Exhibit 10.43
 
 
 

 
LOAN AGREEMENT
 
 
 
Between
 
 
 
METROPOLITAN LIFE INSURANCE COMPANY
 
 
And
 
 
ORM TIMBER OPERATING COMPANY II, LLC,
as Borrower

With
 
 
ORM TIMBER FUND II, INC.,
as Guarantor

FIRST MORTGAGE LOAN
of US$11,000,000
 
 
 
LOAN NO.: 194231
 
 
 
September 1, 2010
 
 
 
 
 
 
 

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TABLE OF CONTENTS
 
 

 
Page  
ARTICLE 1.      LOAN TERMS AND COLLATERAL
2
   
1.1
Loan Amount
2
1.2
The Note
2
1.3
Interest and Payments
2
1.4
Collateral Security for the Loan
2
1.5
Collateral Security Documents for Loan
2
1.6
Other Loan Documents
3
1.7
Acquisition
3
   
ARTICLE 2.      REPRESENTATIONS AND WARRANTIES
3
   
2.1
Nature of Business
3
2.2
Financial Statements; Equity, Debt; Contracts; Material Adverse Change
3
2.3
Ownership of Borrower; Subsidiaries
4
2.4
Pending Litigation
4
2.5
Title to Timberlands; Collateral
4
2.6
Timber, Coal, Oil and Gas
5
2.7
Recreational and Hunting Leases; Licenses
6
2.8
Taxes
7
2.9
Non Foreign Certification
7
2.10
Borrower Organization and Authority
7
2.11
Restrictions on Borrower
9
2.12
Compliance with Law
9
2.13
Pension Plans; ERISA
10
2.14
Certain Laws
10
2.15
Environmental Compliance
10
2.16
Loan Transaction Legal and Authorized; Obligations are Enforceable
12
2.17
No Defaults
13
2.18
Use of Proceeds
13
2.19
Validity of Lien
13
2.20
Solvency
14
2.21
Full Disclosure
14
2.22
Representations and Warranties Specifically Relating to Certain Agreements
14
2.23
Survival of Representations and Warranties
15
   
ARTICLE 3.      GENERAL COVENANTS
 15
   
3.1
Payment of Taxes and Claims; Deposits for Taxes and Insurance Premiums
15
3.2
Documentary Stamps, Other Taxes
17
3.3
Pension Plans; ERISA
17
3.4
Margin Stock
18
3.5
Insurance
18
3.6
Liens
19
3.7
Maintenance of Properties and Legal Existence
21

 
 
 
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TABLE OF CONTENTS
(continued)
 
 

 
Page  
3.8
Change in Capital Structure
22
3.9
Ownership of Timberlands and Borrower
22
3.10
Merger; Acquisition
24
3.11
Separateness; Operating Procedures
24
3.12
Compliance With Financial Control Laws
26
3.13
Perfection of Liens
27
3.14
Security Agreement
27
3.15
Required Notices
28
3.16
Environmental Covenants
29
3.17
Compliance with Anti-Forfeiture Laws
31
   
ARTICLE 4.      TIMBER COVENANTS
32
   
4.1
Annual Operating Plan
32
4.2
Timber Harvesting and Forest Management Operations
32
4.3
Reporting
35
4.4
Lender Consulting Forester
36
4.5
Appraisals; Timber Cruises
37
4.6
Timber Sale, Harvesting and Stumpage Agreements
39
4.7
Timber Sale and Release
40
4.8
Partial Release Provisions
40
4.9
Substitution of Timberlands
42
4.10
Coal, Oil, Gas and Other Minerals
43
4.11
Agreements and Leases
45
4.12
Estoppel Certificates
45
4.13
Timberlands Management
45
4.14
Purchase Agreement
46
   
ARTICLE 5.      FINANCIAL COVENANTS
46
   
5.1
Financial Records
46
5.2
Financial and Business Information
46
5.3
Restrictions on Incurrence of Debt
47
5.4
Loan to Value Ratio
47
5.5
Restrictions on Distributions
48
   
ARTICLE 6.      CLOSING
49
   
6.1
Documentation
49
6.2
Other Conditions
51
   
ARTICLE 7.      EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
52
   
7.1
Events of Default
52
7.2
Acceleration of the Obligations
55
7.3
Remedies
55
7.4
Remedies Cumulative
55
7.5
Indemnification
55

 
 
 
 
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ARTICLE 8.      MISCELLANEOUS
56
   
8.1
Audit and Appraisal Rights
56
8.2
Fees and Expenses Incurred by Lender
56
8.3
Waiver by the Lender
57
8.4
Severability
57
8.5
Modification of Agreement
57
8.6
Authorization to Disseminate Information
57
8.7
Waivers by Borrower
57
8.8
Authorized Signature
58
8.9
Notices
58
8.10
Assignment
59
8.11
Actions by Lender
60
8.12
Performance by Lender
60
8.13
Entire Agreement
60
8.14
Partial Payment
60
8.15
Time of the Essence
61
8.16
Default Rate
61
8.17
Brokerage Commission
61
8.18
Further Assurances
61
   
ARTICLE 9.      INTERPRETATION OF THIS AGREEMENT
61
   
9.1
Defined Terms
61
9.2
Accounting Terms; Interpretation of Financial Covenants
68
9.3
Directly or Indirectly
68
9.4
Section Headings and Table of Contents, etc
68
9.5
Construction
68
9.6
Governing Law
68
9.7
Jurisdiction
69
9.8
Waiver of Trial by Jury
69
9.9
Counterparts
69
9.10
Joint and Several Liability
69
9.11
Successors and Assigns
70

 
 
 
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SCHEDULES
 
Schedule 1.2
Promissory Note
   
Schedule 1.3
Payment Instructions
   
Schedule 2.3
Ownership of Borrower, Officers of Borrower and Statutory Agents in Each State
   
Schedule 2.4.1
Pending Litigation
   
Schedule 2.6.1
Project Manager Certificate
   
Schedule 2.6.1A
Timber Volumes
   
Schedule 2.6.2
Non-Access to Timberlands
   
Schedule 2.6.3
Timber Sale Agreements
   
Schedule 2.6.4
Leases (other than those included on Schedule 2.7)
   
Schedule 2.6.5
Mining Permits
   
Schedule 2.7
Rent Roll – Recreational Licenses and Leases
   
Schedule 2.15.4
Endangered Species Issues
   
Schedule 2.15.5
Storage Tanks
   
Schedule 4.2.6
Administrative Values
   
Exhibit A
Timberlands
   
Exhibit B
Partial Release Forms
   

 
 
 
 

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LOAN AGREEMENT
 
This LOAN AGREEMENT (this “Agreement”) is dated as of September 1, 2010, by and
among ORM TIMBER OPERATING COMPANY II, LLC, a Delaware limited liability company
(“Borrower”), with an address at 19245 Tenth Avenue NE, Poulsbo, Washington
98370 and METROPOLITAN LIFE INSURANCE COMPANY, a New York corporation
(“Lender”).
 
RECITALS
 
A.     WHEREAS, Borrower has entered into a Purchase Agreement dated as of July
27, 2010 (the “Purchase Agreement”) with Weyerhaeuser Real Estate Development
Company, a Washington corporation (“Seller”), pursuant to which Borrower shall
purchase from Seller a fee simple interest in certain of the Timberlands
situated in the State of Oregon and defined herein as the Copper Creek Block
(all such Timberlands, appurtenances, related contracts rights and property
purchased by or owned by Borrower pursuant to or arising from the transactions
contemplated under the Purchase Agreement, the “Purchased Assets”).
 
B.     WHEREAS, Borrower recently completed the acquisition of certain of the
Timberlands situated in the State of Washington and defined herein as the Riffe
Lake Block (all such Riffe Lake Block Timberlands, appurtenances, related
contracts rights and property purchased by or owned by Borrower pursuant to or
arising from the transactions contemplated under the Purchase Agreement, the
“Riffe Lake Assets”) pursuant to the following agreements (collectively, the
"Riffe Lake Purchase Agreement"): (i) Purchase and Sale Agreement dated July 7,
2010 between Terrapointe LLC, a Delaware limited liability company and Borrower;
and (ii) Purchase and Sale Agreement dated July 7, 2010 between Rayonier Forest
Resources, L.P., a Delaware limited partnership and Borrower.
 
C.     WHEREAS, Borrower has requested that Lender agree to make a first
mortgage loan in the original principal amount of Eleven Million Dollars
$11,000,000, the proceeds of which shall be used by Borrower in purchasing the
Purchased Assets and which loan shall be secured by first mortgage and security
interests in the Purchased Assets together with the Riffe Lake Assets.
 
D.     WHEREAS, subject to the terms and conditions set forth herein, Lender has
agreed to make such loan to Borrower pursuant to that certain Term Sheet/Loan
Application dated July 8, 2010 (the “Application”) in order to fund a portion of
the purchase price to be paid by Borrower for the Purchased Assets, which loan
shall be secured as provided herein and in the other Loan Documents.  The Loan
will be guaranteed by ORM TIMBER FUND II, INC., a Delaware corporation (the
“Guarantor”).
 
E.     WHEREAS, all capitalized terms used but not otherwise defined herein
shall have the meanings set forth in Article 9 hereof.
 
NOW THEREFORE, in consideration of the Loan, the covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
 
 
 

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ARTICLE 1. LOAN TERMS AND COLLATERAL
 
1.1       Loan Amount.  Subject to the terms and conditions of this Agreement,
Lender agrees on the Closing Date to make a senior secured first mortgage loan
to Borrower (the “Loan”) in the original principal amount of ELEVEN MILLION US
DOLLARS (US$11,000,000).
 
1.2       The Note.  The Loan shall be evidenced by one (1) Promissory Note
executed and delivered by Borrower to Lender of even date herewith in the amount
of Eleven Million Dollars ($11,000,000) bearing a fixed rate of interest with a
term of ten (10) years in the form of Schedule 1.2 attached hereto (as amended,
restated, extended, renewed or otherwise modified from time to time, together
with any note or notes given in substitution or replacement thereof at the
request of Lender, collectively, the “Note” or “Notes”).
 
1.3        Interest and Payments.  The Loan shall bear interest at the rate or
rates specified in the Note and principal and interest shall be payable by
Borrower in accordance with the terms of the Note.  Payments in respect of the
Note shall be made by Borrower to Lender in accordance with the payment
instructions set forth on Schedule 1.3.
 
1.4        Collateral Security for the Loan.  The indebtedness evidenced by the
Note and the other obligations of Borrower with respect to the Loan are and
shall continue to be secured by a first and senior mortgage, security interest
and lien (subject only to Permitted Encumbrances) encumbering the Timberlands,
including, without limitation, all Timber and biomass thereon or derived
therefrom, and the other Collateral.
 
1.5        Collateral Security Documents for Loan.  The indebtedness evidenced
by the Note and the other obligations of Borrower with respect to the Loan are
and shall continue to be secured by, among others, the following documents
(collectively, the “Security Documents”):
 
1.5.1   With respect to the Timberlands situated in Marion and Clackamas
Counties, in the State of Oregon, a first Trust Deed, Security Agreement,
Assignment of Leases and Rents and Fixture Filing encumbering the Timberlands,
and with respect to the Timberlands situated in Lewis County, in the State of
Washington, a first Deed of Trust, Security Agreement, Assignment of Leases and
Rents and Fixture Filing encumbering the Timberlands, subject only to the
Permitted Encumbrances (collectively, the “Deeds of Trust”);
 
1.5.2   A first perfected security interest (subject only to the Permitted
Encumbrances) in and to all of Borrower’s Property consisting of personal
property, located on, derived from or related to the Timberlands, pursuant to a
security agreement supplementing or contained herein and in the Deeds of Trust
as well as a separate security agreement from Borrower and any of its
Subsidiaries having an interest in any of the Collateral if required by Lender
(collectively, as amended, restated or supplemented from time to time, the
“Security Agreement”);
 
1.5.3   Assignments of, and a first perfected security interest (subject only to
the Permitted Encumbrances) in and to, all leases, contracts, licenses and
permits relating to the Timberlands, including any listed on Schedules 2.6.4 and
2.7 hereof, together with any consents required for such assignments pursuant to
a security agreement supplementing or contained herein and in the Deeds of Trust
as well as separate assignments from Borrower and any of its Subsidiaries having
an interest in any of the Collateral if required by Lender (collectively, as
amended, restated or supplemented from time to time, the “Assignment of
Contracts”); and
 
 
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1.5.4   Assignments of, and first perfected security interests (subject only to
the Permitted Encumbrances) in and to, all timber sale and stumpage agreements
related to the Timberlands, including any listed on Schedule 2.6.3 hereof, and
timber agreements, purchase contracts, and guarantees thereof, in respect of the
Timberlands, together with any consents required for such assignments pursuant
to a security agreement supplementing or contained herein and in the Deeds of
Trust as well as separate assignments from Borrower and any of its Subsidiaries
having an interest in any of the Collateral if required by Lender (collectively,
as amended, restated or supplemented from time to time, the “Assignment of
Timber Contracts”).
 
1.6         Other Loan Documents.  The Loan is also supported by the following
documents which are Loan Documents:
 
1.6.1   the Environmental Indemnity Agreement executed by the Borrower and
Guarantor which is not secured by the Deeds of Trust; and
 
1.6.2   the Guaranty Agreement executed by the Guarantor.
 
1.7    Acquisition.  Borrower shall furnish to Lender a collateral assignment of
the purchaser’s rights, but not the purchaser’s obligations or liabilities,
under the Purchase Agreement together with any consent by the seller required
under the Purchase Agreement and Borrower shall not permit any amendment of the
Purchase Agreement without the prior written consent of Lender.  Borrower shall
purchase the Purchased Assets simultaneously with, but immediately prior to, the
Closing.
 

ARTICLE 2.   REPRESENTATIONS AND WARRANTIES
 
As an inducement to Lender to enter into this Agreement and to make the Loan and
with the understanding that Lender is relying thereon, Borrower represents and
warrants to Lender, as of the date hereof and as of the date of Closing as
follows:
 
2.1    Nature of Business.  Borrower’s only business is the ownership and
operation of the Timberlands and the Unencumbered Timberlands as
timberlands.  The Timberlands and related assets and the Unencumbered
Timberlands and related assets constitute the only assets owned by Borrower.
 
2.2     Financial Statements; Equity, Debt; Contracts; Material Adverse Change.
 
2.2.1   Financial Statements. Borrower has delivered to Lender prior to the date
of Closing copies of audited annual financial statements and operating
statements of the Borrower dated as of December 31, 2009, and unaudited
consolidated quarterly financial statements for Guarantor and Borrower dated as
of June 30, 2010, which have been accepted by Lender.  All of said financial
statements (including in each case the related schedules and notes) are true and
correct in all material respects and present fairly the financial position of
the Borrower and/or Guarantor, as applicable, as of the respective dates
specified in such statements (subject, in the case of interim financial
statements, to audit and normal year end adjustments) and the results of its
operations and its cash flows for the respective periods so specified and have
been prepared in accordance with GAAP consistently applied throughout the
periods involved except (i) for charges required or permitted by GAAP and with
which the auditors of Borrower or Guarantor, as applicable, concur, or
(ii) where applicable, as set forth in the notes thereto.
 
 
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2.2.2   Debt.  Borrower has no Debt other than the Loan.
 
2.2.3   Material Adverse Change. Since the date of the most recent financial
statements delivered to Lender pursuant to Section 2.2.1 there has been no
material adverse change in the business, prospects, profits, property or
condition (financial or otherwise) of Borrower or Guarantor or any Affiliate.
 
2.2.4   Bankruptcy; Compromise.  Neither Borrower nor Guarantor or any Affiliate
is or has ever been, involved in bankruptcy or adjudicated as bankrupt, and has
not entered into an agreement or received the benefit of any settlement or
compromise of a Debt, as debtor.
 
2.3   Ownership of Borrower; Subsidiaries.  All of the direct and indirect
interests in Borrower are owned by the parties and in the manner set forth in
Schedule 2.3, which Schedule also identifies all Subsidiaries of
Borrower.  Borrower’s statutory agent for service of process in each state in
which its Property is located is also set forth in Schedule 2.3.
 
2.4     Pending Litigation.
 
2.4.1   Pending Litigation. Except as set forth on Schedule 2.4.1 attached
hereto and made a part hereof, there are no proceedings, actions or
investigations pending or, to the knowledge of Borrower, threatened against or
affecting Borrower, Guarantor, any Subsidiaries or any of their respective
Property (including without limitation the Collateral) in any court or before
any Governmental Authority or arbitration board or tribunal.
 
2.4.2   No Defaults. None of Borrower, Guarantor, any Subsidiaries nor any of
their respective Property is in default with respect to any judgment, order,
writ, injunction or decree of any court, Governmental Authority, arbitration
board or tribunal.
 
2.5     Title to Timberlands; Collateral.
 
2.5.1   Timberlands. The Timberlands consist of (i) approximately 12,759 acres,
collectively located in Marion and Clackamas Counties, Oregon and referred to
herein as the Copper Creek Block; and (ii) approximately 9,119 acres located in
Lewis County, Washington, all as described in Exhibit A, as shown on maps
furnished by Borrower to Lender and as described in the Deeds of Trust.
 
2.5.2   Title to the Timberlands. At Closing, Borrower will have good and
marketable fee simple, indefeasible title to all of the Timberlands free of all
Liens except the Permitted Encumbrances.
 
 
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2.5.3   Timber.  At Closing, Borrower will have good and marketable unencumbered
title to all of the Timber standing, lying, or growing on the Timberlands,
(except for timber sold in the ordinary course of business pursuant to the
timber sale agreements listed on Schedule 2.6.3).
 
2.5.4   Timberlands.  The Timberlands include all of the Purchased Assets.
 
2.5.5   Collateral.  The Collateral constitutes all Property of the Borrower
that relates to, is derived from, is appurtenant to, is located on or is
necessary for the operation of the Timberlands as commercial timberland, and
Borrower has no other Property which does not constitute Collateral, except for
the Unencumbered Timberlands and such Property that exclusively relates to, is
derived from or is appurtenant to or is located on the Unencumbered Timberlands.
 
2.6         Timber, Coal, Oil and Gas.
 
2.6.1   Condition and Volumes of Timber.  To the best knowledge of Borrower
following diligent inquiry, the standing Timber located on the Timberlands is in
good condition and is substantially free from pests, blight, fungus, disease, or
infestation and from any other adverse condition.  The Merchantable Timber
located on the Timberlands is marketable.  Borrower certifies to Lender that the
information set forth in the timber inventory verification report attached
hereto as Schedule 2.6.1 setting forth the species, age, quantity, location and
volumes of all standing timber located on the Timberlands is not misleading and
is true, correct and complete at a 95% confidence level with a margin of error
of +/- 5%, and is the same information that was provided by Borrower or Project
Manager to the appraiser and from which was prepared the appraisal referenced in
Section 4.5.2 below.  Borrower shall deliver to Lender prior to Closing a
certificate of Project Manager representing and warranting to Lender the truth
and accuracy of the statements in this Section 2.6.1, in the form of
Schedule 2.6.1 attached.  Both Project Manager and Borrower have certified said
Timber volumes to Lender knowing that Lender is relying on such certifications
to make this Loan, including, without limitation, Lender’s reliance on the
appraisal update referenced in Section 4.5.2 below, which is based upon such
Timber volumes.
 
2.6.2   Access to Timberlands.  Except as set forth in Schedule 2.6.2, the
Timberlands are accessible to vehicles either via direct access from a public
road or by valid, enforceable, perpetual easements or irrevocable licenses over
third-party lands, and such access is sufficient for timberland management,
timber harvesting, transportation of forest products and rock aggregates, and
planting operations and other silvicultural practices customary in the
industry.  Portions of the Timberlands that are contiguous to other portions of
the Timberlands which have such access shall be deemed to have such access.
 
Following the Closing, Borrower shall obtain the consent from the Bureau of Land
Management (“BLM”) for the assignment to Borrower of the Road Use Agreement
referenced in Schedule 2.6.2, and shall provide evidence of Borrower’s legally
enforceable rights to access the Copper Creek Block under the Road Use Agreement
promptly upon receipt but in no event later than September 1, 2011.  Borrower
shall keep Lender apprised of BLM’s consent process and provide Lender with
copies of the related documentation.
 
 
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With regard to the portion of the Riffe Lake Timberlands identified on Schedule
2.6.2, Borrower agrees to obtain legally enforceable access easements
appurtenant to and sufficient to use and operate this portion of the
Timberlands, in a form or forms reasonably approved by Lender, prior to
September 1, 2011. Failure to obtain the foregoing easements for the benefit of
all but 640 acres of the portion of the Riffe Lake Timberlands identified on
Schedule 2.6.2 by such date shall constitute an Event of Default unless Borrower
shall have provided to Lender, by such date, Replacement Timberlands meeting the
standards set forth in Section 4.9.
 
2.6.3   Timber Sale Agreements.  There are presently no leases, timber deeds,
stumpage agreements, timber cutting agreements or other agreements in effect for
the sale or cutting of any timber on the Timberlands, except as set forth on
Schedule 2.6.3, which includes all of the documents comprising all of the sale
agreements or leases affecting the Timberlands wherein Borrower is the seller or
landlord, together with all modifications, amendments and supplements thereto,
from which any payments, royalty or any other income is or may be received by
Borrower from the sale or harvest of timber from the Timberlands; no party has
made a claim or demand adverse to the title of Borrower as set forth in any such
agreement or lease; and such agreements and leases are in full force and effect
without default by any party thereto and no action under the bankruptcy laws of
the United States or any State, whether voluntary or involuntary, are pending
against any of the purchasers or tenants or sublessees (including all parties
presently owning any interest as purchaser or tenant thereunder) of such
agreements or leases; and no consent of any of such purchasers or tenants or
sublessees, or any other party, is required for the assignment by the Borrower
of said agreements or leases to Lender.
 
2.6.4   Other Leases.  Except as set forth on Schedule 2.6.4, there are
presently no leases or other agreements affecting the Timberlands wherein
Borrower is the landlord, including, without limitation, pasture leases, cell
tower leases, wind turbine leases, commercial leases, mineral leases, surface
leases to mineral owners, any other leases from which any royalty or production
income may be received by Borrower from, or which permits the tenant thereunder
to undertake, the mining of coal, oil, gas or other minerals, and any other
leases or use or occupancy agreements affecting the Timberlands.
 
2.6.5   Mining Permits.  Except as set forth on Schedule 2.6.5, Borrower has not
held at any time, and does not now hold, nor has Borrower ever permitted the
holding for the benefit of or on behalf of Borrower (it being understood and
agreed that a mining permit held by a tenant under a bona fide lease from
Borrower to such tenant shall not be considered held for the benefit of or on
behalf of Borrower), any permit or license issued by any Governmental Authority
which permits or allows the exploration, mining, drilling, extraction,
production, storage, transportation or processing of coal, oil, gas or any other
minerals on or at the Timberlands, and no such permit or license is required to
be held by or for the benefit of or on behalf of Borrower for any operations
presently carried on at the Timberlands or contemplated by Borrower.  For the
purpose of this Section 2.6.5, mining for sand, hard rock or gravel by Borrower
is not considered mining.
 
 
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2.7         Recreational and Hunting Leases; Licenses.  Attached hereto as
Schedule 2.7 is a Rent Roll of all of the licenses and other documents
comprising all agreements affecting the Timberlands wherein Borrower has leased
or licensed, including all modifications, amendments and supplements thereto,
rights for hunting, fishing or other recreational uses, and the term, expiration
date and rents or fees payable with respect thereto.  Borrower has submitted to
Lender its standard form of license agreement and certifies that the licenses
listed on the Schedule are generally in the form of such standard form.
 
2.8         Taxes.
 
2.8.1   Returns Filed; Taxes Paid.  All Federal and other tax returns, if any,
required to be filed by Borrower and any other Person with which Borrower files
or has filed a consolidated return in any jurisdiction have in fact been filed
on a timely basis, and all taxes, assessments, fees and other governmental
charges upon Borrower and any such Person, and upon any of their respective
Properties, income or franchises, that are due and payable have been paid,
including, without limitation, ad valorem taxes imposed on the Timberlands and
any conveyance or excise taxes related thereto except for such taxes (i) which
are not delinquent or (ii) that are being contested in good faith and by proper
proceedings.
 
2.8.2   Reserves for Taxes.
 
(i) Borrower has made adequate provision to establish reserves for liability for
taxes as of the date hereof (including, without limitation, any payment due
pursuant to any tax sharing agreement) as are or may become payable by Borrower
(and any other Person with whom Borrower is required by applicable law to file a
consolidated tax return) in respect of all tax periods ending on or prior to
such dates.
 
(ii) Borrower knows of no proposed additional material tax assessment against it
or any Person with whom Borrower is required by applicable law to file a tax
return and all taxes payable in connection with the acquisition of the Purchased
Assets have been or shall be paid as and when due.
 
2.9        Non Foreign Certification.  Neither Borrower , Guarantor, nor any
Affiliate is a foreign corporation, foreign partnership, foreign trust or
foreign estate (as these terms are defined in the Internal Revenue Code and
Income Tax Regulations).
 
2.10  Borrower Organization and Authority.
 
2.10.1         Borrower:
 
                   (i)            Is a duly formed, validly existing limited
liability company and in good standing under the laws of the State of Delaware;
 
                   (ii)   Has all requisite power and authority, and the legal
right, to own and operate its Property and to conduct the business in which it
is currently engaged and as presently proposed to be conducted in each
jurisdiction in which it is currently conducting its business or presently
proposing to conduct its business;
 
 
 
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                   (iii)   Is duly qualified as a foreign limited liability
company and in good standing under the laws of Washington, Oregon, and any other
jurisdiction where its ownership, lease or operation of Property or the conduct
of its business requires such qualification; and
 
                    (iv)   Has all necessary licenses, permits and certificates
to own and operate its Property and to carry on its business as now conducted
and as presently proposed to be conducted.
 
2.10.2   Guarantor:
 
                     (i)   Is a duly organized, validly existing corporation,
and is in good standing under the laws of Delaware;
 
                     (ii)   Has all requisite power and authority, and the legal
right, to own and operate its property and to conduct the business in which it
is currently engaged and as presently proposed to be conducted in each
jurisdiction in which it is currently conducting its business or presently
proposing to conduct its business;
 
                     (iii)   Is duly qualified as a foreign corporation and in
good standing under the laws of any jurisdiction where the conduct of its
business requires such qualification; and
 
                     (iv)   Has all necessary licenses, permits and certificates
to carry on its business as now conducted and as presently proposed to be
conducted.
 
2.10.3   Olympic Resource Management LLC, a Washington limited liability
company, is the Manager of Borrower (“Manager”) and:
 
                                          (i)   Is a duly organized, validly
existing limited liability company and in good standing under the laws of the
State of Washington;
 
                    (ii)   Has all requisite power and authority, and the legal
right, to own and operate its property and to conduct the business in which it
is currently engaged and as presently proposed to be conducted in each
jurisdiction in which it is currently conducting its business or presently
proposing to conduct its business, and specifically, to act as manager of the
Borrower;
 
                    (iii)   Is duly qualified as a foreign limited liability
company and in good standing under the laws of any jurisdiction where the
conduct of its business requires such qualification; and
 
                    (iv)   Has all necessary licenses, permits and certificates
to carry on its business as now conducted and as presently proposed to be
conducted.
 
2.10.4   Borrower’s organizational information is as follows:
 
                    (i)   The exact legal name of the Borrower as that name
appears on its Certificate of Formation is as follows:  ORM Timber Operating
Company II, LLC.
 
 
 
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                    (ii)   The following is the principal place of business and
mailing address of the Borrower:  19245 Tenth Avenue NE Poulsbo,
Washington  98370.
 
                    (iii)   The following is the Borrower’s state issued
organizational identification number: 602904078.
 
                    (iv)   The following is a list of all other names (including
trade names or similar appellations) used by the Borrower, or any other business
or organization to which the Borrower became the successor by merger,
consolidation, acquisition, change in form, nature or jurisdiction of
organization or otherwise, now or at any time during the past five years:  none.
 
                    (v)   The following are all other states in the United
States of America in which the Borrower is qualified to do business: Oregon,
Washington, and Delaware.
 
2.10.5   Borrower maintains all of its books or records relating to any of the
Collateral consisting of accounts, instruments, chattel paper, general
intangibles or mobile goods at its place of business set forth above.
 
2.10.6   The officers of Borrower are as set forth on Schedule 2.3.  The
Officers of Manager are as set forth on Schedule 2.3.
 
2.10.7   Borrower’s U.S. employer identification number is: 27-0970624.
 
2.11  Restrictions on Borrower.  Borrower is not a party to any contract or
agreement, or subject to any restriction in its organizational documents that
restricts the right or ability of Borrower to incur Debt, (other than any
restrictions in its organizational documents that have been satisfied with
respect to the borrowing of the Loan), other than this Agreement, or otherwise
perform under the terms of the Loan Documents; and has not agreed or consented
to cause or permit in the future (upon the happening of a contingency or
otherwise) any of the Timberlands, or any interest therein, whether now owned or
hereafter acquired, to be subject to a Lien other than a Permitted Lien; and has
not agreed or consented to cause or permit in the future (upon the happening of
a contingency or otherwise) any of the Collateral, or any interest therein,
whether now owned or hereinafter acquired, to be subject to a Lien other than
Permitted Liens.
 
2.12  Compliance with Law.
 
Neither Borrower, Guarantor nor any Affiliate:
 
2.12.1   Is in violation of any law, ordinance, governmental rule or regulation
to which it or its Property is subject, including, without limitation, those
relating to zoning and planning, building, subdivision, inland-wetland, wildlife
protection, forest practices, hazardous or toxic waste, materials or substances,
mining, drilling, extraction, or reclamation, but not including any such laws,
ordinances, rules or regulations which are specifically addressed in Subsections
2.12.3 or 2.12.4;
 
 
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2.12.2   Has failed to obtain any license, certificate, permit, franchise or
other governmental authorization necessary to the ownership of its Property or
to the conduct of its business, including, without limitation, to the extent
required, building, zoning, subdivision, traffic and environmental approvals,
forest practices, wildlife protection, certificates of occupancy, mining,
drilling, extraction, or reclamation; but not including under this Section any
of the same that are addressed in Subsections 2.12.3 or 2.12.4;
 
2.12.3   Is in violation of any law, ordinance, government rule or regulation
with respect to mining, drilling, extraction, sale or management of the coal,
oil, gas and other minerals from the Timberlands, and has not failed to obtain
any necessary license, certificate, permit, franchise or other governmental
authorization;
 
2.12.4   Is in violation of any law, ordinance, government rule or regulation
with respect to cutting, handling, harvesting, selling and the management of
Timber from the Timberlands, and has not failed to obtain any necessary license,
certificate, permit, franchise or other governmental authorization; and
 
2.12.5   Has received any written notice of any violation of or with respect to
any of the matters set forth above in this Section.
 
2.13  Pension Plans; ERISA.  Borrower does not maintain any pension plan or
employee benefit plan.  Neither Borrower nor any entity with which Borrower
would be aggregated (a “Commonly Controlled Entity”) under Section 414(b), (c),
(m) or (o) of the IRS Code, is an “employee benefit plan” (as such term is
defined in Section 3(3) of ERISA) or “governmental plan” (as defined in Section
3(32) of ERISA), and none of Borrower’s assets constitute “plan assets”, as
defined in 29 C.F.R. §2510.3-101 or “assets of a governmental plan” subject to
regulation under any of the laws of the United States of America.  The
transactions under this Agreement do not constitute a non-exempt prohibited
transaction under ERISA and will not result in the assessment of a direct or
indirect liability to Borrower or Lender under Section 409 or 502 of ERISA or
Section 4975 of the Code by reason of the QPAM exemption or otherwise.
 
2.14  Certain Laws.  The incurrence of the Debt evidenced by the Note, and the
performance under the Loan Documents by the Borrower and Guarantor:
 
2.14.1   Is not subject to regulation under the Investment Company Act of 1940,
as amended, the Transportation Acts, as amended, or the Federal Power Act, as
amended, and
 
2.14.2   Does not violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to Borrower or Guarantor.
 
2.15  Environmental Compliance.
 
2.15.1   Compliance. To the best of Borrower’s knowledge following diligent
inquiry and except as disclosed in the Phase I Report, Borrower and its
Property, including, without limitation, the Timberlands, and the use thereof,
are in compliance with all Environmental Protection Laws in effect in any
jurisdiction where it currently is doing business or owns Property, including,
without limitation, all states where any of the Timberlands are located.
 
 
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2.15.2   No Releases.  To the best of Borrower’s knowledge following diligent
inquiry and except as disclosed in the Phase I Report, there has not been any
Release (as hereinafter defined) or threat of a Release of any Hazardous
Substances on, upon, into or emanating from the Timberlands, except those
Releases, permitted by applicable Environmental Laws or reported to the
appropriate government authorities and resolved to the satisfaction of such
authorities, and except for minor oil leaks from logging operations or vehicles
used in Timberlands management and the application of pesticides or herbicides
used in accordance with applicable regulations in the ordinary course of normal
silvicultural activities and possible “over spray” of pesticides or herbicides
from agricultural operations on adjacent lands, and there have never been any
such Releases on, upon or into any real property adjoining or in the vicinity of
the Timberlands which could have had the result that Hazardous Substances have
come to be located upon the Timberlands or the water or groundwater
thereunder.  As used in this Agreement, “Release” means any presence, spill,
leak, seepage, discharge, escape, leaching, dumping, or disposing in or into the
environment (including the abandonment or discarding of barrels, containers, and
other closed receptacles containing any Hazardous Substance or pollutant or
contaminant).
 
2.15.3   To the best of Borrower’s knowledge following diligent inquiry and
except as disclosed in the Phase I Report, no Hazardous Substances are currently
located on or under the Timberlands and no portion of the Timberlands has been
used as a land fill or dump to receive garbage, refuse or waste.
 
2.15.4   No portion of the Timberlands is listed or proposed for listing on the
National Priorities List established by the United States Environmental
Protection Agency or any other list purporting to identify properties posing the
threat or existence of contamination by Hazardous Substances; except as set
forth on Schedule 2.15.4, to the best of Borrower’s knowledge after diligent
inquiry, no “endangered species” or “threatened species”, as those terms are
defined in the Endangered Species Act of 1973, 16 U.S.C. § 1531 et seq., as
amended (the “Endangered Species Act”), are present on the Timberlands, and no
portion of the Timberlands has been designated as a “critical habitat”, as that
term is defined in the Endangered Species Act.
 
