated Acres  
Wholly-Owned, Non-Appraised
               
 
               
Georgia
               
 
               
 
  Atlanta            
 
               
 
  Fox Hall (ent. Portion Fox Hall - Newberry Estates at Fox Hall)   Coweta    
177  
 
               
 
  Total Georgia         177  
 
             
 
             
Missouri
               
 
  Kansas City            
 
               
 
  Somerbrook   Clay     4  
 
               
 
  Total Missouri         4  
 
             
 
               
Colorado
               
 
               
 
  Denver            
 
  Westlake Highlands   Jefferson     —  
 
               
 
  Total Colorado         —  
 
             
 
               
Texas
               
 
               
 
  Austin            
 
               
 
  Double Horn Creek   Burnet     61  
 
  The Arbors at Dogwood Creek   Bastrop     8  
 
               
 
               
 
  Dallas/Fort Worth            
 
               
 
  The Gables at North Hill   Collin     2  
 
               
 
  Total Texas         71  
 
             
 
               
Utah
               
 
               
 
  Salt Lake City            
 
               
 
  Fort Bingham Estates   Weber     1  
 
               
 
  Total Utah         1  
 
             
 
                Total Entitled Land Under Development (Wholly-Owned,
Non-Appraised )     253  
 
             
 
                Total Entitled Land Under Development (Wholly-Owned, Appraised &
Non-Appraised)     580  
 
             

 

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Schedule 9
Non-Appraised Entitled Land

 

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Schedule 9
Joint Venture
as of 6/30/2010

                              Estimated           County   Total Acres  
Joint Venture Entitled (Non-Appraised)
               
 
               
Florida
               
 
               
 
  Tampa            
 
  Bridle Path Estates   Hillsborough     439  
 
  Creekside Preserve   Manatee     41  
 
  River Plantation   Manatee     32  
 
               
 
       Total Florida         512  
 
             
 
               
Georgia
               
 
               
 
  Atlanta            
 
  Bentwater   Paulding     1  
 
  Happy Valley   Paulding     213  
 
  Harris Place   Paulding     3  
 
  Seven Hills   Paulding     267  
 
  The Georgian   Paulding     653  
 
  Westpark   Cobb     47  
 
               
 
  Total Georgia         1,184  
 
             
 
               
 
  Total Tennessee         —  
 
             
 
               
Texas
               
 
               
 
  Austin            
 
  Chandler Road   Williamson     19  
 
  Entrada   Travis     156  
 
               
 
  Corpus Christi / Gulf Coast            
 
  Caracol   Calhoun     21  
 
  Padre Island   Nueces     15  
 
  Tortuga Dunes   Nueces     32  
 
               
 
  Dallas/Fort Worth            
 
  Fannin Farms West   Tarrant     36  
 
  Lantana   Denton     517  
 
  Light Farms (Light Ranch)   Collin     625  
 
  Stillwater Canyon   Dallas     31  
 
  Stoney Creek   Dallas     663  
 
  Summer Creek Ranch   Tarrant     716  
 
  The Bar C Ranch   Tarrant     209  
 
  Timber Creek   Collin     179  
 
  Village Park   Collin     44  
 
  Village Park (North)   Collin     28  
 
               
 
  Houston            
 
  City Park   Harris     148  
 
  Harper's Preserve (Woodlake Village)   Montgomery     538  
 
  Long Meadow Farms   Fort Bend     362  
 
  Southern Trails   Brazoria     145  
 
  Summer Lakes   Fort Bend     181  
 
  Waterford Park   Fort Bend     169  
 
               
 
  San Antonio            
 
               
 
  Olympia Hills   Bexar     26  
 
  Stonewall Estates   Bexar     97  
 
               
 
  Total Texas         4,957  
 
             
 
                Total Joint Venture Entitled (Non-Appraised)     6,653  
 
             

 

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Schedule 11
Excluded Subsidiaries as of Closing Date
Arrowhead Ranch Utility Company LLC (TX)
Double Horn Water Supply Corporation (TX)
Sabine Real Estate Company (DE)
Johnstown Farms, LLC (DE)
Top of Westgate, Inc. (TX)
CCA Hospitality, Inc. (TX)
Harbor Lakes Golf Club LLC (DE)
Harbor Lakes Club Management LLC (TX)
San Jacinto I LLC (TX)
Stoney Creek Properties LLC (DE)
Firstland Investment Corporation (TX)
LIC Ventures Inc. (DE)

 

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Schedule 5.8
Alabama Mortgage Modifications

1.   Second Modification of Mortgage, Assignment of Rents, Leases and Other
Agreements, Security Agreement and Fixture filing dated as of August ___, 2010,
to be recorded in the Office of the Judge of Probate of Cherokee County, Alabama
  2.   Third Modification of Mortgage, Assignment of Rents, Leases and Other
Agreements, Security Agreement and Fixture filing dated as of August ___, 2010,
to be recorded in the Office of the Judge of Probate of Cleburne County, Alabama
  3.   Second Modification of Mortgage, Assignment of Rents, Leases and Other
Agreements, Security Agreement and Fixture filing dated as of August ___, 2010,
to be recorded in the Office of the Judge of Probate of Etowah County, Alabama  
4.   Second Modification of Mortgage, Assignment of Rents, Leases and Other
Agreements, Security Agreement and Fixture filing dated as of August ___, 2010,
to be recorded in the Office of the Judge of Probate of Randolph County, Alabama
  5.    

 

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Schedule 6.7
Litigation
None

 

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Schedule 6.10
Open Audit Periods
Pre-Spin Off Years

     
Federal
   
Pending:
  2006-2007 IRS exam of consolidated tax returns of Temple-Inland inclusive of
Forestar
 
   
Open:
  None
 
   
State
   
Pending:
Open:
  None
Applicable state limitation period – 2010

Post-Spin Off Years (2008 and Forward)

     
Federal
   
Pending:
Open:
  2008
2009-2010
 
   
State
   
Pending:
Open:
  None
Applicable state limitation period – 2010

 

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Schedule 6.15
Transactions with Affiliates
None

 

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Schedule 6.20(f)
Unresolved Real Estate Claims with Affiliates
None

 

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Schedule 6.20(g)
Material Real Estate Agreements
Hotel Services Agreement For Radisson Hotel and Suites Austin, Texas by and
between Temple-Inland Insurance Corporation and Talbert Hotel Corporation,
executed as of November 30, 2000, as amended

 

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Schedule 8.2
Permitted Liens

          Entity   Non-KeyBank Liens   Collateral
Forestar (USA) Real
Estate Group Inc.
  UCC Financing Statement No. 20081108529 - Greatamerica Leasing Corporation as
Secured Party; Filed 3/31/2008 with the Delaware Secretary of State   Leased
Sharp Equipment
 
       
Harbor Lakes Golf
Club LLC
  UCC Financing Statement No. 20091989299 — Wells Fargo Financing Leasing, Inc.
as Secured Party; Filed 6/22/2009 with the Delaware Secretary of State (Leased
Equipment)   Leased Equipment under
Master Lease Agreement
#019-0000588
 
       
Capitol of Texas Insurance Group Inc.
  UCC Financing Statement No. 20083329248 — Bank of America, N.A. as Secured
Party;Filed 10/1/2008 with the Delaware Secretary of State (Fixture Filing)  
Land and Fixtures

 

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Schedule 8.3
Investments
None other than as required by the Terms of
the Credit Agreement