SECOND AMENDMENT TO REVOLVING AND TERM CREDIT AGREEMENT

Exhibit 10.1

Execution Version

SECOND AMENDMENT TO REVOLVING
AND TERM CREDIT AGREEMENT

     This Second Amendment to Revolving and Term Credit Agreement (this “Amendment” ), made as of July 16, 2009, among FORESTAR (USA) REAL ESTATE GROUP INC., a Delaware corporation ( “Borrower” ), the undersigned Guarantors, KEYBANK NATIONAL ASSOCIATION, a national banking association ( “KeyBank” ), and the other financial institutions party to the Credit Agreement as lenders (each individually a “Lender” and collectively, “Lenders” ), and KEYBANK NATIONAL ASSOCIATION, as Agent for the Lenders (in such capacity, “Agent” ) and Swing Line Lender.

WITNESSETH:

     WHEREAS, Borrower, Guarantors, Lenders, Agent, Swing Line Lender, General Electric Capital Corporation and AgFirst Farm Credit Bank, as Co-Syndication Agents, and KeyBanc Capital Markets, as sole arranger and sole bookrunner, entered into that certain Revolving and Term Credit Agreement dated as of December 14, 2007, as amended by the First Amendment to Revolving and Term Credit Agreement and Other Loan Documents dated as of March 12, 2008 (as amended, the “Credit Agreement” ), pursuant to which Lenders established a revolving credit facility and a term loan facility for the benefit of Borrower; and

     WHEREAS, Borrower has requested that certain terms of the Credit Agreement be modified and amended as hereinafter set forth; and

     WHEREAS, Lenders and Agent have agreed to such amendments as set forth herein, subject to the terms and conditions hereinafter set forth;

     NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Amendment hereby agree that all capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Credit Agreement, and hereby further agree as follows:

     1.  Amendments to §1.1 of the Credit Agreement .

          (a) Section 1.1 of the Credit Agreement, Definitions , is hereby modified and amended by adding the following new definitions in their appropriate alphabetical order:

          “ Base Rate Spread . The per annum rate of two and one-half percent (2.5%).

           Bulk Sales . See §2.9.

           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), 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.

           Defaulting Lender . Any Lender that has (a)(i) become or is insolvent or has a parent company that has become or is 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).

           Extending Lenders . All Lenders in agreement with the Maturity Date extension option set forth in §3.1(c) with respect to their respective Loans, initially being all Lenders listed on Schedule 1.2 attached to the Second Amendment, which Schedule shall also indicate the Commitment of each Extending Lender after giving effect to the Second Amendment.

           Hancock Sale . See §2.9(a).

           Interest Rate Floor . A minimum per annum rate equal to two percent (2%) which shall be applied with respect to Outstanding Loans of the Extending Lenders except those subject to a Hedge Agreement on the effective date of the Second Amendment.

           LIBOR Rate Spread . The per annum rate of four and one-half percent (4.5%).

           Non-Extending Lender . The Lenders who are not in agreement with the Maturity Date extension option set forth in §3.1(c) with respect to their Loans, initially being all Lenders listed on Schedule 1.3 attached to the Second Amendment, which Schedule shall also indicate the Commitment of each Non-Extending Lender after giving effect to the Second Amendment.

           Second Amendment . The Second Amendment to Revolving and Term Credit Agreement dated as of July 16, 2009, by and among the Loan Parties, Lenders and Agent.

           TEMCO Investment . See §8.3(u).”

          (b) Section 1.1 of the Credit Agreement, Definitions , is hereby modified and amended by deleting the definitions of “ Base Rate ”, “ Borrowing Base Assets ”, “ Entitled Land Under Development ” “ Forestar Group ” “ High Value Timberland ”, “ Indebtedness ”, “ Maturity Date ”, “ Mortgaged Property or Mortgaged Properties ,” “ Mortgaged Property Documents ”, “ Net Income ”, “ Permitted Refinancing Indebtedness ”, Raw Entitled Land ,” “ Required Lenders ”, and “ Requisite Class Lenders ” in their entirety and by substituting the following new definitions in lieu thereof, respectively:

     “ Base Rate . The term Base Rate shall mean either:

     (a) with respect to Base Rate Loans of the Extending Lenders, 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; or

     (b) with respect to Base Rate Loans of the Non-Extending Lenders, the greater of (a) the variable annual rate of interest announced from time to time by Agent at Agent’s Office as its “prime rate” or (b) one-half of one percent (0.5%) above the Federal Funds Effective Rate (rounded upwards, if necessary, to the next one-eighth of one percent). The Base Rate is a reference rate and does not necessarily represent the lowest or best rate being charged to any customers. Any change in the rate of interest payable hereunder resulting from a change in the Base Rate shall become effective as of the opening of business on the date on which such change in the Base Rate becomes effective, without notice or demand of any kind.