2.15.5   Storage Tanks.  To the best of Borrower’s knowledge following diligent
inquiry and except as set forth in the Phase I Report, and except as listed on
the attached Schedule 2.15.5, there are no underground storage tanks of any kind
or character, whether empty or containing substances of any nature located
within the Timberlands, and there are no above-ground storage tanks of any kind
or character, whether empty or containing substances of any nature, located
within the Timberlands, except as shown on Schedule 2.15.5.
 
2.15.6   Liability.    Borrower is not subject to any liability under any
Environmental Protection Law.
 
2.15.7   Notices.    Borrower has not received, nor, to Borrower’s best
knowledge, have there been issued to any party any:
 
                    (i)    Written notice from any Governmental Authority by
which any of the Collateral, including, without limitation, the Timberlands has
been identified in any manner by any Governmental Authority as a Hazardous
Substance disposal or removal site, clean-up site or candidate for removal,
remediation or closure pursuant to any Environmental Protection Law;
 
 
 
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                    (ii)    Notice of any violation of, or Lien arising under or
in connection with any Environmental Protection Law with respect to the
Timberlands; or
 
                    (iii)    Communication from any Governmental Authority or
other Person concerning any Hazardous Substance on or related to the Timberlands
or any action or omission by Borrower in connection with its currently or
previously owned or leased Properties, including, without limitation, the
Timberlands, concerning the release or presence of any Hazardous Substance or
concerning any violation of any Environmental Protection Law.
 
2.15.8   For the purposes of this Section 2.15:
 
                    (i)   Any notice shall not include any matter that has been
resolved to the written satisfaction of Governmental Authorities; and
 
                    (ii)   “Timberlands” owned by Borrower shall be deemed to
include any Property of any Affiliate of Borrower which would be treated as if
it were a part of the Timberlands under any Environmental Protection Law.
 
2.16  Loan Transaction Legal and Authorized; Obligations are Enforceable.
 
2.16.1   Loan Transaction Legal and Authorized. The execution and delivery by
Borrower of the Note and the other Loan Documents to which it is a party, and
compliance by Borrower with all of its obligations under the Loan Documents are
within the company powers and authority of Borrower; are legal and do not
conflict with, result in any breach of any of the provisions of, constitute a
default under, or result in the creation of any Lien other than Permitted Liens
upon any Property of Borrower under the provisions of, any agreement or other
instrument to which it is a party or by which it or any of its Property may be
bound; and do not give rise to a right or option of any other Person under any
agreement or other instrument.
 
2.16.2   Obligations are Enforceable. Each of the Note and the other Loan
Documents to which Borrower is a party has been authorized by all necessary
company actions on the part of Borrower, has been properly executed and
delivered by the duly authorized officer of Borrower, and constitutes a legal,
valid and binding obligation of Borrower enforceable in accordance with its
terms.
 
2.16.3   Guaranty Agreement Legal.  The execution and delivery by Guarantor of
the Guaranty Agreement are legal and do not conflict with, result in any breach
of any of the provisions of, constitute a default under, or result in the
creation of any Lien on any Property of Guarantor under the provisions of any
agreement or other instrument to which Guarantor is a party or by which it or
any of its Property may be bound; and do not give rise to a right or option of
any other Person under any agreement or other instrument.
 
 
 
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2.16.4   Obligations under Guaranty Agreement are Enforceable.  The Guaranty
Agreement has been properly executed and delivered by Guarantor and constitutes
a legal, valid and binding obligation of Guarantor enforceable in accordance
with its terms.
 
2.16.5   Governmental Consent.  Neither the nature of Borrower or Guarantor, or
of any businesses or Properties of Borrower or Guarantor, nor any relationship
between Borrower or Guarantor and any other Person, nor any circumstance in
connection with the Loan transaction and the execution and delivery of the Loan
Documents, is such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any Governmental Authority on the
part of Borrower or Guarantor as a condition to the execution and delivery of
any Loan Document or the Loan transaction, including, without limitation, the
Hart Scott Rodino Act.
 
2.17  No Defaults.
 
2.17.1   The Loan Documents. No event has occurred and no condition exists that,
upon consummation of the Loan transaction contemplated hereby and the execution
and delivery of the Loan Documents, would constitute a Default or an Event of
Default.
 
2.17.2   Organizational Documents; Other Agreements. Borrower is not in
violation in any respect of any term of its certificate of formation, operating
agreement or any other constitutive document or instrument.  To the best of
Borrower’s knowledge, neither Borrower nor Guarantor is in violation of any term
in any agreement or other instrument to which it is a party or by which it or
any of its Property may be bound.
 
2.18  Use of Proceeds.
 
2.18.1   Use of Loan Proceeds. Proceeds of the Loan will be used by Borrower to
pay a portion of the purchase price of the Purchased Assets, closing costs for
the transaction contemplated hereunder and for general working capital needs and
for no other purpose.  Borrower’s uses of the proceeds of the Loan are, and will
continue to be, legal and proper uses under Borrower’s organizational documents
and applicable laws and regulations.  Borrower’s uses of the proceeds of the
Loan are limited to its commercial business activities.
 
2.18.2   Margin Securities. None of the transactions contemplated by the Loan
Documents (including, without limitation, the use of the proceeds from the Loan)
violates, will violate or will result in a violation of section 7 of the
Exchange Act, or any regulations issued pursuant thereto, including, without
limitation, Regulations T, U and X of the Board of Governors of the United
States of America Federal Reserve System, 12 C.F.R., Chapter II.  Borrower does
not intend to use the proceeds from the Loan to own, carry or purchase, or
refinance borrowings that were used to own, carry or purchase, any Margin
Security, or for any purpose that might constitute this Loan as a purpose credit
within the meaning of such Regulation U.
 
 
 
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2.19  Validity of Lien.  Upon recording the Deeds of Trust in the proper
recording offices, the execution and delivery of the Security Documents and the
filing of related financing statements in the proper filing offices, the Liens
granted to Lender by Borrower and any Subsidiary pursuant to the Loan Documents
shall constitute valid perfected first priority Liens under the laws of each
State in which any part of the Collateral is located and all other applicable
laws, ordinances, rules and regulations, entitled to all the rights, benefits
and priorities provided by such law and any and all other such laws, ordinances,
rules and regulations, and the Collateral is subject to no other Liens except
for Permitted Liens. All action that is necessary or advisable to establish such
Liens of Lender, and their priority as described in the preceding sentence,
including filing of registrations, financing statements or similar notices in
the appropriate offices and the recording of all appropriate documents with
appropriate public officials, will be taken on or prior to the Closing Date or
provisions satisfactory to the Lender for the taking of such actions have been
or will be made, and there will be, upon execution, delivery and filing or
recordation of such registrations, financing statements and documents, no
necessity for any further action in order to protect, preserve and continue such
Liens and such priority other than the filing of continuation statements with
respect to such financing statements, which Borrower hereby agrees to undertake
or cause to be undertaken as reasonably necessary to protect, preserve and
continue such Liens and such priority.  Borrower has the full power and lawful
authority to assign, transfer, deliver and pledge, or cause to be assigned,
transferred, delivered and pledged, the Collateral.
 
2.20  Solvency.  The fair value of the business and assets of Borrower and
Guarantor is in excess of the amount that will be required to pay its respective
liabilities (including, without limitation, contingent, subordinated, unmatured
and unliquidated liabilities on existing debts, as such liabilities may become
absolute and matured), in each case both before and after giving effect to the
transactions contemplated by the Loan Documents.  Neither Borrower nor
Guarantor, after giving effect to the transactions contemplated by the Loan
Documents, is engaged in any business or transaction, or about to engage in any
business or transaction, for which such party has unreasonably small assets or
capital (within the meaning of applicable law, including, without limitation,
section 548 of the United States Bankruptcy Code), and neither Borrower nor
Guarantor has intent to (a) hinder, delay or defraud any entity to which it is,
or will become, on or after the Closing Date, indebted, or (b) incur debts that
would be beyond its ability to pay as they mature.
 
2.21  Full Disclosure.  The statements and information contained in the Loan
Documents and the application, documents, certificates and other written
information furnished by or on behalf of Borrower or Guarantor to Lender in
connection with the Loan and the closing of the Loan are true and complete
(other than projections and forward looking information).  There is no fact that
Borrower has not disclosed to Lender that has had or, so far as the Borrower can
now reasonably foresee, could be expected to have, a materially adverse effect
on (i) the business, prospects, profits, Property or condition (financial or
otherwise) of Borrower, Guarantor or any Affiliate; (ii) the ability of Borrower
to perform its obligations set forth herein and in the Note, (iii) any of the
rights or remedies of Lender under any Loan Document or (iv) the enforceability
against Borrower or Guarantor of any Loan Document to which Borrower or
Guarantor is a party.
 
 
 
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2.22  Representations and Warranties Specifically Relating to Certain
Agreements.
 
2.22.1   The Borrower has good title to the Leases and Rents (for the purpose of
this Section, as defined in the Deeds of Trust) assigned in the Deeds of Trust
and good right to assign the same, and no other person, corporation or entity
has any right, title or interest therein.
 
2.22.2   The Borrower has duly and punctually performed all and singular terms,
covenants, conditions and warranties of the Leases on the Borrower’s part to be
kept, observed and performed.
 
2.22.3   The Borrower has not previously sold, assigned, transferred, mortgaged
or pledged the Leases or the Rents, whether now or hereafter to become due.
 
2.22.4   Other than annual rents under hunting, recreational and crop leases,
and advance payments under lump-sum pay-in-advance cutting agreements, no Rents
due for any period subsequent to the month next succeeding the date hereof have
been collected, and no payment of any of the Rents has otherwise been
anticipated, waived, released, discounted, set-off or otherwise discharged or
compromised, except in the ordinary course of the Borrower’s business.
 
2.22.5   To the best of the Borrower’s knowledge, none of the parties to any
Leases are in default under any of the terms thereof.
 
2.23  Survival of Representations and Warranties.  Borrower covenants, warrants
and represents to Lender that all representations and warranties of Borrower
contained in this Agreement and the other Loan Documents are true and correct on
the date hereof and at Closing and shall survive the execution, delivery and
acceptance thereof by Lender and the parties thereto and the Closing of the
transactions described therein or related thereto.
 

ARTICLE 3.   GENERAL COVENANTS
 
Borrower covenants and agrees that on and after the Closing Date and thereafter
for so long as any Obligations are outstanding to Lender:
 
3.1     Payment of Taxes and Claims; Deposits for Taxes and Insurance Premiums.
 
3.1.1   Subject to Section 3.1.3 hereof, Borrower will pay or cause to be paid
prior to delinquency all taxes, assessments, ad valorem taxes and other
governmental, municipal or other public dues, charges, fines or impositions
imposed or levied on or with respect to its Property, including, without
limitation, upon the Timberlands or on the interests created by any Deed of
Trust or with respect to the filing of any Deed of Trust, and any tax or excise
on rents or other tax, however described, assessed or levied by any state,
federal or local taxing authority as a substitute, in whole or in part, for
taxes assessed or imposed on the Collateral, including, without limitation,
timber, coal or mineral severance taxes, taxes on the value of unmined or
unextracted coal, oil, gas or other minerals, or any other taxes related to
mining, drilling, extracting, producing, transporting, storing or processing
coal, oil, gas or other minerals, or any royalty interest therein, and all
excise, privilege or license taxes that may be levied against or upon coal, oil,
gas or other minerals located on or produced from the Timberlands, or on the
lien and other interests created by any Deed of Trust (collectively, the
“Impositions”), and Borrower will deliver to Lender on an annual basis, along
with the financial statements required to be delivered under Section 5.2.2
below, a certification (“Tax Certificate”) by Borrower to Lender that all such
Impositions for the immediately preceding Fiscal Year have been paid in full
(other than those Impositions being contested in accordance with Section 3.1.3
hereof), or at the request of Lender, receipts for such Impositions or other
evidence of payment satisfactory to Lender.
 
 
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3.1.2   Borrower shall file all Federal and other tax returns required to be
filed in any jurisdiction (or shall obtain effective extensions for filing) and,
subject to Section 3.1.3 hereof, shall pay and discharge all taxes prior to
delinquency whether or not shown on such returns, and, in addition to the
Impositions, all other taxes, assessments, governmental charges, conveyance
taxes or levies imposed upon its Property or activity (the “Other Taxes,” and
collectively with the Impositions, the “Taxes”).
 
3.1.3   Borrower may, at Borrower’s own expense, in good faith contest any Taxes
and, in the event of any such contest, may permit the Taxes so contested to
remain unpaid during the period of such contest and any appeal therefrom,
provided that (a) no Event of Default shall be in existence during such period;
(b) such contest is carried out in good faith and by appropriate proceedings
diligently pursued, (c) adequate reserves are established and maintained by
Borrower in accordance with GAAP and in amount and manner reasonably acceptable
to Lender, and (d) title of Borrower to, or its right to use, any affected
Property, is not, and is likely not to be, adversely affected thereby (and in no
event is foreclosure or other adverse action under any lien or any other
proceeding or governmental right arising from such non-payment or contest is
imminent).
 
3.1.4   If any tax or assessment (other than state and federal income or
franchise taxes) is levied, assessed or imposed by any Governmental Authority on
Lender as the legal holders of the Notes, any interest in any Deed of Trust or
any of the other Loan Documents, then unless all such taxes and assessments are
paid by Borrower before they become delinquent (and in the reasonable opinion of
counsel for Lender, such payment by Borrower is lawful and does not place Lender
in violation of any law, or subject Lender to any penalty), Lender may, if
Borrower shall fail to pay any such tax or assessment within thirty (30) days
after written notice thereof from Lender, at its option, declare an Event of
Default under the applicable Deed of Trust or hereunder.
 
3.1.5   Lender may, at its option exercisable at any time that Borrower shall
fail to provide Lender the Tax Certificate when due or shall fail to provide
Lender the receipts or other evidence of payment required under paragraph 3.1.1
above, after ten (10) days written notice from Lender, and at any time that an
Event of Default is in existence, either:  (i) require Borrower to provide to
Lender, at Borrower’s expense, a tax service contract for the term of the Loan
issued by a tax reporting agency acceptable to Lender, or (ii) require Borrower
to thereafter deposit with Lender on the first (1st) day of each month, in
addition to making payments of regular installments of principal and interest,
an amount equal to one-twelfth (1/12) of all Impositions, and all ground rents,
maintenance charges, other governmental impositions and other governmental
charges, with regard to the Collateral, including, without limitation, license
fees (collectively, “Other Charges” ) and/or of the annual premiums for all
insurance as estimated by Lender in order to accumulate with Lender sufficient
funds to pay such amounts thirty (30) days prior to their due dates.  Such
deposits shall not be, nor be deemed to be, trust funds, may be held by Lender
in commingled accounts and shall not bear interest, but Lender shall, subject to
the provisions hereof, make payment of such Impositions and Other Charges to the
appropriate authorities, as set forth in bills or other statements therefor
furnished to Lender by Borrower.  Upon demand by Lender, Borrower shall deliver
to Lender such additional monies as are necessary to make up any deficiencies in
the amounts necessary to enable Lender to pay such Impositions, Other Charges
and premiums when due.  At any time following the occurrence and during the
continuance of an Event of Default, Lender may apply to the reduction of the
sums secured by the Deeds of Trust in such order, priority and proportions as
Lender acting reasonably shall determine in its sole and absolute discretion,
any amount under this paragraph then being held by Lender on account of such
deposits and any return premium received from cancellation of any insurance
policy by Lender upon foreclosure of the Deeds of Trust.  Upon an assignment of
this Agreement by Lender and upon assumption by the assignee thereof of the
obligations of Lender as escrow holder, Lender shall pay over the balance of
such deposits in its possession to the assignee and provide a written statement
of such amount to Borrower.  Lender shall thereupon be completely released from
all liability with respect to such deposits transferred to the assignee, and
Borrower shall look solely to the assignee or transferee with respect thereto,
except as otherwise provided by applicable law.  This provision shall apply to
every transfer of such deposits to a new assignee.
 
 
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3.2         Documentary Stamps, Other Taxes.
 
3.2.1   If at any time the United States of America, any State thereof or any
subdivision of any such State shall require revenue or other stamps to be
affixed to the Note or the Deeds of Trust, or impose any mortgage recording tax,
mortgage privilege tax or similar tax or charge on the same.  Borrower will pay
for the same, with interest and penalties thereon, if any.  In the event of the
passage, after the date of the Deeds of Trust, of any law deducting from the
value of the Property subject thereto, for the purposes of taxation, any Lien
thereon or security interest therein, or changing in any way the laws now in
force for the taxation of mortgages, deeds of trust and/or security agreements,
or the manner of the collection of any such taxes, which has the effect of
imposing payment of the whole or any portion of any taxes, assessments or other
similar charges against any of such Property upon Lender, the Obligations shall
immediately become due and payable at the option of Lender; provided, however,
that such election by Lender shall be ineffective if prior to the due date
thereof:  (1) Borrower is permitted by law (including, without limitation,
applicable interest rate laws), and without subjecting Lender to any penalty,
to, and actually does, pay such tax or the increased portion thereof (in
addition to continuing to pay the Obligations as and when due and payable); and
(2) Borrower agrees with Lender in writing to pay or reimburse Lender for the
payment of any such tax or increased portion thereof when thereafter levied or
assessed against such Property or any portion thereof.  Any money paid by Lender
with respect to any such taxes or changes referenced in this Section shall be
reimbursed to Lender upon demand or at Lender’s option, added to the
Obligations.
 
3.3         Pension Plans; ERISA.
 
3.3.1   Borrower shall not take any action which would cause it to become an
“employee benefit plan” as defined in Section 3(3) of ERISA, or a “governmental
plan” as defined in Section 3(32) of ERISA, or its assets to become “assets of a
governmental plan” subject to regulation under any of the laws of the United
States of America.  Borrower shall not sell, assign or transfer all or
substantially all of its Property, to any transferee which does not execute and
deliver to Lender its written assumption of the obligations of this
covenant.  Borrower shall not cause or permit the loan transaction which is the
subject of this Agreement to constitute a non-exempt prohibited transaction
under ERISA or to result in the assessment of a direct or indirect liability to
Borrower or Lender under Section 409 or 502 of ERISA or Section 4975 of the IRS
Code.  Borrower further covenants and agrees to protect, defend, indemnify and
hold Lender harmless from and against all loss, cost, damage and expense
(including without limitation all reasonable attorneys’ fees and excise taxes,
and costs of correcting any prohibited transaction or obtaining an appropriate
exemption) which Lender may incur as a result of Borrower’s breach of the
foregoing covenants in this Section.  This indemnity shall survive repayment of
the Note and the extinguishment of the Liens securing the Obligations by
foreclosure or action in lieu thereof with respect to events that occur before
the repayment of the Note and the extinguishment of the Liens securing the
Obligations by foreclosure.
 
 
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3.3.2   Borrower shall not (i) have any pension plan, employee benefit plan or
Employee Welfare Plan; (ii) create or adopt, or become liable with respect to,
any employee benefit plan without the prior written consent of Lender;
(iii) create or adopt any new Employee Welfare Plan; or (iv) engage, or
participate, in any transaction which would reasonably result in the assessment
of a direct or indirect liability to Borrower under Section 409 or 502 of ERISA
or Section 4975 of the IRS Code.
 
3.4        Margin Stock.  Borrower shall not own, purchase or acquire (or enter
into any contract to purchase or acquire) any Margin Security unless, prior to
any such purchase or acquisition or entering into any such contract, Lender
shall have received an opinion of counsel satisfactory to Lender to the effect
that such purchase or acquisition will not cause this Agreement or the Note to
violate Regulations U or X or any other regulation of the Federal Reserve Board
then in effect.
 
3.5         Insurance.  Borrower shall, at Borrower’s cost and expense, and at
no cost or expense to Lender:
 
3.5.1   Liability Insurance. Maintain commercial general liability insurance
with respect to its Property and businesses, including broad form contractual
liability subject to specific policy conditions, limitations and exclusions,
personal injury and third party bodily injury (including death) and property
damage coverage, in an amount of not less than $5,000,000, combined single limit
with respect to damages or injuries (including death) arising from use or
occupation of its Property and against such other customary risks or hazards as
Lender may from time to time reasonably designate with a deductible of not more
than $10,000. Limits can be met with a combination of primary and/or
umbrella/excess liability policies.  Such policies shall name Lender, its
subsidiaries, affiliates, successors and assigns, as additional insureds.
 
3.5.2   Property Insurance.  Maintain property insurance with respect to any
buildings owned by Borrower in connection with the and any other improvements
(but not, for the avoidance of doubt, any Timber) which may in the future be
located on the Timberlands, against all risks, for the full replacement value,
and in such amounts and covering such risks or hazards as Lender may from time
to time reasonably designate.  Such policies shall name Lender, its
subsidiaries, affiliates, successors and assigns as their interest may appear,
as mortgagee under a non-contributory, standard mortgagee clause.
 
 
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3.5.3   Generally.  All insurance required hereunder shall be maintained with
financially sound and reputable insurers licensed in each State in which the
Collateral is located, accorded a rating by A.M. Best Company of “A-” or better
and a size rating of “VIII” or larger (or comparable ratings by any comparable
successor rating agency) and otherwise acceptable to Lender in its reasonable
discretion. Each insurance policy shall contain such provisions as Lender
reasonably deems necessary or desirable to protect its interests, from time to
time, as various needs arise. Each insurance policy shall contain, without
limitation, a provision for at least thirty (30) days prior written notice to
the Lender of cancellation in the risk or coverages insured. At Lender’s
request, Borrower shall furnish to Lender a copy of each insurance policy as
evidence of coverage certified true and correct by an appropriate authority of
the issuing insurance company; provided, that, a certified, insurance company
issued binder will suffice until a reasonable time has been allowed for such
insurance company to issue a certified copy of an insurance policy.  Borrower
shall furnish to Lender on or before January 1 of each year (or such other date
which is the expiration or termination of the then existing coverage),
certificates of insurance from or authorized by the carrier verifying continual
coverage as required hereunder in form and substance reasonably acceptable to
Lender.
 
3.5.4   Insurance Proceeds.  In the event of any insured loss, Borrower shall
give immediate written and oral notice thereof to Lender and to the
insurer.  All of the loss proceeds of any such policies shall be applied, first
for the sole purpose of altering, restoring or rebuilding all or any part of the
Improvements which may have been damaged or destroyed as a result of any of the
insured perils, and any remainder, or the entire amount if Borrower decides not
to so repair or rebuild, to the payment of principal of the Loan (whether or not
then due and payable), which shall be treated like any other prepayment,
interest accrued on the Loan and any other amounts due or to become due
hereunder or under the Loan Documents, or shall be paid to Borrower, on such
terms as Lender may reasonably specify.
 
In the event of a foreclosure sale of all or any part of the Timberlands
pursuant to the provisions of the Deeds of Trust, Lender shall succeed to all
the rights and interest of the Borrower, including any right to unearned
premiums in and to all such policies of insurance with respect to such
foreclosed Timberlands, or any part thereof.
 
3.6         Liens.
 
3.6.1   Negative Pledge.  Borrower shall not cause or permit, or agree or
consent to cause or permit now or in the future (upon the happening of a
contingency or otherwise), any of its Property, including without limitation any
of the Collateral, the Unencumbered Timberlands and the Property of any
Subsidiary, whether now owned or hereafter acquired, to be subject to a Lien,
whether voluntarily or by operation of law, in each case, without the prior
written consent of Lender, except the following permitted liens (the “Permitted
Liens”):
 
                                  (i)   Liens securing taxes, assessments or
governmental charges or levies, provided that the payment thereof is not at the
time required by Section 3.1 or liens for taxes being contested in good faith by
appropriate proceedings in the same manner as permitted in Section 3.1.3;
 
 
 
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                                  (ii)   Liens in favor of the Lender that
secure obligations under any of the Loan Documents;
 
                                  (iii)   As to the Timberlands, Liens created
by specifically identified (e.g. by name, date, parties, recording information,
etc.) written documents which, or a memorandum of which, are recorded in the
land records and listed as exceptions on  Schedule B of any title insurance
policy for the Timberlands which Lender has accepted and approved, including
without limitation the Alta Rock Lease Documents, any inchoate liens for real
property taxes listed on such Schedule B and any statutory inchoate liens to the
extent covered by such title insurance policy, and as to the Unencumbered
Timberlands, encumbrances, easements and restrictions of record as of the date
hereof which do not comprise Liens securing Debt, other than any inchoate liens
for real property taxes (the “Permitted Encumbrances”);
 
                                  (iv)   The leases or licenses set forth in
Schedule 2.7 and any extensions or renewals of such licenses or leases and other
hunting or recreational leases or licenses hereinafter entered into in the
ordinary course of business on a form approved by Lender with respect to
portions of the Timberlands not exceeding 1,000 acres in any one case or having
a term greater than two (2) years granted for recreational purposes, provided
such leases do not have an adverse impact on the operation or value of the
Timberlands affected;
 
                                  (v)   Timber sale agreements set forth on
Schedule 2.6.3 and timber sale agreements entered into in the future which are
permitted under Section 4.6 below which are subject and subordinate to the Lien
of the Loan Documents, unless a partial release thereof is issued by Lender;
 
                                  (vi)   Liens imposed by law arising in the
ordinary course of business such as materialmen’s, mechanics’, logger’s,
carriers and other nonconsensual statutory Liens which are not delinquent or
which are being contested in good faith by appropriate proceedings for which
adequate reserves determined in accordance with GAAP and acceptable to Lender
have been established (and as to which the property subject to any such Lien is
not subject to foreclosure, sale or loss on account thereof);
 
                                  (vii)   Easements and rights of way affecting
the Unencumbered Timberlands (but not the Timberlands), and easements and rights
of way affecting the Timberlands, other than the easements described in Section
2.6.2 which require Lender’s prior approval, which (a) do not materially detract
from the value or functionality of the Timberlands; (b) do not materially
interfere with the ordinary conduct of silvicultural activities on the
Timberlands; (c) do not result in the incurrence by Borrower of any Debt; (d)
are expressly subordinate by their terms to the Deeds of Trust and any other
Security Documents; (e) provide for any benefits thereunder to run with the
Timberlands and inure to successive owners thereof; and (f) have been provided
to Lender in draft form at least thirty (30) days prior to execution; and
 
 
 
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                                  (viii)   Judgment or attachment liens
resulting from litigation or other legal proceedings (and not otherwise an Event
of Default hereunder) in the ordinary course of Borrower’s business which (a)
are currently being contested in good faith by appropriate proceedings; (b) will
not, if determined adversely, result in a loss or forfeiture of any of the
Property having a collective value of $50,000 or more; and (c) are supported by
adequate reserves and posted bonds sufficient to satisfy the related lien or, if
possible, to remove the lien as an encumbrance against the Timberlands.
 
3.6.2   Collateral.  Nothing in this Section shall be deemed to permit Borrower
to cause or permit, or agree or consent to cause or permit now or in the future
(upon the happening of a contingency or otherwise), any of the Collateral,
whether now owned or hereafter acquired, to be subject to any Lien, or to any
Permitted Lien (other than a Permitted Encumbrance) which has priority over any
Deed of Trust or any other Loan Document, or otherwise in violation of the terms
of this Agreement or the Loan Documents.
 
3.6.3   Equity Interests in Borrower. Notwithstanding anything to the contrary
in this Section, Borrower shall not cause, or agree or consent to cause or
permit now or in the future (upon the happening of a contingency or otherwise),
any interest in Borrower or any Subsidiary, whether direct or indirect, or
through one or more intermediaries, at any time to be subject to a Lien.
 
3.6.4   Financing Statements and Registrations. Borrower shall not sign, file or
authorize the filing of a financing statement under the Uniform Commercial Code
of any jurisdiction or similar act that names Borrower as debtor, or sign any
security agreement authorizing any secured party thereunder, other than Lender,
to file any such financing statement, with respect to the Collateral or any
interests in Borrower.
 
3.7         Maintenance of Properties and Legal Existence.
 
3.7.1   Property.  Borrower shall preserve and maintain the Collateral in good
condition, ordinary wear and tear and damage by casualties (subject to
Sections 4.2.13 and 7.1.11) excepted, and make all necessary repairs, renewals,
replacements, additions, betterments and improvements thereto, except for any
equipment that is obsolete or worn-out or with respect to which, in Borrower’s
reasonable business judgment, replacement is unnecessary, and shall not commit
or permit any waste to occur with respect thereto.
 
3.7.2   Compliance with Law. Borrower shall comply at all times with all present
and future laws, ordinances governmental rules and regulations, decrees, orders
and governmental standards to which it or any of its Property is or may become
subject, including, without limitation, any zoning, planning, building,
subdivision, inland-wetland, stream management, wildlife protection or forest
practices laws, tree severance or growth tax laws, mining, drilling, extraction,
reclamation and occupational health and safety laws (but not including under
this Section 3.7.2 any Environmental Protection Laws which are addressed in
Section 3.16 below), and shall obtain and continuously maintain any and all
licenses, permits, franchises or other governmental authorizations necessary to
the ownership of its Properties or to the conduct of its business.
 
 
 
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3.7.3   Maintenance of Business. Borrower and Guarantor will continue to be
engaged in the business of owning, growing, managing and harvesting timber on
the Timberlands, and shall continuously operate such business and maintain such
business and franchises in full force and effect, and shall preserve and keep in
full force and effect its legal existence as set forth in the certificate of
Borrower submitted to Lender by Borrower pursuant to Section 6.1.9.
 
3.7.4   Timber Stumpage and Sale Agreements.  Borrower shall fully perform all
obligations of Borrower under any Timber stumpage or sale agreement or Timber
leases, or any other agreement for the sale of Timber, however denominated,
affecting the Timberlands and shall not permit any violation thereof on the part
of Borrower, and shall enforce all obligations of the purchaser thereunder in a
commercially reasonable manner.  Further, Borrower shall enforce the obligations
of any guarantor under any guarantee of any such agreements.
 
3.7.5   Compliance with Conservation Easements.  Borrower shall comply with all
conservation easements and other similar agreements affecting the Timberlands
and shall not permit any violation thereof on the part of Borrower, and shall
enforce the terms and conditions of such conservation easements and other
agreements in a commercially reasonable manner.
 
3.8    Change in Capital Structure.  Borrower shall not (i) create any
additional Subsidiaries, (ii) divest itself of all or any part of the
Timberlands or any other Property that is collateral security for the Loan,
(except in compliance with Sections 4.2, 4.6, 4.7 or 4.8), and including,
without limitation, any transfer of any or all of them to any Affiliate of
Borrower or Subsidiary, (iii) enter into any partnership, joint venture or
similar arrangement, or (iv) make any change in its ownership or capital
structure; in each of the above cases, without the prior written consent of
Lender.
 
3.9    Ownership of Timberlands and Borrower.  Borrower acknowledges that in
agreeing to make the Loan, Lender has examined and relied on the
creditworthiness and experience of Borrower and Guarantor and the experience,
competence and reputation of Manager, and their respective directors and
officers, with respect to the operation of the Timberlands and that Lender will
continue to rely on Borrower’s ownership of the Collateral, and the Manager
continuing to be the manager of Borrower and continuing to have directors,
officers and employees of the same experience, competence and capacity as
presently exists, as a means of maintaining the value of the Collateral as
security for repayment of the Obligations.  Borrower further acknowledges that
Lender has a valid interest in maintaining the value of the Collateral so as to
ensure that, should Borrower default in the repayment of the Obligations, Lender
can recover the Obligations by a sale of the Collateral.
 
3.9.1   Borrower shall not, without the prior written consent of Lender, or in
compliance with Section 3.6, 4.2, 4.6, 4.7 or 4.8, sell, convey, alienate,
mortgage, encumber, pledge or otherwise transfer the Timberlands or any part
thereof or interest therein or possession thereof, or suffer or permit the
Timberlands or any part thereof or interest therein or possession thereof to be
sold, conveyed, alienated, mortgaged, encumbered, pledged or otherwise
transferred, and whether voluntarily, involuntarily or by operation of law.
 
 
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3.9.2   A sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer within the meaning of this Section shall be deemed to include, without
limitation:  (i) an installment sales agreement wherein Borrower agrees to sell
the Timberlands or any part thereof for a price to be paid in installments,
(ii) an agreement by Borrower leasing all or a substantial part of the
Timberlands, or a sale or assignment or other transfer of, or the grant of a
security interest in, Borrower’s right, title and interest in and to any leases
or rents related to the Timberlands, (iii) any assignment or transfer, whether
voluntary or involuntary, by operation of law or otherwise, of or affecting more
than 20% of the ownership or membership interest in Borrower or Manager, whether
through one or more intermediaries and whether at one time or in a series of
related transactions (iv) the change, removal, resignation or addition of a
manager or managing member of Borrower, Manager or any Affiliate, (v) any change
in ownership of more than 20% of any ownership and membership interest in
Borrower or Manager, or change in control of any such interest in Borrower or
Manager, whether through one or more intermediaries and whether at one time or
in a series of related transactions, and (vi) any assignment or transfer,
whether voluntary or involuntary, by operation of law or otherwise, that would
cause Pope Resources, a Delaware limited partnership, to fail to maintain at
least a 19.2% ownership interest in Guarantor and at least a 100% direct or
indirect ownership interest in Manager.  Borrower shall notify Lender promptly
upon any other change in the identity or percentage interest held by
shareholders in Guarantor such that Lender shall at all times be advised of the
current ownership of interests in Guarantor.
 
3.9.3   Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default hereunder in order to establish the
existence of an Event of Default in any violation of any of the terms and
conditions of this Section.  This provision shall apply to every sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer in violation
of this Section, regardless of whether voluntary, involuntary or by operation of
law, or whether or not Lender has consented to any previous sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Timberlands.  Any
sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Collateral made in contravention of this Section shall constitute an Event of
Default and at the option of Lender, shall be null and void and of no force and
effect.
 
3.9.4   Lender’s consent to a sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Timberlands or any other action described
in this Section shall not be deemed to be a waiver of Lender’s right to require
such consent to any future occurrence of same.  Any sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Timberlands or
other action made in contravention of this Section shall be null and void and of
no force and effect.
 
3.9.5   Borrower agrees to bear and shall pay or reimburse Lender on demand for
all reasonable expenses (including, without limitation, reasonable attorneys
fees and disbursements, title search costs and title insurance endorsement
premiums) incurred by Lender in connection with the review, approval and
documentation of any such sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer.
 
 
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3.9.6   Except for changes in officers for which Borrower shall submit to Lender
a revised Schedule 2.3 within thirty (30) days after such change, and except for
changes permitted under this Section 3.9 and changes in identity or address of
agents for service of process, for which Borrower shall submit to Lender a
revised Schedule 2.3 at least fifteen (15) days prior to such change, the
information set forth on Schedule 2.3 shall remain true and correct and
unchanged in all respects at all times.  Further, the certificate of formation,
operating agreement and all other organizational documents of Borrower,
Guarantor and Manager shall at all times be acceptable in form and substance to
Lender and shall not be modified or amended in any manner whatsoever, whether
directly or indirectly, through one or more agreements or intermediaries, and no
agreements among members, officers, managers or directors with respect to
voting, operations or any other matters addressed in the organizational
documents of such entity or customarily addressed in the organizational
documents of similar entities shall be permitted to exist, whether verbal or in
writing, without the prior written consent of the Lender, such consent not to be
unreasonably withheld.  Each of Borrower, Guarantor and Manager shall at all
times comply with such organizational documents.  Borrower shall, at the request
of the Lender from time to time, verify and certify the status of the
information on Schedule 2.3, and the ownership and organizational documents of
Borrower, Guarantor and Manager and their respective direct and indirect owners,
and other relevant information to establish compliance under this Section 3.9.
 
3.10      Merger; Acquisition.  Borrower shall not merge with or into,
consolidate with, or sell, lease as lessor, transfer or otherwise dispose of all
or substantially all of its Property to, any other Person or permit any other
Person to merge with or into or consolidate with it, without the prior written
consent of Lender.
 
3.11      Separateness; Operating Procedures.  Borrower represents, warrants and
covenants to Lender as follows:
 
3.11.1   Borrower’s purpose for which Borrower is organized and existing shall
be and remain limited solely to (A) acquiring, owning and holding the
Timberlands, harvesting and selling Timber and/or portions of the Timberlands to
third parties, and operating and managing the Timberlands as industrial
timberlands, (but shall not include any mining or mineral extraction or
processing activity that requires any permit or may cause Borrower to be liable
under SMCRA or any other law relating to mining or minerals other than the
activities conducted under the Alta Rock Lease Documents), (B) acquiring, owning
and holding the Unencumbered Timberlands, harvesting and selling timber located
on the Unencumbered Timberlands and/or portions of the Unencumbered Timberlands
to third parties, and operating and managing the Unencumbered Timberlands as an
industrial timberlands, (but shall not include any mining or mineral extraction
or processing activity that requires any permit or may cause Borrower to be
liable under SMCRA or any other law relating to mining or minerals), (C)
entering into the Loan and (D) transacting any and all lawful business that is
incident, necessary and appropriate to accomplish the foregoing, and Borrower
will not engage in any other business without the prior written consent of
Lender.
 
3.11.2   Borrower does not own and will not own any asset or property other than
the Collateral and the Unencumbered Timberlands and subsequently acquired
timberlands permitted under the terms of Borrower’s organizational documents.
 
 
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3.11.3   Borrower will not enter into any transaction, including, without
limitation, the purchase, sale or exchange of Property or the engagement or
rendering of any service, with any Affiliate of Borrower, any direct or indirect
constituent party of Borrower, any owner of Borrower, the Manager of Borrower,
the Project Manager, any Affiliate of any such party, or any officer of any such
party, except in the ordinary course of business and pursuant to the
requirements of Borrower’s business and upon terms and conditions that are
intrinsically fair, commercially reasonably and upon fair and reasonable terms
no less favorable to Borrower than would exist in a comparable arm’s-length
transaction with a Person not an Affiliate, constituent party, owner or
officer.  Borrower has not entered into any agreement, whether written or oral,
with Project Manager except the Management Agreement.
 
3.11.4   Borrower has not made and will not make any loans or advances to any
entity or person (including any Affiliate or constituent party or owner of
Borrower), and shall not acquire obligations or securities of its Affiliates or
any constituent party (other than the ownership interests of any currently
existing Subsidiaries).
 
3.11.5   Borrower is and will remain solvent and Borrower will pay its debts and
liabilities (including, as applicable, shared personnel and overhead expenses)
from its assets as the same shall become due.
 
3.11.6   Borrower will maintain all of its books, records, financial statements
and bank accounts separate from those of its Affiliates, any constituent party
and any other Person.  Subject to the exception set forth in the next sentence,
Borrower’s assets will not be listed as assets on the financial statement, of
any other entity.  Borrower shall have its own separate financial statement,
provided, however, that Borrower’s assets may be included in a consolidated
financial statement of its parent companies if inclusion on such a consolidated
statement is required to comply with the requirements of GAAP, provided that
such consolidated financial statement shall contain a footnote to the effect
that Borrower’s assets are owned by Borrower and that they are being included on
the financial statement of its parent solely to comply with the requirements of
GAAP, and further provided that such assets shall be listed on Borrower’s own
separate balance sheet.  For Federal income tax purposes, Borrower has elected
to be taxed as a partnership under the Internal Revenue Code, and will notify
Lender in writing if such election is changed.  Borrower will file its own tax
returns and will not file a consolidated Federal income tax return with any
other entity, unless required to do so by applicable law or regulation.
 
3.11.7   Borrower will be, and at all times will hold itself out to the public
as, a legal entity separate and distinct from any other Person (including any
Affiliate of Borrower or any constituent party of Borrower), shall correct any
known misunderstanding regarding its status as a separate entity, shall conduct
business in its own name, shall not identify itself or any of its Affiliates as
a division or part of any other Person and shall maintain and utilize separate
checks and invoices.  The collective reference to Borrower and Guarantor in
public reports and filings as “Fund II” shall not constitute a violation of the
foregoing covenant.
 
3.11.8   Borrower will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations.
 
 
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3.11.9   Borrower shall maintain its bank accounts separate from any other
person or entity and will not commingle the funds and other assets of Borrower
with those of any Affiliate, constituent party or owner of Borrower, or any
other Person, and will not participate in a cash management system with any
party other than its Affiliates.
 
3.11.10        Borrower will not guarantee or become obligated for the debts of
any other entity or Person or pledge its assets for the benefit of any such
entity or Person and does not and will not hold itself out as being responsible
for the debts or obligations of any other Person, or hold out its credit as
available to satisfy the obligations of any other person or entity.
 
3.11.11        Borrower shall allocate fairly and reasonably any overhead
expenses that are shared with an Affiliate or any other Person, including paying
for office space and services performed by any employee of an Affiliate or any
other Person.
 
3.11.12        Borrower shall hold regular meetings, as appropriate, to conduct
the business of the Borrower, and Borrower has done or caused to be done and
will do all things necessary to observe all customary organizational and
operational formalities and to preserve its existence.
 
3.11.13        Borrower shall pay its own liabilities and expenses out of its
own funds drawn on its own bank account.
 
3.11.14        Borrower shall not buy or hold evidence of indebtedness,
obligations or securities issued by its direct or indirect owners or Affiliates
or any other Person or entity (other than cash and investment-grade securities).
 
3.11.15       Borrower shall maintain all required qualifications to do business
in each state in which the Timberlands is located.
 
3.11.16       Neither Borrower nor any constituent party will seek the
dissolution, winding up, liquidation, consolidation or merger in whole or in
part, or the sale of substantially all of the assets of Borrower.
 
3.11.17       Borrower has maintained and will maintain its assets in such a
manner that is not costly or difficult to segregate, ascertain or identify its
individual assets from those of any Affiliate, or any other Person.
 
3.12      Compliance With Financial Control Laws.
 
3.12.1   Borrower and Guarantor is each, and shall remain at all times, in
compliance with all applicable laws and regulations of the United States of
America that prohibit, regulate or restrict financial transactions, and any
amendments or successors thereto and any applicable regulations promulgated
thereunder (collectively, the “Financial Control Laws”), including but not
limited to those related to money laundering offenses and related compliance and
reporting requirements (including any money laundering offenses prohibited under
the Money Laundering Control Act, 18 U.S.C. Sections 1956, 1957 and the Bank
Secrecy Act, 31 U.S.C. Sections 5311 et seq.), the Trading with the Enemy Act
and the Foreign Assets Control Regulations, 31 C.F.R. Section 500 et seq.; each
as amended.
 
 
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3.12.2   Borrower represents and warrants that: (i) no Borrower or Affiliate is
a Barred Person (hereinafter defined); (ii) no Borrower or Affiliate is owned or
controlled, directly or indirectly, by any Barred Person; and (iii) no Borrower
or Affiliate is acting, directly or indirectly, for or on behalf of any Barred
Person; and Borrower covenants and agrees that Borrower shall not now or at any
time in the future permit or suffer the assignment or ownership of any
membership or shareholder interest in Borrower to or by any Barred Person.
 
3.12.3   Borrower represents and warrants that it understands and has been
advised by legal counsel on the requirements of the Financial Control Laws.
 
3.12.4   Under any provision of this Loan Agreement or any of the other Loan
Documents where the Lender shall have the right to approve or consent to any
particular action, including without limitation any (i) sale, transfer,
assignment of the Timberlands or of any direct or indirect ownership interest in
Borrower, (ii) leasing of the Timberlands, or any portion thereof, or
(iii) incurring of additional financing secured by Timberlands, or any portion
thereof or by any direct or indirect ownership interest in any Borrower, Lender
shall have the right to withhold such approval or consent, in its sole
discretion, if the granting of such approval or consent could be construed as a
violation of any of the Financial Control Laws.
 
3.12.5   Borrower covenants and agrees that it will upon request provide Lender
with (or cooperate with Lender in obtaining) information required by Lender for
purposes of complying with any Financial Control Laws.
 
3.12.6   As used in this Loan Agreement or any of the other Loan Documents, the
term “Barred Person” shall mean (i) any person, group or entity named as a
“Specially Designated National and Blocked Person” or as a person who commits,
threatens to commit, supports, or is associated with terrorism as designated by
the United States Department of the Treasury’s Office of Foreign Assets Control
(“OFAC”), (ii) any person, group or entity named in the lists maintained by the
United States Department of Commerce (Denied Persons and Entities), (iii) any
government or citizen of any country that is subject to a United States Embargo
identified in regulations promulgated by OFAC and (iv)  any person, group or
entity named as a denied or blocked person or terrorist in any other list
maintained by any agency of the United States government.
 
3.13      Perfection of Liens.  At the request of Lender, Borrower, at its sole
expense, will promptly take all steps necessary to cause the authorization,
execution, filing and recording, or the re-execution, refiling and re-recording
of any documents pertaining to the Loan as may be reasonably specified by
Lender.  Borrower shall take such other actions as Lender may reasonably request
in order to perfect and protect the Liens or security interests of Lender in the
Property in which a Lien is granted pursuant to the Loan Documents, together
with all other Property in which Borrower now or will hereafter pursuant to this
Agreement grant a Lien in favor of Lender.  Upon any failure by Borrower to do
so (within ten (10) Business Days following the written request of Lender unless
any Event of Default shall have occurred and be continuing), Lender may make,
execute and record any and all such instruments, certificates and documents for
and in the name of Borrower, and at the sole expense of Borrower, and Borrower
hereby irrevocably appoints Lender the agent and attorney in fact of Borrower to
do so, this appointment being coupled with an interest  Lender shall promptly
provide Borrower a copy of any instrument, certificate, or document executed by
Lender on behalf of Borrower.
 
 
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3.14      Security Agreement.  Borrower hereby grants to Lender a security
interest in all of the types and categories of personal property included within
the Collateral or as described in the Deeds of Trust or any of the other Loan
Documents set forth in Sections 1.5 or 1.6 above.  Borrower hereby irrevocably
authorizes Lender at any time and from time to time to file in any Uniform
Commercial Code jurisdiction any initial financing statements and amendments
thereto that (a) indicate the UCC or Code Collateral (as defined in the Deeds of
Trust) regardless of whether any particular asset included in such Collateral
falls within the scope of Article 9 of the Uniform Commercial Code of such
jurisdiction, and (b) contain any information required by part 5 of Article 9 of
the Uniform Commercial Code of the applicable state for the sufficiency or
filing office acceptance of any financing statement or amendment, including
(i) whether the debtor is an organization, the type of organization and any
organization identification number issued to the debtor and, (ii) in the case of
a financing statement filed as a fixture filing or indicating collateral that is
as-extracted collateral or timber to be cut, a sufficient description of real
property to which the collateral relates and, if the debtor does not have an
interest of record in the real property, provide the name of the record
owner.  Further, Borrower, to the extent permitted by law, does hereby authorize
Lender to file any financing statement in respect of any Lien created pursuant
to the Loan Documents which may at any time be required or which, in the
reasonable opinion of Lender, may at any time be desirable.  If signing such
financing statement is required, Borrower agrees to sign the same within five
(5) days after written request by Lender, or, at Lender’s election, Lender may
and is hereby authorized by Borrower, to sign such financing statement on behalf
of Borrower and file the same.  Lender may, at its option, advance the expenses
incurred in making, executing and recording any and all such instruments,
certificates and documents, and such sums advanced, with interest, will be
repaid to Lender by the Borrower upon request.  This Agreement shall constitute
a security agreement for the purpose of the Uniform Commercial Code.
 
3.15      Required Notices.  In addition to any and all notices required to be
made by Borrower hereunder, Borrower shall notify Lender in writing of:
 
3.15.1   Promptly upon Borrower becoming aware thereof, any litigation or
administrative proceeding, or written threat thereof, against Borrower, any
Affiliate of Borrower, Guarantor or Project Manager, or relating to the
Collateral, or which, if not seeking money damages or such performance, could
have an adverse effect on the business, finances or prospects of Borrower or
Guarantor, whether or not the claim is considered by Borrower to be covered by
insurance;
 
3.15.2   Promptly upon Borrower becoming aware thereof, (a) any Default
hereunder or under any of the Loan Documents, (b) any payment default or any
material non-payment default under any note, indenture, loan agreement, lease,
deed or other similar agreement relating to any indebtedness, obligation or
Property of Borrower, or (c) any (i) default by Borrower under any timber sale
agreement, timber deed, timber mortgage, timber lease or any agreement however
denominated whereby any Timber or any interest in Timber from the Timberlands is
being sold or transferred in any manner, or (ii) obligation of Borrower under
any such agreement to furnish more Timber, reduce the payment required, refund
any payments or take any other action due to a shortage of Timber on the portion
of the Timberlands which was originally subject to such an agreement;
 
 
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3.15.3   Within ten (10) days after the occurrence thereof, any default
continuing beyond any applicable notice or grace periods by any obligor under
any note or other evidence of debt payable to Borrower which is material to the
financial condition of Borrower or Guarantor;
 
3.15.4   At least ten (10) days prior thereto, Borrower’s intention to relocate
any Collateral from any location at which Lender has a valid, perfected security
interest with respect to such Collateral to any location with respect to which
Lender has not filed registrations, financing state­ments or similar notices
necessary for the perfection of the Lender’s security interest in such
Collateral, provided that no notice shall be required in connection with
ordinary course sale of Timber, stumpage or personal property, or any Mineral
Activity, or other sale or disposition that is otherwise permitted hereunder or
under the Loan Documents;
 
3.15.5   Promptly following receipt of any written notice thereof, any violation
or asserted violation of any law, regulation, governmental standard or code with
respect to the Timberlands, or Borrower, any Subsidiary or Guarantor;
 
3.15.6   Not less than thirty (30) days prior thereto, any change in the
location of its principal place of business, or any other places of business or
of the establishment of any new place of business, or the discontinuance of any
existing place of business, or the change in Borrower’s place of organization;
and
 
3.15.7   Promptly upon Borrower becoming aware thereof, any catastrophic damage
to Timber from fire, insects, disease and storms.  As used herein, “Catastrophic
Damage” shall mean any natural disaster affecting more than 500 acres of the
Timberlands.
 
3.15.8   As early as possible prior to (and in any event at least two (2)
business days prior to, except in the case of an emergency), any proposed press
release (with a full copy thereof) to be issued by Borrower, Guarantor, Manager,
any Affiliate or Project Manager.
 
3.15.9   Promptly upon Borrower becoming aware of the exercise of any option
rights under the Alta Rock Lease Documents or the  execution of any lease
pursuant thereto.
 
3.16      Environmental Covenants.  With respect to Hazardous Substances,
Borrower represents, warrants, covenants and agrees as follows, and such
representations, warranties, covenants and agreements shall survive the
foreclosure of the Deeds of Trust:
 
3.16.1   In the event that any underground storage tank is discovered on the
Timberlands, Borrower shall within sixty (60) days after discovery remove or
“abandon” in place (that is, fill with sand and disable the tank) in accordance
with all applicable laws and regulations.
 
3.16.2   If Borrower receives any notice of (i) the happening of any event
involving the use, presence, spill, discharge or cleanup of any Hazardous
Substances (a “Hazardous Discharge”) affecting Borrower or the Collateral or
(ii) any complaint, order, citation or notice with regard to air emissions,
water discharges, noise emissions or any other environmental matter affecting
Borrower or the Collateral (an “Environmental Complaint”) from any person or
entity, including, without limitation, the United States Environmental
Protection Agency (“EPA”), then Borrower will give, within seven (7) Business
Days, written notice of same to the Lender.
 
 
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3.16.3   Upon the reasonable request of Lender and no more often than once per
year, Borrower agrees to provide Lender with copies of all emergency and
hazardous chemical inventory forms (hereinafter “Notices”) given by Borrower to
any Governmental Authority as required pursuant to the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C., Section 11001 et seq.
 
3.16.4   Borrower agrees, during the term of the Loan, to promptly furnish to
Lender a complete copy of any written environmental report, assessment or
similar information prepared by an environmental professional or environment
company relating to the Timberlands which is at any time in the possession or
control of Borrower and, at the request of Lender, shall cause Lender to be a
named “user” under such reports or provide reliance letters in favor of Lender
from the preparers of such reports.
 
3.16.5   Borrower, promptly upon any request of Lender, given from time to time
during the existence of an Event of Default or upon a Hazardous Discharge or
Environmental Complaint or upon the reasonable determination of Lender that
Hazardous Substances are present on the Collateral, shall cause to be performed
by an environmental professional reasonably acceptable to Lender, tests,
including without limitation, subsurface testing, soil and ground water testing,
and other tests which may physically invade the Timberlands pursuant to a scope
of work proposed by Borrower and approved by Lender (the “Tests”), as Lender, in
its reasonable discretion, determines are necessary to (i) investigate the
condition of the Timberlands, (ii) protect the security interest created under
the Deeds of Trust and (iii) determine compliance in all material respects with
all Environmental Protection Laws, the provisions of the Loan Documents and
other matters relating thereto.  Upon completion of such Tests, Borrower shall
provide Lender environmental site assessment or environmental audit report, or
an update of such an assessment or report, including the results of any
additional testing recommended by an environmental professional or determined to
be necessary by Lender based upon such audits or reports, all in scope, form,
content, and prepared and certified by an environmental professional
satisfactory to Lender at Borrower’s expense.  In the event Borrower shall fail
to so provide any such assessment, audit or update or shall fail to remove or
remediate any Hazardous Substances required to be removed or remediated by
Borrower under any Environmental Protection Law or if Lender is not reasonably
satisfied with the results of any of the Tests or of any environmental site
assessment, audit or report, Borrower grants Lender and its employees and agents
an irrevocable and non-exclusive license, subject to the rights of tenants, to
enter the Collateral to conduct testing and to remove or remediate such
Hazardous Substances, and the reasonable out of pockets costs of such testing
and removal shall immediately be due and payable by the Borrower upon demand by
Lender together with interest at the Default Rate and shall be secured by the
Deeds of Trust, provided Lender shall not exercise such rights unless Borrower’s
failure continues for more than thirty (30) days after such request by Lender,
except in the case of an emergency where failure to do so would reasonably be
expected to imminently and adversely affect human health or the environment, or
where failure to quickly act would reasonably be expected to make it impossible
or materially more difficult to remedy or control the potential contamination.
 
 
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3.16.6   Borrower covenants and agrees that it shall comply with all
Environmental Protection Laws which are now or in the future applicable to the
Collateral, including, without limitation, removal and remediation of any
Hazardous Substances as required by such applicable law, and shall maintain the
Timberlands in accordance with all Environmental Protection Laws.
 
3.16.7   Borrower shall not cause, or permit and shall, using commercially
reasonable due diligence, prevent, any part of the Timberlands to be used for or
to contain, (a) other than in connection with the lawful exercise of mineral
rights which are not owned by Borrower or any Affiliate of Borrower, a mine,
drilling site or underground storage for gas or other minerals, (b) a landfill,
a dump, or other disposal facility, (c) any underground storage tanks of any
kind or character, whether empty or containing substances of any nature to be
located on the Collateral, (d) the location, production, treatment,
transportation, incorporation, discharge, emission, release, deposit or disposal
of any Hazardous Substances in violation of any Environmental Protection Law in,
upon, under, over or from the Collateral, or (e) any Hazardous Substances except
for the routine use and storage, all in accordance with applicable laws,
regulations and codes, of petroleum and other commercial products used in the
ordinary course of Borrower’s business, such as minor oil leaks from logging
operations or vehicles used in Timberlands management and the application of
pesticides or herbicides used in accordance with applicable laws and regulations
and in the ordinary course of normal silvicultural activities.
 
3.16.8   Borrower has not been, is not and will not hold or cause or permit to
be held for its benefit, any permit or license with respect to exploration,
mining, extraction, storage, transportation or processing or sale of coal, oil,
gas or any other minerals (except for any permits required for Borrower to
extract hard rock, sand, and gravel for its own use and which does not subject
Borrower or the Timberlands to SMCRA), or become involved in operations at the
Timberlands or any other property currently or subsequently owned or operated by
Borrower which could lead to imposition on Borrower of liability under any
Environmental Protection Law or any law relating to exploration, mining,
extraction, or processing of coal, oil, gas or other minerals, including,
without limitation, laws relating to reclamation of land affected
thereby.  Borrower expressly warrants, represents and covenants that Borrower
shall comply or cause compliance with all material requirements of Environmental
Protection Laws and other laws relating to exploration, mining, extraction or
processing of coal, oil, gas or other minerals, and shall immediately notify
Lender of any releases of Hazardous Substances at, upon, under or within the
Timberlands.
 
3.17      Compliance with Anti-Forfeiture Laws.  Borrower will not commit,
permit or suffer to exist any act or omission affording the federal government
or any state or local government the right of forfeiture as against the
Collateral or any part thereof or any money paid in performance of Borrower’
obligations under the Notes or under any of the other Loan Documents.  Without
limiting the generality of the foregoing, the filing of formal charges or the
commencement of proceedings against any Borrower, or against all or any part of
the Collateral under any federal or state law for which forfeiture of the
Collateral or any part thereof or of any monies paid in the performance of
Borrower’ obligations under the Loan Documents is a potential result shall, at
the election of the Lender, constitute an Event of Default hereunder without
notice or opportunity to cure.
 
 
 
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ARTICLE 4.     TIMBER COVENANTS
 
 
Borrower covenants and agrees that on and after the Closing Date and thereafter
for so long as any Obligations are outstanding to Lender:
 
4.1        Annual Operating Plan.  On or before the date of Closing, for the
remaining portion of the 2010 Fiscal Year (September 1, 2010 through December
31, 2010) and on or before December 1 of each year thereafter for the following
Fiscal Year, Borrower will submit to Lender for approval an annual plan of
operations for forest management and Timber harvesting (the “Plan”) for the
Timberlands, which shall be in form and substance satisfactory to Lender in
Lender’s reasonable discretion.  The Plan shall (a) specify the total Timber
volume to be harvested from the Timberlands, by species, product class and
location, the planned forest management and silvicultural programs during that
year, (b) not create an Event of Default hereunder, (c) contain a certification
by Borrower and Project Manager to Lender that such plan or modification will
not create a Default and complies with the terms of this Agreement, including,
without limitation, the long term sustainability of the Timberlands and SFI (as
set forth in Section 4.2 below), (d) upon request, contain maps to identify
proposed harvest sites, projected cash flow budgets and cruise and inventory
plans, and (e) such other information as may be reasonably requested by Lender.
 
4.2        Timber Harvesting and Forest Management Operations.  Borrower
covenants and agrees to comply with all of the following requirements; and
provided that no Event of Default exists hereunder and that Borrower is not in
default in any of the terms and conditions contained herein and in the other
Loan Documents, then Borrower shall have the privilege to sell Timber on the
stump, cut or remove any volume of Timber from the Timberlands in any one Fiscal
Year without principal reduction, provided that such volume shall in no event
exceed the amounts which comply with and would be permitted under the following
requirements and conditions:
 
4.2.1   That all Timber sales, cutting, or removal of Timber, shall be (a) in
accordance with generally accepted forestry industry practices and standards,
(b) in compliance with all then current federal, state and local laws,
regulations and ordinances concerning the harvesting of timber and operation of
a tree farm with respect to the Timberlands, as well as applicable forest
management rules promulgated by the Oregon Department of Forestry and the
Washington Department of Natural Resources and any other applicable governmental
authority, (c) in measure and manner consistent with a long-term Timberlands
investment approach that promotes a sustained availability of commercially
merchantable timber volume, (d) in a manner which shall maintain the value of
the Timberlands and (e) shall be in compliance with this Loan Agreement
(including, without limitation, Section 5.4 below) and the Loan Documents.
 
4.2.2   That no Timber sales, cutting or removal of Timber shall be permitted at
any time that there is an Event of Default or at any time a Default exists due
to the LTV not being in compliance under Section 5.4.1 and no Timber sales,
cutting or removal of Timber shall be permitted which may cause such a Default
due to the LTV not being in compliance.  Lender may determine the LTV at any
time and from time to time in its sole discretion for the purpose of confirming
compliance with this Section.
 
 
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4.2.3   That all cutting, logging and removal shall be conducted in a manner
which shall maintain the value of the Timberlands, and compliance with this
Agreement and the Loan Documents.  Further, Borrower represents and warrants to
Lender that all forest management, cutting, logging and removal of Timber with
respect to the Timberlands shall be in accordance with sustainable forestry
practices and shall comply with the requirements of the Sustainable Forestry
Initiative (“SFI®”), whether or not certified, but as if certified to the
standard which would be applicable to maintain the designation under the SFI®
2005-09 Standard and, not later than January 2011, under the SFI® 2010-2014
Standard, and to comply with all future modifications of SFI® as reasonably
agreed by Lender and Borrower.  Borrower shall furnish to Lender evidence of SFI
certification for all of the Timberlands prior to September 1, 2011.  Once
obtained,  Borrower shall promptly furnish to Lender evidence of the status of
the SFI certification designations of the Timberlands, at least annually
thereafter.
 
4.2.4   Until and unless subsequently revised from time to time by Lender, and
subject to the other conditions herein, Borrower shall have the privilege of
cutting from the Timberlands in any one Fiscal Year, without mandatory
prepayment of the Loan, the volume of Merchantable Timber generally representing
the volume of the anticipated annual growth of Timber on the Timberlands (the
“Annual Allowable Cut” or “AAC”).  Volume references in the Loan Documents and
associated reports shall be reported as net merchantable volume in thousands of
board feet (“MBF”) or millions of board feet (“MMBF”).  Until modified in
accordance with this Agreement, the AAC shall be 12,000 MBF.  The AAC may be
adjusted by Lender, in Lender’s reasonable discretion, either up or down, based
on updated cruise and inventory information from a Lender approved third party
consultant, provided, however, that Lender shall not make any such adjustments
more frequently than once every five (5) years, except as such adjustments as
may be made by Lender to reflect any land released from Lender’s security during
the previous cutting period or such other adjustments as are otherwise
specifically provided for herein.
 
4.2.5   For any Fiscal Year in which less than the AAC permitted for such year
is harvested, the difference between the AAC and the actual volume severed (the
“Annual Harvest Remainder”) for such period will be carried forward to
subsequent Fiscal Years, subject to the limitations in this Section 4.2.5.  For
any Fiscal Year, the AAC for that year plus the sum of any unapplied Annual
Harvest Remainders from previous years is referred to as the “Cumulative
Allowable Harvest” or “CAH,” provided, however that (i) the unapplied Annual
Harvest Remainders from previous Fiscal Years that may be carried over to the
next Fiscal Year is limited for any year to an amount equal to the then AAC, and
(ii) any Annual Harvest Remainder in excess of the AAC must be deferred to a
subsequent Fiscal Year, and (iii) an Annual Harvest Remainder arising during any
given Fiscal Year may only be carried forward to a subsequent Fiscal Year for a
period of five (5) successive Fiscal Years.  In no event shall the CAH for any
Fiscal Year exceed twice the AAC unless Excess Cutting Payments are made for
such Excess Cuts in accordance with Section 4.2.6.  In any Fiscal Year that a
CAH shall exist, the CAH shall be applicable under Sections 4.2.6 and 4.2.7
instead of the AAC in determining the Timber that may be cut and the Excess Cut.
 
 
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4.2.6   For any cutting period in which the volume of Timber harvested is more
than the AAC or CAH, as applicable (an “Excess Cut”), Borrower shall pay to
Lender an amount equal to Seventy-five Percent (75%) of: (a) the volumes,
species and products of the Timber comprising the Excess Cut (that is, the
volumes, species and products of Timber which caused the harvest for such year
to exceed the applicable AAC or CAH), multiplied by (b) the Administrative
Values of such Timber comprising the Excess Cut (an “Excess Cutting
Payment”).  The Administrative Values determined by Lender as of the date of
Closing are established on Schedule 4.2.6 hereto, and may be adjusted from time
to time, at Lender’s option because of changes in the inventory or volume
projections indicated by cruise results, estimated growth rates, casualties,
disease, regulatory changes or other similar reasons as determined by Lender in
its reasonable discretion.  Any Excess Cutting Payment for Excess Cuts performed
during any fiscal quarter shall be paid by Borrower to Lender on the next
Payment Date (as defined in the Note) following the close of that fiscal
quarter.  Any such prepayment of principal shall be treated in accordance with
the terms and manner provided in the Note and this Agreement in the same manner
as any other prepayment and shall be subject to any prepayment premium, if any,
as set forth in the Note.  Borrower’s Excess Cut in any cutting period shall be
an allowable harvest of Timber and shall not result in a breach of this
Agreement or any Deed of Trust so long as Borrower timely pays any Excess
Cutting Payment, if any, as required to be paid under this Agreement for such
Excess Cut.
 
4.2.7           Notwithstanding anything else contained herein, Borrower may
harvest and shall not be obligated to pay any Excess Cutting Payment for any
cutting periods during the term of the Loan in which the volume of Timber
severed exceeds the CAH for such cutting period by not more than ten percent
(10%) of the AAC and Borrower may harvest the related volume of Timber;
provided, however, that in no event shall the volume harvested over a period of
any five (5) successive calendar years exceed 100% of the sum of each AAC for
such 5-year period.  Any excess over said 100% volume for such 5-year period
shall constitute an Excess Cut for which an Excess Cutting Payment shall be due.
 
4.2.8           The volume of Timber harvested in any cutting period shall be
consistent with, and shall not exceed the volumes set forth in the Plan for such
Fiscal Year, unless changes to such Plan are agreed by Lender in advance in
writing.
 
4.2.9           On any harvest units operated on as part of the Annual Plan, no
significant pockets of Merchantable Timber identified for harvest in such Plan
shall be left uncut due to difficult logging conditions.  If pockets of
Merchantable Timber are left, Lender can require that these pockets be removed
from the Timber inventory as reflected in Quarterly or Annual Collateral Reports
if previously included.  All timber products removed shall be reported according
to its highest applicable product classification.
 
4.2.10         The words “year(s)” and “cutting period(s)” as used in this
Agreement shall mean the period of any Fiscal Year, and the Fiscal Year shall be
each twelve-month period from January 1 to December 31.  The period from the
date of Closing to December 31, 2010 will be considered as the first cutting
period, for which the prorated AAC under Section 4.2.3 shall be 4,000 MBF.  For
any subsequent cutting period which is less than twelve (12) full months, the
amount of the AAC shall be prorated.
 
 
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4.2.11         All timber harvest and removal made from the Timberlands from and
after the Closing are subject to the terms of this Agreement.
 
4.2.12         If during any cutting period there is material damage to the
timber on the Timberlands by mining, drilling, right-of-way clearing, fire,
disease, insects, storm or other hazards, Borrower shall promptly cut timber or
take such other reasonable and prompt measures as may be necessary to protect
timber from further damage in accordance with good forestry practices and this
Agreement.  Any timber cut under such circumstances may thereafter be removed
from the Timberlands by Borrower, provided Borrower furnishes to Lender a
periodic accounting of the amount of such timber cut and removed.  Further, any
Timber damaged, lost or destroyed, and any Timber cut under such circumstances,
or in the event of the removal of Timber under the Alta Rock Lease Documents,
shall be treated in the same manner as any other Timber cut under this
Agreement, including, without limitation, application of the AAC or CAH, as the
case may be, and any requirement for an Excess Cutting Payment, which shall be
subject to prepayment premium, if any, in the same manner as any other
prepayment.
 
4.2.13         Borrower shall notify Lender promptly in the event any trees are
severed or removed from the Timberlands by Borrower, its customers, agents,
employees, permittees, contractors or assigns, other than in accordance with
this Section, as the same may be amended from time to time.  Borrower shall then
have the period of time afforded under Section 7.1.6 for the cure of any related
Default.
 
4.2.14         That Borrower shall comply with, and such volume shall be
permitted under, all then current federal, state and local laws, regulations and
ordinances concerning the harvesting of timber and operation of a tree farm with
respect to the Timberlands, including without limitation the Washington Forest
Practices Act (RCW Chapter 76.09) and the Oregon Forest Practices Act (ORS
Chapter 527) and related regulations as well as the Best Management Practices in
Forestry as promulgated by the Department of Natural Resources, Forest Practices
Board and Department of Forestry or the equivalent in each State with respect to
the portion of the Timberlands located in such State from time to time.
 