      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(a). 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.

      Entitled Land Under Development . Real Estate owned in fee simple absolute by any Loan Party and described in Schedule 8 as of November 24, 2007, 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).

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

      High Value Timberland . The Real Estate owned in fee simple absolute by a Loan Party and described on Schedule 6 hereof as of November 27, 2007, 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).

      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.

      Maturity Date . December 1, 2010, or, with respect to the Loans of the Extending Lenders only, June 30, 2012 if the Maturity Date is extended pursuant to §3.1(c), or, with respect to all Loans, such earlier date on which the Loans shall become due and payable pursuant to the terms hereof. All references herein to “Maturity Date” shall be deemed to be references to the applicable Maturity Date in respect of the applicable Lender as described in this definition.

      Mortgaged Property or Mortgaged Properties . Individually and collectively, the property described on Schedule 3 attached hereto and on Schedule 1A attached to the

Second Amendment, 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 and Schedule 2A attached to the Second Amendment, each by reference made a part hereof.

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

      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.

      Raw Entitled Land . The Real Estate described on Schedule 7 hereof as of November 24, 2007 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).

      Required Lenders . As of any date, the Lender or Lenders (not including any Defaulting Lender which shall not be entitled to vote) whose aggregate Commitment Percentage equals or exceeds the Applicable Approval Percentage. For purposes of this

definition, a Revolving Lender (other than Swing Line Lender) shall be deemed to hold a Swing Line Loan or participate in a Letter of Credit to the extent such Lender has acquired a participation therein under the terms of this Agreement and has not failed to perform its obligations in respect of such participation.

      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.

      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.

     2.  Amendment to §2.3 of the Credit Agreement . §2.3 of the Credit Agreement, Interest on Loans , is hereby modified and amended by deleting clauses (a) and (b) thereof in their entirety and by substituting the following new clauses (a) and (b) in lieu thereof:

          ”(a) Extending Lender Loans . With respect to the Loans of the Extending Lenders:

               (i) 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

               (ii) 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.

          (b) Non-Extending Lender Loans . With respect to the Loans of the Non-Extending Lenders:

               (i) Each LIBOR Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last date 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 (i) the LIBOR Rate plus (ii) the applicable percentage for such Loan as set forth on the table below:

               (ii) Each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the date on which such Base Rate Loan is repaid or converted to a LIBOR Rate Loan at a rate per annum equal to the sum of (i) the Base Rate plus (ii) the applicable percentage for such Loan as set forth on the table below:

     3.  Amendments to §2.9 of the Credit Agreement . §2.9 of the Credit Agreement, Increase in Commitments , is hereby modified and amended by deleting the existing language thereof in its entirety and by substituting the following language in lieu thereof:

     “2.9 Reductions of the Commitments .

          (a) Bulk Sales . The parties acknowledge that the Loan Parties have sold or intend to sell up to 175,000 acres of Timberland in one or more bulk sales identified as such by Borrower in writing to Agent (the “ Bulk Sales ” and each, a “ Bulk Sale ”). The parties acknowledge that a Bulk Sale of approximately 75,000 acres to affiliates of Hancock Timber Resource Group closed on June 16, 2009 (the “ Hancock Sale ”). In conjunction with the Bulk Sales, the aggregate Commitments will be reduced by $850 per acre sold in each Bulk Sale, or such greater amount per acre as Borrower may elect, with such reduction applied sixty percent (60%) to the total Term Commitments and forty percent (40%) to the total Revolving Commitments, such reductions being further applied pro rata to the Term Commitment of each Term Lender based upon such Lender’s Term Commitment Percentage and pro rata to the Revolving Commitment of each Revolving Lender based upon such Lender’s Revolving Commitment Percentage, as applicable. Except with respect to the Hancock Sale, such Commitment reductions shall occur at the end of each calendar quarter (or earlier, at Borrower’s election) based on a Loan Party’s receipt of the net cash proceeds from the