4.3        Reporting.  Borrower shall keep and maintain in Borrower’s offices
adequate and accurate books and records of all timber cut and removed from the
Timberlands and the payments received therefrom.  Such books and records
(including financial records) shall be available for inspection by any
authorized representative of Lender at any reasonable time and any
representative may inspect, examine and be furnished by Borrower with copies
thereof.  Borrower shall furnish to Lender a record of harvesting and receipts
as set forth below (except that during any period that a Default or Event of
Default shall exist, Lender may require reports more frequently and may require
additional information in such reports) and all such records and reports shall
be in form and substance satisfactory to Lender:
 
 
 
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4.3.1   A quarterly report (“Quarterly Collateral Report”) shall be due within
sixty (60) days after the end of each Fiscal Year quarter, with the first such
Quarterly Collateral Report due no later than June 1, 2011.  Each Quarterly
Collateral Report shall summarize the Timberland inventory as of the end of the
current Fiscal Year quarter, and shall be calculated starting with the
Timberland inventory as stated in the prior Quarterly Collateral Report adjusted
for the depletion of the forest inventory volume associated with the acres
harvested, as opposed to logs scaled, during the current Fiscal Year quarter
(“Quarterly Depletion”), and further adjusted for re-inventory cruises
undertaken during such fiscal quarter (“Quarterly Cruises”) and shall include
re-inventory and cruise data sufficient to reflect satisfaction of the
requirements in Section 4.5.5.  Each Quarterly Collateral Report shall include a
certification by Borrower and Project Manager (subject to Section 4.5.5(d)
below) of the total volume of timber harvested and logs scaled by species for
each product type with a comparison of the respective period’s volumes as set
forth in the Plan for such period, and year to date, and shall demonstrate and
certify compliance with all conditions and restrictions on harvesting
hereunder.  The Quarterly Collateral Report shall also include the results of
any timber cruise or inventory analysis relating to all or any portion of the
Timberlands performed by or on behalf of Borrower or become available to
Borrower from any source.
 
4.3.2   Within sixty (60) days after each Fiscal Year end, Borrower shall
deliver an annual collateral report (“Annual Collateral Report”), which shall be
a certification by Borrower and the Project Manager to Lender as to the
then-standing timber inventory volumes on the Timberlands.  The methodology to
prepare the Annual Collateral Report shall be identical to the Quarterly
Collateral Report, with the addition of an adjustment for  biological growth as
discussed below.  The Annual Collateral Report shall incorporate for the Fiscal
Year all Quarterly Depletions (including any Timber otherwise removed or
destroyed pursuant to the records and/or knowledge of Borrower and Project
Manager), volume adjustments as a result of Quarterly Cruises, plus the then
applicable added biological growth of the timber volumes since the date of the
last Annual Collateral Report, such annual growth percentage to be acceptable to
Lender (the “Annual Growth”).  The Annual Collateral Report will contain a
reconciliation explaining any variances in year-end Timber inventory volumes
between it and the data used by the appraiser to develop his year-end value as
described in Section 4.5.4 below and shall include a certification that the
re-inventory cruises required under Section 4.5.5 have been completed.  The
first Annual Collateral Report shall cover the period from the Closing Date
through December 31, 2010.  To the extent Borrower or Project Manager has any
suspicion or belief that the existing Timber inventory volumes are inaccurate or
misleading, the certification required hereunder shall include and explain such
suspicion or belief and provide alternate calculations therefore.  The Annual
Collateral Report shall also include the results of any appraisal, Timber cruise
or inventory analysis relating to all or any portion of the Timberlands that may
have been performed by or on behalf of Borrower or become available to Borrower
from any source.
 
4.3.3   Borrower agrees that Lender, and its agents, contractors, and consulting
forester shall have the right, but not the obligation, to inspect the
Timberlands and any activities carried out thereon, scaling practices, scaling
slips, and log scale summaries, at any reasonable time, upon prior notice and
during normal business hours.  During the continuance of an Event of Default,
property inspections by Lender and/or its agents may occur at such times and
frequency as Lender may deem necessary, at Borrower’s expense.
 
4.3.4   Borrower shall provide to Lender, together with the Annual Collateral
Report, but no more frequently than annually, current GIS shape file layer data
with respect to the Timberlands in form and manner reasonably satisfactory to
Lender.
 
 
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4.4         Lender Consulting Forester.  Lender may, at its option and at
Borrower’s expense (payable thirty (30) days after receipt of invoice) appoint
an independent third-party consulting forester(s) of the Lender’s choice to
perform loan monitoring services, make such inspections and to perform other
services as set forth in the Loan Documents or as deemed necessary by Lender,
including, without limitation, property inspections, evaluation of release
requests, monitoring of timber management and harvesting, audit of Borrower’s
cruise data, timber inventory and inventory systems, confirmation of timber
volumes, review of timber management plans, appraisals, valuations and
confirmation of any term of this Agreement or the other Loan Documents.
 
4.5         Appraisals; Timber Cruises.
 
4.5.1   Borrower has provided to Lender, prior to the date hereof, evidence of
the volume of Timber on the Timberlands as of a current date, in the form of a
timber inventory report and verification report prepared and certified to Lender
by Borrower and Project Manager (subject to the terms of Section 4.5.5(d) below)
pursuant to Section 2.6.1 above.
 
4.5.2   Borrower has, prior to the date hereof, furnished to Lender a
comprehensive appraisal of the Copper Creek Block portion of the Timberlands as
of July 19, 2010, prepared by The Healy Company.  Said appraisal has been
accepted by Lender.  Lender has established, in its sole discretion, the final
opinion of value for all purposes under this Agreement.  Borrower shall furnish
to Lender a comprehensive appraisal (which appraisal may be an abbreviated
format acceptable to Lender) of the Riffe Lake Block portion of the Timberlands
as of December 31, 2011, to be delivered no later than February 15, 2012.
 
4.5.3   Borrower shall cause to be prepared and delivered to Lender at
Borrower’s expense a comprehensive appraisal of the entire Timberlands addressed
to and for the benefit of Lender and Borrower, (i) as of December 31, 2013 and
every third (3rd) year thereafter (as of December 31), to be delivered no later
than 45 days after the valuation date; and (ii) at the request of Lender at any
other time that an Event of Default shall exist, as of a date determined by
Lender.  Each such appraisal shall be done by a third party professional
acceptable to Lender and in accordance with USPAP standards, and the appraisal,
as well as the methods and assumptions included therein, must be approved by,
and acceptable in all respects to Lender.  Borrower shall obtain Lender’s prior
written consent as to the appraiser, which consent may be withheld in Lender’s
sole discretion, and Borrower shall also obtain Lender’s prior written consent
as to the scope of work planned, and the volumes, methods, assumptions, form and
substance of the appraisal.  The appraisal shall incorporate all data from the
cruises under Section 4.5.5 below, updated for growth, harvest and then current
market conditions as necessary in a manner acceptable to Lender and any other
information known to Borrower and Project Manager from any source, including,
without limitation, any information required to be furnished under
Section 4.5.5(d) below.
 
 
 
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4.5.4   Not later than February 15, 2012 and not later than each subsequent
February 15th (other than any year for which a comprehensive appraisal is being
prepared as of December 31 of the previous year pursuant to Section 4.5.3),
Borrower shall cause to be prepared and addressed to and for the benefit of
Lender and Borrower at Borrower’s expense, an update of the last comprehensive
appraisal as of the end of the prior Fiscal Year taking into account the
Quarterly Cruises, Quarterly Depletions, Annual Growth as described in Sections
4.3.2 and 4.5.5 and then current market conditions in a manner reasonably
acceptable to Lender.  Borrower anticipates providing the appraiser with
necessary timber inventory data early in the fourth quarter of each Fiscal Year
and will concurrently provide the same data to Lender.  The updated appraisals
shall be completed by the same third party professionals that did the most
recent comprehensive appraisal, shall be in accordance with USPAP standards,
shall be prepared in form and manner and with methodology and assumptions
acceptable in all respects to Lender and shall be subject to approval by Lender.
 
4.5.5   Timber Re-Inventory Requirements.
 
(a)   Borrower shall meet certain timber re-inventory requirements in part by
completing re-inventory cruises in order to maintain an up-to-date forest
inventory of the Timberlands.  Borrower shall provide Lender with copies of all
forest inventories maintained with respect to the Timberlands and any supporting
data within ten (10) days of Lender’s request. The forest inventory will be used
to (among other purposes) manage the Timberlands and provide information for the
Quarterly Collateral Reports, the Annual Collateral Reports, and the appraisal.
The Borrower shall complete re-inventory cruises which represent on an annual
rotational basis, a minimum of fifteen percent (15%) of the Timberlands acreage
which is considered by both Borrower and Lender to contain Merchantable
Timber.  If the Borrower completes the re-inventory of all merchantable acres on
an accelerated schedule, the annual cruising requirement shall then be modified
and consist of re-inventory of all merchantable stands having cruise ages
greater than seven (7) years, the effect being no merchantable stand shall have
a cruise age greater than seven years.
 
(b)   The re-inventory timber cruises under clause (a) shall be stand level
cruises completed by ORM or other a third party professional reasonably
acceptable to Lender.  The re-inventory cruises shall each be completed to
acceptable cruising standards established in advance by Lender and Borrower as
to methodology, assumptions, form and substance.  References to a “re-inventory
timber cruise”, “timber inventory cruise”, “timber cruise” or “cruise” shall all
have the same meaning hereunder.  The updated inventory information shall be
furnished to the appraiser for incorporation into the appraisal or appraisal
update, as the case may be.  The appraiser shall be provided the updated
inventory information in a timely fashion in order to facilitate delivery of the
appraisals as described in Sections 4.5.3 and 4.5.4.  The forest inventory data
provided to the appraiser shall reflect all forest inventory updates occurring
in the first three quarters of the Fiscal Year, including an estimate of Annual
Growth and the Quarterly Depletion for the final Fiscal Quarter of the
year.  All variances to the estimates of growth and harvests shall be reconciled
in the Annual Collateral Report for the Fiscal Year.
 
 
 
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(c)   Notwithstanding anything herein to the contrary and for the avoidance of
doubt, Borrower and Project Manager hereby covenant and agree with Lender that
at any time that either Borrower or Project Manager have any reason to suspect
or believe that the then current Timber inventory, any cruise data, or any other
data or information regarding Timber volumes, species, product types, ages,
quality or any other criteria with respect to the Timberlands and the
Collateral, which is directly or indirectly reflected in any reports, financial
data, certificates, projections, statements or other information furnished to
Lender or any appraiser (who is to prepare an appraisal hereunder) by Borrower
or Project Manager, or upon which any information furnished to Lender may be
based in whole or in part, is misleading or is not true, complete or accurate,
including, without limitation any statement or certification which is prepared
or given in accordance with the specific terms of this Agreement or industry
standards, but is nevertheless suspected or believed to be misleading,
inaccurate, untrue or incomplete with respect to the actual amount of Timber
then in existence on the Timberlands, as to volume, species, product types,
ages, quality or any other criteria, Borrower and Project Manager shall each
have an independent and overriding obligation and duty to Lender to promptly
provide information concerning such suspicion or belief to Lender, and any
certification as to Timber inventory volumes shall also be determined or
re-determined in a manner consistent with such suspicion or belief, without
regard to the volumes set forth in any then outstanding appraisal, cruise or
Timber inventory of Borrower and Project Manager.  The Borrower and Project
Manager make this agreement knowing that Lender shall rely on their faithful
performance in fulfilling their obligations and duties under this
Section.  Borrower shall cause Project Manager to execute and deliver to Lender
as a condition to Closing a document in form and substance acceptable to Lender
whereby Project Manager agrees to the terms and conditions of this Section.
 
4.5.6   At any time that an Event of Default shall exist, or Borrower shall be
in Default for failing to comply with the LTV required under Section 5.4.2, or
Lender has reasonable cause to believe that the re-inventory cruise reports or
certifications of inventory volumes are inaccurate, Borrower shall cause to be
prepared and delivered to Lender,  at Lender’s request and at Borrower’s
expense, a complete stand-level timber cruise of the Timberlands and a complete
appraisal of the Timberlands, each on and as of a date reasonably designated by
Lender.  The timber cruise and appraisal shall each be done by a third party
professional acceptable to Lender, and the timber cruise and the appraisal, as
well as the methods and assumptions included therein, must be acceptable in form
and substance to Lender, including, without limitation, the applicable
methodology and assumptions.
 
4.5.7   At any time that Borrower requests a Material Partial Release (as
defined in Section 4.8.7 below) of Timberlands hereunder, Lender may require as
a condition to considering whether to approve such request or in determining the
amount of prepayment of the Loan that may be required, that Borrower furnish to
Lender at Borrower’s expense a stand-level timber cruise and/or appraisal of the
portion of the Timberlands proposed to be partially released as well as the
balance of the Timberlands, all to be in form and substance, prepared by a third
party professional, and with methods and assumptions, acceptable to Lender.
 
4.5.8   Borrower shall provide to Lender a copy of any appraisal, timber cruise
or inventory analysis of the Timberlands, or any audit thereof at any time
commissioned by, obtained by, or made available to, Borrower within ten (10)
days after receipt thereof by Borrower.
 
4.5.9   Other than appraisals or cruises as required above, Lender may have the
Timberlands appraised or cruised at any time at its own expense.
 
 
 
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4.6        Timber Sale, Harvesting and Stumpage Agreements.  Without the prior
written approval of Lender, provided that Borrower furnishes to Lender all
necessary documentation and information required by Lender and its agent with
respect to such request, Borrower shall not enter into, and the Timberlands
shall not be subject to, any individual contract or agreement, or any series of
contracts or agreements that may reasonably be construed as one contract or
agreement (whether written or oral) for the sale or disposition of timber,
whether harvested by or on behalf of Borrower or by third parties which are
granted the privilege of entry upon the Timberlands for cutting and removal of
timber, which:  (a)  has a term of more than two (2) years (including any
renewal options and any extensions for weather or any other reason), (b) affect
five percent (5%) or more of the total then existing merchantable Timber
inventory on the Timberlands, or (c) has terms and conditions inconsistent with
the then current approved Plan or this Agreement (each, a “Material
Contract”).  As long as no Event of Default shall exist and unless otherwise not
permitted under this Agreement, Borrower may enter into contracts or agreements
to sell timber that are not Material Contracts, without the prior written
consent of Lender.
 
4.7        Timber Sale and Release.  Provided that no Default shall then exist,
or be caused thereby, permission is hereby granted by Lender to Borrower to cut,
or allow others to cut, Timber from the Timberlands in accordance with the
current Plan previously approved by Lender and on the terms and conditions set
forth in this Agreement.  Subject to Section 4.2 and the payment of any amounts
due thereunder and provided that no Default shall have occurred and be
continuing:  (A) the lien of the Deeds of Trust (and the related security
interests under the Code) against any such cut or severed Timber (but not the
proceeds thereof, it being the intent hereof that Lender’s Lien and security
interest continues in proceeds) shall be released, without any action by
Borrower or Lender, from any such Timber cut or severed in the ordinary course
of business upon the sooner of:  (a) receipt by Borrower of full payment
therefor, or (b) removal of such Timber from the Timberlands and after weight or
volume is established and payment therefore assured in a manner reasonably
acceptable to Lender and which creates a receivable owned by Borrower under the
applicable UCC, or (B) Lender shall furnish to Borrower, upon request, a partial
release with respect to any Timber sold as permitted pursuant to the Plan or a
Material Contract approved by Lender, provided that (i) Borrower shall pay to
Lender within thirty (30) days after written request all reasonable fees, costs
and expenses incurred by Lender to third parties in connection with any such
partial releases including, without limitation, legal, appraisal and accounting
fees incurred by Lender and all other expense, and recording and title insurance
and title expenses, but without any administrative fee charged by Lender, (ii)
Borrower furnishes to Lender all necessary documentation and other information
to process such request, and (iii) Lender, upon its request therefor, shall have
received satisfactory evidence of Borrower’s compliance with the covenants
contained in this Loan Agreement.
 
4.8        Partial Release Provisions.  Lender agrees to provide Borrower with
partial releases of the liens of the Deeds of Trust with respect to certain
portions of the land and timber encumbered thereby comprising certain portions
of the Timberlands (the “Release Parcel”), upon written request therefore,
subject to the following terms and conditions:
 
4.8.1   No Release Parcel shall be released except in connection with an
arms-length bona fide sale of such Release Parcel to a third party in the
ordinary course of Borrower’s business in operating the Timberlands, as
determined by Lender in its sole judgment.
 
4.8.2   No Default shall then exist (including, without limitation, any
non-compliance with the LTV as required under Section 5.4) and the partial
release shall not create a Default.
 
 
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4.8.3   Lender will, in its sole and absolute discretion, calculate a reasonable
payment (the “Release Price”) for such partial release and communicate same to
Borrower.  The Release Price shall be paid by Borrower to Lender for application
to prepayment of principal of the Note.  Any such prepayment shall be treated in
the same manner as any other prepayment and shall be subject to prepayment
premium in the same manner as any other prepayment.  Notwithstanding the
foregoing, so long as the partial release of the Release Parcel does not cause
the LTV to exceed 40% (as determined pursuant to Section 5.4 below), and
otherwise complies with all of the provisions of this Section 4.8, no Release
Price shall be required, although Borrower shall be responsible for all costs
and expenses incurred by Lender in reviewing and processing such partial release
as set forth in Section 4.8.9.
 
4.8.4   Any request by Borrower shall be accompanied by an LTV calculation by
Borrower in accordance with Section 5.4 on a pro forma basis as if the partial
release requested had been granted, and any partial release shall be subject to
verification by Lender of such pro forma LTV in accordance with Section 5.4 and
shall be otherwise acceptable to Lender.  No partial release will be permitted
which may cause any non-compliance with Section 5.4 below as determined with
respect to such pro forma LTV by Lender in the exercise of its sole judgment
based upon the most recent appraisal or appraisal update approved by Lender,
adjusted for any previous releases, removals, growth, any other matters since
such date and the best information then available to Lender.  However, any
request for a partial release which meets all of the requirements in this
Section except this Subsection 4.8.4 shall nevertheless be approved by Lender,
provided that Borrower shall pay to Lender, on or before the delivery of any
such partial release, for application to prepayment of principal of the Note, an
amount determined by Lender which shall, at the least, be sufficient to cause
compliance with this Subsection.  Any such prepayment shall be treated in
accordance with the terms of this Agreement and the Note in the same manner as
any other prepayment and shall be subject to prepayment premium, if any, as set
forth in the Note.
 
4.8.5   No partial release will be provided which may have a negative effect on
access to, value of, income producing ability or operations of, the remaining
Collateral, as certified by Borrower and as determined by Lender in the exercise
of its reasonable judgment.
 
4.8.6   At Lender’s request, Borrower shall cause the title insurance company
which issued Lender’s Title Policy in connection with the Deeds of Trust to
issue an endorsement to such Title Policy with respect to any partial release,
which endorsement shall be in form and substance satisfactory to Lender and at
Borrower’s expense.
 
4.8.7   Lender may require a timber cruise and appraisal to be made by Borrower
under Section 4.5.7 above in the case of a request for a “Material Partial
Release”, which shall mean: (a) any partial release request where the timber
proposed to be released exceeds fifteen percent (15.00%) of either the total (i)
value or (ii) volume of all merchantable Timber included in the Timberlands at
such time, or (b) any partial release request where the land proposed to be
released exceeds fifteen percent (15.00%) of either the total (i) value or (ii)
acreage of the land included in the Timberlands at such time.
 
4.8.8   Borrower shall furnish to Lender all necessary documentation and
information to process said partial release request.
 
 
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4.8.9   All reasonable third-party fees, costs and expenses incurred by Lender
in connection with the consideration of any request for a partial release under
this Section, and in connection with the execution and delivery of any such
partial release, including without limitation, legal, appraisal and accounting
fees and expenses, and all recording, title insurance premiums and title
expenses, shall be borne solely by Borrower.  Borrower agrees to pay all such
fees, costs and expenses promptly upon presentation of an invoice therefor or
upon demand by Lender.  In addition, in connection with each request for a
partial release under this Section, Lender shall be entitled to receive payment
of a reasonable administration fee for each parcel released.  To the extent
possible, the forms of partial releases attached hereto as Exhibit B shall be
utilized for all partial releases hereunder.  All closing deliveries may be made
by Lender under escrow conditions or otherwise in a manner satisfactory to
Lender and its counsel.  Lender, upon its request therefore, shall have received
satisfactory evidence of Borrower’s compliance with the covenants contained in
the Loan Agreement.
 
4.8.10   Timber volume attributable to any released parcel will be removed from
the Timberlands’ inventory.
 
4.9        Substitution of Timberlands.  Provided that no Default or Event of
Default shall have occurred and be continuing, Borrower may request Lender’ s
approval to receive a partial release of any portion of the Timberlands in
return for the simultaneous mortgage and pledge of additional Property that
would constitute replacement Timberlands (the “Replacement Timberlands”)
including in connection with a like-kind exchange through an exchange
facilitator (including so-called “forward” or “reverse” exchanges, in which
case, Lender agrees to cooperate with Borrower in effecting such an exchange
other than on a simultaneous basis, provided, however, that any prepayment
required by any partial release cannot be postponed, deferred or avoided on
account of any such non-simultaneous exchange) as long as Lender shall have no
liability or expense in regard to such exchange (it being understood that a
forward or reverse exchange may cause more expense than others) and provided
that Borrower shall indemnify and hold harmless Lender from any loss, cost or
expense arising from any such exchange, subject, however, to the following
conditions:
 
4.9.1   The Replacement Timberlands shall be of equal or greater value and have
the same or greater volume of Timber thereon, as compared with the portion of
the Timberlands released, shall be comparable Timberlands with stands of similar
size, age, quality and product type in a comparable market, have satisfactory
access, be capable of producing comparable income and be environmentally
acceptable, all in Lender’s sole discretion, and shall otherwise be satisfactory
in every way to Lender and in conformity with Lender’s then underwriting
criterion, in Lender’s sole discretion, including, without limitation, the
location, access, soils, timber type, quality and quantity, marketability, title
condition, title insurance coverage availability and all other aspects of the
Replacement Timberlands.
 
4.9.2   No substitution will be approved by Lender unless the LTV after the
substitution shall be in compliance with Section 5.4 and shall be equal to or
less than the LTV which existed immediately prior thereto, as determined by
Lender on a pro forma basis.
 
 
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4.9.3   Borrower shall furnish to the Lender, at Borrower’s expense, all
information reasonably required by the Lender to analyze such substitution,
including, without limitation, all documentation required by Lender to establish
the value of the released portion of the Timberlands and of the Replacement
Timberlands.  In connection with the evaluation of the requested substitution,
appraisals and/or timber inventory cruises may be required in Lender’s sole
discretion, and Lender may also require inventory data, pro forma calculations
of LTV, analyses and such other reports, information, data and projections as
Lender may reasonably request, with respect to the Timberlands to be released as
well as the Replacement Timberlands, all of which materials must be in form and
substance satisfactory to the Lender in its sole discretion.  Any such
appraisals or cruises shall be done by a third party professional acceptable to
Lender and the methods and assumptions thereof must be in a form and manner
acceptable to Lender.
 
4.9.4   In connection with any such substitution, Borrower shall furnish to
Lender, at Borrower’s expense, all documentation, amendments to the Loan
Documents, instruments, title insurance, consents, opinions and such other
information and agreements as the Lender may determine or require in its
reasonable discretion.
 
4.9.5   All decisions with respect to the release of any portion of the
Timberlands and the substitution of Replacement Timberlands therefor shall be in
the sole discretion of the Lender.  Borrower shall be responsible for payment of
all reasonable fees and expenses associated with such request (whether or not
granted) and the consideration and documentation thereof, including, without
limitation, the fees and expenses of third-party advisors and attorneys of the
Lender, a reasonable administrative fee and processing fees charged by the
Lender, the cost of any title insurance policies or endorsements required by the
Lender and all fees and expenses relating to the preparation of the materials
relating to such request.
 
4.10       Coal, Oil, Gas and Other Minerals.
 
4.10.1   Borrower shall not at any time (a) undertake or hold any permit or
license which allows, or (b) cause or permit any other party to undertake or
hold any permit or license which allows, as Borrower’s agent or for the benefit
of Borrower (other than through a lease as set forth in Section 4.10.2 below);
whether directly or indirectly, the exploration, extraction, mining, processing,
production, storage, transportation or handling of any coal, oil, gas or any
other minerals owned by the Borrower (collectively, “Mineral Activity”).
 
4.10.2   Borrower may, however, enter into bona fide leases to third parties
permitting such third parties to undertake Mineral Activity on the Timberlands
for their own account, including, without limitation, the Alta Rock Lease
Documents (“Mineral Leases”), which Mineral Leases shall be reasonably
satisfactory to Lender.  Lender approves the making of any lease pursuant to the
Alta Rock Lease Documents; provided that (i) Borrower shall provide Lender with
notice of the exercise of any option under the Alta Rock Lease Documents
together with an executed copy of the related lease within five (5) days of
exercise and delivery; (ii) any of the rights of Borrower arising under the
“Table Rock – Bagby Butte Agreement” dated as of September 1, 2010 (the “Alta
Rock Three Party Agreement”) among Borrower, Alta Rock Energy, Inc. and
Weyerhaeuser Real Estate Development Company and any leases executed pursuant to
the Alta Rock Lease Documents and compensation paid thereunder are hereby
assigned to Lender for security purposes as additional Collateral under the Loan
Documents and Borrower shall execute all such additional documents as may be
required by Lender to confirm such assignment; (iii) Borrower shall not modify,
assign or extend the Alta Rock Lease Documents absent Lender’s prior written
consent except to the extent Borrower is otherwise obligated under the Alta Rock
Three Party Agreement and in such event Borrower shall provide written notice to
Lender; and (iv) Borrower shall provide to Lender, within ten (10) days
of  receipt, copies of all exploration plans, requests, notices and other
information provided to Borrower under the terms of the Alta Rock Lease
Documents.
 
 
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4.10.3   Any Mineral Activity on the Timberlands permitted hereunder shall not
be undertaken or permitted by Borrower, except in such manner that Borrower and
Lender shall not be liable under applicable law with respect to the existence of
any Hazardous Substances, non-hazardous wastes, claims of surface owners,
existence or generation of pollution or contamination, discoloration or
degradation of any water or streams, interference with the bed of any stream or
the natural flow thereof, old mine works, reclamation or revegetation or
violation or non-compliance with any Environmental Protection Laws or any other
applicable laws which may arise directly or indirectly from such Mineral
Activity.  Borrower shall assure or use commercially reasonable efforts to
assure that all reclamation and revegetation is timely completed in accordance
with applicable laws, Environmental Protection Laws and applicable Best
Management Practices (as referenced above).
 
4.10.4   If any Mineral Activity shall cause there to be any Hazardous
Substances in or upon the Timberlands, Borrower at its sole cost and expense, to
the extent required by applicable Environmental Protection Laws, shall
immediately remove, or cause to be removed, such Hazardous Substances in
compliance with all applicable laws, keeping Lender fully informed and shall
provide to Lender full information with respect to proposed plans and comply
with Lender’s reasonable requirements with respect to such plans.
 
4.10.5   Borrower shall furnish any documentation requested by Lender necessary
for Lender to obtain a perfected security interest in any minerals, royalties or
rights of Borrower to minerals related to the Timberlands.
 
4.10.6   Borrower shall indemnify and hold harmless Lender and its 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 legal fees) arising out of or in any way
connected with any failure of Borrower to perform its obligations under this
section or with any deposit, spill, discharge or other release of any Hazardous
Substances or non-hazardous waste materials that occurs during the term of this
Agreement upon or from the Timberlands and which constitutes a violation of, or
requires remediation under, applicable Environmental Protection Laws, or is
harmful to human health or the environment, or any storage or disposal of any
Hazardous Substances or non-hazardous waste materials in, or upon the
Timberlands, or the transportation of Hazardous Substances or non-hazardous
waste materials from the Timberlands, or from Borrower’s failure to provide all
information, make all submissions and take all actions required by the
Environmental Protection Laws or any other applicable laws or any Governmental
Authority which is in any way related to any mineral activity, except that this
indemnity shall not be applicable to the extent that any fines, penalties,
actions, suits, legal proceedings and costs and expenses associated therewith
are attributable to actions or omissions by any indemnified person constituting
gross negligence or willful misconduct.  The obligations of Borrower under this
clause shall survive the termination or expiration of this agreement.
 
 
 
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4.11       Agreements and Leases.  Borrower shall perform all obligations of the
Landlord under all Agreements (as defined in the Deeds of Trust), leases and
licenses by which Borrower is bound or affecting the Timberlands, including
without limitation, the Mineral Leases.  Borrower shall enforce such Agreements,
leases and licenses in a diligent, commercially reasonable and professional
manner.  Borrower shall furnish to Lender annually, along with Borrower’s annual
financial statement under Section 5.2.2 or at such other time mutually
acceptable to Lender and Borrower, and upon request of Lender at any other time,
a listing or rent roll certified by Borrower and Project Manager to Lender which
lists all such Agreements, leases and licenses, the expiration date, the
payments or rental and when paid through, whether any default exists and any
other information reasonably requested by Lender.
 
4.12       Estoppel Certificates.
 
4.12.1   Borrower, within ten (10) Business Days after request by Lender, shall
furnish Lender from time to time with a statement, duly acknowledged and
certified, setting forth (i) the amount of the original principal amount of the
Note, (ii) the unpaid principal amount of the Note, (iii) the rate of interest
on the Note, (iv) the date through which all installments of interest,
commitment fees and/or principal have been paid, (v) any offsets or defenses to
the payment of the Obligations, if any, (vi) that the Note and this Agreement
have not been modified or if modified, giving particulars of such modification
and (vii) such other information as shall be reasonably requested by Lender.
 
4.12.2   Borrower, upon request by Lender, will use commercially reasonable
efforts to obtain and furnish (within the time periods, if any, provided in the
applicable timber sale agreements, or if no time period is so specified, within
thirty (30) days after request) Lender with statements from purchasers or
tenants under then existing timber sale agreements, coal leases, and oil and gas
leases, as to the amount of timber purchased or coal, oil or gas extracted, as
the case may be, and the amounts paid to or for the benefit of Borrower during
the preceding twelve months.
 
4.13       Timberlands Management.  Borrower shall at all times during the term
hereof  have professional management of the Timberlands and the operation of the
Timberlands with a manager (the “Project  Manager”), which shall have the
experience, competence, capacity and professional reputation to manage the
Timberlands and shall be subject to Lender’s prior written approval, under a
management agreement (as amended, restated or supplemented from time to time,
the “Management Agreement”), which shall be subject to Lender’s prior written
approval as to form and substance, including any amendments, restatements or
supplements.  Borrower shall not cause or permit any modification of the
Management Agreement without the written consent of Lender.  Upon any
termination of the Management Agreement, Borrower shall, on or before if
possible, but in any event within thirty (30) days after, the date of any such
termination, replace the Project Manager with a party reasonably acceptable to
the Lender under a new management agreement reasonably acceptable to the Lender
and otherwise in accordance with this Section.  Any change in the officers,
personnel or ownership of the Project Manager which could reasonably be expected
to adversely affect the performance of Project Manager shall be deemed to be the
appointment of a new Project Manager which shall be subject to Lender’s
approval.  Borrower shall cause each Project Manager to deliver a manager’s
subordination and agreement to Lender substantially in the form delivered to
Lender at Closing by Project Manager, subject to the terms of the Management
Agreement involved and in form and substance acceptable to Lender.  Such
agreement shall provide, among other things, that (i) such management agreement
or arrangement shall not affect or be a lien upon the Timberlands and shall be
subordinate to the lien of the Deeds of Trust, and (ii) upon and during the
continuance of any Event of Default, any such management agreement or
arrangement with any such Project Manager shall be subject to termination by
Lender in Lender’s sole discretion.
 
 
 
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Lender has approved Olympic Resource Management LLC, a Washington limited
liability company (“Olympic”) as the Project Manager, and Lender has approved
that certain Management Agreement dated as of June 1, 2010, between Olympic and
Borrower as the Management Agreement.  To the extent that such Management
Agreement, or any other Management Agreement, conflicts with the provisions of
this Agreement, the provisions of this Agreement shall control.
 
4.14       Purchase Agreement.  Borrower shall not cause or permit any
modification, amendment or supplement of the Purchase Agreement, whether in
writing, orally or by course of dealing, without in each case the prior written
consent of Lender.  Borrower shall promptly furnish to Lender copies of any
notices given or received by Borrower with respect to the Purchase
Agreement.  Borrower shall exercise and enforce all rights and indemnities
inuring to the benefit of Borrower under the Purchase Agreement, provided,
however, that Borrower shall not fail to promptly enforce a material right or
indemnity under the Purchase Agreement without the prior written consent of
Lender.  Borrower shall, upon the request of the Lender, report the status of
any claim, action or proceeding with respect to the Purchase Agreement.
 
ARTICLE 5. FINANCIAL COVENANTS
 
All financial covenants herein refer and apply to the Borrower and Guarantor, as
applicable, and shall be interpreted in accordance with GAAP.
 
5.1        Financial Records.  Borrower and Guarantor shall each maintain sound
accounting policies and an adequate and effective system of accounts and
internal accounting controls that will safeguard assets, properly record income,
expenses and liabilities and assure the production of proper financial
statements in accordance with GAAP, consistently applied.  Borrower has adopted
the Fiscal Year as its fiscal year for all purposes, including federal income
tax purposes, and shall not change its fiscal year from the Fiscal Year.
 
5.2        Financial and Business Information.  Borrower shall deliver or cause
to be delivered to Lender, in addition to any other reports required to be
delivered hereunder or under the Guaranty, the following:
 
 
 
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5.2.1   Within sixty (60) days after the end of each quarterly period in each
Fiscal Year of Borrower (other than the last quarterly period of each such
Fiscal Year), copies of: (i) Borrower’s and Guarantor’s unaudited balance sheet,
as at the end of such quarter, and (ii) Borrower’s and Guarantor’s statements of
income and cash flows, for such quarter and for the portion of the Fiscal Year
ending with such quarter, setting forth in each case in comparative form the
figures for the corresponding periods in the previous Fiscal Year, all in
reasonable detail, and prepared in accordance with GAAP, consistently applied,
applicable to quarterly financial statements generally, and certified as
complete and correct, subject to changes resulting from year-end adjustments, by
an officer of Borrower and Guarantor, as appropriate, and accompanied by a
certificate of an officer of Borrower and Guarantor, as appropriate, that such
statements are true, complete and correct and demonstrating compliance with the
financial covenants contained in this Agreement (including without limitation
the covenant regarding cash on hand set forth in Section 5.5) and certifying,
based upon such officer’s knowledge, that no Event of Default exists, or, if
such officer is aware of such Event of Default, the nature thereof;
 
5.2.2   Within ninety (90) days of each Fiscal Year of Borrower and as of the
last day of such Fiscal Year, annual audited financial statements (including,
but not limited to, a balance sheet as of the end of such year, statements of
income and expenses, retained earnings and statement of cash flows) of Borrower
for such year, prepared, audited and certified, at Borrower’s expense, by an
independent certified public accountant reasonably acceptable to Lender on a
GAAP basis consistently applied, and accompanied by a certificate of an officer
of Borrower that such statements are true, complete and correct.
 
5.2.3   Concurrently with the delivery of the financial state­ments described in
subsection 5.2.2 above, a certificate of an officer of Borrower in form and
manner acceptable to Lender certifying to Lender that such person is familiar
with the financial provisions of this Loan Agreement and that based upon such
Person’s examination and knowledge of the affairs of such Borrower obtained in
connection with preparation of said financial statements and such officer’s
examination and analysis of the financial provisions of this Agreement and the
Loan, no Event of Default has occurred or is in existence, or, if an Event of
Default does exist, the nature thereof, and the period it has been in existence
and such certificate shall contain a certification and demonstration of
compliance with the financial covenants and other provisions of this Loan
Agreement and the other Loan Documents; and
 
5.2.4   Such other data and information (financial and otherwise) as Lender,
from time to time, may reasonably request, bearing upon or related to any
Borrower’s or Affiliate’s financial condition and results of operations or
Property.
 
5.3        Restrictions on Incurrence of Debt.  Borrower shall not at any time
have any Debt, other than the Loan. No Debt or indebtedness of Borrower (other
than the Loan) may be secured in any manner whatsoever (and including, without
limitation, secured in a manner so as to be subordinate or pari passu to the
Loan) by Property of Borrower.
 
5.4        Loan to Value Ratio.
 
5.4.1   The initial “Loan to Value Ratio” or “LTV,” defined below, as determined
by Lender in its sole discretion, shall be the ratio of the outstanding
principal balance of the Loan to the value of the Copper Creek Block of the
Timberlands as established pursuant to a third party certified appraisal
delivered prior to Closing, meeting the standards as set forth in Section
4.5.3.  As of December 31, 2011, and thereafter, the “Loan to Value Ratio” or
“LTV” as determined by Lender in its sole discretion, shall mean the ratio of
the outstanding principal balance of the Loan to the value of the Timberlands
(inclusive of the Copper Creek Block and any additional Timberlands for which
certified comprehensive appraisals have been received and updated in accordance
with Section 4.5).
 
 
 
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5.4.2   Borrower shall not at any time cause or permit the Loan to Value Ratio
to exceed Forty Percent (40%), and any such non-compliance shall be a Default
hereunder, and any such Default which is not restored to compliance by a
prepayment of principal made as required under the terms of Section 5.4.4 below,
shall constitute an Event of Default hereunder.  For the avoidance of doubt, the
“value of the Timberlands” shall in no event include any money or Property,
other than the Timberlands.
 
5.4.3   The Loan to Value Ratio shall be calculated by Borrower for submission
to Lender under Section 5.4.2 on or before March 1, 2011, and thereafter on or
before March 1 of each year, as of the prior Fiscal Year end, and with respect
to any partial release pursuant to Section 4.8.3 and at any other time as
required by Lender, each as of an effective date selected by Lender.  The LTV
shall be based upon the outstanding balance of the Loan taking into
consideration any payments made and received by Lender on or before the
applicable effective date.  For instance, the LTV as calculated annually on
March 1, 2011 as of the prior December 31, 2010, shall be based on the
outstanding balance of the Loan taking into consideration any payment made on or
before said prior December 31, 2010.  The value of the Timberlands used for such
scheduled annual calculation shall be as determined by the last comprehensive
appraisal or updated appraisal, as applicable, required under Section 4.5.3 or
Section 4.5.4, respectively as of such immediately prior Fiscal Year end which
has been approved by Lender.
 
5.4.4   Lender shall review each submission made by Borrower under
Section 5.4.2, and all assumptions, information and calculations made by
Borrower in connection with such calculation shall be subject to verification
and approval by Lender, it being agreed that the LTV shall in each case under
this Section 5.4 and this Agreement, be determined by Lender in its sole
discretion.  At any time that Lender shall decide to determine the LTV, except
as set forth in the preceding sentence, Lender may, in its sole discretion,
consider any information available to Lender in determining value, including,
without limitation, evidence of actual volumes of timber, timber removals and
growth rates, all from any source, the most recent timber cruise and appraisal
reports received and approved by Lender, and any updates thereof or as otherwise
determined by Lender, provided, however, that, except as set forth in the
preceding sentence, Lender may require that an appraisal be done at any time for
the purpose of applying the Loan to Value test.  Further, Lender may determine
the Loan to Value Ratio at any time and from time to time at its sole
discretion.
 
5.4.5   If at any time Lender shall give notice to Borrower that Borrower is not
in compliance with subsection 5.4.2 above, Borrower shall make a prepayment of
the Loan in an amount sufficient to cause Borrower to be in compliance with
subsection 5.4.2, and such prepayment shall be made within ten (10) days after
the date said notice of non-compliance is given by Lender to Borrower.  Any such
prepayment shall be treated in the same manner as any other prepayment,
including, without limitation, any requirement for a prepayment premium.
 
 
 
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5.5        Restrictions on Distributions.  From the period from Closing until
the first anniversary of Closing, Borrower shall at all times maintain a minimum
cash balance equal to one full year of interest payments to be due under the
Loan. Borrower shall not make any Distributions provided, however, that
Distributions shall be permitted as long as (1) there is no Event of Default or
Default, (2) all financial covenants herein are in compliance, (3) the
Loan-to-Value Ratio shall be in compliance, (4) prior to and after such
Distribution the Borrower’s minimum cash balance shall be equal to one full year
of interest payments prospectively due on the Loan, and (5) such Distribution
will not cause any such Default or Event of Default, non-compliance or shortfall
and shall otherwise be in accordance with the terms of this Agreement, but, in
any event, Borrower shall not declare or make or incur any liability to declare
or make any Distribution, or redeem, retire, purchase or otherwise acquire
ownership interests in the Borrower during the continuance of a Default or Event
of Default, or which would or may reasonably be expected to give rise to a
Default or Event of Default.

ARTICLE 6. CLOSING
 
The closing of the Loan (the “Closing”) is scheduled to be held in a manner
acceptable to Lender on or before September 1, 2010 (herein referred to as the
“Closing Date”).  Notwithstanding any other provision of this Agreement or any
other Loan Documents, and without affecting in any manner the rights of Lender
under the other sections of this Agreement, it is understood and agreed that
Lender’ obligation to fund the Loan is subject to fulfillment of the terms and
conditions of the Application, Lender’s closing checklist and other terms and
conditions established by Lender, and that Lender shall have no obligation to
fund the Loan if any Default or Event of Default shall exist at such time and
unless and until the following conditions have been satisfied, all in form and
substance satisfactory to Lender and their special counsel:
 
6.1        Documentation.  Lender shall have received the following documents,
each to be in form and substance satisfactory to Lender:
 
6.1.1   The original Note, duly executed by Borrower, and the original Guaranty
Agreement duly executed by the Guarantor;
 
6.1.2   Multiple original counterparts of each of the Security Documents,
including, without limitation, the Security Documents listed in Section 1.5,
with evidence that the Security Documents intended to be recorded have been duly
recorded, or that arrangements satisfactory to Lender have been made for such
recordation, in each Office where such recordation, in each office where such
recordation is necessary;
 
6.1.3   Multiple original counterparts of the Environmental Indemnity Agreement
executed by Borrower and Guarantor (the “Environmental Indemnity Agreement”);
 
6.1.4   A solvency certificate of Borrower and Guarantor;
 
6.1.5   Such UCC-1 financing statements as may be required by the Lender;
 
6.1.6   Original written opinions of counsel covering the State of Delaware and
each State in which any part of the Timberlands is located in form and substance
satisfactory to the Lender with respect to the transactions contemplated by this
Agreement, including, without limitation, the enforceability of the Loan
Documents executed by the Borrower and Guarantor.

 
 
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6.1.7   Certificates of Liability Insurance evidencing liability insurance in
the amount of $5,000,000 in form and substance acceptable to Lender for all
insurance required hereunder or otherwise carried by Borrower, and, upon the
request of Lender certified copies of Borrower’s insurance policies, together
with an endorsement naming the Lender as additional insured, as its interests
may appear, under the liability policy, and a mortgagee loss payee endorsement
under the property policy, and such other endorsements as the Lender may
reasonably require, which endorsements shall be in form and substance reasonably
satisfactory to the Lender;
 
6.1.8   Copies of all filing receipts or acknowledgments issued by any
Governmental Authority to evidence any filing or recordation necessary to
perfect the Liens of the Lender in the Collateral and evidence in a form
acceptable to the Lender that such Liens constitute valid and perfected first
priority Liens, provided that, to the extent that gap coverage has been provided
pursuant to Lender’s Title Policy with respect to any such filing or recordation
or such filing consists of a Uniform Commercial Code Financing Statement, such
filing receipts or acknowledgments may be delivered within a reasonable time
after the Closing;
 
6.1.9   Certificates of a duly authorized officer or Manager of each Borrower
and Guarantor certifying (i) that attached thereto is a true and complete copy
of the Certificate of Formation and Operating Agreement, or Articles of
Incorporation and Bylaws, as applicable, and all other organizational documents
of such entity, as amended to the date of such certification, (ii) that attached
thereto are true and complete copies of consents executed and delivered by the
officers and Manager of each Borrower and Guarantor authorizing the execution,
delivery and performance of this Agreement and the other Loan Documents to which
such entity is a party, (iii) that attached thereto is a true and complete copy
of the organizational documents of Manager, as amended to the date of such
certification, and (iv) as to the incumbency, authority and genuineness of the
signature of each officer of Borrower executing this Agreement or any of the
other Loan Documents to which Borrower or Guarantor is a party, and such other
authority documents as may be requested by Lender;
 
6.1.10   Good standing certificates (or the equivalent) for Borrower, Guarantor
and the Manager of Borrower, issued by the appropriate official of each
jurisdiction where the conduct of Borrower’s and Guarantor’s business activities
or the ownership of its Properties necessitates qualification;
 
6.1.11   The Title Policy, in form and substance satisfactory to the Lender,
with such endorsements as the Lender may require, insuring the validity and
first priority of the lien and effect of the each of the Deeds of Trust, subject
only to such exceptions to and exclusions from coverage as may be acceptable to
the Lender.  In addition, the Lender shall have received copies of all
instruments and other matters affecting title to the Property encumbered by the
Deeds of Trust to the extent shown as exceptions to coverage under the Title
Policy.  Ingress and egress to the Timberlands shall be by public road or deeded
right of way easement included as part of the mortgaged property and insured
under the Title Policy, except as disclosed on Schedule 2.6.3 attached
hereto.  All premiums, charges, fees, costs and expenses of the title insurer or
related to the Title Policy shall be paid in full by Borrower;
 
 
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6.1.12   Multiple original counterparts of this Agreement, duly executed by all
parties;
 
6.1.13   Rent Roll (as required in Schedule 2.7) and all other Schedules and
Exhibits to this Agreement;
 
6.1.14   Environmental Questionnaire;
 
6.1.15   Such other documents, instruments and agreements as are required by the
Application or as the Lender shall reasonably request in connection with the
foregoing matters, including without limitation, updates, revisions or
supplements to previously delivered information or documents where necessary to
make such previously delivered information or documents true, complete and
accurate; and
 
6.1.16   A certificate signed by a duly authorized officer of Borrower dated as
of the Closing Date, stating the Borrower and any Affiliate of Borrower is in
compliance with all of the terms and provisions set forth in this Agreement; and
 
6.1.17           A consent and subordination agreement duly executed by the
Project Manager with respect to the Management Agreement of the Timberlands.
 
6.2        Other Conditions.  The following conditions shall have been and at
the time of Closing shall continue to be satisfied, to the satisfaction of
Lender:
 
6.2.1   Lender shall have received a satisfactory independent appraisal
confirming a value of the Copper Creek Block of the Timberlands of
$34,000,000.  Such appraisal shall include a map or maps of the Copper Creek
Block and shall be in form and substance reasonably satisfactory to Lender;
 
6.2.2   Borrower agrees that Borrower shall have furnished to Lender on or
before the date of Closing, copies of any appraisals, valuations, timber
inventory cruises or the like, and all environmental reports, in each case
available to the Borrower;
 
6.2.3   The ratio of the principal amount of the Loan to the value of the Copper
Creek Block and Timber thereon pursuant to the appraisal approved by Lender
shall not exceed thirty-five percent (35%).
 
6.2.4   No action, proceeding, investigation, regulation or legislation shall
have been instituted, proposed or, to the knowledge of Borrower, threatened in
writing before any court, governmental agency or legislative body to enjoin,
restrain or prohibit, or to obtain damages in respect of this Agreement or the
consummation of the transactions contemplated hereby, or which is related to or
arises out of this Agreement or the consummation of the transactions
contemplated hereby, and which, in Lender’s sole discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement;
 
 
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6.2.5   The Note shall on the Closing Date qualify as a legal investment for
Lender under applicable insurance law including, without limitation,
Section 1045 of the New York Insurance Law (without regard to any “basket” or
“leeway” provisions), and such acquisition shall not subject Lender to any
penalty or other onerous condition in or pursuant to any such law or regulation,
and Lender shall have received such evidence as Lender may request to establish
compliance with this condition;
 
6.2.6   Borrower shall have good and marketable fee simple title to the
Timberlands, subject to no Liens except the Permitted Encumbrances, and Borrower
shall have full power and authority to assign, lease, transfer, pledge and
mortgage the Collateral;
 
6.2.7   The warranties and representations of each of Borrower, Guarantor and
Project Manager contained herein and in the other Loan Documents shall be true
and correct;
 
6.2.8   The organizational documents of Borrower and Guarantor shall be
acceptable in form and substance to Lender;
 
6.2.9   All proceedings taken in connection with the Loan and the other
transactions contemplated hereby and by the other Loan Documents and all
documents and papers relating thereto shall be satisfactory to Lender and its
special counsel.  Lender and its special counsel shall have received copies of
such documents and papers as they may reasonably request in connection
therewith, all in form and substance satisfactory to Lender and its special
counsel.

ARTICLE 7.      EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
 
7.1        Events of Default.  The occurrence of any one or more of the
following events shall constitute an “Event of Default”:
 
7.1.1   (i) Failure to make payment of any scheduled installment of interest or
principal under the Note on or before the date which is four (4) days after the
due date, or (ii) failure to make payment of any partial prepayment of principal
under the Note, including without limitation any Excess Cutting Payment, and any
premiums thereon on or before the date due, or (iii) failure to make payment of
the entire indebtedness under the Note and any premium thereon on or before the
applicable maturity or due date;
 
7.1.2   Borrower shall fail to make payment on or before the due date of any
amount other than an amount referenced in Section 7.1.1 payable to Lender
hereunder or under the Note, the Deeds of Trust or any other Loan
Document  (after any applicable grace or notice period) or if no grace or notice
period is specified, within ten (10) days of written notice thereof, or Borrower
shall be in default of payment in respect of any Taxes or Other Charges (except
to the extent contested in accordance with Section 3) or with respect to any
insurance premiums or payments;
 
7.1.3   Any warranty, representation, certificate, schedule or other statement
or written information made or furnished to Lender in writing by or on behalf of
Borrower or Guarantor herein or in any instrument delivered in connection with
the Loan was false or misleading when made or furnished;
 
 
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7.1.4   Borrower defaults in the performance of or compliance with any covenant
or agreement contained in Sections 3.3, 3.4, 3.6, 3.8, 3.9 (other than 3.9.6),
3.10, 3.11 (other than 3.11.11 and 3.11.12), 3.12, 3.15,  4.6 or in Article 5
(but not including Section 5.2);
 
7.1.5   Borrower defaults in the performance of any of the obligations or
covenants set forth in Section 4.5 and the same is not cured to Lender’s
satisfaction within ten (10) days after written notice thereof by Lender;
 
7.1.6   Borrower fails or neglects to perform, keep or observe any other term,
provision, condition or covenant contained in this Agreement which is required
to be performed, kept or observed by Borrower (other than those referred to in
any of the other paragraphs of this Section) and the same is not cured to
Lender’s satisfaction within thirty (30) days after written notice thereof by
Lender; provided that with regard to Defaults other than in respect of reporting
obligations, if (i) such failure cannot be cured within such thirty (30) day
period, (ii) such failure is susceptible of cure, (iii) Borrower is proceeding
with diligence and in good faith to cure such failure, and (iv) the Lender shall
receive an officer’s certificate of Borrower to the effect of clauses (i), (ii)
and (iii) above and specifying the action Borrower is taking to cure such
failure, then such thirty (30) day cure period shall be extended by an
additional period of time necessary to effect the cure not to exceed ninety (90)
days.
 
7.1.7   There shall occur a default (after the expiration of any applicable
notice or cure periods thereunder, or if no grace or notice period is specified,
within ten (10) days of written notice thereof) or event of default (however
defined), under any other Loan Document, including, without limitation, under
the Environmental Indemnity Agreement or the Guaranty.
 
7.1.8   The occurrence of any default (after the expiration of any applicable
notice or cure periods thereunder) or event of default (however defined) on the
part of Borrower under any other agreement, document or instrument to which
Borrower is a party or by which Borrower is bound creating, evidencing or
related to any debt, liability or obligation of Borrower (other than Material
Contracts subject to Section 7.1.18) in excess of $50,000;
 
7.1.9   Any statement, report, financial statement or certificate made or
delivered by Borrower or Guarantor, or any of their officers, employees or
agents, furnished to Lender in connection with the Closing or pursuant to any
term or condition herein, or in any other Loan Document, to Lender proves to
have been false or incorrect in any material respect on the date as of which
made;
 
7.1.10   Borrower, Guarantor or any Subsidiary (i) is generally not paying, or
admits in writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the filing against it, a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of the Bankruptcy Code or any
other bankruptcy, insolvency, reorganization, moratorium or other similar law of
any jurisdiction, (iii) makes an assignment for the benefit of its creditors,
(iv) consents to the appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) is adjudicated as insolvent or to be
liquidated, or (vi) takes action for the purpose of any of the foregoing;
 
 
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7.1.11   A court or governmental authority of competent jurisdiction enters an
order appointing, without consent by Borrower, Guarantor or any Subsidiary, a
custodian, receiver, trustee or other officer with similar powers with respect
to such Borrower, Guarantor or any Subsidiary or with respect to any substantial
part of the property of such Borrower, Guarantor or any Subsidiary, or
constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of Borrower, Guarantor or any
Subsidiary, or any such petition shall be filed against Borrower, Guarantor or
any Subsidiary and such petition shall not be dismissed within sixty (60) days;
 
7.1.12   There shall occur any loss or casualty to, or condemnation or
government expropriation of, all or any material portion of the Collateral, and
the amount of the prepayment of the Loan made by Borrower is insufficient to
achieve compliance under Section 5.4 or is otherwise insufficient in the
reasonable judgment of Lender, notwithstanding that such prepayment shall
include the entire insurance proceeds or condemnation award, as the case may be,
received by Borrower;
 
7.1.13   A notice of Lien, levy or assessment is filed of record with respect to
all or any of Borrower’s, Guarantor’s or any Subsidiary’s assets by any
Governmental Authority, including, without limitation, the Pension Benefit
Guaranty Corporation or if any taxes or debts owing at any time or times
hereafter to any Governmental Authority becomes a lien or encumbrance upon the
Collateral or any other of Borrower’s or such Subsidiary’s assets, and the same
is not released within thirty (30) days after the same becomes a Lien or
encumbrance or, in the case of ad valorem taxes, prior to the last date when
payment may be made without penalty, provided, that Borrower may contest any
such notice of Lien, levy or assessment or any such lien in accordance herewith
and the Deeds of Trust, and, with respect to any such Lien, levy, assessment or
taxes in any amount, as long as no foreclosure proceeding has been filed with
respect to such Lien, levy or assessment, regardless of the amount thereof;
 
7.1.14   A garnishment, summons or a writ of attachment is issued against or
served upon Lender for the attachment of any Property of Borrower, whether or
not in Lender’s possession and such garnishment, summons or writ of attachment
is not discharged by bond or otherwise within thirty (30) days after the
issuance of service thereof, provided, however, that no foreclosure or similar
proceeding shall have been filed with respect thereto, regardless of the amount
thereof;
 
7.1.15   If Borrower, whether voluntarily or involuntarily, sells, conveys,
mortgages, pledges, leases or otherwise transfers the Collateral, or any portion
thereof, other than as permitted hereunder, without the prior written consent of
the Lender;
 
7.1.16   Borrower, Manager or Guarantor shall dissolve or cease to exist;
 
7.1.17   This Agreement, the Note, the Assignment of Timber Contracts, the
Manager’s Consent and Subordination of Management Agreement, any of the Deeds of
Trust, the Environmental Indemnity Agreement, the Guaranty Agreement or any
other Loan Document shall cease to be in full force and effect (other than with
the consent of Lender);
 
 
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7.1.18   Any material default by Borrower under any Material Contract or any
conservation easement, lease or other encumbrance on the Timberlands.
 
7.2        Acceleration of the Obligations.  Upon the occurrence and during the
continuance of an Event of Default described in subparagraph 7.1.10 or 7.1.11 of
Section 7.1 above, all of the Obligations shall automatically become due and
payable without notice or demand by Lender, and Borrower will forthwith pay to
Lender, in addition to any and all other Obligations due or to become due, the
entire principal of and interest and premium due on the Note.  If any other
Event of Default shall have occurred and be then in existence, the Lender may
declare, in a notice provided to Borrower pursuant to Section 8.9, the
Obligations to be immediately due and payable, and, in such event, Borrower will
forthwith pay to Lender, without notice or demand by Lender, the Obligations,
including the entire principal of and interest and premium due on the Note.
 
7.3        Remedies.  Upon the occurrence of an Event of Default, Lender shall
have all of the rights and remedies available hereunder and under the other Loan
Documents, at law and in equity.
 
7.4        Remedies Cumulative.  All covenants, conditions, provisions,
war­ran­ties, guaranties, indemnities and other undertakings of Borrower
contained in this Agreement, any of the other Loan Documents or in any documents
referred to herein or contained in any agreement supplementary hereto, or in any
schedule given to Lender or contained in any other agreement between Lender and
Borrower, heretofore, concurrently or hereafter entered into, shall be deemed
cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions or agreements of Borrower herein contained, and all
remedies of Lender thereunder shall be cumulative and concurrent, and may be
pursued singularly, successively or together, at the sole discretion of Lender,
and may be exercised as often as occasion therefor shall arise.  No act of
omission or commission of Lender, including without limitation, any failure or
delay of Lender to exercise or enforce any rights, Liens, powers or remedies
hereunder or under any of the aforesaid agreements or other documents or
security or collateral for the Loan, or to exercise its option to accelerate the
Scheduled Maturity Date of the Note, for a period of time or on more than one
occasion, shall be deemed to be, or shall operate as a waiver or release of such
Liens, rights, powers, remedies, and options but all such Liens, rights, powers,
remedies and options shall continue in full force and effect until all of the
Obligations owing or to become owing from Borrower to Lender shall have been
fully satisfied, and all Liens, rights, powers, remedies and options herein
provided for are cumulative and none is exclusive.  Further, once Lender has
exercised any of its rights or remedies hereunder, or under the Loan Documents,
during the existence of an Event of Default, all actions theretofore or
thereafter taken by Lender in pursuit of such rights and remedies shall not be
affected by any cure of such Event of Default, unless Lender shall accept the
cure and terminate pursuit of any such right or remedy, in which case, the
parties shall be restored to their position which existed prior to Lender’s
exercise of its rights or remedies.
 
 
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7.5        Indemnification.  Borrower hereby covenants and agrees
unconditionally and absolutely to indemnify, defend and save harmless Lender,
its officers, directors, shareholders, employees, agents and attorneys against
all damages, losses, liabilities, obligation, claims, litigation, demands or
defenses, judgments, suits, proceedings, fines, penalties, costs, disbursements
and expenses of any kind or nature whatsoever (including without limitation
attorneys’ fees reasonably incurred), which may at any time be imposed upon,
incurred by or asserted or awarded against Lender and arising from any failure
of Borrower to comply with and perform its Obligations hereunder and under the
other Loan Documents, any representation of Borrower herein or in the other Loan
Documents being false or misleading in any material respect when made, except
that this indemnity shall not be applicable to the extent that any damages,
losses, liabilities or other matters or amounts are attributable to actions or
omissions by any indemnified person constituting gross negligence or willful
misconduct.  This indemnity shall survive any foreclosure of the Deeds of Trust,
the taking of a deed in lieu thereof, or any other discharge of the obligations
of the Borrower hereunder or under the Loan Documents, even if the indebtedness
secured hereby is satisfied in full.  Borrower agrees that the indemnification
granted herein may be enforced by Lender without resorting to or exhausting any
other security or collateral or without first having recourse to the Note or the
Collateral through foreclosure proceedings or otherwise; provided, however, that
nothing herein contained shall prevent Lender from suing on the Note or
foreclosing the Deeds of Trust or from exercising any other rights under the
Loan Documents.
 
ARTICLE 8. MISCELLANEOUS
 
8.1        Audit and Appraisal Rights.  Borrower will permit Lender, after prior
notice to Borrower, to visit and inspect any of the Timberlands, and Lender and
its representatives shall have the right during normal business hours at the
office of the Borrower set forth in Section 2.10.3 to examine and audit all of
Borrower’s and Guarantor’s books of account, financial statements, records,
reports and other papers, to make copies and extracts therefrom, to cause such
books to be audited by independent certified public accountants selected by
Lender, and to discuss the Borrower’s affairs, finances and accounts with any
Borrower, Guarantor and its officers, employees and independent public
accountants (and by this provision the Borrower authorize said accountants to
discuss the finances and affairs of Borrower and Guarantor with Lender or its
representatives) all at such reasonable times and as often as may be reasonably
requested.  Without limiting any of the other inspection, audit, appraisal or
similar obligations of Borrower hereunder, or such rights granted to Lender
herein, Lender may have the Collateral reappraised from time to time if it deems
such reappraisal to be prudent in its reasonable judgment.  Borrower shall
promptly reimburse Lender for the costs of conducting any such inspection,
audit, examination or reappraisal permitted by this Section if an Event of
Default exists or if such audit, examination or reappraisal discloses a
difference of income or value in an amount greater than five percent (5%) of the
amount originally reported to Lender.
 
8.2        Fees and Expenses Incurred by Lender.  Borrower shall pay all
reasonable costs and expenses of Lender associated with the administration of
the Loan, and, after a Default, shall also pay all costs and expenses actually
incurred by Lender associated with the enforcement of the Loan, including, in
each case, without limitation, outside attorneys’ fees; consulting fees
(including environmental); appraisal fees; accountants’ fees, costs and
expenses; court costs and expenses; photocopying and duplicating expenses;
corporate search fees; title commitment and insurance fees; filing and recording
fees and taxes; air express charges; and all expenses relating to
telecommunications, facsimile transmissions, overnight mail and the
like.  Borrower shall also pay all reasonable costs and expenses of Lender
incurred in connection with any amendment, modification or waiver of this
Agreement or any of the Loan Documents.  All such expenses, costs, charges and
other fees shall be payable thirty (30) days after written request to Borrower
therefor by Lender (unless otherwise specifically provided herein) and shall be
additional Obligations hereunder.
 
 
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    In addition, if any taxes (excluding income taxes levied against Lender)
shall be payable on account of the execution or delivery of this Agreement, or
the execution, delivery, issuance or record­ing of any of the Loan Documents, or
the creation of any of the Obligations hereunder, by reason of any existing or
hereafter enacted federal or state statute, Borrower will pay all such taxes,
including, but not limited to, any interest or penalty thereon, and will
indemnify, defend and hold Lender harmless from and against liability in
connection therewith.
 
8.3        Waiver by the Lender.  Lender’s failure, at any time or times
hereafter, to require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of Lender thereafter to
demand strict compliance and performance therewith.  Any suspension or waiver by
Lender of an Event of Default by Borrower under this Agreement or the other Loan
Documents shall not suspend, waive or affect any other Event of Default by
Borrower under this Agreement or the other Loan Documents, whether the same is
prior or subsequent thereto and whether of the same or of a different
type.  None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or the other Loan
Documents and no Event of Default by Borrower under this Agreement or the other
Loan Documents shall be deemed to have been suspended, released or waived by
Lender, unless such suspension, release or waiver is by an instrument in
writing, and only to the extent specifically recited therein, and such writing
is signed by a duly authorized representative of Lender and directed and
delivered to Borrower.  Any such written waiver or release in connection with
one event shall not be construed as a waiver or release of any subsequent event
or as a bar to any subsequent exercise of Lender’s rights or remedies hereunder.
 
8.4        Severability.  Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by,
unenforceable or invalid under applicable law, then it is the intent of
Borrowers and Lender that there shall be added in lieu thereof a provision as
similar in terms to such provision as is possible which is legal, valid and
enforceable, without invalidating the remaining provisions of this Agreement.
 
8.5        Modification of Agreement.  This Agreement and the other Loan
Documents may not be modified, altered or amended, except by an agreement in
writing duly executed by Borrowers and Lender, and any other party thereto.
 
8.6        Authorization to Disseminate Information.  Upon the occurrence and
during the continuance of any Event of Default, Lender may distribute to any
Person (other than distribution or release to the public news media, except if
required by law or regulation) such information as Lender may have concerning
the business affairs, financial condition or any other information Lender
reasonably deems relevant for the purpose of assisting Lender in the enforcement
of its rights and remedies in respect of such Event of Default (including, but
not limited to, discussing with such Person a possible foreclosure by private
sale of all or any part of the Collateral or a sale of Lender’s interest in the
Loan), and Lender shall have no liability for any loss or damages suffered or
incurred by Borrower as a result of such distribution.
 
 
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8.7        Waivers by Borrower.  Except as otherwise provided for in this
Agreement, Borrower waives under the Note, this Agreement and the other Loan
Documents that Borrower is a party to (i) presentment, demand and protest and
notice of presentment, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Lender on which Borrower may in any way be liable and hereby
ratifies and confirms whatever Lender may do in this regard; (ii) notice prior
to taking possession or control of the Collateral or any bond or security which
might be required by any court prior to allowing Lender to exercise any of the
Lender’s remedies; (iii) the benefit of all valuation, appraisement and
exemption laws; and (iv) notice that any amounts that are due have not been
paid.
 
8.8        Authorized Signature.  The signature upon this Agreement or upon any
of the other Loan Documents of a duly authorized officer of Borrower to which
they are a party shall bind Borrower, and be deemed to be the act of such
Borrower, affixed pursuant to and in accordance with the provisions of
Borrower’s certificate of formation and operating agreement or articles of
incorporation and bylaws, as the case may be.
 
8.9        Notices.  The addresses for notices to Borrower and Lender are as
follows:
 
If to Lender, at:
 
Metropolitan Life Insurance Company
6750 Poplar Avenue, Suite 109
Memphis, Tennessee  38138
Attention:  Loan No. 194231
 
with a copy to:
 
Metropolitan Life Insurance Company
8717 West 110th Street, Suite 700
Overland Park, Kansas  66210
Attention:  Agricultural Investments
 Loan No. 194231
 
and to:
 
Metropolitan Life Insurance Company
Agricultural Investments – Legal
10 Park Avenue
Morristown, New Jersey  07962
Attention:  Loan No. 194231
 
 
 
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If to Borrower, at:
 
c/o Olympic Resource Management LLC
19245 Tenth Avenue NE
Poulsbo, Washington 98370
Attention: Thomas M. Ringo
Email: tringo@orminc.com

with a copy to:
 
Davis Wright Tremaine LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101-1688
Attention: Greg Adams
Email: gregadams@dwt.com

or to such other address as each party may designate for itself by like notice
given in accordance with this Section.
 
Except for any notices, demands, requests or other communications required under
applicable law to be given in another manner, whenever Borrower or Lender gives
or serves any notices, demands, requests or other communications with respect to
this Agreement or the Note, each such notice, demand, request or other
communication shall be in writing and shall be delivered personally, mailed by
United States Postal Service certified or registered mail or sent by a
nationally recognized courier service such as Federal Express and properly
addressed in accordance with this Section and shall be deemed given upon receipt
or refusal to accept.  Any party may at any time change its address for such
notices by delivering or mailing to the other party hereto, as aforesaid, a
notice of such change.
 
Notwithstanding anything to the contrary set forth herein or in the other Loan
Documents, the delivery of the annual Plan, Quarterly Collateral Reports, Annual
Collateral Reports and other reports submitted pursuant to Section 4, notices
required under Section 3.15, the Tax Certificate and the financial information
required under Section 5.2 by electronic mail delivery, addressed to Paulette
Oxner (poxner@metlife.com) and Scott Marshall (smarshall@metlife.com) or such
other electronic address as Lender may designate from time to time, and such
items shall be deemed delivered upon Borrower’s receipt of electronic
confirmation of receipt from Lender.
 
8.10       Assignment.
 
8.10.1   Borrower may not sell, assign or transfer this Agreement, or the other
Loan Documents or any portion thereof, including, without limitation, any one or
more of Borrower’s rights, title, interests, remedies, powers and/or duties
hereunder or thereunder.
 
8.10.2   Lender shall have the right to, and Borrower hereby consents to, any
participation or sale, assignment, transfer or other disposition of all or any
interest in the Loan.  Any such participation or disposition by Lender of this
Agreement or the other Loan Documents, or of any portion hereof or thereof, may
include, without limitation, Lender’s rights, title, interests, remedies, powers
and duties hereunder or thereunder.  Lender shall give Borrower reasonable
notice of any such participation, sale, assignment, transfer or other
disposition.  Lender may forward to each assignee or participant, and each
prospective assignee or participant, all documents and information which Lender
now has or may hereafter acquire relating to the Loan, the Collateral, the
Borrower or anything else relating hereto.  Upon an assignment of the Note or a
portion thereof together with Lender’s rights under the Loan Documents related
thereto to a Person as permitted in accordance with the provisions hereof,
Lender shall have no further obligation to Borrower under the Loan Documents in
respect of the interest so assigned except to the extent arising out of events
or conditions existing on or prior to the date of such transfer.
 
 
 
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8.11       Actions by Lender.  Without affecting the personal liability of any
Person, including Borrower or Guarantor, for the payment of the Obligations, and
without affecting the lien of the Deeds of Trust for the full amount of the
Secured Obligations (as defined therein) remaining unpaid upon any property
conveyed pursuant hereto, Lender is authorized and empowered at any time and
from time to time, either before or after the maturity of the Note, and without
notice, to:  (a) release any Person liable for the payment of any of the
Obligations, (b) make any agreement extending the time or otherwise modifying
the terms of payment of any of the Obligations, (c) accept additional security
therefor of any kind or (d) release any property, real or personal, securing the
Obligations.
 