closing of such Bulk Sales during such calendar quarter, except that with respect to any Bulk Sales of more than 25,000 acres, such Commitment reductions shall occur within two (2) Business Days of a Loan Party’s receipt of the net cash proceeds from the closing of such Bulk Sale. As a result of the Hancock Sale, the total Revolving Commitments shall be reduced by $25,500,000 to $264,500,000 on the date that the Second Amendment becomes effective and the total Term Commitments were reduced by $39,000,000 to $136,000,000 at the time of the Hancock Sale. In the event Borrower elects to reduce the aggregate Commitments with respect to any Bulk Sale by more than $850 per acre, Borrower may elect to apply such excess reduction against the $850 per acre required reduction with respect to subsequent Bulk Sales, thereby reducing the aggregate Commitment reduction required with respect to such subsequent Bulk Sales, until such excess has been fully applied. Any reductions under this §2.9(a) shall be permanent and may require mandatory prepayments to the extent required under §3.2(a).

          (b) Compliance with §9.3 . The aggregate Commitments shall be permanently reduced from time to time if necessary to maintain compliance with the covenant set forth in §9.3. Such reductions may require mandatory prepayments to the extent required under §3.2(a).

          (c) Maturity of Loans of Non-Extending Lenders . Upon the maturity and payment in full of the Loans of the Non-Extending Lenders, the aggregate Revolving Commitments and the aggregate Term Commitments, and a corresponding amount of the aggregate Commitments, will be reduced by the amount of the Non-Extending Lender’s Revolving Commitment and Term Commitment.

          (d) Revised Schedule 1.1 . After any Commitment reductions under this §2.9, 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 decreased Revolving Commitments or Term Commitments (or both, as applicable)).”

     4.  Amendment to §2.10 of the Credit Agreement . §2.10 of the Credit Agreement, Letters of Credit , is hereby modified and amended by deleting the existing language of clause (ii) in the first sentence of subsection 2.10(a) in its entirety and substituting the following language in lieu thereof:

“(ii) upon issuance of such Letter of Credit, the Outstanding Letters of Credit shall not exceed the lesser of (A) $100,000,000, and (B) twenty-two percent (22%) of the aggregate Commitments.”

     5.  Amendment to §3.1 of the Credit Agreement . §3.1 of the Credit Agreement, Amortization; Stated Maturity , is hereby modified and amended by deleting the existing language thereof in its entirety and substituting the following language in lieu thereof:

     “ §3.1 Amortization; Stated Maturity; Extension Option

          (a) Term Loan Amortization . Commencing on January 1, 2010 and continuing on the first day of each calendar month thereafter through and including November 1, 2010, or May 1, 2012 if the Maturity Date with respect to the Loans of the Extending Lenders is extended pursuant to §3.1(c), Borrower shall pay to Agent for the account of Term Lenders equal monthly installments, each in the amount of one-twelfth (1/12 ^th ) of one percent (1%) of the aggregate principal amount of the Term Loans Outstanding on December 31, 2009, which amounts shall be applied against the then Outstanding principal balance of the Term Loans; provided , however , that any prepayments of the Term Loans as a result of the reductions in the Term Commitments pursuant to §2.9 shall be credited against the amortization required pursuant to this §3.1(a) in direct order of maturity of such installments.

          (b) 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.

          (c) Extension Option . The Borrower shall have the option to extend the Maturity Date with respect to the Loans of the Extending Lenders only to June 30, 2012 by giving Agent written Notice of such election to extend not more than 120 days and not less than 60 days prior to the original Maturity Date, provided that (i) no Default or Event of Default exists either on the date such notice is given or on the original Maturity 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 original Maturity 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) as of the date such extension is effective (A) the aggregate Revolving Commitments of the Extending Lenders are equal to or less than 92.25% of the aggregate Revolving Commitments of the Extending Lenders (and any Non-Extending Lenders who become Extending Lenders pursuant to §3.1(d)) as of the effective date of the Second Amendment and after giving effect to the Second Amendment, and (B) the aggregate Term Commitments of