8.12       Performance by Lender.  If Borrower fails to make any payment
required under this Agreement or any of the other Loan Documents, whether for
real estate taxes, insurance premiums, attorneys’ fees or otherwise, or fails to
do any act as may be required hereunder or thereunder, Lender may, at the
discretion of Lender, without obligation to do so and without releasing Borrower
from any obligation, make any such payment or do any such act in such manner and
such order as Lender shall deem reasonably necessary to protect the
Collateral.  Lender may at any time bill Borrower for such payments and
expenses, which, subject to the following sentence, shall be paid promptly by
Borrower.  At the option of Lender, upon notice to Borrower, such payments and
expenses shall be added to the principal of the Loan and accrue interest at the
Default Rate until paid, whether at the maturity of the Loan or otherwise.
 
8.13       Entire Agreement.  This Agreement, together with the other Loan
Documents and all documents evidencing or securing the Loan referred therein,
constitutes and sets forth the entire understanding and agreement between the
parties with respect to the Loan, and no party hereto has relied upon any
representations, agreements or understandings, verbal or written, not set forth
herein, or in such other Loan Documents, whether made by any party hereto or by
any agent, employee or representative of any party hereto.
 
8.14       Partial Payment.  Acceptance by Lender of any sum in payment or part
payment of any portion of the Obligations after the same is due shall not
constitute a waiver of Lender’s right to require prompt payment when due of the
remainder of the Obligations, nor shall such acceptance cure or waive any
remaining default or waive any subsequent default or prejudice any of the rights
of Lender under this Agreement or the other Loan Documents.
 
 
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8.15       Time of the Essence.  Time is, and shall be, of the essence in the
performance of each and every obligation of Borrower under the Note, this
Agreement and the other Loan Documents.
 
8.16       Default Rate.  Any amounts owed to Lender by Borrower under this
Agreement or any other Loan Document which are not paid when due shall
thereafter bear interest at the Default Rate, as defined in the Note (this
Section shall not apply to amounts specifically due under the Note, which
amounts shall be governed by said Note).
 
8.17       Brokerage Commission.  Lender represents to Borrower that it has
dealt with no broker in connection with the Loan.  Lender shall not be obligated
to pay any commission or brokerage fee in connection with the Loan, the
Application or the consummation of the Loan.  Borrower shall pay any and all
such commissions and fees and hereby agrees to indemnify, defend and hold Lender
harmless from any claim for such commissions or fees.
 
8.18       Further Assurances.  Borrower will from time to time execute such
further instruments and do such further acts and things as Lender may reasonably
require by way of further assurance to Lender of the matters and things in this
Agreement provided for or intended so to be.
 

ARTICLE 9.   INTERPRETATION OF THIS AGREEMENT
 
9.1         Defined Terms.  When used herein, the following terms shall have the
following meanings:
 
“Affiliate” – means Olympic Resource Management LLC, a Washington limited
liability company (also referred to from time to time in this Agreement as
“Manager” and as “Olympic”), and any Subsidiaries of Borrower or Guarantor.
 
A. The term “Control” means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting Securities, by contract or otherwise.
 
“Agreement” – this Loan Agreement, as it may be amended from time to time.
 
“Alta Rock Lease Documents” – means that certain unrecorded Geothermal Lease
Option Agreement dated December 15, 2008, by and between Weyerhauser Company as
Grantor and Alta Rock Energy, Inc. as Grantee, as amended by a First Amendment
dated March 1, 2010, and as supplemented by that certain Table Rock – Bagby Baty
Butte Agreement dated September 1, 2010, among Weyerhauser Real Estate
Development Company, Alta Rock Energy, Inc. and Borrower, a memorandum of which
will be recorded at the Closing Date.
 
“Bankruptcy Code” - shall mean any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect.
 
“Borrower” – as defined in the introductory paragraph of this Agreement.
 
 
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“Business Day” –means any day on which the New York, New York office of Lender
and the New York Stock Exchange are open for the general transaction of
business.
 
“Closing” – as defined in Article 6 of this Agreement.
 
“Closing Date” – as defined in Article 6 of this Agreement.
 
“Collateral” – means, at any time, all Property of Borrower which is security
for the Loan pursuant to the provisions of the Deeds of Trust and the other Loan
Documents, including, without limitation, the Timberlands and the Timber thereon
or derived therefrom.  The Collateral includes all Property set forth in Section
1.4, the Deeds of Trust, any Security Agreement given by any Subsidiary and in
any other Loan Document.
 
 “Commonly Controlled Entity” – shall have the meaning specified in Section 2.13
of this Agreement.
 
“Copper Creek Block” – means the portion of the Timberlands in Marion and
Clackamas Counties, Oregon as more fully identified in Exhibit A attached
hereto.
 
“Debt” – means, at any time, with respect to any Person, without duplication:
 
(a)   All obligations of such Person for borrowed money (including, without
limitation, all obligations of such Person evidenced by any debenture, bond,
note, commercial paper or Security, but also including all such obligations for
borrowed money not so evidenced);
 
(b)   All obligations of such Person, to pay the deferred purchase price of
Property or services, all conditional sale obligations of such Person and all
obligations of such Person under any title retention agreements;
 
(c)   All capital lease obligations of such Person;
 
(d)   All obligations for borrowed money secured by any Lien existing on
Property owned by such Person (whether or not such obligations have been assumed
by such Person or recourse in respect thereof is available against such Person);
 
(e)   Any Guaranty or endorsement of such Person of any obligation or liability
of another Person;
 
(f)   All its liabilities in respect of letters of credit or instruments serving
a similar function issued or accepted for its account by banks and other
financial institutions (whether or not representing obligations for borrowed
money).; and
 
(g)   All obligations of such person pursuant to any judgment or order issued by
a court or any agreement of settlement of any litigation.
 
 
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              Debt of a Person shall include all obligations of such Person of
the character described in clause (a) through clause (g) to the extent such
Person remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
 
“Deeds of Trust” – as defined in Section 1.5.1. of this Agreement.
 
“Default” – an event or condition the occurrence of which would, with the lapse
of time or the giving of notice or both, become an Event of Default.
 
“Distribution” – in respect of any Person means:
 
(a)   The payment of any dividends or other distributions on capital stock or
equity interests of such Person (including distributions in such stock); and
 
(b)   The redemption or acquisition of any Securities of such Person.
 
“Employee Welfare Plan” – shall mean an employee welfare benefit plan, as
defined in Section 3(1) of ERISA.
 
“Environmental Indemnity Agreement” – that certain Environmental Indemnity
Agreement dated as of even date herewith by Borrower in favor of Lender, as the
same may be amended, restated or supplemented from time to time.
 
“Environmental Protection Laws” – means all federal, state, (specifically
including any state where any part of the Timberlands are located) municipal and
local laws, statutes, ordinances, rules, regulations, policies, guidelines,
directives and decisions of all governmental or quasi-governmental authorities,
agencies, regulatory or rule-making bodies, commissions, departments, boards or
courts or other tribunals, as the same may be amended, supplemented or reissued
from time to time, with respect to or related to any materials or substances
dangerous to human health or the environment or Hazardous Substances, pertaining
to environmental regulations, contamination, clean-up or disclosures,
superliens, health, safety or protection of the environment or applicable to
exploration, mining, drilling, extraction, transportation, storage and
processing (including, without limitation, reclamation of land affected thereby)
of coal, oil, gas and any other minerals, and any judicial or administrative
interpretation thereof, including any judicial or administrative orders or
judgments, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. section 9601 et seq.
(“CERCLA”); the Federal Resource Conservation and Recovery Act, 42 U.S.C.
section 6901 et seq. (“RCRA”); Superfund Amendments and Reauthorization Act of
1986, Public Law No. 99-499 (“SARA”); Toxic Substances Control Act, 15 U.S.C.
section 2601 et seq. (“TSCA”); the Hazardous Materials Transportation Act, 49
U.S.C. section 1801 et seq.; the Clean Air Act; the Clean Water Act; and the
Surface Mining Control and Reclamation Act of 1977 (“SMCRA”).
 
“ERISA” – the Employee Retirement Income Security Act of 1974, as amended from
time to time, and all rules and regulations from time to time promulgated
thereunder.
 
“Event of Default” – as defined in Section 7.1 of this Agreement.
 
 
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“Exchange Act” – means the Securities Exchange Act of 1934, as amended from time
to time.
 
“Fiscal Year” – means each twelve-month period from January 1 through December
31.
 
“GAAP” – means accounting principles generally accepted in the United States of
America from time to time in effect and consistently applied.
 
“Governmental Authority” – means:
 
(a)   The government of
 
                              (i)   The United States of America and any state
or other political subdivision thereof, or
 
                             (ii)   Any other jurisdiction (x) in which Borrower
or any Subsidiary or Affiliate conducts all or any part of its business or
(y) that asserts jurisdiction over the conduct of the affairs or Properties of
any of such Persons; and
 
(b)   Any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government.
 
“Guarantor” – means ORM TIMBER FUND II, INC., a Delaware corporation.
 
“Guaranty” – with respect to any Person means an obligation other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection of such Person which guarantees or in effect guarantees,
or assures the payment of, or performance with respect to, any indebtedness,
dividend or other obligation of any other Person (the “primary obligor”) in any
manner, whether directly or indirectly, including, but not limited to,
obligations incurred by such Person through an agreement, contingent or
otherwise:
 
(a)   To purchase such indebtedness or obligation or any Property or assets
constituting security therefor;
 
(b)   To advance or supply funds
 
               (i)   For the purchase or payment of such indebtedness or
obligation, or
 
               (ii)   To maintain working capital or other balance sheet
condition or otherwise to advance or make available funds for the purchase or
payment of such indebtedness or obligations;
 
               (iii)   To lease Property or to purchase any Security or other
Property or services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of the primary obligor to make payment
of such indebtedness or obligations (but excluding any agreement to purchase
goods or services in the ordinary course of business); or
 
 
 
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               (iv)   Otherwise to assure the owner of such indebtedness or
obligation of the primary obligor against loss in respect thereof.
 
“Guaranty Agreement” means that certain Guaranty Agreement executed by Guarantor
at and as a condition to Closing in form and substance acceptable to Lender.
 
“Hazardous Substances” – means pollutants, contaminants, hazardous or toxic
substances, wastes or substances, any substances which because of their
quantitative concentration, chemical, radioactive, flammable, explosive,
infectious or other characteristics, constitute or may reasonably be expected to
constitute or contribute to a danger or hazard to public health, safety or
welfare or to the environment, including, without limitation, any asbestos
(whether or not friable) and any asbestos-containing materials, waste oils,
solvents and chlorinated oils, polychlorinated biphenyls (PCBs), toxic metals,
etchants, pickling and plating wastes, explosives, reactive metals and
compounds, pesticides, herbicides, radon gas, urea formaldehyde foam insulation
and chemical, biological and radioactive wastes, or any other similar materials
or any hazardous or toxic wastes or substances which are included under or
regulated by any federal, state or local law, rule or regulation (whether now
existing or hereafter enacted or promulgated, as they may be amended from time
to time) pertaining to environmental regulations, contamination, clean-up or
disclosures, and any judicial or administrative interpretation thereof,
including any judicial or administrative orders or judgments including, without
limitation, any contaminant, dangerous goods and wastes, chemicals, wastes
(including, without limitation, subject wastes, liquid industrial wastes, other
industrial wastes, toxic wastes, hazardous wastes, solid wastes, special wastes,
medical wastes and waste oil), hazardous materials, hazardous substances or
radioactive materials or coal in any form, natural gas in any form, petroleum
(including, without limitation, crude oil or any fraction thereof, or synthetic
gas).
 
“Lender” – as defined in the introductory paragraph of this Agreement.
 
“Lien” – any interest in Property securing an obligation owed to, or a claim by,
a Person other than the owner of the Property, whether such interest is based on
the common law, statute or contract, and including but not limited to the
security interest, security title or lien arising from a mortgage, deed of
trust, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes.  The term “Lien” shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property.
 
“Loan” – as defined in Section 1.1 of this Agreement.
 
“Loan Documents” – this Agreement, the Note, the Deeds of Trust, the Assignment
of Timber Contracts, the Environmental Indemnity Agreement, the Guaranty
Agreement, the documents listed under Sections 1.5 and 6.1 above, and any and
all other agreements, instruments and documents, including, without limitation,
mortgages, security agreements, assignments, pledges, powers of attorney,
consents, and all other written agreements heretofore, now or hereafter executed
by Borrower in favor of Lender or the Lender or in respect to the transactions
contemplated by this Agreement, in each case as may be amended from time to
time.
 
 
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“LTV” – as defined in Section 5.4 of this Agreement.
 
“Manager” – as defined in Section 2.10.2 of this Agreement.
 
“Mandatory Prepayment” – any prepayment required to be made under the terms of
the Loan Documents, including, without limitation, any prepayments required
under Sections 4.2.2, 4.2.6, 4.8.3 and 5.4 herein.
 
“Margin Security” – means “margin stock” within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System of the United States of
America, 12 C.F.R., Chapter II, as amended from time to time.
 
“Material Contracts” – as defined in Section 4.6 of this Agreement.
 
“Merchantable Timber” – means that portion of the Timber greater than 35 years
in age located on acres classified as “Available” in Borrower Forest Inventory
Reporting System measured in Scribner long log scale.
 
“Multiemployer Plan” – shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
 
“Note” and “Notes” – as defined in Section 1.2 of this Agreement.
 
“Obligations” – any and all obligations to repay sums at any time loaned or
advanced by Lender to or on behalf of Borrower, including, but not limited to,
the principal of, and interest and premium, if any, due on, the Notes and other
sums loaned or advanced pursuant to the terms of this Agreement (including
accrued interest) the full, prompt and complete performance of all obligations
at any time owed by Borrower to Lender, including, without limitation, any and
all amounts owed to or advanced by Lender pursuant to any of the Loan Documents;
all obligations of Borrower to indemnify, defend and hold Lender harmless as set
forth in this Loan Agreement or any other Loan Document, and all other
obligations or liabilities of any and every kind at any time owed by Borrower to
Lender, including, but not limited to, the Loan, howsoever created, evidenced or
acquired and whether direct, indirect, primary, secondary, fixed, or contingent.
 
“Other Charges” –  as defined in Section 3.1.5 of this Agreement.
 
“Permitted Encumbrances” – as defined in Section 3.6.1 of this Agreement.
 
“Permitted Liens” – as defined in Section 3.6.1 of this Agreement.
 
“Person” – an individual, partnership, corporation, limited liability company,
trust or unincorporated organization, or a government or agency or political
subdivision thereof or other legal entity.
 
“Phase I Report”  - means the URS Phase I Environmental Site Assessment Rayonier
Lewis County Timberlands, Lewis County, Washington dated August 16, 2010, and
URS Phase I Environmental Site Assessment Copper Creek Timberlands, Clackamas
and Marion Counties, Oregon dated August 16, 2010.
 
 
 
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“Project Manager” – as defined in Section 4.13 of this Agreement.
 
“Property” – all property or assets of any kind whatsoever, whether real,
personal or mixed, or tangible or intangible.
 
“Release” – as defined in Section 2.15.2 of this Agreement.
 
"Riffe Lake Block" – means the portion of the Timberlands in Lewis County,
Washington as more fully identified in Exhibit A attached hereto.
 
“Scheduled Maturity Date” – shall mean September 1, 2020.
 
“Security” – shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
 
“Security Documents” – as defined in Section 1.5 of this Agreement.
 
“Subsidiary” – means, as to any Person, any corporation, association or other
business entity in which such Person  directly or indirectly owns an equity
interest, and any partnership or joint venture in which an interest in the
profits or capital thereof is directly or indirectly owned by such
Person.  Unless the context otherwise clearly requires, any reference to a
“Subsidiary” is a reference to a Subsidiary of the Borrower.
 
“Timber” – means any trees of any age, species or condition, whether standing,
lying, growing or to be grown, alive or dead, all biomass and any other organic
products growing or to be grown, all now or hereafter at any time located on the
Timberlands.
 
“Timberlands” – means the fee simple interest in and to that certain land and
real estate interests located in Marion and Clackamas Counties, Oregon and in
Lewis County, Washington all as described in Section 2.5, as set forth in
Exhibit A hereof and more particularly described in the Deeds of Trust and
including, without limitation, (a) all easements, rights and appurtenances
thereto, (b) all Timber, thereon from time to time, (c) all fixtures, buildings,
structures and improvements thereon from time to time, (d) all coal, oil, gas
and other minerals thereon owned at any time by Borrower, and (e) all rights of
Borrower to royalties, profits, proceeds, products and income therefrom, (f) all
right, title and interest in and to any credits, claims, rights or benefits
arising from or related to the absorption of carbon dioxide by the trees and
other organic plants growing on the Timberlands, carbon sequestration, carbon
credits, carbon financial instruments or any other benefit by any other name or
description, financial or otherwise related to the control or reduction of
greenhouse gases, carbon dioxide or any other form of air or atmospheric quality
incentives, whether created or sponsored through legislation of any government,
industry arrangements, barter, private market or otherwise, and all proceeds,
accounts and general intangibles resulting from the sale of such agricultural
products or the sale, issuance, trade, barter or other transactions with any
such credits, claims, rights or benefits, and (g) all other Real Estate as
defined in the Deeds of Trust.  The Timberlands includes the Copper Creek Block
and a portion of the Riffe Lake Block but does not include the Unencumbered
Timberlands.
 
 
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“Title Policy” – shall mean those certain lenders policies of title insurance
and all endorsements thereto covering the Timberlands issued to Lender in
Washington and Oregon by Chicago Title Insurance Company in the aggregate amount
of $11,000,000 which shall be in form and substance satisfactory to and accepted
by Lender.
 
"Unencumbered Timberlands" – means certain land and real estate interests
together with all Property of the Borrower located thereon or related
exclusively thereto, which timberlands and related Property shall not be
encumbered by the Deeds of Trust or the other Security Documents.  These
timberlands are generally described below:
 
Willamina Tree Farm                                                      5,297
acres                     Tillamook, Yamhill Counties, Oregon
 
Rockaway Tree Farm                                                      6,378
acres                    Tillamook County, Oregon
 
Riffe Lake Tree Farm (Portions)                                    3,640
acres                     Lewis County, Washington not described in
                                        the Deeds of Trust.
 
9.2     Accounting Terms; Interpretation of Financial Covenants.  Any accounting
terms used in this Agreement which are not specifically defined shall have the
meanings customarily given them in accordance with GAAP at the time in
effect.  The financial covenants and terms contained herein shall be applied to
Borrower and its permitted Subsidiaries, if any, on a consolidated basis.
 
9.3        Directly or Indirectly.  Where any provision herein refers to action
to be taken by any Person, or that such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person, including actions taken by or on behalf of any
limited liability company or partnership in which such Person is a member or
general partner, respectively.
 
9.4        Section Headings and Table of Contents, etc.  The titles of the
Sections of the Note, this Agreement, the other Loan Documents and the Table of
Contents appear as a matter of convenience only, do not constitute a part hereof
and shall not affect the construction hereof.  The words “herein,” “hereof,”
“hereunder” and “hereto” refer to this Agreement as a whole and not to any
particular Section or other subdivision.  All references in this Agreement to
Schedules, Exhibits, Annexes or other addenda shall be deemed to mean the
Schedules, Exhibits, Annexes or other addenda to this Agreement, each of which
is hereby incorporated herein as though fully set forth herein.  Each reference
in this Agreement to any gender shall be deemed also to refer to any other
gender.  The use in this Agreement of the singular shall be deemed also to
include the plural and vice versa, unless the context requires otherwise.
 
9.5        Construction.  Each covenant contained herein shall be construed
(absent an express contrary provision herein) as being independent of each other
covenant contained herein, and compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
one or more other covenants.  The Recitals are hereby incorporated into this
Agreement.
 
 
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9.6        Governing Law.  This Agreement, the Note and the other Loan Documents
shall be governed by, and construed and enforced in accordance with, the law of
the State of Washington and the Federal laws of the United States of America in
force therein, excluding choice-of-law principles of the law of such state that
would require the application of the laws of a jurisdiction other than such
jurisdiction; except that the Deeds of Trust and the other Loan Documents
recorded or which may be recorded or which so state, and the creation,
perfection and enforcement of the Deeds of Trust and the liens and security
interests under the Deeds of Trust and the other Loan Documents recorded or
which may be recorded or which so state, shall be governed by and construed and
enforced in accordance with the law of the state in which any Deed of Trust is
recorded or such other Loan Document may be recorded or as so stated
therein.  Borrower and Lender stipulate and agree that the State of Washington
has a substantial relationship to Lender, the Loan Documents, the Obligations
and this transaction, and in all respects, including, without limiting the
generality of the foregoing, matters of construction, validity, and performance
of the Loan Documents, it being understood and agreed that the law of the State
of Washington, except as specifically provided otherwise in this Section, shall
govern the validity and enforceability of this Agreement and the other Loan
Documents.
 
9.7        Jurisdiction.  Borrower hereby irrevocably agrees and submits to the
exclusive jurisdiction of any state or federal court located within Washington
or Oregon or, at the option of Lender in its sole discretion, and to the extent
permitted by law, of any state or federal court(s) located within any other
county, state or jurisdiction in which any of the Timberlands is located, and to
the extent permitted by law, Borrower waives any objection based on forum non
conveniens and any objection to venue of any such action or proceedings.  To the
extent permitted by law, if such litigation is commenced, Borrower agrees that
service of process may be made by serving a copy of the summons and complaint
upon Borrower, through any lawful means, including upon its registered agent
within said state, whom Borrower hereby appoints as their agent for these
purposes.  Nothing contained herein shall prevent Lender from bringing any
action or exercising any rights against Borrower personally or against any
property of Borrower within any other county, state or country.  The means of
obtaining personal jurisdiction and perfecting service of process set forth
above are not intended to be exclusive but are in addition to all other means of
obtaining personal jurisdiction and perfecting service of process now or
hereafter provided by applicable law.
 
9.8        Waiver of Trial by Jury.  TO THE EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER WAIVES TRIAL BY JURY IN ANY PROCEEDING RELATING TO THIS LOAN AGREEMENT
OR ANY OF THE OTHER DOCUMENTS RELATING TO THE LOAN AND AGREES THAT NO SUCH
ACTION WITH RESPECT TO WHICH A JURY TRIAL HAS BEEN WAIVED SHALL BE SOUGHT TO BE
CONSOLIDATED WITH ANY OTHER ACTION WITH RESPECT TO WHICH A JURY TRIAL CANNOT OR
HAS NOT BEEN WAIVED.
 
9.9        Counterparts.  This Agreement may be executed in any number of
identical counterparts, each of which shall be deemed to be an original, and all
of which shall collectively constitute a single agreement, fully binding upon
and enforceable against the parties hereto.
 
          9.10      Joint and Several Liability.  If more than one person or
entity is included in the definition of Borrower, the obligations and
liabilities of each such person or entity shall be joint and several.
 
 
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9.11       Successors and Assigns.  Borrower agrees that all the rights,
benefits and privileges herein and hereby conferred upon Lender shall vest in,
and be enforceable by Lender and their respective successors and
assigns.  Borrower agrees that this Agreement shall bind Borrower’s heirs,
executors, administrators, personal representatives, successors and assigns.
 
 
 
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
specified at the beginning hereof.

 

 
BORROWER:
 
ORM TIMBER OPERATING COMPANY II, LLC
a Delaware limited liability company
            By: Olympic Resource Management LLC, a       Washington limited
liability company       Its Manager                  
 
 
By:
___________________________________         Printed Name:
________________________         Title:  ______________________________        
   

 
 
 
 

 
LENDER:
 
METROPOLITAN LIFE INSURANCE COMPANY,
a New York corporation
       
 
By:                                                                   
    Name:  C. Ray Smith       Title:   Director

 
 
 
[Signature Page to Loan Agreement]

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

 
 
 
STATE OF WASHINGTON
)
   
) ss.
 
COUNTY OF ___________________
)
       

 
On this _____ day of ________________, 2010, before me personally appeared
___________________________________, to me known to be the _____________________
of Olympic Resource Management LLC, a Washington limited liability company, the
Manager of ORM TIMBER OPERATING COMPANY II, LLC, the Delaware limited liability
company that executed the within and foregoing instrument, and acknowledged said
instrument to be the free and voluntary act and deed of said company, for the
uses and purposes therein mentioned, and on oath stated that _____ was
authorized to execute said instrument on behalf of said company.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year first above written.

 
 

 
Signature:_____________________________________
     
Name (Print):___________________________________
     
NOTARY PUBLIC in and for the State
 
of Washington, residing at ________________________
 
My appointment expires:__________________________

 
 
 
 
 
[Acknowledgement Page to Loan Agreement]

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

 
 
 
STATE OF TENNESSEE
COUNTY OF SHELBY
 
Before me, the undersigned Notary Public in and for the State and County
aforesaid, personally appeared C. Ray Smith, with whom I am personally
acquainted, and who, acknowledged himself to be the Director of Metropolitan
Life Insurance Company, a New York corporation, and that he, on behalf of such
corporation, being authorized so to do, executed the foregoing instrument for
the purposes therein contained by signing the name of Metropolitan Life
Insurance Company, a New York corporation, by himself as Director of such
corporation as his free act and deed and the free act and deed of said
corporation.
 
Witness my hand and seal at office this ___ day of ____________, 2010.
 

______________________________________
Print Name:
Notary Public
My Commission Expires:
 
 
 
 
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SCHEDULE 1.2

PROMISSORY NOTE

 
Loan No. 194231
   
$11,000,000
September 1, 2010

 
FOR VALUE RECEIVED, the undersigned, ORM TIMBER OPERATING COMPANY II, LLC, a
Delaware limited liability company with an  address at 19245 Tenth Avenue NE,
Poulsbo, Washington 98370 (hereinafter referred to as “Maker”), promises to pay
to the order of METROPOLITAN LIFE INSURANCE COMPANY, a New York corporation,
together with any subsequent holder of this Note (“Holder”), at the location and
in the manner provided in Section 1.3 of the Loan Agreement between Maker and
the Lender (as defined therein) (as amended, restated or supplemented from time
to time, the “Loan Agreement”), or at such other location and manner as Holder
may designate in writing from time to time, the principal sum of ELEVEN MILLION
AND NO/100 DOLLARS (US$11,000,000.00) in lawful money of the United States of
America (the “Loan”) together with interest thereon at the rates and times
specified below.  Capitalized terms used but not otherwise defined herein shall
have the respective meanings assigned thereto in the Loan Agreement.
 
ARTICLE 1.       
INTEREST RATE

 
1.1      Interest.  Maker promises to pay interest on the unpaid principal
balance from the date of funding by Holder until payment in full at the rate of
four and 85/100 percent (4.85%) per annum (the “Loan Rate”).  Interest at the
Loan Rate shall be calculated on the basis of a three hundred sixty day (360)
calendar year containing twelve (12) months of thirty days (30) each; provided
that for partial payment periods, interest shall be calculated on the basis of
the actual number of days elapsed over a three hundred sixty-five (365) day
calendar year.  The date of funding hereunder shall be considered the date that
the Loan funds are wired or delivered by Holder to Maker or if the Loan is being
closed through an escrow, to the escrow agent responsible for closing the Loan,
regardless of the date that the escrow agent releases such funds to Maker.
 
1.2      Default Interest.  Upon the occurrence of (i) an Event of Default
and/or (ii) maturity of this Note (whether maturity occurs by demand,
acceleration, lapse of time or otherwise), at the option of Holder, the unpaid
principal balance of the Loan and accrued but unpaid interest due on this Note
and all other sums owed by Maker to Holder shall bear interest until paid at a
default rate of interest of four percent (4.00%) per annum above the Loan Rate
but not in excess of the maximum interest rate permitted by law (the “Default
Rate”).  Any interest due at the Default Rate shall be added to the amount due
hereunder, and shall be deemed to be secured by the Deeds of Trust.  The fact
that any such interest shall become due hereunder shall not be construed as an
agreement or privilege to extend the date of the payment of any amount due
hereunder, nor as a waiver of any other right or remedy available to Holder by
reason of the occurrence of any Event of Default, nor to prevent Holder from
collecting the late fee rate set forth in Section 2.3 below.

 
 
- Schedule 1.2 - 1 -

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ARTICLE 2.       
PAYMENTS; MATURITY DATE

 
2.1      Payments.     Maker promises to pay the principal and interest under
this Note to Holder as follows:
 
            2.1.1      Accrued interest only at the Loan Rate shall be due and
payable quarterly, commencing on October 1, 2010 and continuing on the first day
of each succeeding January, April, July and October thereafter (each such day, a
“Payment Date”) until the Maturity Date.
 
            2.1.2      The outstanding principal balance and all accrued and
unpaid interest thereon and all other sums and fees due under this Note, the
Loan Agreement and the other Loan Documents shall be due and payable on
September 1, 2020 (the “Maturity Date”).
 
2.2      Payment on Non-Business Days.      If a payment of principal or
interest on this Note is due on a day other than a Business Day, such payment
shall be due on the next succeeding Business Day.  A “Business Day” shall mean
any day that is not a Saturday, Sunday or holiday and on which the New York, New
York office of Holder and the New York Stock Exchange are open for business.
 
2.3      Late Fee.      In the event Maker fails to make any required payment by
the end of the fourth (4th) calendar day following the due date of any such
payment (the “Grace Period”), Holder shall be entitled to collect, and Maker
agrees to pay, in addition to the amount of the scheduled payment, a late charge
equal to five percent (5%) of the overdue amount, as liquidated damages for the
costs and risk incurred by Holder as a result of the delinquent payment (the
“Late Charge”). The Late Charge is intended to reimburse Holder for a portion of
the administrative cost and additional loan risk associated with said late
payment and shall be in addition to, and not in lieu of, any other remedy Holder
may have (e.g., to collect Default Rate interest) and is in addition to Holder’s
right to collect reasonable fees and charges of any agents or attorneys which
Holder employs in connection with any Event of Default, whether or not
litigation is commenced.  Such late charges if not previously paid shall become
part of the indebtedness evidenced hereby and shall, at the option of Holder, be
added to any succeeding monthly payment due hereunder.  Failure to pay such late
charges with such succeeding monthly payment shall constitute an Event of
Default and such late charges shall bear interest at the Default Rate from the
date due.  Notwithstanding the foregoing, in no event shall Maker be entitled to
the benefit of the Grace Period for payments due on the Maturity Date.
 
 
 
- Schedule 1.2 - 2 -

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ARTICLE 3.          APPLICATION OF PAYMENTS
 
Provided no Event of Default has occurred, each payment received with respect to
the Loan may be applied by Holder as follows:  first, to recovery, with interest
thereon at the Default Rate, of any expenses, costs, or fees, including
attorneys’ fees, funds paid or advanced by Holder or any similar charges
pursuant to any of the Loan Documents; second, to any scheduled escrow for tax,
insurance or similar items; third, to any late charge or interest calculated at
the Default Rate then due; fourth, to the payment of accrued interest at the
Loan Rate from time to time remaining unpaid; fifth, to any prepayment premium
due with respect to the current payment and any other prepayment premium that
may remain unpaid; and sixth, subject to the prepayment provisions of this Note,
to reduce the principal hereunder, whether or not due and payable.  If any
partial payment is accepted on this Note at a time when an amount in excess of
such partial payment is then due and payable, such partial payment shall be
applied to the oldest outstanding amount in arrears in the order of the
arrearage unless Holder elects to apply such payment in some other
order.  Notwithstanding any other provision of this Note or of any of the other
Loan Documents, from and after the occurrence of an Event of Default, all
payments and other amounts received by Holder may be applied by Holder in such
manner and to such indebtedness (whether to payment of advances made by Holder
pursuant to any provision of any of the Loan Documents, interest, principal,
Late Charges, interest at the Default Rate, prepayment premium, fees and
expenses or otherwise) and in such amounts and order of priority as Holder may
determine in the exercise of its sole and absolute discretion.

 
ARTICLE 4.       
PREPAYMENTS

 
4.1      Prepayment.       Subject to the provisions of this Section 4, upon not
less than thirty (30) days prior written notice to Holder, which notice must
identify the amount being prepaid and the date of prepayment (a “Prepayment
Notice”), Maker shall have the right to prepay this Note in full or in part,
subject to the conditions provided below, on any Payment Date by paying, in
addition to the amount of the principal prepayment, all accrued and unpaid
interest hereunder and all additional sums and charges due under this Note
and/or the other Loan Documents, together with a prepayment premium equal to the
greater of:
 
(a)              an amount determined by calculating one percent (1%) of the
outstanding principal balance;
 
OR
 
(b)              an amount determined by:

        (i)         calculating the sum of the present values of all unpaid
principal and interest payments required under the Loan Documents through and
including the scheduled Maturity Date and including the present value of the
outstanding principal balance as of such date (prior to the application of the
principal being prepaid), by discounting such payments from their scheduled
payment dates back to the date prepayment will be made utilizing a discount rate
equal to the Converted Treasury Yield (as defined below); and

    (ii)        subtracting from such sum the outstanding principal balance
(prior to application of the principal being prepaid) as of the date prepayment
will be made; and
 
 
 
- Schedule 1.2 - 3 -

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(iii)       multiplying such remainder by the quotient of (A) the principal
being prepaid, divided by (B) the outstanding principal balance as of the date
of prepayment (prior to application of the principal being prepaid).

The “Converted Treasury Yield” means 50 basis points plus the yield available,
or if there is more than one yield available, the average yields of United
States Treasury non-callable bonds and notes having a maturity date closest to
(before, on, or after) the scheduled Maturity Date as reported in The Wall
Street Journal or similar publication on the fifth (5th) Business Day preceding
the date prepayment will be made (as calculated by Holder in the exercise of its
reasonable judgment), converted to a quarterly equivalent yield.  As used
herein, the terms “Converted Treasury Yield” and quarterly equivalent yield are
annualized rates which reflect the frequency of the interest payments made
during a calendar year.
 
Notwithstanding the foregoing, no prepayment premium shall be payable if Maker
voluntarily prepays the Loan in full or in part, within the fifteen (15) day
period immediately preceding  the scheduled Maturity Date, and on the date such
prepayment is made Holder has not exercised and is not entitled to exercise its
right to accelerate the scheduled Maturity Date.
 
    4.2      Prepayment Rights.       Maker acknowledges that it possesses no
right to prepay the Loan, except as expressly provided herein.  Maker further
acknowledges and agrees that, except as expressly provided herein, if the Loan
is prepaid prior to the scheduled Maturity Date, for any reason, including, but
not limited to, acceleration of the Maturity Date by reason of an Event of
Default, any subsequent tender of payment of the Loan made by Maker or by anyone
on behalf of Maker or otherwise, including any tender of payment at any time
prior to or at foreclosure sale or proceedings or during any redemption period
following foreclosure, or during any federal or state bankruptcy or insolvency
proceedings, shall constitute an evasion of the restrictions on prepayment set
forth herein, and shall be deemed a voluntary prepayment prior to the scheduled
Maturity Date requiring payment of the prepayment premium provided for, if any,
and Holder shall not be required to accept such prepayment if it does not
include payment of the prepayment premium provided for, if any.  Further,
Holder’s acceptance of such prepayment without the requisite prepayment premium
shall not constitute or be deemed to constitute a waiver by Holder of its right
to seek payment of the required prepayment premium in accordance with the terms
hereof or any rights and remedies Holder may have under this Note, the other
Loan Documents, at law or in equity on account of Maker’s failure to timely pay
such prepayment premium as and when required hereunder.  To the extent permitted
by law, Holder may bid at any foreclosure sale, as part of the indebtedness
evidenced by the Loan Documents, the amount of the prepayment premium, if any,
which is payable hereunder calculated as if prepayment of the Loan occurs on the
date of such foreclosure sale.  To the extent the amount of the indebtedness
evidenced by this Note must be determined as of a date certain pursuant to a
judicial foreclosure, the Loan will be deemed prepaid as of the date judgment
enters and the prepayment premium due and payable hereunder (if any) will be
calculated as if prepayment of the Loan occurred on the date of said judgment.
 
 
 
- Schedule 1.2 - 4 -

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

 
 
    4.3      Negotiation of Prepayment Premium.       Maker and Holder have
negotiated the Loan upon the understanding that if the Loan is paid or prepaid
prior to the scheduled Maturity Date, for any reason, except as expressly
provided herein, Holder shall receive the prepayment premium provided for as
partial compensation for: (i) the cost of reinvesting the prepayment proceeds
and/or the loss of the contracted rate of return on the Loan; and (ii) the
privilege of early payment of the Loan, which Maker has expressly bargained for
and which privilege Holder would not have granted to Maker without a prepayment
premium.  Maker agrees that the prepayment premium provided for herein is
reasonable.  Maker agrees that Holder shall not be obligated, as a condition
subsequent to its receipt of the prepayment premium provided for, to actually
reinvest all or any part of the amount prepaid in any United States Treasury
instruments or obligations or otherwise.
 
    4.4      Application of Prepayments.       Any partial prepayments of the
principal of this Note shall be applied to installments of principal coming due
hereunder in the inverse order of maturity, and shall not reduce the scheduled
installments of principal payable hereunder, if any.  If the amounts necessary
to prepay this Note in accordance with the terms and provisions hereof are
received by Holder after 2:00 p.m. (Eastern Time), such prepayment shall be
deemed to have been made on the next occurring Business Day and Holder shall be
entitled to receive interest on the outstanding principal balance of the Loan,
calculated at the Loan Rate or the Default Rate, as applicable, and a
re-calculated prepayment premium to the effective date of such prepayment.
 
    4.5      Prepayment in Connection with Casualty, Condemnation or Excess
Interest.       Notwithstanding anything to the contrary set forth in this Note
or the other Loan Documents, Holder agrees that provided no Event of Default has
occurred, no prepayment premium shall be due and payable in connection with the
reduction of the outstanding principal balance of the Loan pursuant to (i) the
application of insurance or condemnation proceeds received by Holder pursuant to
the Deed of Trust, or (ii) the application of Excess Interest (as defined in the
this Note).
 
    4.6      Prepayment Permitted Without Premium.       Subject to the
provisions of this Section 4, but notwithstanding Section 4.1, Maker may prepay
principal in an amount of not more than ten percent (10%) of the original
principal amount of the Loan during any calendar year or portion thereof without
prepayment premium, provided that no Event of Default exists.
 
 
    4.7      Notice of Prepayments.       Any prepayment otherwise permitted
under Sections 4.1 4.5 and 4.6, shall not be permitted unless Holder shall have
received written notice from Maker of the amount of such prepayment and the date
such prepayment will be paid at least thirty (30) days prior to such date of
prepayment.
 
    4.8      Prepayment Not Permitted.     Except as hereinabove set forth, no
full or partial prepayments of principal shall be allowed.
 

MAKER’S INITIALS _____
INITIALS ______
INITIALS ______

ARTICLE 5.       
ISSUANCE PURSUANT TO LOAN AGREEMENT

 
This Note has been issued by the Maker pursuant to the terms of the Loan
Agreement, and Maker and Holder are entitled to the benefits and subject to the
obligations thereof.  This Note is secured by, among other things, the Deeds of
Trust.  Reference is hereby made to the
 
 
- Schedule 1.2 - 5 -

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

 
 
Loan Agreement for a full statement of the rights of the holder of, and the
nature and extent of the security for, this Note.  All covenants, conditions and
agreements contained in the Loan Agreement, the Deeds of Trust and any other
document securing this Note, are hereby made a part of this Note.  In the event
of any conflict between the terms of the Note and the terms of the Loan
Agreement, the Deeds of Trust and other security instruments, the terms of this
Note shall govern.  Maker acknowledges and agrees that the Loan and the other
obligations evidenced and secured by the Loan Documents are fully recourse and
that, subject to the provisions of this Note, the Loan Agreement, the Loan
Documents and the Deeds of Trust and applicable law, Holder’s remedies upon
default by Maker are not limited to foreclosure of the Deeds of Trust.
 
ARTICLE 6.       
EVENTS OF DEFAULT AND REMEDIES

 
The entire unpaid principal balance and accrued interest under this Note, and
any and all other notes of Maker to Holder or other sums owed from Maker to
Holder, shall, as set forth in the Loan Agreement, either automatically or as
declared at the option of Holder, be immediately due and payable upon the
occurrence of an Event of Default with respect to any automatic acceleration and
upon the occurrence and during the continuance of one or more Events of Default,
with respect to any optional acceleration.  Upon the occurrence and during the
continuance of one or more Events of Default, Holder shall also have the right
to (i) demand additional security in lieu of asserting any other remedy; (ii)
use any remedy Holder has under any federal, state, or local law of the United
States; and (iii) use any remedy given to Holder in the Loan Agreement or in any
of the Loan Documents.
 
ARTICLE 7.       
ACTIONS BY HOLDER

 
Any forbearance by Holder in exercising any right or remedy under this Note, the
Deeds of Trust, the Loan Agreement, or any other Loan Document or otherwise
afforded by applicable law shall not be a waiver of or preclude the exercise of
that or any other right or remedy.  The acceptance by Holder of any payment
after the due date of such payment or in an amount which is less than the
required payment shall not be a waiver of Holder’s right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment.  Enforcement by Holder of any
security for Maker’s obligations under this Note shall not constitute any
election by Holder of remedies so as to preclude the exercise of any other right
or remedy available to Holder.
 
ARTICLE 8.       
ATTORNEYS’ FEES

 
If Holder shall employ the services of legal counsel in connection with (i) any
request made by Maker to Holder for a modification, amendment, waiver, or
consent in connection with the Loan Documents, (ii) defending or protecting
Holder’s interests in any Loan Document or any property securing the Loan from
and against any claim or assertion made by any third party, (iii) rendering
advice to Holder, enforcing Holder’s legal rights, or performing other legal
services for Holder upon the occurrence of an Event of Default, including,
without limitation, any services relating to any so-called “work-out” or other
negotiations following or anticipating the occurrence of any Event of Default,
(iv) representing the interests of Holder in any lawsuit arising out of or in
connection with the Loan Documents or Holder’s position as secured party or
beneficiary under any Loan Document, or (v) any other judicial or nonjudicial
action, suit or proceeding instituted by Holder or any other person connected
with or related to or with reference to the Loan or to reclaim, seek relief from
a judicial or statutory stay, sequester, protect, preserve or enforce Holder’s
interest in this Note or the Deeds of Trusts or any other Loan Document
(including proceedings under state or federal bankruptcy or insolvency law, in
eminent domain, under probate proceedings, or in connection with any state or
federal tax lien), then in such event Maker promises to pay or reimburse Holder,
within fifteen (15) days following demand, for all reasonable attorneys’ fees
and reasonable costs and expenses and any other professional’s fees incurred by
Holder and/or its attorney in connection with the above-mentioned events.
 
 
- Schedule 1.2 - 6 -

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

 
 
ARTICLE 9.       
MAXIMUM INTEREST RATE/CHARGES

 
It being the intention of Holder and Maker to comply with the laws of the State
of New York with regard to the rate of interest charged hereunder, it is agreed
that, notwithstanding any provision to the contrary in this Note or any of the
other Loan Documents, no such provision shall require the payment or permit the
collection of any amount (“Excess Interest”) in excess of the maximum amount of
interest permitted by law to be charged for the use or detention, or the
forbearance in the collection, of all or any portion of the indebtedness
evidenced by this Note.  If any Excess Interest is provided for, or is
adjudicated to be provided for, in this Note or any of the other Loan Documents,
then in such event:
 
(a)           The provisions of this paragraph shall govern and control;
 
(b)           Maker shall not be obligated to pay any Excess Interest;
 
(c)           Any Excess Interest that Holder may have received hereunder shall,
at the option of Holder, be (i) applied as a credit against the then-outstanding
principal balance due under this Note, accrued and unpaid interest thereon not
to exceed the maximum amount permitted by law, or both, (ii) refunded to the
payor thereof, or (iii) any combination of the foregoing;
 
(d)           The applicable interest rate or rates shall be automatically
subject to reduction to the maximum lawful rate allowed to be contracted for in
writing under the applicable usury laws of the aforesaid State, and this Note,
the Loan Agreement and the other Loan Documents shall be deemed to have been,
and shall be, reformed and modified to reflect such reduction in such interest
rate or rates; and
 
(e)           Maker shall not have any action or remedy against Holder for any
damages whatsoever or any defense to enforcement of the Note, Loan Agreement or
any of the other Loan Documents arising out of the payment or collection of the
Excess Interest.

 
ARTICLE 10.       
GOVERNING LAW AND OTHER AGREEMENTS

 
Maker agrees that:  (i) this Note and the rights and obligations of the parties
hereunder shall be governed by the laws of the State of Washington without
reference to the conflict of law principles of such state; (ii) the obligation
evidenced by this Note is an exempted transaction under the Truth In Lending
Act, 15 U.S.C. Section 1601, et seq.; and (iii) said obligation constitutes a
business loan and is not intended by Maker for use for personal, family, or
household purposes.
 
 
 
- Schedule 1.2 - 7 -

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

 
 
 
ARTICLE 11.       WAIVERS
 
Maker and any and all others who may become liable for all or part of the
obligations of Maker under this Note (collectively the “Obligors”) agree to be
jointly and severally bound hereby and jointly and severally, to the extent
permitted by law:  (i) waive and renounce any and all redemption and exemption
rights and the benefit of all valuation and appraisement privileges against the
indebtedness evidenced by this Note or by any extension or renewal hereof; (ii)
waive presentment and demand for payment, notices of nonpayment and of dishonor,
protest of dishonor, and notice of protest; (iii)waive all notices in connection
with the delivery and acceptance hereof and all other notices in connection with
the performance, default, or enforcement of the payment hereof or hereunder,
except as otherwise specifically provided in the Loan Documents; (iv) waive any
and all lack of diligence and delays in the enforcement of the payment hereof;
(v) agree that the liability of each Obligor shall be unconditional and without
regard to the liability of any other person or entity for the payment hereof,
and shall not in any manner be affected by any indulgence or forbearance granted
or consented to by Holder to any Obligor or any such other person or entity;
(vi) consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Holder with respect to the payment or other
provisions hereof, and to the release of any security at any time given for the
payment hereof, or any part thereof, with or without substitution, and to the
release of any person or entity liable for the payment hereof; and (vii) consent
to the addition of any and all other makers, endorsers, guarantors, and other
obligors for the payment hereof, and to the acceptance of any and all other
security for the payment hereof, and agree that the addition of any such
obligors or security shall not affect the liability of any of Obligors for the
payment hereof.
 
ARTICLE 12.       ENTIRE AGREEMENT
 
This instrument, together with the other Loan Documents as defined above,
constitutes and sets forth the entire understanding and agreement between the
parties, and no party hereto has relied upon any representations, agreements or
understandings, verbal or written, not set forth herein, or in such other Loan
Documents, whether made by any party hereto or by any agent, employee or
representative of any party hereto.  Specifically, without limiting the
generality of the foregoing, the parties agree that Holder has made no agreement
to extend or renew this Note in any way, and no such agreement will be binding
upon Holder unless made in writing, subsequent to the date hereof, and executed
by a duly authorized representative of Holder.
 
ARTICLE 13.       
HEADINGS AND INTERPRETATION

 
Headings are for convenience only and are not intended as a limitation on the
content of the paragraph following, nor as an aid to the construction
thereof.  The parties hereto intend and believe that each provision in this Note
comports with all applicable law.  However, if any provision in this Note is
found by a court of law to be in violation of any applicable law, and if such
court should declare such provision of this Note to be unlawful, void or
unenforceable as written, then it is the intent of Maker and Holder that there
shall be added in lieu thereof a provision as similar in terms to such provision
as is possible which is legal, valid and enforceable, provided, however, that if
any provision of this Note which is found to be in violation of any applicable
law concerns the imposition of interest hereunder, the rights, obligations and
interests of Maker and Holder with respect to the imposition of interest
hereunder shall be governed and controlled by the provisions of this Note.  TIME
IS OF THE ESSENCE OF THIS NOTE.  Use of the word “including” shall not be
construed as a limitation and the word “including” shall be deemed to mean
“including, but not limited to.”
 
 
 
- Schedule 1.2 - 8 -

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

 
 
 
ARTICLE 14.       
MISCELLANEOUS

 
 
14.1      Changes to Note.       This Note may not be modified, amended, waived,
extended, changed, discharged, or terminated orally or by any act or failure to
act on the part of Maker or Holder, but only by an agreement in writing signed
by both Maker and Holder.  Holder may change any terms of payment of this Note,
including extensions of time and renewals, and release any security for, or any
party to, this Note, without notifying or releasing any accommodation maker,
endorser or guarantor from liability on this Note.
 
14.2      Loss, Theft or Destruction of Note.       In the event of the loss,
theft or destruction of this Note, upon Maker’s receipt of a reasonably
satisfactory indemnification agreement executed in favor of Maker by Holder or
in the event of the mutilation of this Note, upon the surrender of the mutilated
Note by Holder to Maker, Maker shall execute and deliver to Holder a new note in
form and content identical to this Note in lieu of the lost, stolen, destroyed
or mutilated Note.
 
14.3      Meaning of Particular Terms.       Wherever used, the singular member
shall include the plural, the plural the singular, and the words “Holder” and
“Maker” shall include their respective successors, assigns, heirs, executors and
administrators.  Upon any endorsement, assignment, or other transfer of this
Note by Holder or by operation of law, the term “Holder,” as used herein, shall
mean such endorsee, assignee, or other transferee or successor to Holder then
becoming the holder of this Note.  This Note shall inure to the benefit of
Holder and its successors and assigns and shall be binding upon the undersigned
Maker and its successors and assigns.  Maker agrees that Holder and any future
Holders or participants may grant or sell participation interests in this Note
to other Persons without notice to, or approval of Maker.
 
14.4      Notices.       All notices required to be given hereunder shall be
given in the manner specified in the Loan Agreement directed to the parties at
their respective address as provided therein.
 
14.5      Joint and Several Liability.       If Maker consists of more than one
person or party, the obligations and liabilities of each such person or party
shall be joint and several.
 
14.6      Counterparts.       This Note may be executed in several counterparts,
each of which when executed and delivered is an original, but all of which
together shall constitute one instrument.  In making proof of this Note, it
shall not be necessary to produce or account for more than one such counterpart
which is executed by the party against whom enforcement of such Note is sought.
 
14.7      Purpose of Note.       MAKER ACKNOWLEDGES, REPRESENTS AND WARRANTS TO
HOLDER THAT THE LOAN EVIDENCED BY THIS NOTE IS FOR COMMERCIAL PURPOSES.  MAKER
FURTHER ACKNOWLEDGES, REPRESENTS AND WARRANTS THAT IT IS ENGAGED EXCLUSIVELY IN
COMMERCIAL PURSUITS AND THAT THE PROCEEDS OF THIS NOTE ARE TO BE UTILIZED IN THE
BUSINESS ACTIVITIES OF MAKER AND WILL NOT BE UTILIZED FOR CONSUMER PURPOSES.

 
 
- Schedule 1.2 - 9 -

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

 
 
 
14.8      Waiver of Trial by Jury.       MAKER WAIVES TRIAL BY JURY IN ANY
PROCEEDING RELATING TO THIS NOTE, THE DEEDS OF TRUST, OR THE OTHER DOCUMENTS OR
TRANSACTIONS EVIDENCED HEREBY OR THEREBY AND AGREES THAT NO SUCH ACTION WITH
RESPECT TO WHICH A JURY TRIAL HAS BEEN WAIVED SHALL BE SOUGHT TO BE CONSOLIDATED
WITH ANY OTHER ACTION WITH RESPECT TO WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED.
 
14.9      NO ORAL AGREEMENTS.     
 
THIS NOTE AND ALL THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT OF
THE BORROWER AND THE LENDER AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE LOAN AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE BORROWER AND
THE LENDER. THERE ARE NO ORAL AGREEMENTS BETWEEN THE BORROWER AND THE LENDER.
THE PROVISIONS OF THIS NOTE AND THE OTHER LOAN DOCUMENTS MAY BE AMENDED OR
REVISED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE BORROWER AND THE LENDER.
 
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
 

 

 
- Schedule 1.2 - 10 -

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

 

 
IN WITNESS WHEREOF, Maker has executed this Note as of the date first above
written.

 

 
ORM TIMBER OPERATING COMPANY II, LLC
a Delaware limited liability company
            By: Olympic Resource Management LLC, a       Washington limited
liability company       Its Manager                  
 
 
By:
         
David L. Nunes
President & Chief Executive Officer
           

 
 
 
 
 

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

 
 

SCHEDULE 1.3

PAYMENT INSTRUCTIONS

 
Midland Loan Services, Inc.
 
Customer Service Information:
 
Main Phone:  1-800-894-9205
Main Fax:  1-913-253-9737
 
General Correspondence:
 
Mailing Address:
Midland Loan Services, Inc.
Attn:  (name of contact)
P.O. Box 25965
Shawnee Mission, KS  66225-5965
 
Overnight Package Mailing Address:
Midland Loan Services, Inc.
 
Attn:  (name of contact)
10851 Mastin, Suite 300
Overland Park, KS  66210
 
Payments:
 
Overnight Address:
Midland Loan Services, Inc.
c/o JP Morgan Chase Lockbox 974754
14800 Frye Road, TX1-0006
Fort Worth, TX  76155
 
Wire:
PNC Bank NA
ABA#: 043000096
Midland Loan Services Inc.
Credit #:  1006967647
Ref Loan#:
 
Wire Address:  (if necessary)
PNC Bank
620 Liberty Avenue
Two PNC Plaza
Pittsburgh, PA  15222
 
 
Schedule 1.3 - 1
 

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

 

 
SCHEDULE 2.3

OWNERSHIP OF BORROWER, SUBSIDIARIES, OFFICERS OF
BORROWER AND STATUTORY AGENTS IN EACH STATE
 
Ownership of Borrower:

Direct ownership of Borrower is as follows:
-  
99% owned by ORM Timber Fund II, Inc. (“Guarantor”)

-  
1% owned by Olympic Resource Management LLC (“Olympic”) and Olympic is the
member-manager of the LLC

 
Direct ownership of Guarantor is as follows:

-  
100% owned by 25 common stock investors, one of which is Pope Resources, A
Delaware Limited Partnership (“Pope Resources”) that owns 19.2% of Guarantor

-  
There are approximately 125 preferred non-voting stock investors in Guarantor

Direct ownership of Olympic is as follows:
-  
100% owned by ORM, Inc., a Washington corporation, that is in turn owned 100% by
Pope Resources

-  
Pope MGP, Inc., the managing general partner of Pope Resources and has a
profit-sharing interest only in Olympic

 
Subsidiaries of Borrower (100% owned):

Tillamook Log Company LLC, a Delaware limited liability company

Officers of Borrower:
David L. Nunes, President & Chief Executive Officer of Olympic
Thomas M. Ringo, Vice President, Chief Financial Officer, Treasurer & Secretary
of Olympic

Officers of Guarantor:
David L. Nunes, President
Thomas M. Ringo, Treasurer & Secretary

Officers of Project Manager:
David L. Nunes, President & Chief Executive Officer
Thomas M. Ringo, Vice President, Chief Financial Officer, Treasurer & Secretary

Statutory Agents for Service of Process:

Washington:
Olympic Resource Management LLC
 
19245 Tenth Avenue NE
 
Poulsbo, Washington 98370
     Oregon: Davis Wright Tremaine LLP   1300 SW Fifth Avenue, Suite 2300  
Portland, Oregon 97201

 
 
Schedule 2.3 - 1
 

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

 
 
SCHEDULE 2.4.1

PENDING LITIGATION

None
 
 

 
 
Schedule 2.4 - 1

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

 

 
SCHEDULE 2.6.1

PROJECT MANAGER CERTIFICATE

The undersigned Thomas M. Ringo, the Vice President, Chief Financial Officer,
Treasurer and Secretary of Olympic Resource Management LLC, a Washington limited
liability company, the Project Manager for the Timberlands as that term is
defined in paragraph 4.13 of that Loan Agreement dated as of September 1 2010,
by and between ORM Timber Operating Company II, LLC as Borrower and Metropolitan
Life Insurance Company as Lender, certifies that he is authorized to execute
this Project Manager Certificate in the name of and on behalf of the Project
Manager, and further certifies and represents to the Lender on behalf of
Borrower that:

1.  
The information set forth in the timber inventory verification report attached
hereto as Schedule 2.6.1A setting forth the species, age, quantity, location and
volumes of all standing Timber located on the Timberlands is not misleading and
is true, correct and complete at 95% confidence level with a margin of error of
+/- 5%, and is the same information that was provided by Borrower and Project
Manager to The Healy Company in its development of the comprehensive appraisal
of the Copper Creek Block referenced in Section 4.5.2 of the Loan Agreement.

 
2.  
The information referred to above is certified knowing that Lender is relying on
such certification to make this Loan.

 

WITNESS, the signature of the undersigned as an officer of the Project Manager,
and not individually, on this Certificate as of this 1st day of September, 2010.
 
 
 
 
By:          __________________________________________
Printed Name:   Thomas M. Ringo
Title:  Vice President, Chief Financial Officer, Treasurer and Secretary
 
 

 
 
 
Schedule 2.6.1 - 1

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

 
 
SCHEDULE 2.6.1A

TIMBER VOLUMES
 
 
Appraisal Summary Report

All Properties Property      
Owner      Stand#         Available        Parcel         Yr. Est.        Ct.
Yr.         Stand Type       L.S.        Owl Cir All Properties     
  *       *          *           *           *          *            *       
  *         *  
Misc1                                Misc2                      SubParcel            
                                                    Mortgage
        *                *                 
          *                                      MetLife Collateral  

 

LAND Gross Acres  
 Timberland:
 Non-Timbered:
18,924
2,954
 
Grand Total:
21,878
             
PRE-Merchantable
Net Acres
 
0 - 4
5 - 9
10 - 14
15 - 19
20 - 24
25 - 29
30 - 34
1,597
1,280
790
2,407
1,641
1,518
1,332
 
Total Pre-Merch Acres
10,566
 

 
SUB-Merchantable Timber: Age 35-44
                                       
Acres
      12+       8-11      
Chipnsaw
   
Pulpwood
   
Total MBF
 
Doug-fir
          1,343       5,151       3,767       2,177       49,194  
Hemlock
          865       1,638       1,364       1,133       5,000  
Cedar
          43       13       27       38       121  
Oth. Con.
          196       526       424       285       1,431  
Red Alder
          1       55       217       407       680  
Oth. Hwd.
          10       10       90       110       219  
Total Sub-Merch Acres
    5,178       2,458       7,393       5,889       4,151       56,646          
                                                                               
           
Merchantable Timber: Age 45+
                                               
 
 
Acres
      12+       8-11      
Chipnsaw
   
Pulpwood
   
Total MBF
 
Doug-fir
            4,944       7,577       3,400       1,685       56,226  
Hemlock
            1,965       2,770       2,179       1,731       8,645  
Cedar
            28       91       53       64       236  
Oth. Con.
            495       713       355       623       2,186  
Red Alder
            15       309       924       487       1,735  
Oth. Hwd.
            69       233       255       105       661     Total Merch MBF    
3,180       7,516       11,692       7,165       4,695       69,689  

 
 
 
 

GRAND TOTAL MBF              9,974       19,085       13,054       8,846      
126,335  

 
 
 

 
 
 

Olympic Resource Management Area Source: NetAcres 8/20/2010 @  08:34 AM

 
 
 
 
 
 
 
 
Schedule 2.6.1A-1

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

 
 
Appraisal Summary Report

Copper Creek Property      
Owner      Stand#         Available        Parcel         Yr. Est.        Ct.
Yr.         Stand Type       L.S.        Owl Cir Copper
Creek        *       *          *           *           *         
*            *          *         *  
Misc1                                Misc2                      SubParcel            
                                                    Mortgage
        *                *                 
          *                                      MetLife Collateral  

 

LAND Gross Acres  
 Timberland:
 Non-Timbered:
11,308
1,451
 
Grand Total:
12,759
             
PRE-Merchantable
Net Acres
 
0 - 4
5 - 9
10 - 14
15 - 19
20 - 24
25 - 29
30 - 34
848
301
63
97
350
597
1,214
 
Total Pre-Merch Acres
3,470
 

 
SUB-Merchantable Timber: Age 35-44
                                       
Acres
      12+       8-11      
Chipnsaw
   
Pulpwood
   
Total MBF
 
Doug-fir
          997       3,934       3,054       1,712       46,452  
Hemlock
          441       1,122       1,115       853       3,530  
Cedar
          7       8       27       31       72  
Oth. Con.
          184       515       421       282       1,401  
Red Alder
          1       37       91       214       343  
Oth. Hwd.
          0       0       77       66       143  
Total Sub-Merch Acres
    4,912       1,629       5,615       4,786       3,157       51,942          
                                                                               
           
Merchantable Timber: Age 45+
                                               
 
 
Acres
      12+       8-11      
Chipnsaw
   
Pulpwood
   
Total MBF
 
Doug-fir
            4,525       7,011       3,135       1,473       54,764  
Hemlock
            1,503       2,343       1,833       1,567       7,246  
Cedar
            10       52       46       60       169  
Oth. Con.
            495       713       355       623       2,186  
Red Alder
            15       51       334       202       603  
Oth. Hwd.
            0       6       34       17       57     Total Merch MBF     2,926  
    6,548       10,178       5,736       3,943       65,024  

 
 
 
 

GRAND TOTAL MBF              8,176       15,793       10,522       7,100      
116,967  

 
 
 

 
 
 

Olympic Resource Management Area Source: NetAcres 8/20/2010 @  08:32 AM

 
 
 
 
 

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

 
 
 
Appraisal Summary Report

Riffe Lake Property      
Owner      Stand#         Available        Parcel         Yr. Est.        Ct.
Yr.         Stand Type       L.S.        Owl Cir Riffe Lake          * 
      *          *           *          *          *            *       
  *         *  
Misc1                                Misc2                      SubParcel            
                                                    Mortgage
        *                *                 
          *                                      MetLife Collateral  

 

LAND Gross Acres  
 Timberland:
 Non-Timbered:
7,617
1,502
 
Grand Total:
9,119
             
PRE-Merchantable
Net Acres
 
0 - 4
5 - 9
10 - 14
15 - 19
20 - 24
25 - 29
30 - 34
750
979
727
2,310
1,291
921
118
 
Total Pre-Merch Acres
7,096
 

 
SUB-Merchantable Timber: Age 35-44
                                       
Acres
      12+       8-11      
Chipnsaw
   
Pulpwood
   
Total MBF
 
Doug-fir
          346       1,218       713       465       2,741  
Hemlock
          425       516       249       280       1,470  
Cedar
          37       5       0       7       49  
Oth. Con.
          12       12       3       3       31  
Red Alder
          0       18       126       193       337  
Oth. Hwd.
          10       10       13       44       76  
Total Sub-Merch Acres
    267       829       1,777       1,103       993       4,704                
                                                                               
     
Merchantable Timber: Age 45+
                                               
 
 
Acres
      12+       8-11      
Chipnsaw
   
Pulpwood
   
Total MBF
 
Doug-fir
            419       566       265       213       1,463  
Hemlock
            462       426       346       164       1,399  
Cedar
            18       39       7       3       67  
Red Alder
            0       257       590       285       1,132  
Oth. Hwd.
            69       227       221       88       604     Total Merch MBF    
254       968       1,515       1,429       752       4,665  

 
 
 
 

GRAND TOTAL MBF              1,798       3,292       2,532       1,746      
9,368  

 
 
 

 
 
 

Olympic Resource Management Area Source: NetAcres 8/20/2010 @  08:30 AM

 

 
 
 

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

 

SCHEDULE 2.6.2

NON-ACCESS TO TIMBERLANDS

RIFFE LAKE TREE FARM

The following portions of the Riffe Lake Block currently are accessible to
vehicles by private roads for which Borrower does not currently hold perpetual
easements or irrevocable licenses:

South half of the Northwest quarter; the Southwest quarter; the West half of the
Southeast quarter of Section 4;
All of Section 8, except the Southeast quarter;
All of Section 9;
All of Section 17, all in Township 11 North, Range 5 East, W.M., County of
Lewis, State of Washington.

Government Lots 1, 2, and 3, and the Southwest quarter of the Northeast quarter
all in Section 6, Township 12 North, Range 4 East, W.M., County of Lewis, State
of Washington.

Northeast quarter of the Southwest quarter and the Southeast quarter of the
Northwest quarter, Section 32, Township 12 North, Range 4 East, W.M., County of
Lewis, State of Washington.
EXCEPT that portion described as follows: Beginning at the Northwest corner of
said Southeast quarter of the Northwest quarter;
Thence South 88° 10’ 29” East 1,333.79 feet;
Thence South 1° 22’ 58” West 971.98 feet;
Thence North 52° 14’ 46” West 1,656.44 feet to the point of beginning.

West half of Section 31, Township 13 North, Range 4 East, W.M., County of Lewis,
State of Washington.

COPPER CREEK TREE FARM

The Copper Creek Block currently is accessible to vehicles only via BLM-owned
roads passing through Weyerhaeuser lands, BLM lands, the Copper Creek Block, and
other private property, under Right-of-Way and Road Use Agreement RWA S-975
dated November 2, 1987, as amended from time to time (as amended, the “Road Use
Agreement”), which covers extensive lands owned by Weyerhaeuser.  After closing,
the BLM is required to cooperate with the former and new owners in a full or
partial assignment of the access rights under the Road Use Agreement, and
Weyerhaeuser is required under Section 13.19(b) of the Purchase Agreement to
cooperate with Borrower in completing the assignment.

 
Schedule 2.6.2-1

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

 
 
SCHEDULE 2.6.3

TIMBER SALE AGREEMENTS

1.           Master Stumpage Agreement dated June 7, 2010 between ORM Timber
Operating Company II, LLC as Seller, and Tillamook Log Company as Purchaser.

2.           Log Marketing Agreement dated June 1, 2010 between Olympic Resource
Management LLC as Contractor, and Tillamook Log Company LLC as Company.

 
 
 
 
 
 
Schedule 2.6.3-1

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

 
 
SCHEDULE 2.6.4

LEASES AFFECTING TIMBERLANDS
 
 
 
None
 
 

 
 
Schedule 2.6.4-1

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

 
 
SCHEDULE 2.6.5

MINING PERMITS
 
 

None
 
 
 
 
 
Schedule 2.6.5-1

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

 
 
SCHEDULE 2.7

RENT ROLL – RECREATIONAL LICENSES AND LEASES
 
None
 
 
 
 
 
 
 
Schedule 2.7.2-1

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

 
 
SCHEDULE 2.15.4

ENDANGERED SPECIES ISSUES

RIFFE LAKE TREE FARM

None.

There are no known activity centers for Northern Spotted Owls, marbled
murrelets, bald or golden eagles, osprey, and other species known to negatively
impact timberland management, although these species may be found on nearby and
adjacent timberlands.

The majority of the Riffe Lake Tree Farm is located in the Mineral Spotted Owl
Special Emphasis Area, which requires special timberland management provisions
if habitat exists and an activity center is established.

COPPER CREEK TREE FARM

There are no known activity centers for Northern Spotted Owls, bald or golden
eagles, osprey, and other species known to negatively impact timberland
management, although these species may be found on nearby and adjacent
timberlands.

Northern Spotted Owls are located on adjacent federal timberlands, and adjacent
mature timber on the Copper Creek Tree Farm suitable for habitat has been
classified as “Unavailable” in the Borrowers Forest Inventory Reporting System.

Upper Willamette River Chinook and Upper Willamette River Steelhead are present
in the Molalla River and its larger tributaries, including Copper Creek and the
Table Rock Fork of the Molalla River.  These waterways are protected by riparian
management zones where they flow through and adjacent to the Copper Creek Tree
Farm.
 

 
 
 
Schedule 2.15.4-1

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

 
 
SCHEDULE 2.15.5

STORAGE TANKS

None
 
 
 
 
 
 
 
 
Schedule 2.15.5-1

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

 
 
SCHEDULE 4.2.6

ADMINISTRATIVE VALUES

 
Schedule 4.2.6 - AdIministiative Values
   

Species

$ per MBF
Douglas-fir
320
   
Whitewoods
206
   
Hardwoods
267
   
Red Cedar
838
   

 
 
 
 
 
Schedule 4.2.6-1

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

 
 

 

EXHIBIT A

TIMBERLANDS

COPPER CREEK:

THE FOLLOWING DESCRIBED PROPERTY IN TOWNSHIP 7 SOUTH, RANGE 4 EAST OF THE
WILLAMETTE MERIDIAN, CLACKAMAS COUNTY, OREGON:

Section 1:
That portion of the South half of the Southwest quarter lying South of the
centerline of the Table Rock Fork of the Molalla River
TOGETHER WITH an easement for Access, Utilities, Storm Water Easement Area and
Tailhold Easement Area as set forth and more fully described in Easement
Exchange agreement recorded July 26, 2010 as Fee No. 2010-044441, Clackamas
County Records
   
Section 2:
That portion of the South half lying South of the centerline of the Table Rock
Fork of the Molalla River
TOGETHER WITH an easement for Tailhold Easement Area as set forth and more fully
described in Easement Exchange agreement recorded July 26, 2010 as Fee No.
2010-044441, Clackamas County Records
   
Section 3:
That portion of the  Southeast quarter, Southwest quarter, and the South half of
the Northwest quarter lying South of the centerline of the Table Rock Fork of
the Molalla River
TOGETHER WITH an easement for Access, Utilities, Storm Water Easement Area and
Tailhold Easement Area as set forth and more fully described in Easement
Exchange agreement recorded July 26, 2010 as Fee No. 2010-044441, Clackamas
County Records
   
Section 4:
That portion of the Southeast quarter of the Northeast quarter lying South of
the centerline of the Table Rock Fork of the Molalla River, the North half of
the Southeast quarter, and the Northeast quarter of the Southwest quarter
TOGETHER WITH an easement for Tailhold Easement Area as set forth and more fully
described in Easement Exchange agreement recorded July 26, 2010 as Fee No.
2010-044441, Clackamas County Records
   
Section 10:
The North half
   
Section 11:
All
   
Section 12:
All
   
Section 13:
All

 
 
 
Exhibit A-1

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

 
 
 

   
Section 14:
The East half and the Northwest quarter
   
Section 23:
The East half
   
Section 24:
The North half; the North half of the Southwest quarter; the Southeast quarter
of the Southwest quarter; and the Southeast quarter
   
Section 28:
The South half
   
Section 29:
The Southeast quarter
   
Section 30:
All
   
Section 31:
Government Lots 1, 2, 5, 6, 7, 8, 13 and 14; the Northeast quarter; and the East
half of the Northwest quarter
   
Section 32:
All
   
Section 33:
All
   
Section 34:
All

THE FOLLOWING DESCRIBED PROPERTY IN TOWNSHIP 8 SOUTH, RANGE 3 EAST OF THE
WILLAMETTE MERIDIAN, CLACKAMAS COUNTY, OREGON:

Section 12:
The Northeast quarter, and the North half of the Southeast quarter

THE FOLLOWING DESCRIBED PROPERTY IN TOWNSHIP 8 SOUTH, RANGE 4 EAST OF THE
WILLAMETTE MERIDIAN, CLACKAMAS COUNTY, OREGON:

Section 4:
All
   
Section 5:
All
   
Section 6:
All
   
Section 8:
All
   
Section 9:
The North half, and the Ogle Mountain Consolidated Mining Claim, comprising the
Hillside, Franklin No. 1, Franklin No. 2, Oregon City, Silver Leaf, Russell No.
1, Wildcat and Russell Fraction Lodes, being portions of the North half of the
Southwest quarter, the Southeast quarter of the Southwest quarter, and the West
half of the Southeast quarter of said Section 9, more particularly described as
follows:

 
 
 
Exhibit A-2

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

 
 
 

 
Commencing at the South quarter section corner of said section; thence North
88o10’ West a distance of 62.5 feet to Corner No. 1 of Hillside Lode, the true
point of beginning, said corner being marked by a porphyry stone, 30 x 14 x 7
inches, set 15 inches in the ground, chiseled 1-710, whence a fir, 30 inches in
diameter, bears North 35o30’ West 28 feet, and a hemlock, 20 inches in diameter,
bears South 74o West 24.2 feet, each blazed and scribed BT 1-710; thence South
89o22’ West, along the Southerly line of said lode, a distance of 115.00 feet to
Corner No. 2 therefrom, which is marked by a basalt stone 24 x 9 x 8 inches, set
12 inches in the ground, chiseled 2-710, whence a fir, 48 inches in diameter,
bears South 77o20’ West 21.6 feet and a hemlock, 16 inches in diameter, bears
North 27o West 11.4 feet, each blazed and scribed BT 2-710; thence North 5o49’
East, along the Westerly line of said lode, a distance of 280.37 feet to its
intersection with the Southeasterly line of Franklin No. 1 Lode; thence South
55o50’ West, along the Southeasterly line of said Franklin No. 1 Lode, a
distance of 290.49 feet to Corner No. 1 thereof, which is marked by a porphyry
stone 24 x 15 x 14 inches, set 12 inches in the ground, chiseled 1-710, whence a
hemlock, 16 inches in diameter, bears North 68o30’ East 9.3 feet, and a hemlock,
18 inches in diameter, bears South 58o45’ West 28.0 feet, each blazed and
scribed BT 1-710; thence North 34o40’ West, along the Southwesterly line of said
lode, a distance of 1445.30 feet to Corner No. 2 thereof, which is also Corner
No. 1 of Franklin No. 2 Lode, and is marked by a basalt stone 24 x 14 x 10
inches, set 12 inches in the ground, chiseled 2-1-710, whence a hemlock, 18
inches in diameter, bears North 33o10’ East 26.0 feet, and a hemlock, 18 inches
in diameter, bears South 11o30’ East 12.6 feet, each blazed and scribed BT
2-1-710; thence North 30o35’ West, along the Southwesterly line of Franklin No.
2 Lode, a distance of 1160.00 feet to Corner No. 2 thereof, which is marked by a
cross (x) at the exact corner point and 2-710 chiseled on the East face of a
ledge of rock, whence a fir, 30 inches in diameter, bears North 64o East 18.0
feet, and a fir, 36 inches in diameter, bears North 40o West 13.0 feet, each
blazed and scribed BT 2-710; thence North 55o50’ East, along the Northwesterly
line of said lode, a distance of 600.00 feet to Corner No. 3 thereof, which is
marked by a basalt stone 26 x 12 x 7 inches, set 13 inches in the ground,
chiseled 3-710, whence a hemlock, 18 inches in diameter, bears North 74o30’ East
9.3 feet and a hemlock, 18 inches in diameter, bears South 40o West 9.8 feet,
each blazed and scribed BT 3-710; thence South 30o35’ East, along the
Northeasterly line of said lode, a distance of 740.00 feet to Corner No. 3 of
the Oregon City Lode, which is marked by a porphyry stone 24 x 14 x 14 inches,
set 12 inches in the ground, chiseled 3-710, whence a hemlock, 16 inches in
diameter, bears North 83o30’ East 22.6 feet, and a hemlock, 36 inches in
diameter, bears North 18o East 36.4 feet, each blazed and scribed BT 3-710;
thence North 59o25’ East, along the
   

 
 
 
 
Exhibit A-3

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

 
 
 

  Northerly line of said Oregon City Lode, a distance of 365.00 feet to Corner
No. 4 thereof, which is marked by a porphyry stone 24 x 16 x 12 inches, set 12
inches in the ground, chiseled 4-710, whence a hemlock, 14 inches in diameter,
bears South 52o East 15.3 feet, and a hemlock, 30 inches in diameter, bears
South 48o30’ West 15.8 feet, each blazed and scribed BT 4-710; thence South
21o15’ East, along the Easterly line of said lode, a distance of 449.70 feet to
Corner No. 5 thereof, which is also Corner No. 2 of Silver Leaf Lode, and is
marked by a porphyry stone 26 x 10 x 6 inches, set 13 inches in the ground,
chiseled 2-710, whence a fir, 30 inches in diameter, bears South 15o20’ East 8.6
feet, and a hemlock, 18 inches in diameter, bears North 42o25’ East 10.7 feet,
each blazed and scribed BT 2-5-710; thence North 62o50’ East, along the
Northerly line of said Silver Leaf Lode, a distance of 537.9 feet to Corner No.
3 thereof, which is also Corner No. 2 of Russell Fraction Lode, and is marked by
a basalt stone 26 x 10 x 5 inches, set 14 inches in the ground, chiseled
3-2-710, whence a hemlock, 18 inches in diameter, bears South 44o40’ West 24.8
feet, and a hemlock, 18 inches in diameter, bears North 33o45’ West 22.8 feet,
each blazed and scribed BT 3-710; thence North 15o58’ West, along the Westerly
line of said Russell Fraction Lode, a distance of 535.50 feet to Corner No. 3
thereof, which is marked by a cross (x) at the exact corner point and 3-710
chiseled on a ledge of rock facing West, whence a hemlock, 20 inches in
diameter, bears North 33o30’ West 17.5 feet, and a hemlock, 22 inches in
diameter, bears South 23o West 18.2 feet, each blazed and scribed BT 3-710;
thence North 80o21’ East, along the Northerly line of said lode, a distance of
575.00 feet to Corner No. 4 thereof, which is marked by a basalt stone 24 x 10 x
6 inches, set 12 inches in the ground, chiseled 4-710, whence a hemlock, 20
inches in diameter, bears North 3o20’ East 10.5 feet, and a hemlock, 16 inches
in diameter, bears South 89o30’ West 10.3 feet, each blazed and scribed BT
4-710; thence South 0o17’ West, along the Easterly line of said lode, a distance
of 701.15 feet to its intersection with the Northerly line of Russell No. 1
Lode; thence North 72o13’ East, along the Northerly line of said Russell No. 1
Lode, a distance of 306.30 feet to Corner No. 3 thereof, which is also Corner
No. 2 of Wildcat Lode, and is marked by a basalt stone 24 x 10 x 8 inches, set
12 inches in the ground, chiseled 3-2-710, whence a larch, 26 inches in
diameter, bears South 54o10’ West 26.6 feet, and a fir, 30 inches in diameter,
bears South 6o30’ West 7.0 feet, each blazed and scribed BT 3-2-710; thence
South 86o24’ East, along the Northerly line of said Wildcat Lode, a distance of
565.90 feet to Corner No. 3 thereof, which is marked by a basalt stone 26 x 12 x
7 inches, set 12 inches in the ground, chiseled 3-710, whence a hemlock, 36
inches in diameter, bears South 30o West 23.3 feet, and a fir, 24 inches in
diameter, bears South 38o30’ West 45.6 feet, each blazed and scribed BT 3-710;
thence South 1o35’ West, along the Easterly line of said lode, a distance of
1120.70 feet to Corner No. 4 thereof, which is marked by a basalt stone 24 x 20
x 6 inches, set 12 inches in the ground, chiseled 4-710,    

 
 
 
 
Exhibit A-4

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

 
 
 

  whence a fir, 24 inches in diameter, bears South 31o15’ West 21.2 feet, and a
pine, 18 inches in diameter, bears South 27o30’ East 18.5 feet, each blazed and
scribed BT 4-710; thence North 86o24’ West, along the Southerly line of said
lode, a distance of 600.00 feet to Corner No. 1 thereof, which is also Corner
No. 4 of said Russell No. 1 Lode, and is marked by a basalt stone 24 x 10 x 6
inches, set 12 inches in the ground, chiseled 1-4-710, whence a fir, 26 inches
in diameter, bears North 39o10’ East 8.8 feet, and a fir, 26 inches in diameter,
bears North 13o West 5.8 feet, each blazed and scribed 1-4-710; thence South
72o13’ West, along the Southerly line of said Russell No. 1 Lode, a distance of
466.80 feet to Corner No. 1 thereof, which is also Corner No. 4 of said Hillside
Lode, and is marked by a basalt stone, 24 x 14 x 12 inches, set 12 inches in the
ground, chiseled 4-1- 710, whence a hemlock, 30 inches in diameter, bears North
40o East 18.9 feet, and a hemlock, 30 inches in diameter, bears South 10o30’
West 21.4 feet, each blazed and scribed BT 4-1-710; thence South 20o57’ West,
along the Easterly line of said Hillside Lode, a distance of 809.00 feet to the
true point of beginning.
 
(The diameters of the bearing trees mentioned herein were measured in the period
October 5 to 20, 1908.)
   

THE FOLLOWING DESCRIBED PROPERTY IN TOWNSHIP 8 SOUTH, RANGE 3 EAST OF THE
WILLAMETTE MERIDIAN, MARION COUNTY, OREGON:

Section 12:
The Southeast quarter of the Southeast quarter, and Government Lot 6.

THE FOLLOWING DESCRIBED PROPERTY IN TOWNSHIP 8 SOUTH, RANGE 4 EAST OF THE
WILLAMETTE MERIDIAN, MARION COUNTY, OREGON:

Section 16:
The North half, the Southwest quarter, and the West half of the Southeast
quarter
   
Section 17:
The East half
   
Section 18:
All
   
Section 20:
All
   
Section 21:
The Northwest quarter

 

 
 
Exhibit A-5

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

 

RIFFE LAKE:

THE FOLLOWING DESCRIBED PROPERTY IN SITUATED IN LEWIS COUNTY WASHINGTON:

PARCEL 1

South half of the northwest quarter; the southwest quarter; the west half of the
southeast quarter of Section 4, Township 11 North, Range 5 East, W.M., Lewis
County, Washington.

PARCEL 2

ALL of Section 8, Township 11 North, Range 5 East, W.M., Lewis County,
Washington.
EXCEPT the southeast quarter of said Section 8.

PARCEL 3

ALL of Section 9, Township 11 North, Range 5 East, W.M., Lewis County,
Washington.

PARCEL 4

ALL of Section 17, Township 11 North, Range 5 East, W.M., Lewis County,
Washington.

PARCEL 5

Southwest quarter of the northeast quarter; the west half of the southwest
quarter; the north half of the southeast quarter; Government Lots 5-11 inclusive
in Section 3, Township 11 North, Range 6 East, W.M., Lewis County, Washington.
TOGETHER WITH those easement rights as disclosed by that document recorded June
17, 1968, under Auditor's File No. 724363.

PARCEL 6

Government Lots 1-4 inclusive, 8 and 9 in Section 4, Township 11 North, Range 6
East, W.M., Lewis County, Washington.
EXCEPT that portion of the northwest quarter of Section 4, Township 11 North,
Range 6 East, W.M., Lewis County, Washington, described as follows:
BEGINNING at the northwest corner of said Section; thence south 02º58'30" west
along the west line of said Section a distance of 346.61 feet to the true point
of beginning; thence south 66º45'18" east a distance of 445.73 feet; thence
south 78º47'35" east a distance of 175.48 feet; thence north 77º41'25" east a
distance of 1374.99 feet; thence south 81º27'58" east a distance of 202.86 feet;
thence south 04º10'13" west to the right bank of the Cispus River; thence
continuing southerly and westerly along the top bank of said River to the
intersection of said west line and the northerly top bank of said River; thence
continuing north 02º58'30" east along said west line to the true point of
beginning.
 
 
 
Exhibit A-6

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

 
 
TOGETHER WITH those easement rights as disclosed by that document recorded June
17, 1968, under Auditor's File No. 724363.
 
PARCEL 7

ALL of Section 14, Township 11 North, Range 6 East, W.M., Lewis County,
Washington.
TOGETHER WITH those easement rights as disclosed by that document recorded June
17, 1968, under Auditor's File No. 724363.

PARCEL 8

ALL of Section 1, Township 12 North, Range 3 East, W.M., Lewis County,
Washington.
EXCEPT Government Lot 1 and the southeast quarter of the northeast quarter.
TOGETHER WITH easement rights as disclosed by that document recorded May 15,
1989, under Auditor's File No. 8903952.

PARCEL 9

ALL of Section 3, Township 12 North, Range 3 East, W.M., Lewis County,
Washington.
EXCEPT the south half of the southeast quarter.

PARCEL 10

ALL of Section 4, Township 12 North, Range 3 East, W.M., Lewis County,
Washington. EXCEPT that portion of the southwest quarter of said Section,
described as follows:
BEGINNING at the southwest corner of said southwest quarter; thence north 400
feet along the west line of said southwest quarter; thence east 270 feet to the
true point of beginning; thence west 270 feet to the west line of said southwest
quarter; thence north 1613 feet along said west line; thence east 60 rods;
thence south 42 rods; thence southwesterly to the true point of beginning.

PARCEL 11A

North half of Section 5, Township 12 North, Range 3 East, W.M., Lewis County,
Washington. EXCEPT the southeast quarter of the northwest quarter thereof.

PARCEL 11B

South half of the southeast quarter of Section 5, Township 12 North, Range 3
East, W.M., Lewis County, Washington.
EXCEPT a tract of land in the northeast quarter of the southeast quarter of the
southeast quarter described as follows:
BEGINNING at the northeast corner of said southeast quarter of the southeast
quarter; thence 170 feet west along the north line of said southeast quarter of
the southeast quarter to a point; thence south approximately 15 feet to the
north boundary of the Lewis County Road; thence southeasterly along the east
boundary of said County Road to a point where it intersects the east line of
said southeast quarter of the southeast quarter; thence north along the east
line of said southeast quarter of the southeast quarter approximately 514 feet
to the point of beginning.
ALSO EXCEPT the Young County Road.
 
 
 
Exhibit A-7

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PARCEL 11C

The southeast quarter of the northwest quarter and the northeast quarter of the
southwest quarter of Section 5, Township 12 North, Range 3 East, W.M., Lewis
County, Washington.
EXCEPT that portion of the northeast quarter of the southwest quarter of Section
5, Township 12 North, Range 3 East, W.M., Lewis County, Washington, more
particularly described as follows:
BEGINNING at the southwest corner of said Subdivision; thence north 2º26'56"
east along the west line of said Subdivision a distance of 441.49 feet; thence
south 88º36'56" east a distance of 1280.20 feet to the east line of said
Subdivision; thence south 1º45'11" west along the east line of said Subdivision
a distance of 441.42 feet to the southeast corner of said Subdivision; thence
north 88º36'56" west along the south line of said Subdivision a distance of
1285.56 feet to the point of beginning.

PARCEL 12

Government Lots 1 and 2 of Section 6, Township 12 North, Range 3 East, W.M.,
Lewis County, Washington.

PARCEL 13

Northeast quarter of the northeast quarter of the northeast quarter of Section
8, Township 12 North, Range 3 East, W.M., Lewis County, Washington.

PARCEL 14

North half of the north half of Section 9, Township 12 North, Range 3 East,
W.M., Lewis County, Washington.

PARCEL 15

The north half of the north half of Section 10, Township 12 North, Range 3 East,
W.M., Lewis County, Washington.

PARCEL 16

All of Section 11, Township 12 North, Range 3 East, W.M., Lewis County,
Washington, EXCEPT that part of the south half of the southwest quarter lying
southwesterly of the following described line:
Beginning at the northwest corner of the southwest quarter of the southwest
quarter; thence southeasterly to the south one-quarter corner and the terminus
of said line.  ALSO EXCEPT Primary State Highway No. 5.
 
 
 
 
Exhibit A-8

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

 

 
PARCEL 17

South half of Section 12, Township 12 North, Range 3 East, W.M., Lewis County,
Washington.
EXCEPT that part lying southeasterly and south of a line described as follows:
BEGINNING at the southeast corner of the northeast quarter of the southeast
quarter; thence northerly along the east line of said Section a distance of
400.0 feet; thence westerly parallel to the south line of said northeast quarter
of the southeast quarter to a point on the west line of said Subdivision; thence
southwesterly to the southwest corner of the southeast quarter of the southeast
quarter of the southwest quarter and the terminus of said line.
ALSO EXCEPT Primary State Highway No. 5.
ALSO EXCEPT Rife-Morton Highway.

PARCEL 18

That portion of the north half of the northwest quarter of Section 13, Township
12 North, Range 3 East, W.M., Lewis County, Washington, lying northwesterly of
the following described line:
BEGINNING at the southwest corner of the north half of the northwest quarter;
thence north 58º57'36" east to the northwest corner of the northeast quarter of
the northeast quarter of the northwest quarter and the terminus of said line.

PARCEL 19

That part of the northwest quarter of the northeast quarter of Section 14,
Township 12 North, Range 3 East, W.M., Lewis County, Washington, lying northerly
of a line beginning at the north quarter corner; thence on a bearing south
60º54'03" east to the northeast corner of the southeast quarter of the northwest
quarter of the northeast quarter.
ALSO that part of the northeast quarter of the northeast quarter of Section 14,
Township 12 North, Range 3 East, W.M., Lewis County, Washington, lying northerly
of a line beginning at the northwest corner of the southwest quarter of the
northeast quarter of the northeast quarter; thence south 60º37'52" east to the
southeast corner of the northeast quarter of the northeast quarter.

PARCEL 20

Government Lots 1, 2, and 3, and the southwest quarter of the northeast quarter
all in Section 6, Township 12 North, Range 4 East, W.M., Lewis County,
Washington.
 
 
 
 
Exhibit A-9

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

 

 
PARCEL 21

Northeast quarter of the southwest quarter and the southeast quarter of the
northwest quarter, Section 32, Township 12 North, Range 4 East, W.M., Lewis
County, Washington.
EXCEPT that portion described as follows:  Beginning at the northwest corner of
said southeast quarter of the northwest quarter; thence south 88º10'29" east
1333.79 feet; thence south 1º22'58" west 971.98 feet; thence north 52º14'46"
west 1656.44 feet to the point of beginning.

PARCEL 22

That portion of Section 33, Township 12 North, Range 6 East, W.M., Lewis County,
Washington, lying southeasterly of Line "A":
BEGINNING at the northwest corner of said Section; thence south 01º11'41" west a
distance of 276.50 feet to a point on the west line of said Section; thence
south 04º45'45" east along said west line a distance of 344.18 feet; thence
north 35º39'51" east a distance of 597.29 feet; thence north 84º34'31" east a
distance of 521.07 feet; thence south 69º21'42" east a distance of 963.53 feet;
thence north 87º37'09" east a distance of 470.73 feet; thence south 75º09'24"
east a distance of 662.91 feet; thence south 58º55'09" east a distance of 358.49
feet; thence north 47º52'15" east a distance of 628.57 feet; thence north
30º10'05" east a distance of 435.77 feet to the north line of said Section;
thence north 89º26'00" east along said north line a distance of 1072.76 feet to
the true point of beginning of Line "A"; thence south 05º41'23" west a distance
of 1053.06 feet; thence south 37º40'05" west a distance of 1589.65 feet; thence
south 68º35'31" west a distance of 1361.82 feet; thence north 29º14'23" west a
distance of 665.42 feet; thence south 65º23'29" west a distance of 1657.40 feet;
thence south 87º41'13" west a distance of 580.65 feet to the west quarter corner
of said Section and the terminus of said Line "A".

ALSO that portion of the north half of Section 33, Township 12 North, Range 6
East, W.M., Lewis County, Washington, lying northerly of the following described
property:
That portion of the north half of Section 33, Township 12 North, Range 6 East,
W.M., Lewis County Washington, described as follows: BEGINNING at the northwest
corner of said Section; thence south 01º11'41" west a distance of 276.50 feet to
a point on the west line of said Section; thence south 04º45'45" east along said
west line a distance of 344.18 feet to the True Point of Beginning; thence north
35º39'51" east a distance of 597.29 feet; thence north 84º34'31" east a distance
of 521.07 feet; thence south 69º21'42" east a distance of 963.53 feet; thence
north 87º37'09" east a distance of 470.73 feet; thence south 75º09'24" east a
distance of 662.91 feet; thence south 58º55'09" east a distance of 358.49 feet;
thence north 47º52'15" east a distance of 628.57 feet; thence north 30º10'05"
east a distance of 435.77 feet to the north line of said Section; thence north
89º26'00" east along said north line a distance of 1072.76 feet; thence south
05º41'23" west a distance of 1053.06 feet; thence south 37º40'05" west a
distance of 1589.65 feet; thence south 68º35'31" west a distance of 1361.82
feet; thence north 29º14'23" west a distance of 665.42 feet; thence south
65º23'29" west a distance of 1657.40 feet; thence south 87º41'13" west a
distance of 580.65 feet to the west one quarter corner of said Section; thence
north 04º45'45" west along the west line a distance of 2275.51 feet to the True
Point of Beginning.
EXCEPTING THEREFROM the Cowlitz River.
TOGETHER WITH those easement rights as disclosed by that document recorded June
17, 1968, under Auditor's File No. 724363.
ALSO TOGETHER WITH those easement rights as disclosed by those documents
recorded August 3, 2010, under Auditor's File Nos. 3348832 and 3348833.
 
 
 
Exhibit A-10

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PARCEL 23

The southwest quarter of the northeast quarter and Government Lot 6 (fractional
southwest quarter of the northwest quarter) and the south half of Government Lot
7 (fractional southeast quarter of the northwest quarter) and that portion of
the east half of Government Lot 2 (fractional northwest quarter of the northeast
quarter), lying south of Bennett County Road, all in Section 24, Township 12
North, Range 7 East, W.M., Lewis County, Washington.

ALSO that portion of Government Lot 5 (fractional northwest quarter of the
northwest quarter) in Section 24, Township 12 North, Range 7 East, W.M., Lewis
County, Washington, described as follows:
BEGINNING at the northwest corner of said Section 24; thence south 1020 feet;
thence north 63º east 630 feet; thence north 17º east 225 feet; thence north 43º
east to the north line of the said Section; thence west along the Section line
to the point of beginning.

PARCEL 24

The northeast quarter of the southeast quarter of Section 31, Township 13 North,
Range 3 East, W.M., Lewis County, Washington.

PARCEL 25

The south half of Section 34, Township 13 North, Range 3 East, W.M., Lewis
County, Washington.

PARCEL 26

South half of the northwest quarter; the east half of the southeast quarter; the
east half of the west half of the southeast quarter all in Section 35, Township
13 North, Range 3 East, W.M., Lewis County, Washington.

PARCEL 27

The south half of the southwest quarter of Section 24, Township 13 North, Range
4 East, W.M., Lewis County, Washington.
ALSO the northeast quarter of Section 24, Township 13 North, Range 4 East, W.M.,
Lewis County, Washington.
EXCEPT the southwest quarter of the northeast quarter.
TOGETHER WITH those easement rights as disclosed by those documents recorded
August 4, 2010, under Auditor's File Nos. 3348881, and December 2, 2008, under
Auditor's File No. 3317340.
 
 
 
Exhibit A-11

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

 

 
PARCEL 28

That portion of Section 25, Township 13 North, Range 4 East, W.M., Lewis County,
Washington, lying westerly of the North Fork of the Tilton River.
TOGETHER WITH those easement rights as disclosed by that document recorded
December 2, 2008, under Auditor's File No. 3317340.

PARCEL 29A

The north half of the south half of Section 26, Township 13 North, Range 4 East,
W.M., Lewis County, Washington.
EXCEPT the east half of the northeast quarter of the southeast quarter of
Section 26, Township 13 North, Range 4 East, W.M., Lewis County, Washington.
ALSO, the south half of the southeast quarter and the southeast quarter of the
southwest quarter of Section 26, Township 13 North, Range 4 East, W.M., Lewis
County, Washington.
EXCEPT the east half of the southeast quarter of the southeast quarter of
Section 26, Township 13 North, Range 4 East, W.M., Lewis County, Washington.
TOGETHER WITH those easement rights as disclosed by that document recorded
December 2, 2008, under Auditor's File No. 3317340.

PARCEL 29B

The east half of the northeast quarter of the southeast quarter of Section 26,
Township 13 North, Range 4 East, W.M., Lewis County, Washington.
ALSO, the east half of the southeast quarter of the southeast quarter of Section
26, Township 13 North, Range 4 East, W.M., Lewis County, Washington.
TOGETHER WITH those easement rights as disclosed by that document recorded
December 2, 2008, under Auditor's File No. 3317340.

PARCEL 30

West half of Section 31, Township 13 North, Range 4 East, W.M., Lewis County,
Washington.

 
 
Exhibit A-12

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PARCEL 31

The northwest quarter of the northeast quarter of Section 35, Township 13 North,
Range 4 East, W.M., Lewis County, Washington.
 
EXCEPT State Road No. 7, as described in Warranty Deed recorded November 9,
1971, under Auditor's File No. 760141.
 
ALSO that part of the west half of the northeast quarter of Section 35, Township
13 North, Range 4 East, W.M., Lewis County, Washington, described as follows:
BEGINNING at Highway Engineer's Station (hereinafter referred to as HES) 80+00
on the SR 7 Line Survey of SR 7, Morton to Elbe; thence southeasterly to a point
opposite said HES and 125 feet southeasterly therefrom; thence northeasterly
parallel with said SR 7 Line Survey to a point opposite HES 90+00 thereon;
thence northeasterly to a point opposite HES 92+00 on said SR 7 Line Survey and
140 feet southeasterly therefrom; thence northeasterly (along a line drawn from
said point opposite HES 92+00 and 140 feet southeasterly therefrom northeasterly
to a point opposite HES 97+00 on said SR 7 Line Survey and 110 feet
southeasterly therefrom) to a point on the east line of said west half of the
northeast quarter; thence northerly along said east line to a point on a line
drawn parallel with and 190 feet northwesterly, when measured radially, from
said SR 7 Line Survey; thence southwesterly along said parallel line to a point
opposite HES 89+00 thereon; thence southwesterly to a point opposite HES 88+00
on said SR 7 Line Survey and 100 feet northwesterly therefrom; thence
southwesterly parallel with said SR 7 Line Survey to a point opposite said HES
80+00 thereon; thence southeasterly to the point of beginning.
TOGETHER WITH those easement rights as disclosed by that document recorded
December 2, 2008, under Auditor's File No. 3317340.
 
 
 
 
Exhibit A-13

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

 
 
EXHIBIT B

PARTIAL RELEASE FORMS

REQUEST FOR PARTIAL RECONVEYANCE

TO:           Chicago Title Insurance Company, Trustee

Reference is made to that certain Deed of Trust, Security Agreement, Assignment
of Leases and Rents and Fixture Filing dated September 1, 2010 recorded on
____________, 2010 in File No. __________________,  Official Records of
____________ County, [Washington] [Oregon], (as supplemented and amended from
time to time, the “Deed of Trust”), made by ORM TIMBER OPERATING COMPANY II,
LLC, a Delaware limited liability company (the “Grantor”) to the above named
Title Insurance Company, as trustee (the “Trustee”) for the benefit of
METROPOLITAN LIFE INSURANCE COMPANY, a New York corporation (the “Beneficiary”),
in which the Grantor conveyed that certain real property, together with the
appurtenances thereto and improvements and timber thereon and other interests
therein, as more fully described in the Deed of Trust (the “Property”),
reference to which is hereby made, to secure a certain Promissory Note of even
date therewith from Grantor to the Beneficiary.

You are hereby requested and directed to reconvey to the Grantor, without
warranty, the estate now held by you under the Deed of Trust in and to ONLY that
certain portion of the Property more particularly described on Exhibit A
attached hereto and made a part hereof, together with the appurtenances thereto
and improvements and timber thereon and other interests therein (the “Released
Property”).

It is expressly agreed and understood that this is a partial reconveyance only
as to the Released Property; and nothing herein contained shall be construed to
in any way affect, impair, or release the liens and security interest held by
the Trustee under the Deed of Trust as to any other portion of the Property, or
any other property whatsoever, real or otherwise, and any appurtenances thereto
and improvements or timber thereon, described in the Deed of Trust, but all such
other property shall remain bound and encumbered in favor of Beneficiary,
pursuant to the terms of the Deed of Trust in the same manner as if this Request
for Partial Reconveyance had never been given. You are to record said
reconveyance and the recorded document should be mailed to, and your fees and
the recording fees in connection herewith paid by:    [Insert the Borrower’s
Name].

[Remainder of page intentionally left blank, signature page to follow]
 
 
 
 
Exhibit B-1

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

 

 
Dated this _____ day of _____________, 20____.
 
 

Beneficiary:      
METROPOLITAN LIFE INSURANCE COMPANY
                 
 
By:
        Name:       Title:       Duly Authorized  

 
 

 
Address of Beneficiary:

Metropolitan Life Insurance Company
6750 Poplar Avenue, Suite 109
Memphis, Tennessee  38138
Attention: Paulette J. Oxner
 
 
 
 
Exhibit B-2

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

 
 
EXHIBIT A

[Insert Legal Description]

 
 
 

 
 
Exhibit B-3

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

 

WHEN RECORDED RETURN TO:
[Name of Borrower]
[Address:_____________]
[Attention:____________]

 

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

DEED OF PARTIAL RECONVEYANCE
(WITHOUT SATISFACTION)

The undersigned is the trustee (“Trustee”) under that certain Deed of Trust,
Security Agreement, Assignment of Leases and Rents and Fixture Filing dated
September 1, 2010 recorded on ____________, 2010 in File No.
__________________,  Official Records of ____________ County, [Washington]
[Oregon] (as supplemented and amended from time to time, the “Deed of Trust”),
made by ORM TIMBER OPERATING COMPANY II, LLC, a Delaware limited liability
company (the “Grantor”) for the benefit of METROPOLITAN LIFE INSURANCE COMPANY,
a New York corporation (the “Beneficiary”), in which the Grantor conveyed that
certain real property, together with the appurtenances thereto and improvements
and timber thereon and other interests therein, as more fully described in the
Deed of Trust (the “Property”), reference to which is hereby made, to secure a
certain Promissory Note of even date therewith from Grantor to the Beneficiary.
 
The undersigned, having received a written request from the Beneficiary to
reconvey without warranty to the Grantor ONLY that certain portion of the
Property more particularly described in Exhibit A attached hereto and made a
part hereof, together with the appurtenances thereto and improvements and timber
thereon and other interests therein (the “Release Property”), does hereby
reconvey the Release Property to the Grantor.
 
It is expressly agreed and understood that this is a partial reconveyance only
as to the Release Property; and nothing herein contained shall be construed to
in any way affect, impair, or release the liens and security interest held by
the Trustee under the Deed of Trust as to any other portion of the Property, and
any other property whatsoever, real or otherwise, and any appurtenances thereto
and improvements or timber thereon, described in the Deed of Trust, but all such
other property shall remain bound and encumbered in favor of Beneficiary,
pursuant to the terms of the Deed of Trust in the same manner as if this Partial
Reconveyance had never been given.  The Loan secured by the Deed of Trust
remains outstanding and this Partial Reconveyance does not satisfy or evidence
the satisfaction of any portion of the outstanding indebtedness.

Dated this   _____ day of _____________, 20___.
 

Trustee:      
CHICAGO TITLE INSURANCE COMPANY
             
 
By:
        Name:         Title:         Duly Authorized  

 
 
 
 
Exhibit B-4

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

 
 
 
 
STATE OF WASHINGTON
)
   
) ss.
 
COUNTY OF
)
       

 
On this ____ day of _________, 20___, before me, the undersigned, a Notary
Public in and for the State of Oregon, duly commissioned and sworn, personally
appeared _____________________, to me known to be the _________________________
of the corporation that executed the foregoing instrument, and acknowledged the
said instrument to be the free and voluntary act and deed of said corporation,
and on oath stated that he/she is authorized to execute the said instrument for
the uses and purposes therein mentioned.

Witness my hand and official seal affixed the day and year first above written

 
 

       
NOTARY PUBLIC in and from the State of
       
My appointment expires:
  ,    

  My Commission expires on:    

 
 
 
 
 
Exhibit B-5

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

 
 

EXHIBIT A

Release Property

[Insert Legal Description]

 
 
 
 
 
 
Exhibit B-6